Improving risk management at highlands to increase corporate performance

products of Highlands Coffee in the other systems of the Jollibee restaurants in Asia.This will be a significant added value for Jollibee, because Vietnamese coffee hasgained worldwide r

Improving risk management at highlands to

increase corporate performance

Group sciences: Lê Ngọc Oanh

Khương Thu Trang Trịnh Thuỳ TrangPhạm Kiều AnhClass: AC2015C

Science advisor: Dr Nguyễn Phú Hưng

CHAPTER 1 INTRODUCTION OF RESEARCH 1.1 Rationale of the research

The ongoing development of F & B chains has attracted more and more domestic andforeign investors So the war for the market in the chain in this industry is becomingmore intense than ever So in order to be successful in this area, companies have toovercome a lot of holy trials and risks, including the change in consumer behavior,effective employee management, competition with companies It is true that only fewcompanies can overcome these challenges, such as Trung Nguyen, Cong coffee,Highlands coffee because they know the tastes of Vietnamese people, provide qualityproducts and services For customers, they also know how to highlight the company inthe market is fierce competition

The research below will highlight the challenges and risks that businesses may facewhen they want to join the F & B market The appropriate solutions and solutions canthen be set

1.2 Objectives of study

The ultimate objective of this study is to explore challenges and risk a beverage firm ingeneral and Highlands in particular has to face and the ways successful companieshave used to overcome these factors

1.3 Questions of study

● What are the risks and challenges the Highland is facing from the views of

managers and staffs?

● What are the factors affecting business performance of a firm?

● What are potential risks that can be inferred from the customer assessment on

quality of Highlands coffee’s products, services?

● How to enhance the business performance of HL through?

1.4 Scope of the study

Due to limits on financial, time, and human, the research will limit to study in theHanoi city only

1.5 Methodologies and Data

We first conduct a Literature review, then we conduct a survey to investigate thecurrent situation The questionnaire will be use to summerize opinions from sources ofcustomers, employees and managers

The research will be implemented by the 5 following stages, including problemdefinition, (ii) planning, (iii) surveying, (iv) analyzing results, and (v) discussingfindings and recommendations to Highlands

● Qualitative analysis: Based on the results of the survey survey, which gives a

high score on the strengths of the highlands, face to face interviews were alsoconducted to gain insights from clients, staff, and management on how to work

in Highlands coffee

● Quantitative analysis: refers to the process of gathering, analyzing and

presenting the information from raw data in any phenomenal issues of theresearch that mainly related to numbers The quantitative inquiry is basedmainly on the theories which can be demonstrated in practice and by subjectiveaspect because of the principle in numbers In this case, the quantitativeresearch amplified mostly to the closed questionnaire in the survey Thestatistical result is used to test the truly hypothesizes through table, chart, andgraph indications

1.5.2 Data source

1.5.2.1 Primary data

Primary data is original research data in its raw form, without any analysis orprocessing which provides the most useful of information for the specific purpose ofresearchers Beside, the targeted surveyees are peoples living in Hanoi and city

Data can be collected via 3 ways:

● In-depth interviews with customers to identify customer demands and customerimpressions on the quality of Highlands coffee.

● Direct interview with internal employees to get overall picture on the match of

current capacity with current and future requirements to Highlands coffee

● Survey by questionnaire: Use the electronic form sent to a large number of

targeted customers to gather their assessment to Highlands coffee

1.5.2.2 Secondary data

Secondary data which have been processed and gathered in other reports will providefurther knowledge of the market and competitions They are cheaper and more quicklyreachable than the primary data and also may be available when primary data cannot

be obtained at all

1.5.3 Data Collection of the survey

The data was collected by two main channels:

(1) Direct: this channel was used with people in Hanoi which is easy for the printingquestion papers and doing the interview as well

(2) Indirect: The paper was on the cloud; part of the question can be conducted onlinethrough Google Doc for the people who are prefer to answer online

For the primary data, this paper shall emphasis on doing survey includingquestionnaire and interviews survey With the secondary data, undoubtedly, searching

on the internet by using searching machine is the fastest way for collected secondarydata The survey will fulfill by surveyees in Hanoi and Ho Chi Minh cities

CHAPTER 2 HIGHLANDS BUSINESS ANALYSIS 2.1 Introduction

In this chapter, we are going talk about a well-known coffee in Hanoi, Highlandscoffee which was born out of the pure passion for Vietnamese coffee We will take adeep look at several prospective, things like the development of Highlands coffeechain, markets and customers target, the structure of organization and somehighlightenned performance

2.2 Overview of Highlands Company

In the late 1980s and early 1990s, David Thai witnessed the rise of the Starbuckscoffee chain from a small company in his hometown of Seattle to a multinationalcorporation This made him had the inspiration behind the founding of HighlandsCoffee, which first began operation in Hanoi in 1998 The company's initialregistration marked the first time an Overseas Vietnamese was able to register a privatecompany of any kind in Vietnam In 2000, two years later, the company was registered

as a joint stock company

Highlands limited itself to produce packaged coffee and be sold through supermarkets,hotels, restaurants, and cafés in the time of its foundation In 2002, the first HighlandsCoffee shop was established across from Notre-Dame Cathedral in Ho Chi Minh City

As of 2009, the company had a strong development, they operated 80 coffee shops insix cities and provinces across Vietnam: Hanoi, Ho Chi Minh City, Hai Phong, DaNang, Vung Tau and Dong Nai

As of May 2010 the company offered 5 blended roast and ground and whole beancoffees included Heritage Blend, Traditional Blend, Gourmet Blend, Moka Blend, CuliSupreme, and 4 espressos in ground and whole bean: Full City Roast, ArabicaSupreme, a water-process DeCaf espresso produced at their in-house water processdecaffeination facility, and Cinnamon Roast espresso The espresso line also includedESE-compatible 45mm espresso pods packaged in Malaysia In December 2009 thecompany introduced a Ready-To-Drink (RTD) "Iced Coffee" in an 8-ounce can, in twoversions, one labeled "with Milk" and the other labeled "Black" By May 2010 the

company stated that the RTD product had been distributed to more than 17 Asiancountries and the USA.

In 2011, Highlands Coffee purchased the pho chain Pho 24 from Ly Qui Trung for anestimated 20 million USD The next year, Highlands sold 50% of its shares to JollibeeWorldwide for 25 million USD In this affair, Jollibee said, they will add products ofHighlands Coffee in the other systems of the Jollibee restaurants in Asia, besidescontinuing to develop this coffee chain in Vietnam Because Vietnamese coffee hasgained worldwide recognition for top quality, it will help to be a significant addedvalue for Jollibee

In March 2012, under a partnership with Philippine Internet café company DigitalParadise, the first hybrid Highlands/Netopia internet café and coffee shop was opened

in the Philippines Beside traditional coffee products, Highlands coffee researched anddeveloped new products such as GreeKe products in 2014 and Tea-Milktea products in

2015 (wikipedia, 2017), (Website, Highlands, 2014), (Lộc, n.d.)

2.3 Organizational structure

The overal organizational structure of the Highlands corporation is presented in thefigure below

Figure 2-1: Organizational structure of the Highlands corporation

Figure 2-2: Structure of a local Highlands division

2.4 Performance highlights

After more than 15 years’ operation, Highlands coffee supply chain have beendeveloping rapidly in recent years with 180 chain stores in Vietnam The growth ofHighland coffee is proved by a strategic success with stores in key retail locations(Trần, "Bình dân hóa" - Chiến lược phát triển của Highlands , 2017)

Spending $25 million to buy Highlands Coffee from a Vietnamese boss, JollibeeGroup of the Philippines has taken steps to be considered very in developing this brand

in Vietnam Besides continuing to develop this coffee chain in Vietnam, they will add

products of Highlands Coffee in the other systems of the Jollibee restaurants in Asia.This will be a significant added value for Jollibee, because Vietnamese coffee hasgained worldwide recognition for top quality The evidence is that after buyingHighlands Coffee, Jollibee also add this coffee brand in its restaurant chain outsideVietnam Moreover, Highlands Coffee has taken big steps in the Philippines Afteropening a new shop at Eton Emerald Lofts in Ortigas, more Highlands Coffee shopswill soon be put into operation at Timog and Katipunan Avenues in Quezon City andPioneer Road, Shaw Boulevard in Mandaluyong (Nam, 2013).

The Superfoods Group, a joint venture between a subsidiary of the Jollibee FoodsCorporation (JFC), JSF Investments Pte Ltd, and the Viet Thai International JointStock Company (VTI), plans to conduct an IPO and list on Vietnam’s stock exchange

“We look forward to making Highlands Coffee and Pho 24 true national championbrands of Vietnam,” Mr Thai Phi Diep, CEO of Superfoods Group and HighlandsCoffee was quoted as saying (Doanh, 2016)

2.5 Business Analysis

This section is going to analyze the business environment of Highlands to identifychallenges and opportunities facing Highlands

2.5.1 The environment and competitive forces

This section uses the frameworks below to analyse the environment and competitiveforces of Highlands

Figure 2-3: Analytical framework (Kaplan Group, 2015 , p 22)

2.5.1.1 Macroenvironment analysis

This section is going to use the PESTEL framework to analyze the macroenvironment

• Political: The political environment includes taxation policy, government stability

and foreign trade regulations

• Economic The economic environment includes interest rates, inflation, business

cycles, income and energy availability and cost

• Social The social/cultural environment includes lifestyle changes, attitudes to work

and leisure, levels of education and consumerism

• Technological The technological environment is influenced by government

spending on research, speed of technological transfer and rates of obsolescence

2.5.1.2 Industry analysis

This section is going to use the Five-force model to analyze industry in whichHighlands is doing business

Domestic market (Website, Highlands, 2014)

● Large Cities: Highlands coffee chain coverage is quite wide in many cities, soit's easier to buy than competitors

o Ha Noi: 41 locations include Hoan Kien district, Hai Ba Trung district,Cau Giay district, Ba Dinh district, Hoang Mai district, etc…

o Ho Chi Minh: 72 locations include 1,2,3,5,8,9,10,11 district, Tan Binhdistrict, Go Vap district, Binh Thanh district, Phu Thuan district, etc…

o Da Nang: 13 locations include Hai Chau district, Thanh Khe district, HaiChau district, Hoi An, Son Tra district

o Hai Phong: 8 locations include Ngo Quyen district, Hong Bang district,etc

o Other cities: Binh Duong, Dong Nai, Can Tho, Vung Tau, Nha Trang,Vinh, Hue, Ha Long, Thanh Hoa, etc…

Work in café industry: In 2006, Highlands Coffee reaching 25 cafeshopnationwide This period is also the time to mark change of Highlands Coffeeboth of brand identity and theme space In 2011, Highlands Coffee expandsrapidly with 50 shops By 2014, this number has raised to 75 shops Byprogressive and pioneering steps, Highlands Coffee has expanded their marketshare, proud of Vietnamese brands From the numbers are 2 shops in 2002, after

15 years of development, Highland has 180 stores in Vietnam, far away fromStarbuck with 34 stores This numbers show that Highlands Coffee graduallydominate the market (style, 2016)

Competitors

● Growing number of competitors between Viet Nam companies.

o Small household café: There are unique spaces to toward specificcustomer segmentation such as nostalgia style store, pets coffee store,vintage coffee store, etc…

o Trung Nguyen: Besides delicious drinks, the space is cozy rather thanother high-class coffee Trung Nguyen has a great advantage that has afactory located at Buon Ma Thuat, the transportation is not a problem.Moreover, Trung Nguyen owns a coffee farm to supply raw materials.Therefore, they ensure transportation costs and purchase costs are thepossible lowest (Report, 2013)

o Cong: Price and quality of this coffee is not really special, but Cong coffee is still selected by many people, because of the unique style unique style memorize the old years by the ways use "đồng nát"

furniture to decorate By combination of traditional and old elements are extremely atrraction for customers (Bowyer, 2016).

o The coffee house: The coffee house concept is every store must be anintegral part of the community Therefore, in their designing, CoffeeHouse always tries to bring the localism to each of its stores and makecustomers to feel they belong to this place from the first time comming

● Growing entrants from foreign

o Starbucks: They have an available number of customers who can tap tobecome key customers because this client groups know Starbuck beforethis brand come to Viet Nam market This client group includesforeigners living and working in Vietnam, overseas student, and foreigntourists who have used Starbucks coffee in foreign This is not largegroup but they have stable income to be easy will become a regularcustomer at Starbucks (website s , 2016)

o The Coffee Bean & Tea Leaf: Carry out the care of your customers inany way through programs that link and support the image of Vietnam.Typically, it is the cooperation with Vietnamese designers to change thecostumes for employees in the whole chain, change the menu, suitableformore pure Vietnamese, especially with more reasonable price (website T.c., n.d.)

2.5.2 Products and Customer segmentation

2.5.2.1 Product lines and their targeted customers

Not only focus on coffee, Highland coffee has diversified the menu, now there arebread, pho, yogurt shake, ice blender, etc Expanding international market is one ofstrategy step and Highland coffee will keep going in that direction in the followingyears

There are 2 main types of coffee beans: Arabica and Robusta

● Robusta is the type coffee bean which is planted in Vietnam because of the

features about terrain, weather and altitude

● Arabica requires being planted in higher places and cooler (about 300->600 feet

above sea level) Arabica need longer time to get ripe, less in quantity but has

more flavor than Robusta Therefore, Arabica’s price is twice the price ofRobusta.

Highland coffee has 2 main types coffee: international and traditional flavor They arecombined by different formula

● Espresso- Full City Roast;

● Espresso- cinnamon Roast;

● Espresso- Arabica Supreme;

● Espresso- Decaffeinated.

Coffee beans have been tested carefully, preserved in right way Especially, thepacking process is observed closely, and the product packaging has function to keepthe fresh of coffee (Turkish Coffee Beans, n.d.)

Figure 2-4: Product lines of Highland

The office staffs and the active young generation are the middle class for the targetcustomers Highlands coffee because drinking coffee here with the prestigious coffeebrand helps them confirm their status in the society This is one of reason to help theresearch and developing team that can find the appropriate locations for Highland.Therefore, Highlands Coffee stores are usually located at center of city or famousshopping malls, which are all crowded areas When coming to Highlands stores inluxury buildings such as Vincom, Parkson, customers may notice Highlands Coffeewith wooden floor separate from the surrounding area The first impression is a luxuryspace with two main colors: red and black The red lanterns which are stronglyattached to Highlands Coffee store network create warmness and orient In particular,the indoor stores are also equipped with high tables with swivel chairs like bar, facingthe street, to serve those wishing to contemplate the streets Besides, Highlands Coffeebrings Western values to their stores through the wooden tables and chairs, large

armchairs, all of them are extremely modern Moreover, Highlands coffee alwaysfocuses on creating the comfortable and exciting atmosphere for customers to enjoycoffee every day In addition, Highlands also targeting customer group are youngbusinesses and the foreigner living and working in Vietnam, who used to study andlive abroad so they are familiar with the style of European-American like drinkingcoffee at a chic restaurant that impress the style of the place they used to live Aftertime on work, this is an appropriate location with the quiet and less luxurious space todiscuss with their friends and enjoy coffee with pastry-the Western style, bring forthem an interesting relax time With outdoor stores, Highlands Coffee put emphasis onthe big white umbrellas, which reminds of outdoor coffee shops in Italia or France.They are still wooden and in consistent style with the indoor stores, bring for thecustomer a strongly realize about Highland's design The allocation of different areas

at Highlands Coffee is quite reasonable The preparation counter is placed at store’scenter with target for customers can easily observe the preparation process, hygieneetc As for Highlands’ staff, it helps them to capture customer’s needs and servequickly The preparation counter is equipped with modern coffeemakers, which makesthe area professional There are also nearby shop windows full of various types ofcakes and other food Visitors to the restaurant, in addition to the drinks and deliciousfood, also receive value from the comfortable, luxurious and highclass space

2.5.2.2 The value of products and services

The customers come to Highlands Coffee not only to have a drink but also to dealwith their clients, chat with friends, to think about life and to find a quiet space of theirown after a stressful working day Understanding this customers’need and providingthem with a very good service, Highlands Coffee deserves to be one of the best choicefor its customers

2.5.3 Internal resources, capabilities, and competences

Internal resources, capabilities, and competences are showed through the Porter’ valuechain

Figure 2-5: Porter’s value chain (Kaplan Group, 2015 , p 58)

Porter developed the value chain to help identify which activities within the firm werecontributing to a competitive advantage and which were not The approach involvesbreaking down the firm into five 'primary' and four 'support' activities, and thenlooking at each to see if they give a cost advantage or quality advantage (Porter, 2012)

The components of Porter’ value chain model

● The primary activities: is the list of activities including inbound logistics,

operations, outbound logistics, marketing and sales, service

Inbound logistics – is the process of receiving, storing and handling raw material

inputs For example, a just-in-time stock system could give a cost advantage Coffee

beans are transported from Dac Lac, Lam Dong, and Buon Ma Thuot to the Highlandscoffee warehouse for storage and distribution to small businesses.

Operations - transformation of the raw materials into finished goods and services The

beans after being imported from the HighLands will be processed through theproduction line into coffee powder and grains and discarded for distribution todomestic chains and partially packaged for export

Outbound logistics - storing, distributing and delivering finished goods to customers.

Highlands coffee uses a multi-channel delivery method that uses two or more differentdistribution systems in parallel to cover the market, targeting the best possible targetcustomers Aside from distributing products (coffee powder and caffee bean) tohighlands coffee shops, highlands are also looking to third parties: retail chains such asVinmart, Coopmart, Lotte mart Even more impressive, with the merger of the JollibeeGroup, the highlands have expanded their distribution network not only at home andabroad

Marketing and sales:Highlands marketing strategies utilize the edge with other

companies

● Eye catching decoration:The Highlands coffee shop is decorated in a mixture ofEastern culture traditional Vietnamese and Western culture to create a sense ofcloseness bringing highland breath between the pace of modern cities

● Merger: Merging with Jollibee has created a highlands attraction for localmedia and customer attention

● Purchasing Vietnamese raw materials: Highlands to the high value and the spirit

of writing using the Vietnamese coffee beans, that has hit the national interest ofthe Vietnamese people

● Service: Provides online ordering through App Deliverynow, a self-servicemethod that uses a service bell when ordering drinks or food in a restaurant

● Secondary activities include the following activities such as firm

infrastructure, technology development, human resources development,procurement

Firm infrastructure:

● Finance:With the investment capital, the Highlands are clearly the largest inthe coffee chain Financial capacity is a great advantage to help theHighlands occupy beautiful sites and rapidly expand its chain stores.

● Location: The Highlands locations are highly homogenous, all in goodlocations or at the foot of office buildings This helps the customer to clearlyand uniquely identify the brand image of the Highlands

Technology development : Highlands coffee uses self-service through high technology,when employees complete the order, the bell will ring and customers willautomatically pick up

Human resources development : Highlands coffee invests heavily in trainingprograms for both experienced and inexperienced staff to match the company's uniquework environment

Procurement: obtaining raw materials, designing products, building manufacturing

facilities, developing co-operative agreements, providing customer service

Highlands Business Value Chain Analysis offers the following benefits:

● It provides a generic framework to analyse both the behaviour of costs as well

as the existing and potential sources of differentiation

● Activities that are not adding value can be identified and addressed – for

example, improved so they do add value or outsourced if this is not possible

● It emphasises the importance of (re)grouping functions into activities to

produce, market, deliver and support products, to think about relationshipsbetween activities and to link the value chain to the understanding of anorganisation's competitive position

● It makes it clear that an organisation is multifaceted and that it’s underlying

activities need to be analysed to understand its overall competitive position

● It is an attempt to overcome the limitations of portfolio planning in

multidivisional organisations Rather than assuming that SBUs should actindependently, Porter used his Value Chain analysis to identify synergies orshared activities between them and to provide a tool to focus on the wholerather than on the parts

2.5.4 Stakeholders, ethics and culture

In this part, we will seek for some factors effecting to the organization behaviour,espencially stakeholders, ethics and culture

Income Take

dividends

Providecapital for HL

to work

If an owner withdrawcapital, Highlands coffeesuffers a lack of capital

Managers Earning Receiving

salaryCommandand oderstaff toconducttasks

Maximizeshareholder’svalue

Rotation frequentlyBonus if doing well,penalty if fail to meetobjective given by thetasks of manager

Career path

Staffs Income Insurance,

remuneration,

Do assignedtasks well;

perform goodservice

Not enough money tomake ends meet

Bargan Provide

enoughquality as

quantity ofproduct andservices Customers Traditional

space,favourcoffee, high

Complaintany thingsmaking themdissatisfied

Qualify of product andservice is not as good asexpectable

and

regulatory

bodies

Protecthealth ofpeopleTake tax forthe budget

Collect taxpayment

Provide bestconditions for

2 Corporate level: focuses on the ethical issues facing individual companies whenformulating and implementing stragegies.

3 Individual level: concerns the behavior and actions of individuals within theorganization

Benefits of an organisation being ethical

● Lower risk will create stable earnings and should make cheaper financeavailable

● Attractive to customers

● Attractive to potential empoyees

● Less spent on paying fines and damages

● Less time and cost spent on dealing with regulatory and bodies

Figure 2-6 The cultural web (Kaplan Group, 2015 , p 100)

Routines and rituals – routines are defined as the way things are done around here andmay guilde the orgnaizatio to a beneficial competency way Rituals imply somethingthat is especially valued, including events such as award ceremonies for best-performing salesperson

Stories and myths- normally, these are told or be word of mounth by employess andembed the present in its organisational history and demonstrate important events andpersonalities

Symbols – things like logos, offices, cars, titles, type of language and terminologycommonly used in shorthand representation of company for raising customer’awareness

Power structure – the dominant coalition is the obvious source of power in anorganisation This may be contigent to management position and seniority butsometimes organisations power can be assigned to other levels or functions

Control systems – the system that is responsible for control working environment toemphasise what is important to monitor and to focus attention and activity upon

Organisational structure – the formal and informal ways in which the organisationworks Structures are likely to reflect power

2.5.5 Strategic analysis

2.5.5.1 Strategic position

Clearly drawing up the positioning strategy at the very first stage of developing abusiness project plays a critical role in enhancing the business success The positioningstrategy focus on the two important questions: which place the firm is currently on thecustomers' mind and which place they want to hold on the market

Firstly, the place the firm currently holds in customers' mind Brand positioning in themind of customers is very important, Highlands has chosen the chain business strategywith the synchronous model and expand the branches to reach the potential customers.The fact is that Highlands coffee shops are always close to each other about 1 to 2 kmapart to increase the ability to identify customers However, there are many complaintsregarding to the service quality at Highlands coffee 6 Nha Tho, mostly about the longwaiting time or the noise "The serving is too slow", "I normally have to wait abouthalf an hour to enjoy my coffee", "This place has the most annoying blender machine

on earth", said the customers From some information from customers that thereporters collected during the shop visit and websites, it can be seen that HighlandsCoffee shop is really a special coffee shop to customers, since they offer high qualitycore product to customers and has the variable supplementary services, however theyneed to professionalize the staff to build better image on customers' mind

Secondly, the place the shop wants to hold Highlands Coffee Shop positions itself as ahigh price, high quality coffee shop The shop owners want to emphasize that, the highprice means high service quality as well Since customers are enjoying a more specialservice, so they should also pay a higher price for what they are getting

Figure 2-7: The place the shops want to hold

2.5.5.2 Strategic choices

Highlands coffee has clearly identified the segment of customers that it is targeting,namely the intellectual intelligentsia So, most Highlands coffee shops areconcentrated in high class or high-rise buildings, populated areas, close to workplaces

or universities Choosing the location above has made a significant contribution to thestrategy of reaching out to high-end customers

2.5.5.3 Strategic action

With the warm welcome from Vietnamese consumers, Highlands is expanding itscoffee chain system Since then, it has gained a large market share in the competitivebeverage industry Besides, the Jollibee sweepstakes has clearly expressed theaspirations to reach the international range of Vietnamese coffee That breakthroughhas helped Highlands not only reach Vietnamese customers but also internationalcustomers

2.5.6 Quality issues

Quality control is the traditional approach, concerned with ensuring that actual quality,

as measured, meets the target or benchmark standards that have been set It isconcerned with maintaining quality standards, rather than improving them andinvolves:

• Establishing quality standards for a product or service

• Establishing procedures and processes that ought to ensure that these qualitystandards are met in a suitably high number of cases (in other words, qualityacceptance standards are established)

• Monitoring actual quality

• Taking control action in cases where actual quality falls below the standard

• Procedures for inspecting and checking the quality of boughtin materials, andproduction output

● Services quality: Every time customers come to Highlands Coffee, they willfeel dynamic, friendly and professional of the staffs Regarding enjoymentspace, it combines between luxurious and cozy blank for indoor space andmany trees in harmony with nature bring bustling dynamic for outdoor space.All the above factors bring the best service for customers when come toHighland coffee

● Hygienic conditions: The whole system of Highlands Coffee applies thestandards of food hygiene and safety which to be issued by the Ministry ofHealth and it also has been granted certificates for the whole system HighlandsCoffee's employees get certificate about health standards and they still updateconstantly about international food safety standards

● Health: Applying closed process, Highlands brings the products also meet foodsafety standards for customers, do not contain toxic chemicals to affect health

of clients

2.5.7 People

The structure of working positions of Highlands is presented in the figure below

Figure 2-8 Career development

● Director is the top manager of a store chain, which is responsible for receivingpromotions or training policies for employees from the board of directors andsenior executives At the same time, ditector is responsible for the division ofwork for employees, handling difficult situations during the operation of thestore This requires high-level management to be highly accountable in theworkplace, requiring skills in the long-term experience

● Assistant: the person who is responsible for the tasks assigned to the seniormanagement, and the managerial support in the management of the store

● Bartender: A bartender is a person who formulates and serves coffee or softdrink beverages behind the bar, usually in a licensed establishment Bartendersalso usually maintain the supplies and inventory for the bar

● The Waiter/Waitress: will take orders and serve food and beverages to Guests inour restaurant Always aware of Guest satisfaction to deliver the perfect serviceexperience Ensure high quality of food and beverages to Guests Duties andresponsibilities include, but are not limited to: servicing the Guest in a friendly,efficient manner while maintaining a clean and safe work environment Guestsmust feel welcome, comfortable and well attended to at all times Making menurecommendations, answering questions and sharing additional information withrestaurant patrons Provide the perfect service experience for every guest

● Delivery Staff: It is the responsibility of the customer to deliver the product tothe customer with a dedicated customer service attitude Delivery Staff is

careful, friendly and agile Adhere to timing standards for products andservices.

● Securities Guard: It is responsible for protecting assets such as motorcycles,vehicles of the customer as well as being responsible for protecting the assets ofthe shop Securities Guard is a careful person who is observant, honest andtakes a high responsibility for the job

2.5.8 Information technology

Use sales app to manage orders

Use centralized management information system (MIS): all local cafeteria sites areinterconnected through internet

is very noticeable and easy to impress passersby The convenient location of the shop

is one of the key factors for the service business in general and the highlands inparticular

One of the key factors in the success of the highlands is the difference in the servicesystem Successfully transformed from a traditional form of service to a modern self-service form combined with the company's ringing technology called Ecall.Instead ofserving customers in traditional style like regular coffee shops, Highlands coffeechoose the modern service style through the installation of self-service equipmentthroughout the system The introduction of self-service equipment into the operationmodel of the chain of Coffee shops Highlands help the customer service continuouslybecause employees just stand at the counter without having to go to each table to askwhat customers want to drink Meanwhile, customers will save more time becauseguests actively order drinks from entering the restaurant As for employees, self-service facilities help employees focus on making drinks, without the time to go to

each table to serve customers anymore Guests arriving before will be served before,later guests will be served after This solution not only helps highland to reduce thecost of hiring staff, but also improve the quality of the restaurant service to bringsatisfaction to customers that is considered the key to success of the highland coffee The difference in the way of decoration at the shop of Highlands also partlycontributed to the success of this brand The decoration has conveyed the value oftraditional culture in Vietnam, as well as mixed modern European style in all the shops

of the Highlands coffee It is a community of cohesion and friendliness This increasesthe brand's ability to brand identity of the Highlands coffee chain Futhermore, brandassociation for businessmen of the Highlands Coffee has been "popular", to serve morecustomers In addition, with the participation of Jollibee, the coffee chain Highlandswas change spectacular by the support of promoting products from Jollibee fast foodchain By 2014, the Highlands only has 60 stores, as of March 31, 1977 the numberhas reached 180, this is a clear demonstration of the success of this strategy (Trần,Không phải Trung Nguyên hay Starbucks, Highlands mới đang là "bá chủ" chuỗi càphê ở Việt Nam, 2016)

Highlands coffee also has a flexible shipper service with app delivery now, if thenumber of package is less, Highlands coffee will limit the ship service within 1km but

if ordered in large quantities will agree to expand the scope of shipment Besides, one

of other success of Highland is combines with the international and traditional flavor

to bring satisfaction for many customers Furthermorw, they use the main rawmaterials which purchase from the coffee farms in Gia Lai Dac Lak, Buon Ma Thuotand Lam Dong

Regarding products, Highlands coffee launches regularly new product line, the mostrecent time they have launched the Highland freeze with new flavor and it is wellreceived by customers Thus, after more than 15- year development, Highlands haveamount of large loyal customers, who often choose Highlands are places to relaxing,working, study These strengths have promoted Highlands rank to belong the top 3high-end coffee chains with the large market share in Vietnam Other strengths ofHighlands is bargaining power that is the ability of Highlands to exert influence over

suppliers in a negotiation in order to achieve a deal which is favourable to themselves.((Trần, Không phải Trung Nguyên hay Starbucks, Highlands mới đang là "bá chủ"chuỗi cà phê ở Việt Nam, 2016)).

Highland coffee has a good recruitment policy David Thai, the founder of HighlandCoffee, shared the company's corporate philanthropy policy: “We do not need to hirehighly experienced people We do not need to hire people who are trained We recruitpeople who love work, love coffee, show passion for coffee, skill training is a part ofthe job”, this is one of the things that are worth to the Vietnamese business’s recruiting

It will definitely help your business grow strongly.( (Ecall, 2017) Not to mention tofriendly and professional staffs also bring satisfaction to customers Experienced andwell-trained management team at each level provides high performance whenmanaging and implementing programs and policies at each highlands coffee shops

2.6.2 Weaknesses

For young people who always like innovation, creativity, however Highland coffeeshops are similar in format of decoration When customers want to enjoy anothertheme space, despite they come to different location of Highland, it still has a similartheme In addition, Highland has been developing in Vietnam for a long time, thereforetheir spaces do not have a breakthrough in the decoration when comparing withcompetiors

The other weakness of Highland, they almost do not focus promote campaigns Thepromotion programs still are not diversified enough to attract to customers Promotionand sale programs have not really attracted customers, and promoted the brand value

In addition to these weaknesses, Highlands coffee also makes it easy for many newcustomers to misunderstand their product segment For example, their brand did notshow the full range of their products such as tea, bread, cakes

In the past two to three years, more and more farmers have decided to replace thecoffee with other profitable crops such as black pepper, butter, and lemon goodincome This makes the area of coffee grows drastically, especially in Dak Lak andLam Dong provinces, which are the main provinces supplying raw coffee for HLleading to price changes that can not be controlled stably

2.6.3 Opportunities

● Abundant foreign investment

Trading in Food & Beverage chains, especially coffee chains, has experienced a lot

of fluctuations The development of this market has quickly attracted foreign capitaland domestic investors which offers exceptional opportunities for the industry In fact,

in 2012, Viet Thai International (VTI) sold 49% of Vietnam's business division and60% of its Hong Kong business division to Jollibee Group, for $ 25 million Inaddition, Highlands Coffee is also loaned $ 35 million by Jollibee Expected amountVTI will use to invest in the future The deal has helped the coffee chain get morecapital to carry out aggressive expansion, especially in recent years (Thắng, 2011).Jolibee Foods Corp and their partner, Viet Thai International, are also planning to listSuperfoods, a unit that manages the Highlands coffee chain on the stock exchange ofVietnam in 2019 This shows that F & B chain businesses have a lot of potential forgrowth When listed stocks are released to the public, businesses will also have astronger access to customers

● Large and potential markets.

Drinking coffee has long been a habit of Vietnamese people Most of the 18-30year olds feel that frequent coffee breaks are a habit in their lifestyle Catching up onthis trend, the Highlands has quickly developed a market for coffee related beverages.Moreover, the per capita income of Vietnam is increasing This means that the quality

of the river day is enhanced and people are ready to spend large sums of money toenjoy good food and drinks From there, opening up a potential market for Highlands

to develop and diversify its products to attract more customers

● Opponents are slow, weak and bad.

Competition is a great opportunity for businesses to make a difference to the brand.While the F & B industry in Vietnam is booming, many of the imported coffee brandshave made competition in the beverage industry increasingly severe So many brands

of coffee have to accept to withdraw which are Espressamente Illy, Gloria Jean`sCoffees, NYDC - New York Dessert Café, However, the fierce competition and the

withdrawal of some of these brands is the opportunity for highlands to affirm itsposition and brand in the coffee market in Vietnam (Lê, 2017)

2.6.4 Threat (Challenges) Challenges

● Growing competitor

These days, with the great potential of the beverage industry, there are for more andmore domestic and foreign coffee bands which are emerging in the Vietnamese marketthat makes business in this area become one of the most intense competition Thegrowing of other coffee brands is considered the biggest threat of Highlands coffeebecause these brands will attract a large number of potential customers It can be seenfrom the current coffee market, the image of Starbucks (USA), Gloria Jean's Coffee(Australia), Coffee Bean & Tea (USA), Illy (Italy), Dunkin 'Donuts (USA), ordomestic coffee chain such as Phuc Long, Cong coffee, Trung Nguyen has graduallyreplaced a few brands in the country Highlands Coffee selects the segment of officeworkers and businessman to serve, positioning as a luxury coffee brand However, theimage and the success of Starbucks in other markets is a big threat to Highlands Coffeewhen it come into Vietnamese market because Starbuck is a well-know brands in USand it is also the real competitor in the businessman and office worker segment whichHighlands Coffee is dominating In Vietnam, although Starbuck is not really popular,the young have almost heard of the big coffee chain of this world already

The rapidly development of Cong coffee chain is an illustration for the growth of localcoffee chains Cong coffee is constantly trying to bring the old spiritual experiencethrough the unique space, items or corner reflect the subsidy period It attracts anumber of customers who come here for this style of specific space which is not found

in Highlands coffee Besides, the growth of Phuc Long coffee chain - a pureVietnamese brand is also a challenge of highlands because many customer choose tocome to Phuc Long coffee instead of luxurious brands such as Starbuck, Highlands(Thọ, 2017)

● Growing entrants

In addition to its long-established and well-known competitor, the Highlands quicklybecame competitive by a number of new cafes and restaurants which opened up in a

similar model Many young customers with money have more choices when thesestartup companies in this industry appear more and more Some examples for thesenew brands are: KAT Coffee, The coffee house, Linh coffee, That these new coffeebrands have innovated in style as well as products attract many customers brings adareay for Highlands.

● Brand loyalty

The threat to highlands is also the loyalty of the brands of some segments of customerswhen they only choose coffee brand which they ussually come to to enjoy becausethey are familiar with space as well as products, service here as a habit It is notintended to try new products of another cafe brands For instance, domestic coffeesuch as Trung Nguyen is a well-know brands in mind of Vietnamese people for longperiod of time

● Competitive price

Highland coffee brand has competition on price That a growing number of emergingcoffee brands have decreased their prices to lower prices to attract more customers isconcern for Highlands because of its price which is assessed rather high in someoppinions

Table 2-2 The comparisons between the price of KAT coffee and Highlands coffee:

Black Coffee VND 20,000

Bac xiu VND 30,000

Freeze Matcha VND 40,000

Black coffee VND 59,000Esspresso VND 54,000Freeze Matcha VND 65,000

● Fluctuate of raw material price

Raw materials at Highlands Coffee are purchased from farmers' farms in Gia Lai, DakNong, Buon Me Thuot and Lam Dong Coffee prices may rise in the coming decades

as climate change will hinder the production of coffee beans or under pressure fromforeign beans price such as coffee beans from Brazil High coffee prices will affect

revenue of Highlands as the price of its products are fixed but input prices soaredwhich causes the ability that the business will benefit less and even the risk of loss.

● Increasing cost of rent

Highlands coffee aim at office workers and businessmen, so most Highlands cafes arelocated in big commercial centers and city centers Choosing the key locations,Highlands Coffee pays a high rent for a shop from VND 100 to 200 million per month

on Trang Tien Street in the central part of Hanoi With the current fierce marketcompetition, that the demand for space rents has increased leads to a rapidly raise inthe cost of renting space which is an intimidation to the revenue of this coffeebrand.Analysts question whether high-end coffee chains can make profits when payinghigh rent for retail premises (Chi, 2017)

● High rate of staff turnover

The highlands challenge is that almost all highlands employees are part-time workers

in their school years and do not intend to be attached to the job The high rate of staffturnover is a big challenge to the goal of enhancing the customer service of manycompanies because this affects the cost of losses, the cost of staff trainingcontinuously In particular, Highlands use the form of technology in its service, so ittakes more time to tranning

● Human resource managing in variety of locations

Highlands is a nationwide chain of coffee, so it faces the challenge of managing people

in a variety of locations and stricter management controls when the staff changesconstantly

● Alternative challenge

In addition to the increasing number of domestic coffee chains and foreign chainsimported in Vietnam, milk tea brands are increasingly appearing on the market at arapid growth followed by the trend of milk tea increase rapidly There are manyoptions for drinking milk tea Many milk tea brands are conveniently located, beautifulspace, good service are attractive to young people Types of tea imported from Japan,Taiwan, South Korea with many strange and delicious taste such as Dingtea, Gongcha,Xingcha Blackball, Mr Goodtea, Royal tea, Tocotoco, Feeling tea, Bobapop This is

also an alternative challenge for Highlands coffee as the rise of milk tea brands indomestic market has attracted the young customers segment of the Highlands.

Figure 2-9: SWOT analysis

2.7 Chapter conclusions

From analyzing the operational aspects of the Highlands and using SWOT, we canclearly see the weak points of the business so as to find ways to overcome and improve

CHAPTER 3LITERATURE REVIEWS3.1 Risk Management concept and definition

It is considered that corporate risk has a significant effect on project and businessperformance Recently, existence of risk is essential in every aspect of business,identification and understanding of corporate risk Its influence also play an important

role in developing strategic management (Chapman C and Ward S , 1997) “That better understand the nature of the risks and can manage them more effectively cannot only avoid unforeseen disasters but can work with tighter margins and less contingency, freeing resources for other endeavors , and seizing opportunities for advantageous investment that might otherwise be rejected as ‘too risky’” (Chapman &

Ward, Project Risk Management: Processes, Techniques and Insight, 1997)

What is the definition of risk? Oxford dictionary define the word “ risk” as: “The possibility of something bad happening at some time in the future; a situation that could be dangerous or have a bad result (Oxford Learner's Dictionaries, n.d.) This

definition is also based on the publication of the US Project Management Institute(PMI) and the UK Association for Project Management (APM) Their definitions are

similar:“Risk - an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective”- (Project Management Institute, 2000, p 127).

“Risk— an uncertain event or set of circumstances that, should it occur, will have an effect on the achievement of the project’s objectives” - (The Association for Project

There are various definitions of the word “corporate risk management” by numerousresearchers and writers The establishment of corporate risk management inmanagement strategy is to answer the the following matter: what is the risk, who is

involved in risk, any available control for those risks any whether these control operateproperly If there is none of effective controls, there is requirement of actions to reducethe risk to a reasonable and acceptable level (Tupa, Simota, & Steiner, 2017, p 1225)Generally speaking, risk management is a formal process of identifying, analyzing andresponding to the influence of risk in appropriate way (Merna & AL-Thani, CorporateRisk Management, p 2).

A brief view of the phrase “risk management” in “Fundamental of risk and insurance”(tenth edition):

“Risk management is a scientific approach to dealing with risks by anticipating possible losses and designing and implementing procedures that minimize the occurrence of loss or the financial impact of the losses that do occur.” - (M.Vaughan,

1807, p 16)

Although there are many ways of defying risk management, they all focused on 2points: the first is that risk management is relevant to risks, and the second is that themanagement’s process and management is for evaluating and managing the risks faced

by the enterprise

Levels within a corporate organization (Merna, Management and Corporate Risk,Appraisal, Risk and Uncertainty, 2003)

3.2 Risk Management tools

One of the biggest challenges that organizations have to confront in the present is how

to apply any risk managements in effective manner in order to identify, limit, and

eliminate hazards in business With the expectation to perform the best riskmanagements, many risk management tools are needed.

Tools are described by many different researchers Tools is illustrated by FrenchSaward (1983) as an instrument which are known as both manual and mechanical used

to achieve its intention of controlling and managing risk Also, tools and techniqueshave close relationships of each other as states by ( (Merna, F, & Al-Thani, CorporateRisk Management (Second-Edition), 2008, p 67)): “the methodology which employsnumerous techniques to achieve its aim” that RMT employs decision tree technique istypical example On the basis of this point, tools that organizations use to manage riskconsist 2 main categories: qualitative and quantitative techniques

Qualitative method is definitely appropriated and used to compare undesirable riskfacing a project from the impacts of them happens on the project outcome Qualitativetechnique is highly recommended in the process of risk analysis and assessment whichbased on experience, descriptions and scales (Thompson & Perry, 1992, p 68)

According to (Merna & Al-Thani, 2008, p 69), qualitative includes: brain storming,assumption analysis, Delphi , interview, hazard and operability studies (HAZOP),checklists, prompt lists, risk register, risk mapping, probability-impact tables, riskmatrix chart, project risk management road mapping

However, quantitative techniques are considered when the capability of the investmentand project obtaining its aims within time and budget is needed for budgetauthorization or presentation of the project’s status to the highest of managers (board

of directors) (Merna & Al-Thani, 2008, p 76) - This analysis method based onmathematical formulas and consists 5 main methods: decision tree, controlled intervaland memory technique, Monte Carlo simulation, sensitive analysis, and probability-impact Grid analysis

Moreover, some other RMT are also used in some particular cases These methodsinclude: soft system methodologies (SM), utility theory, risk attitude and utility theory(risk neutral, risk seeking, risk averse), nominal group technique, stress testing anddetermining analysis, tornado diagrams

In research of (science direct), the key in RMs are the decisions on what tools should

be apply suitably and effectively In this research, researcher also point out the mostcommon tools are used within today complex economy, they are: brainstorming,Delphi method, sensitive method, risk matrix, Net work scheduling (PERT, CCM,CPM), decision tree, artificial neutral network, modeling and computer simulations.Some most common tools are discussed later on the basis of research of (Merna & Al-Thani, 2008, pp 69-84)

In recent decades, brainstormings are used widely and spread for all types of businessand applied by everyone who has issues with desire to be solved (Chapman, 1998, p.337) Chapman indicated that brainstorming process consists set of actions: redefiningthe issues, listing ideas, so as to find the potential solutions, selecting solutions thatreally needed for this problems and conducting them effectively The basis rules of thismethod includes:

● Requirements of time restrictions.

● A comprehensive declaration of the matters.

● A methods of generating ideas.

● Visible space of storing ideas and let them incubate.

● Implementation of the principle that no bad ideas exist.

● Suspension of assessment.

● Inspiration of participants to think and drift around the problems.

● Quantity is considered rather than quality.

● Cross-fertilization by obtaining the team ideas and expanding and developing

● The standpoints of the risk impacts related to a project or investment is really

necessary from respondents

● Then, the chairpersons who have responsibilities to check and compare the

information and declare brief of the findings to the respondents

● Finally, a set of steps mentioned above can be done again until either consensus

is reached or no benefit can be found from more reiterating

Third, risk matrix chart is one of the most useful method which implemented in riskcontrolling by discriminating high impact risk from low-impact risk based on theimpacts and the probability of the risk

Figure 3-1: Risk matrix

This method is explained in more details by using the chart below:

From this chart above, the impact of risk and its probability can be clearly realized.For instance, the case of unpunctual employee for work would be considered asKITTENS with low probability and low impact of risk since little attention is neededwith the reason is that employees finish their work in own time On the other hands, indrug development of a pharmaceutical product, it is essential for this product to betested to bring the final comfortable results During test, the prohibition of the sideeffects of first experiment in person are extremely high and cause significant impacts.This example of testing pharmaceutical product is classified as TIGERS with bothhigh probability and impacts To minimize these reactions by keeping the test down to

a small level such as small samples and ensuring the person take the test are insured

long-term effects It can be seen from this chart, TIGERS and ALLIGATORS are bothneeded to be lessen before KITTENS and PUPPIES.

In the fluctuation and competition of business, management are regularly confrontingwith multiple choices In general, management face with the options for only one andthis create opportunity costs To select the most effective option, decision tree methodsdeveloped and used widely Decision tree is depicted by (PMBOK, 1996) PMBOK(1996) as diagrams with branches that show the interaction between decisions andinterrelated chance events This method describes a decision result and expectedoutcome under each possible set of circumstances If the probability and value ofpotential outcomes are given that using this method to calculate with the objective ofcreating expected value of each choice The managers will base on the differences ofexpected value to make right decisions The form of decision tree method is depicted

by square note and linked by branches, this method is explained clearly throughexample as follow: