Application of technology in the management of distribution system at habeco trading one member company limited

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH ---NGUYỄN THU NGA APPLICATION OF TECHNOLOGY IN THE MANAGEMENT OF DISTRIBUTION SYSTEM AT HABECO TRADING ONE-MEMBER COMPANY LIMITED ỨNG

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

-NGUYỄN THU NGA

APPLICATION OF TECHNOLOGY IN THE

MANAGEMENT OF DISTRIBUTION SYSTEM AT HABECO

TRADING ONE-MEMBER COMPANY LIMITED

ỨNG DỤNG CÔNG NGHỆ TRONG QUẢN TRỊ HỆ THỐNG PHÂN PHỐI TẠI CÔNG TY TNHH MỘT THÀNH VIÊN

THƯƠNG MẠI HABECO

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2021

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

-NGUYỄN THU NGA

APPLICATION OF TECHNOLOGY IN THE

MANAGEMENT OF DISTRIBUTION SYSTEM AT HABECO

TRADING ONE-MEMBER COMPANY LIMITED

ỨNG DỤNG CÔNG NGHỆ TRONG QUẢN TRỊ HỆ THỐNG PHÂN PHỐI TẠI CÔNG TY TNHH MỘT THÀNH VIÊN

THƯƠNG MẠI HABECO

Chuyên ngành: Quản trị kinh doanh

Mã số: 8340101.01

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS HOÀNG ĐÌNH PHI

HÀ NỘI - 2021

The author confirms that the research outcome in the thesis is the result ofauthor’s independent work during study and research period and it has not yetpublished in other’s research and article

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

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

First and foremost, I would like to express my faithful acknowledgement toHanoi School of Business, Vietnam National University (HSB, VNU) and all themembers, lecturers and assistants for knowledge and experience that has been taughtand shared through comprehensive and inspiring lectures, discussions and examsthroughout MBA 13 course.”

I would also want to extend my most sincere appreciation to my supervisor,Assoc Prof Dr Hoang Dinh Phi, whose vast knowledge and logical thought ofbusiness management in general and technology field in particular has brought greatvalues and inspiration to me His sharing of knowledge and experience has encouragedand enable me to complete this MBA thesis.”

On the other hand, I would not be able to complete this thesis in its most practicalaspect without the strong support from my leaders and colleagues at Habeco TradingOne Member Company Limited, who are though very busy with business issues butstill spare their precious time and passion in responding thoughtfully to my interviewsand survey.”

Last but not least, I would like to grant my most heartfelt thanks to my family.Without their encouragement and continuous support, I would have not been able tofocus on completing on my thesis, which is one of my biggest achievement of theyear.”

Table of Contents

ABBREVIATION i

LIST OF TABLES ii

LIST OF FIGURES iii

TITLE CHAPTER 1

1 Rationale 1

2 Literature review 2

3 Aims of research 4

4 Objects of research 5

5 Scope of research 5

6 Research methodology 5

6.1 Research process 5

6.2 Data collection 6

6.2.1 Secondary data 6

6.2.2 Primary data 6

6.2.3 Data analysis 7

7 Thesis structure 7

CHAPTER 1: BASIC THEORY ON TECHNOLOGY APPLICATION IN THE MANAGEMENT OF DISTRIBUTION SYSTEM 8

1.1 Overview of technology 8

1.1.1 Definition of technology 8

1.1.2 Classifications of technologies 9

1.1.3 Roles of technology in business 10

1.2 Overview of distribution system 12

1.2.1 Definition of distribution system 12

1.2.2 Roles and functions of distribution system 12

1.2.3 Distribution channel system management 18

1.3 Technology application in the management of distribution system 21

CHAPTER 2: CURRENT SITUATION OF TECHNOLOGY APPLICATION IN THE DISTRIBUTION SYSTEM MANAGEMENT AT HABECO TRADING ONE MEMBER COMPANY LIMITED 28

2.1 Overview of beer industry in Vietnam 28

2.2 Overview of Habeco Trading One - Member Company Limited 32

2.2.1 History of development and establishment 32

2.2.2 Organizational structure 34

2.3 Overview of distribution system at Habeco Trading One Member Co., Ltd 38

2.4 Actual situation of management of distribution system in Habeco Trading One Member Co., Ltd 45

2.5 Current status of applying technology in distribution system management 58

CHAPTER 3: PROPOSAL OF SOLUTIONS FOR BETTER APPLICATION OF TECHNOLOGY IN THE DISTRIBUTION SYSTEM MANAGEMENT AT HABECO TRADING ONE MEMBER CO., LTD 68

3.1 Selecting technologies for the management of distribution system 68

3.1.1 Objectives of application technologies for the management at Habeco 68

3.1.2 Technologies for the management of distribution system 68

3.2 Recommendations for the effective and efficient application of technologies for the management of Habeco distribution system 85

CONCLUSION 91

LIST OF REFERENCE 92

APPENDIX 1 93

APPENDIX 2 94

APPENDIX 3 99

MBA : Master of Business Administration

HABECO : Hanoi Beer Alcohol and Beverage Joint Stock Corporation

MTV HABECO : HABECO Trading One Member Co., Ltd

LIST OF TABLES

Table 1: Information about number distributor & monthly revenue of MTV Habeco 42Table 2: Information about the quantity of sales team in MTV Habeco 56Table 3: Survey on distribution management reporting system in MTV Habeco 63Table 4: Evaluation of The BOD's commitment to DMS project implementation 83

LIST OF FIGURES

Figure 1: Research process 5

Figure 2: Technology Equation 9

Figure 3: Consumer distribution channel 15

Figure 4: Channel Flows in general 17

Figure 5: Five Flows in Marketing Channel for Beer 17

Figure 6: Situation of production and consumption of beer industry 2010 –2019 28

Figure 7: Beer market share in Vietnam 29

Figure 8: Forecast of Vietnam beer consumption 31

Figure 9: Revenue & Profit of Habeco from 2016 to 2019 33

Figure 10: Product consumption & Sales revenue of MTV Habeco from 2016 to 2019 .34

Figure 11: Organizational chart of Habeco Trading One Member Co., Ltd 36

Figure 12: Habeco Trading One Member’s staff qualification in 2020 37

Figure 13: Organizational chart of Branch in Habeco Trading One Member Co., Ltd 37

Figure 14: Model of distribution channel in MTV Habeco 38

Figure 15: Progress of restructuring distribution system in MTV Habeco 40

Figure 16: The quantity of distributor in MTV Habeco 41

Figure 17: Map of MTV Habeco Branch 42

Figure 18: The ratio of the area, the number of distributors and revenue between branches in MTV Habeco 42

Figure 22: Model of Distribution system management applied in MTV Habeco 45

Figure 20: Ordering flow & Product flow in Habeco 47

Figure 21: Price map of beer brands in the market 48

Figure 23: Push and Pull Marketing Strategy in MTV Habeco 49

Figure 24: Promotion flow in Habeco 50

Figure 26: The opinon of support policies for distribution system in comparison with competitors 52

Figure 25: Payment flow for promotion program in MTV Habeco 55

Figure 27: % personel division in MTV Habeco 56

Figure 28: % of position in sales division in MTV Habeco 57

Figure 29: DMS.One applied in MTV Habeco from 2014 to 2016 61

Figure 31: Current model of Enterprise Resources Planning applied in Habeco 82

TITLE CHAPTER

1 Rationale

Technology is all around us today and it must be admitted that technology isimpacting almost areas of our lives Especially, in the business sector, there has been acontinuous growth over the last few decades due to the remarkable advancements oftechnology Business has existed since the beginning of the human race in the form ofsimplistic barter, without technology business would not be the same as it is today andmajor industries could have collapsed Technology has made great progress in tradeand commerce Business concepts and models have been revolutionized as technologyintroduced a new and better approach to how business is going Being more competentthan ever, the firms are continuously evolving themselves to make more profits, reach-out to more customers and speed up their business processes With the advent ofArtificial Intelligence, Machine Learning and Automation tools, businesses have beenimproving their workflows

The revolution 4.0 brings both opportunities and challenges to enterprises.Updating new technology trends, changing management methods, automating systems,updating and processing data quickly are what businesses are orienting toward.Marketing, including distribution channels, also needs to adapt to this rapid change tokeep up with the market's shift from traditional marketing to 4.0 technology Channels

of distribution are not merely the movement of physical products from place to place, ithelps to anticipate market demand, user tastes and product No matter how good theproduct, how impressive the marketing is, the business will not develop if the product

is not delivered So in order to improve and maintain the distribution channeleffectively as well as to maximize revenues and profits, applying technology inmanaging distribution channels is necessary Technology will help to manage the workflow easier and more scientific, promptly handle problems, optimize human resourcesfor businesses, contribute to a stable growth and increase value for the company The beer industry in Vietnam is a promising land for domestic and foreignbrewers With the 8th position in Asia in terms of beer consumption volume in 2008,after only 10 years, Vietnam has risen to 3rd position only after China and Japan with

an estimated beer consumption per capita of about 64.9 liters This has strongly

attracted the attention of foreign investors The strong growth and the population of 100million people make Vietnam become an attractive fertile market for brewers.

As one of the three largest beer companies in Vietnam, Habeco is also aware ofthe difficulties in the fiercely competition From the end of 2016 to 2020, Habecoimplemented to restructure its distribution system And now, it is time for Habeco tochange its traditional way of management, instead apply technology in distributionsystem management to optimize and increase work Technological solutions helpHabeco have the optimal automation and workflows that save time and personnelresources for operation and cover more customers instead of recruiting more people.Huge expenses in distribution for promotion, display, sales programs, POSM… arestrictly controlled on the system to help Habeco resolve negative issues, budget lossesand ineffectiveness in deploying these programs

For those reasons, the researcher chose the subject "APPLICATION OF

TECHNOLOGY IN THE MANAGEMENT OF DISTRIBUTION SYSTEM AT HABECO TRADING ONE-MEMBER COMPANY LIMITED" to study and put

into practical application at Habeco to improve distribution activities for beer productsand its competitiveness in the market

is increasing If in the past, information technology was only considered as anadditional value to the company, in the modern technology development era it hasbecome a must-have tool to help the company compete in the market When operatingprocesses have reached maximum productivity, companies need to find solutions toreduce costs in order to increase profitability Information technology will help

businesses: to increase sensitivity to the market, the number of channel types and themarket size; to simplify or change the distribution system; to widespread use of E-commerce; to internationalize and easier entry to the global markets This study hasgiven examples of the support of the technology (like IP tracking technologies,geographic positioning system – GPS, optimum route system, automated distributionsystem, virtual organization system) well as its importance in distribution system.Application of technology has exhibited the positive results in practice.

According to Dr Hoang Dinh Phi in the article “Enhancing management oftechnology and innovation for sustainable competitiveness of SMEs”, published byVNU Journal of Science, Economics and Business in 2010, sustainable development isconsidered as the human goal in the 21st century People have seen the impacts ofeconomic and financial crisis, economic recession, social instability and environmentalpollution into daily life In some countries, small and medium enterprises (SMEs)occupy a large number and play a major role in sustainable development How to buildand develop competitiveness for SMEs is still a question without answer for manygovernments This article introduces a new approach as well as a basic tool that SMEscan apply in order to improve their competitiveness in the context of globalcooperation, competition and global integration Technology management andinnovation is considered as one of the important processes similar to strategicmanagement, human resources, finance, marketing Therefore, the management oftechnology and innovation can be practiced and enhanced to the desired degreesdepending on firm’s core business strategies and requirements

Riste Temjanovski & Tamara Jovanov Marjanov, (2016) “InformationTechnology and Distribution Channels: Current Trends”, Journal of Economics Theresearch focuses on analyzing the applicability of information technologies and tools inthe marketing sector At present, businesses are very interested in how to make theircustomers most satisfied with the least cost In a globally competitive environment,customer satisfaction is having a strong impact on business growth The goal of thebusiness and its employees is to achieve the expectations of its customers Businessesare increasingly paying attention to the application of techniques to meet the needs andwants of their customers Technologies mentioned in the research are internet (as aglobal network that allows users to interactively access a variety of media and

communication content), satellite technology (global positioning technology - GPS areused to track vehicles during their travel from start to finish and play an important role

in modern distribution for the movement of products), wireless technology (with wi-fisystems, bluetooth, GPS traders and consumers can contact at any time, these devicesbreak the barriers of geographic space and time difference) Thanks to technology,information about new products and services, price discounts, place, delivery date andtime of delivery is updated to clients most fastly

The study of Hayriye Nur BAŞYAZICIOĞLU & Kurtuluş KARAMUSTAFA(2018) mentioned impact of technological developments on marketing activities.Development of technologies is changing consumers' habits and behaviors andinfluencing profoundly on production processes In comparison with the technologyand daily life of the 1950s, the changes are outwardly noticed Hence, in parallel withthe change of technology, marketing activities are transformed to Marketing 4.0 Theaim of this study is to reveal how marketing activities based on technologicaldevelopments have changed and to give explanation to the distinctive features of eachmarketing stages The changes in marketing activities were studied as to changes inindustry, markets and consumers There are four understood stages of marketingactivities which can be examined: Marketing 1.0, Marketing 2.0, Marketing 3.0,Marketing 4.0 The technological developments have investigated the transformation ofmarketing mix elements Therefore, the technology and marketing relationships havebeen addressed in a comprehensive manner Above are some researches related to thetopic, most of which have been synthesized of the distribution channel and technology.That is the useful documents for the author's reference, as a research basis for her topic

3 Aims of research

This research aims to achieve the following objectives:

- To summarize the theories on technology application in the management ofdistribution channel and system

- To analyze the current situation of technology application in the management ofdistribution system at Habeco during 2015-2020 and find out its achievements andshortcomings

- To propose some recommendations to effectively deploy and apply technology inthe management of distribution system at Habeco.

4 Objects of research

The main research objects are the factors that form the technology applicationand those factors that impact the technology application in the management ofdistribution system at Habeco

5 Scope of research

- The geographical scope of the research is at Habeco Trading One-MemberCompany Limited.,

- Time period for the research: Secondary data were collected in the period of 2015

- 2020, primary data were collected from May to June, 2020

6 Research methodology

6.1 Research process

Figure 1: Research process

Source: Model developed by author (2020)

6.2 Data collection

6.2.1 Secondary data

Secondary data will be gathered from the company’s website, annual reports,textbooks, journals and searching Internet These data are basic to construct theliterature review and explain the importance of distribution channel system andtechnology application to the business The researcher will mostly use descriptionanalysis method to process these data

Besides that, public information was also collected to make the analysis moreconvincing Based on public information both in Vietnam’s beer industry on the whole,the researcher will try to study through Internet, via newspapers, magazines or otherpeople’s research relating to beer industry in Vietnam market

6.2.2 Primary data

In-depth interviews

Using in-depth interview method in this research will help the author to get moreactual reliable required information The researcher will conduct in-depth interviewwith 3 groups All questions in the interviews must be brief, clear and sharp to ensurethat they will be effective in reaching the reliable and valuable answers The purposes

of in-depth interviews:

- To find out the current situation of distribution system management at Habeco,especially the difficulties in operating and controlling distribution channel and salesforce

- To identify requirements of distribution channel management and expectations inapplying technology at Habeco

- To access the readiness of Habeco for applying technology in management ofdistribution system

Survey (Questionnaire)

The questionnaire forms a set of questions, compiled into writing by theresearcher to collect the necessary data The questionnaire includes both closed andopen questions Personnel will complete the questionnaire Through this method, the

researcher can receive the respondent's own words and think carefully about theanswer Information is collected from surveys to determine policy of supporting thedistribution system compared to the competitor's

6.2.3 Data analysis

The collected data is classified and organized by the researcher In order to getdesired results from the study, data collection was processed, and that is through,editing, coding, classification and tabulation Ms Office Excel software is used to carryout analysis of data Descriptive analysis was used on respondents about factorsinfluencing

CHAPTER 1: BASIC THEORY ON TECHNOLOGY APPLICATION IN THE

MANAGEMENT OF DISTRIBUTION SYSTEM 1.1 Overview of technology

1.1.1 Definition of technology

Technology is one of the keywords and essential part of our world nowadays.There are many concepts and definitions of technology that have been introduced andused

As described by Ramanathan (1995), “there are four factors of technology:technoware, humanware, infoware and orgaware Technoware is the availability ofphysical facilities, it is a combination of materials and information processes.Humanware is the availability of skilled human resources Infoware is the so-calleddocumented knowledge Orgaware is the institutional organization and adjoiningnetworks.” These four factors are in tight relationship and create a mutual environmentfor activities They are linked and interacted The system will not process effectivelywithout one of the four factors

Technology is the way we do things Tarek Khalil (2000) argue that “Technologycan be defined as all knowledge, tools, products, processes, methods, systems, andprocedures employed in the creation of goods or in providing services As such,technology encompasses several areas: hardware, software, brainware, and know how”.Technological advances depend on acquiring knowledge and converting it into usefulapplications This requires the formation and accumulation of knowledge, turning itinto innovation, and creating a system that successfully exploits innovation to achievethe desired outcome

Vietnam Law on Technology Transfer (2006), in article 3 it interprets the term:

“Technology means a technical solution, process or know-how which is accompanied

or not accompanied by a tool or means for turning resources into products”

These above-mentioned definitions almost have not been gone into detail yet andits scope is relatively wide

Dr Hoang Dinh Phi developed a technology equation, being useful to define andanalyze the 3 main factors and the sub-factors of a technology or a technologicalsystem.

tools, factory, operation

office

Design, drawings, formula, processknow-how, production know-how,service model, biz model

Technologicaloperational skills

Figure 2: Technology Equation

Source: Hoang Dinh Phi, 2012

In other word, “A Technology is the innovative combined use of 3 factor as

machine/tools, knowledge and skills to transform the input into a product or a service”

(Hoang Dinh Phi 2012, Management of Technology)

Advanced Technology

High Technology

Emerging Technology

Low technology is unsophisticated technology, that have been used for centuriesand is limited to the production of basic necessities Industrial standard technology with

3 constituent elements (machine, knowledge, skills) meets the standards of eachindustry and is widely used in the world Based on standard technology, the businessesdevelop advanced technology High technology is the practical use of advancedscientific research and knowledge, especially in relation to electronics and computers,and the development of new advanced machines and equipment Emergingtechnologies can change the world and many emerging technologies from yesterdayhave become high-tech today

In terms of functions and operations

Management Technology

Administration, Law, …

Production Technology Mechanical, Chemical,…

Service Technology Banking, Insurance, ….

In terms of contributions in product value chain

Design Technology

Process, Architecture

Production Technology Assemble, ….

Service Technology Logistic, Guarantee…

In terms of economic branches

Industrial Agricultural Transportation Construction Mechanical ……

1.1.3 Roles of technology in business

Becoming more and more important in the development, technology helpsbusiness to save time and effort, enhance the security and run operation smoothly andefficiently

- Technology is fundamental for effective communication internally and externally.Technologies such as emailing, SMS messaging, voice communication, videoconferencing, and document sharing can be fully integrated into how work is conductedand how people interact The breakdowns in communication can lead to multipleproblems for business and employees Once employees and customers are given access

to more consistent, effective, efficient, and optimized communication channels, it isinevitable that workflows and productivity will improve

- To break into new markets, a business will think about using technology, forexample digital advertisement with a view to drive traffic Even as a brick and mortarbusiness, technology must be part of its marketing mix, if expecting to increaserevenue Technology enables businesses to reach more customers in a less time thanusual, meaning the number of customers served will increase than before Moreover, it

is also quite easy for the company to coordinate with its suppliers when it wants toincrease inventory The ability to communicate and store information will increase withtechnology and this will be a great advantage for corporations

- There are more and more cyber attacks that seriously affect the operations ofbusinesses In an era when most of the information that is the property of a business isstored on cloud or premise, the use of advanced technology to protect importantinformation assets is imperative for business.

- Technology plays an important role in all business activities For employees, theyalways want to use the latest and modernist technologies to fulfill their assigned tasks

In contrast, enterprises apply technology in training, development and peoplemanagement; financial accounting and cash flow management, sales management Asfor customers, technology factor is also one of the aspects to be considered whenchoosing suppliers By employing technological advancements, the company hascapacity to compete against others

- With technology, businesses and individuals can easily access an endless source

of knowledge and valuable insights that allows them to conduct research forinnovation, analysis customer insights, from which they will occupy better position indealing with customers and meeting customers’ demands

- Decision-making in any business is an important process and they need thetechnology to streamline it Thanks to technology, tracking customer and market data

as well as extracting accurate metrics from the finance and marketing departmentsallows businesses to find strengths and weaknesses, on which basis will build suitablestrategy accordingly

- Technology helps businesses save time and money by cutting labor costs andincreasing productivity Technology will take the place of humans doing a lot of tasks.Through automation and artificial intelligence, technology has become the most crucialfactor behind the success of every organization Moreover, the application of the latesttechnology gives the company competitive advantages and makes it better thandifferent competitors in the market As a result, the reputation, brand and awareness ofconsumers about the business will be significantly improved

1.2 Overview of distribution system

1.2.1 Definition of distribution system

Distribution system or distribution channel has been studied by many authors andthey have given many different definitions The most popular definition is given byPalmatier, Stern and El Ansary (1995), according to them “distribution channels aresets of interdependent organizations involved in the process of making a product orservice available for use or consumption” In other words, the distribution channel isthe movement of goods and services from production to consumption throughperforming various marketing activities

The producers, intermediaries and consumers are major participants in thedistribution channel The distribution channel increases cost to the company, but it alsoplays a huge and important role in making the company’s products available in theareas where they can be bought by the customers very fast

The existence of intermediaries between the products and the ultimate end-users

is apparent, because manufacturers usually produce a large quantity of only a limitedvariety of goods, whereas consumers typically desire only a limited quantity of a widevariety of goods In any market, the producers are constancy in search of the customerswho could buy their products, and the customers in turn are constancy searching for theproducts or services which could satisfy their needs and wants, so intermediaries arenecessary to shorten the searching process by linking the customers to the producers

1.2.2 Roles and functions of distribution system

Roles of distribution system:

Distribution system has important roles such as: to ensures operational transfer

of products from the producer to the consumer, to add value to the product by

matching the time, place, and possession gap existed between producers andconsumers, to preserve goods properties, to increase the occupancy of labor resources,

to improve the economic efficiency of the trading activity of products

Functions of distribution system:

Distribution channel perform many key functions (Philip Kotler et al., 2012):

- Information: collecting and distributing market research and business information

is crucial for marketing planning;

- Promotion: building and widely disseminating information about offers

- Contact: finding and accessing with prospective clients

- Matching: adjusting the offer to fit a client’s needs, including grading, assemblingand packaging

- Negotiation: agreement on price and other terms of offer

- Physical distribution: transporting and storing goods

- Financing: Obtain and use the fund to cover distribution expenses

- Risk taking: accepting some commercial risks in channel operation

The advantages and disadvantages of distribution channels:

When managing, the company should find the ways to utilize the advantages andlimit the disadvantages The advantages of distribution channels:

- Customer convenience: the distribution channel provides accumulating andassorting services, meaning that they purchase commodity from a variety of suppliersthat a customer may request Furthermore, distribution saves time because customerscan find all they need in a retail store

- Small quantities: Breaking large quantities and selling in smaller quantities isknown as bulk breaking Consumers benefit from buying in smaller quantities and theyalso receive a portion of the profits that retailers get from buying in bulk fromsuppliers

- Financial support: The producers offer financial programs to their distributionsystem to make payment easier

- Cost savings: Distribution channel partners are experts in their work, so they do it

at much lower cost than companies trying to run the entire distribution channel all byitself

- Time saving: the delivery time has been significantly shortened thanks to theeffective experience of the channel members For example, a grocery store may receive

multiple items from one or more wholesalers on the basis of appropriate quantity andtiming to ensure inventory and lead time factors Not only saving the time but alsosaving their own costs.

- Boosting sales: Retailers often uses techniques to persuade customers to buyproduct and increase revenue They take advantage of promotions or product display toattract the attention of buyers

- Providing valuable information: through distribution system manufacturerscollect information and feedback from customers, which helps to improve the product

or increase its sale

- Bigger approach: Distribution channels can deal with customers that the companyare able to access by its own sales force or store A network of distributors or retailersoffering ready coverage of other regions or nationwide An international channeldistributor can provide a small business with access to worldwide markets

- Improve market knowledge: the knowledge of local market is provided for thecompany by distributors, that enable to access to new market more quickly andeffectively with lower cost of market research or marketing programs

- Increase core competency: a small business needs to focus its resources ondeveloping products and generating revenue Utilizing channel distribution enables itfocus on its core competencies without hiring new personnel

- Increase efficiency: the intermediaries help to develop a single line of contact foreach customer That line of contact would include ordering, returning defectiveproducts, collection of payments, product inquiries and product returns All of thisincreases the producer's efficiency

In the other hand, the disadvantages of distribution channels may be:

- Loss of essentials of product due to delay: In the case of a delay in shipment, theproduct loses its essentials in the channel and affects sales

- Do not compete as not much as competitor: the channel members might get ahigher promotional incentive from competitors therefore competitive product mayenjoy greater importance in channel

- Lack of communication control: Lack of communication control: producer losescontrol of the message being conveyed to the end consumers Intermediaries canengage in personal sale to increase revenue He may exaggerate the product's benefits,leading to misinformation to the end user.

The types of distribution channel:

Channels of distribution can be classified under direct and indirect channels ofdistribution Direct channel refers to direct distribution system in which products/services are delivered directly to the consumer without using intermediaries whileindirect channels use intermediaries to deliver the products/services

Figure 3: Consumer distribution channel

Source : Trương Đình Chiến (2012)

A brief explanation of different channels of distribution is given below:

Zero-Level Channel: is the most direct, shortest, cost-effective and simplest

channel in which products/services are directly sold by the producers to their respective

customers without participation of intermediaries Manufacturers have full control overthe distribution process and can sell these products by door-to-door, direct mail orthrough their own retail stores.

One-Level Channel: involves only one intermediary i.e., retailer A producer sells

its products/services through major retailers who in turn sell it to the end-consumer.This channel reduces the cost of selling goods to the end customer and is often suitablefor distribution of high-valued products

Two-Level Channel: this distribution channel has two intermediaries i.e.,

wholesaler and retailer As the most commonly used and traditional distributionprocess, this channel involves a wholesaler who purchases products from the producerand sells it to the retailers The retailers sell the product (possibly along with manyother products) to the final consumer

Three-Level Channel: involves three intermediaries i.e., agent, wholesaler and

retailer A producer who would prefer to offload the cost of distribution sells hisproducts to selling agents These agents distribute the product among few wholesalersand each of them distributes the products across many retailers reaching out to manyend-consumers

The flows of distribution channel:

Flows in distribution channel enable the connection between channel membersand distribution agencies in delivery of goods and services In other words the producercan reach out to their consumer through eight channel flows, namely (1) physicalpossession (product transfers from producer to consumer); (2) ownership (when ownerchange); (3) risking (who has responsibility for damage); (4) negotiation (two-waycommunication); (5) ordering (one-way communication); (6) payment (when moneychange hands); (7) financing (where does the money come from ?); and (8) promotion(one-way persuasive communication) Most of channel flows deals with intangibleasset and can be effect with the support of information software and technology, exceptthe first channel of physical possession, which deals with the tangible products

A series of flows will emerge upon development of a marketing channel Fromthe perspective of the channel management, there are five important flows which areProduct Flow, Negotiation Flow, Onwership Flow, Information Flow and PromotionFlow (Bert Rosenbloom; 2011)

Figure 4: Five Flows in Marketing Channel for Beer

Source : Bert Rosenbloom (2011)

- Product flow shows to the actual movement of the physical product from the

producer through all of the parties who take physical possession of the product until itreaches the end user This process is a single directional flow

CONSUMER PRODUCER

Figure 4: Channel Flows in general

- Negotiation flow involves seller and buyer with their selling and buying functions

respectively and results in transferring of right of ownership of products It is necessary

to note that transportation parties do not involve in the negotiation flow given it doesnot participate in negotiation function This flow is an interactive bi-directional flowbecause negotiations involve a mutual exchange between buyers and sellers at all levels

of the channel

- Ownership flow represents the transfer of title to the product as it passes through

the channel Similar to negotiation flow, transportation does not involve in this processgive transportation itself cannot possess the title

- Information flow is the flow of information from producer to consumer in two

directions Different from above listed flows, all parties including transportation firm(s)involve in this flow given they participate in exchange of information either up ordown flow For e.g information about time of shipping or the rates from producer totransportation

Promotion flow refers to the flow of convincing or persuasive communication in

various forms including but not limited to advertising, personal selling, salespromotion, publicity, etc Advertising agency plays an active role in the flow or in otherwords it provides and maintains the promotional flow The two directional arrowsbetween Retailers and Consumers shows the combined work performance for thepromotional activities

1.2.3 Distribution channel system management

Distribution channel system is designed and built on the basis of analyzingcustomer needs and wants, setting channel goals and constraints, and identifying andevaluating main channel alternatives The right decisions in designing a distributionsystem becomes solid foundation for the success of any distribution channel However,

it is the first step and just the planning part To maintain this success, it needs rightimplementation and management

“Distribution channel management is understood as the whole management andoperation of the channel system to ensure the cooperation between selected channel

members thereby fulfilling the distribution goals of the enterprise” (Truong Dinh

Chien, 2012)

Distribution channel management is the process of selecting a channel member,training and motivating them, evaluating their performance and modifying channelarrangements

- Selecting channel members: The company can evaluate and select any channel

partner on the basis of business experience, financial capabilities, locationaladvantages, growth and profit record, experience of the promoters, cooperativeness andservice reputation Depending on the type of intermediaries, the business maybe usemore criteria such as the number and character of route, the scale and quality of thesales force, potential development and client segments

- Training and motivating channel members: The company should conduct

coaching, market research and other capability development activities to improve theperformance of the intermediaries Training programs about sales and service, productknowledge, expected service quality and operational procedures are designed in order

to help distributors as well as sales staffs to improve performance, knowledge, skillsand attitude It is necessary for distributors to understand that they would be moresuccessful if working together in stable system On the one hand, the company tries totrain them to perform better and on the other, the company gives them incentives,higher margins, premiums, display allowances, advertising allowances and specialdeals If desiring a suitable motivation program encourages distribution channelmembers to work more active and effective accordingly, the company shouldunderstand the practical situation and find out distribution channel member’s needs andconcerns The power of producers on the channel varies widely, depending on theability of influence other channel members’ behaviors or the cooperation ofintermediaries Producers always want to build a strong relationship with members ofthe channel, so from the beginning they must clarify their desires with distributorsabout market coverage, inventory, marketing development, account solicitation,technical and service consulting, marketing information and possibly the introduction

of a compensation plan for compliance with policies Depending on the level in thechannel, producers will determine the form of motivation for channel members Profitsare one of the most useful motivations for sellers to choose products When there is aprofit, the distributor will find to buy products to distribute Factors that influence storeowner's behavior include consumer acceptance, a well-designed sales promotion andpromotion plan, and generous financial incentives

- Evaluating distribution channel: The manufactures need to regularly control the

performance of channel members by evaluation criteria such as sales planimplementation progress, inventory, delivery time, handling of complaints anddefective products, deployment of trade promotion programs, customer services.Depend on each stage, the enterprise determines the criteria used to evaluate:performance evaluation on one or more criteria The scope and frequency of audits aredetermined by factors such as: The manufacturer's level of control over the distributionchannel, the relative importance of the distribution channel, the product and the number

of distribution channel members Intermediaries that perform well and create goodvalues to the company will be recognized and rewarded suitably Those performingpoorly should noticed, assisted and in the worst case, to be replaced However, themanufacturer needs to be sensitive and skillful in dealing with distributors In somecases, if not handling strictly, manufacturers may not only lose the support of thedistribution system but also become entangled in legal problems Distribution channelsmust meet the needs and wants of customers as well as compete with the development

of new channels of competitors The marketing management must continuouslymonitor channel effectiveness and improve the distribution network to match changingconditions and potential market opportunities

In order for the distribution system to work effectively, all flows in the channelmust work fluently and smoothly; therefore, the management of flows in the channel is

very important for business (Truong Dinh Chien, 2012):

- Information flow: build a complete information system in the channel, ensuring

smooth information from the producer to the end consumer Enterprises need to clearlydefine the information being exchanged among channel members and then applymodern means of communication in managing the flow of distribution channel Thiswill optimize the costs of marketing flows, redefine market scopes, change competitionprinciples, and create competitive tools

- Product flow: Management of physical distribution flows based on information

flows and modern means of transport and warehouse Currently, many businesses tend

to calculate between transportation and storage to minimize total costs A goodinformation system in the channel will facilitate storage in the channel "Instant" and

"efficient customer response" methods of distribution can reduce inventories, reduceordering costs, and avoid risks and losses for businesses

- Promotion flow: enterprises must define promotion activities as a tool of

competition in the market and responsibility of all channel members Producers need tocoordinate with members in the channel to develop promotion programs based onmarket information, budget allocation, development strategy Promotion activitiesreach to the right objects with the lowest cost will help increase sales

- Negotiation flow: negotiation between channel members changes due to the

impact of information technology Enterprises are using modern informationtechnology to reduce costs for paper jobs In addition, thanks to sufficient information,both parties have sufficient grounds to establish a purchase and sale contract fully andaccurately

- Payment flow: enterprises participating in the channel must set up a reasonable

payment method and time, have complete information about the financial situation ofmembers in the channel, prepare debt notes to avoid overdue debts or insolvency Costsand risks in payment operations will be reduced through the use of electronic orderingand payment systems

- Order flow: to optimize the process of goods delivery, enterprises must

standardize a process of collecting, gathering and solving orders Applying advancedinformation technology will help businesses build automated ordering systems andcomputerized inventory management Ordering, waiting and delivery time should beshortened

- Ownership flow: based on the assessment of the current channel members,

enterprises need to control the process of buying and selling their products in themarket to avoid circular trading

- Financial flow: enterprises need to build mechanisms of developing capital in the

channel Each channel member participates in this process Leading businesses need todevelop a financial aid program for other smaller members of the channel

- Risking flow: when risks are shared among the members of the channel, eachmember's responsibility for the risks will be clearly defined, helping to implement theresponsibilities quickly and avoid conflicts

Source: Ciklum’s document (2016)

The evolution of distribution software in the world

1.3 Technology application in the management of distribution system

Modern information technology

increasingly has a great influence on

distribution channel management,

requiring enterprises to research to

apply New information technologies

have revolutionized the organization

of distribution channels as well as

reducing the operating costs of

channel flows There are many terms

to describe technologies such as

electronic data interchange,

interorganizational systems,

interactive multimedia, electronic

payment, bar codes, database

Information technology is changing the

distribution system, it redefines the scope of

the market and creates new competitive tools

Since the 1990s, the Vietnamese economy has entered a period of opening up andstrongly developing Multinational corporations entered the market, especially in theconsumer goods industry, brought with them a new distribution mindset Whenapplying a new method of distribution system management, it means that they couldnot continue with the usual manual operations, forcing them to need a more completeand accurate solution From there, apply information technology to minimize manualoperations, limit losses, and save time and human resources Initially, big corporationsapplied solutions from abroad that were tailored to the needs and distribution system inVietnam Therefore, the implementation of distribution software projects is timeconsuming, costly and difficult in maintenance and installation Realizing the growingdemand of the market as well as the growth of domestic enterprises, domesticinformation technology engineers have created a new direction, a solution to manage aVietnamese distribution system

Impact of information technology on distribution system management:

- Delivery of goods and service: information technology creates advantages in

geographic and time Specifically, it helps reduce transaction costs between buyers andsellers, based on the database the system can automatically calculate the order quantitywhen the inventory drops to a predetermined level Due to online, business reduce thecost of renting physical stores Delivery times are also shortened thanks to the rapidflow of information from buyer to seller Buyers access the seller's portfolio quicklyand conveniently via the internet

- Flow efficiency: information technology influences the cost of operating freight

flows, changes logistic operations Collecting information data allows businesses toidentify the right market and target objects to develop and correctly implementprograms to increase business efficiency Negotiation method change gradually fromface to face to via mail, fax, telephone and now online meeting Electronic paymenthelps business reduce paperwork to increase labor productivity and reduce labor costs

In the field of distribution, software solution is now considered as the mosteffective tool to support enterprise to systematize all of processes from production,distribution and business, maintain their positions, and improve the competitiveness intoday’s fierce market

their distribution system,

keep track of all of their

business activities in a

prompt and easy way,

optimize their sales

system through retail

outlets, keep their

distribution channels and

sales staff under control, minimize risks, increase business performance and maximizeprofitability With DMS solution, enterprises can grasp market situation to design andimplement proper policies.

Main function of core DMS:

- Master data: serves as single source of information for market informationanalysis such as market shares, market coverage, sales workforce, distributionchannels, etc Therefore, master data must be informative and multi-dimensional,consistent in nature and flexible in structure so as to minimize resource to operate, re-configure where sales force is restructured in line with market demand

- Sales KPI: With a view to developing distribution system, market informationmust be quantified into key indicators such as: sales revenues, number of successfulorders, coverage ratio, successful ratio of promotion campaigns, etcetera and assignthese KPIs to specific sales areas Based on these KPIs, business can evaluate the salescapabilities and effectiveness of sales teams and promote reasonable training agendabased on specific sales requirements

- Trade Marketing: To support sales team to build up and reinforce their coverageover the network of sales points, marketing/sales support programs such as discount onpurchasing order, accumulative sales revenue, product display, sales support tools areincorporated in Distribution Management System so that DMS will assure consistency

in implementing these marketing programs in every sales point and as such eliminatingthe opportunity for inadequate or insufficient implementation of marketing programs,speed up execution and more importantly provide sufficient input for transparentperformance assessment of sales points as well as enable settlement between companyand distributors

- Purchase Order: This function will support distributor in determine the balancebetween sales target and actual purchasing ability to establish the most effectivepurchasing plan The incorporation of purchasing order function into the company’ssystem enables distributor to manage the status of their purchase orders and saving thecompany’s time and workforce to input purchase information into the system,consequently reduce manual input errors, especially in case of complicated trade

programs Managing purchase order in DMS system also facilitates efficient inventorymanagement.

- Distribution Management System enables distributors to manage their receivablesand payables/debts with the company

- Sales Order function is built in Distribution Management System with a view toprocessing sales orders placed in by salesman or distributor’s direct sales point.Analysis on DMS sales order consolidated data reveals the effectiveness of varioussales forms such as pre-order, mobile sales (van sales), credit sales, cash sales, and so

on and based on this analysis result, understand the most suitable sales form for eachgeography as well as working on best account planning

The benefits from investment and technology deployment in the distributionsystem management:

- Automated processes: With optimal automation and work flows, it helps save

time and personnel resources for operation, and covers more customers instead ofrecruiting more people Huge expenses in distribution for promotion, display, salesprograms, POSM… are strictly controlled by DMS software on the system to helpbusinesses resolve negative issues, budget losses and ineffectiveness in deploying theseprograms

- Time saving: DMS software will help the system update data continuously;

support managers check data quickly and get effective sales decisions It can helpcontrol data, review orders, and manage sales status at any time on mobile devices withintegrated software Manual operation is limited to a minimum level: the systemintegrates calculation functionality to helps staff and administrators record online dataand information sent to the control department quickly

- Automated and flexible reporting: Animated reports with many intuitive

interfaces help administrators get statistical data quickly and accurately Based onintuitive reports, administrators will be able to make effective business decisionswithout too much manipulation of traditional management practices It supports multi-platform and multi-device and can generate and review reports at all times; reports areaccessible for many computer equipment, laptop, smartphone, tablet, etc Analyze andupdate online data with various criteria for each role or department

- Effective management of customer information: The system will continuously

update data, information on the opening of new points of sales, Customer information,and Customer location will be updated to help managers systematize potentialcustomers and provide the best customer care strategy In addition, promotions, After-sales and Customer information will be updated and archived to help businessesmeasure market performance, understand their potential customers and strategy, andwork out a reasonable production strategy

- Providing Real-Time Data: With closely-designed processes and functions and

effective user support in the system, it will enable Enterprises to obtain a complete and

“real” DMS dataset on the market, points of sale, lines of sale, inventory, in, out, promotion, product display, POSM, etc.; prevent from and minimize the problem

sell-of cooking sales data This data will help the company make decisions and developmore effective and accurate sales strategies

Factors affect the application of technology in the management of distributionsystem:

- The role of the Board of Directors: application of a new technology into the

enterprise always faces many difficulties, especially DMS has more and morechallenge because of wide influence Using the new system could affect the interests ofkey members and cause anxiety for end users like salesmen Salesman protested as thenew system made information transparent and could threaten members who workwithout rules or cause a controlled mentality for distributors, Many people alwaysfear the new, change or failure If the Board of Directors is too busy and does notfollow up or provide timely support to the project and especially the mentality of

"using it is also okay", it is easy for the project to apply DMS will go into a failure

- Process of business is not ready: the software solution is only a tool to implement

existing business processes and policies in the enterprise So, if the business managerdoes not take the time to prioritize the business process optimization, the project resultsoften fail because there are too many changes, the project scope is beyond the originalplan Providing software solutions requires additional costs for change Existingprocess optimization should be given priority before applying the incoming softwaresolution

- Assigning the project to the wrong object: The project builds and implements the

DMS software system that directly affects the production and business activities of theenterprise An external project leader with project management skills is required tounderstand the strategic goals of the business, knowledge of the distribution system,skills to lead change, and importantly is influential to the business departmentsinvolved

- Software supplier: always provide pink picture when offering a solution And

they are always clever to draw attention to the strengths that their software has instead

of focusing on the business process requirements of the business A list of questions isrequired to assess the supplier's capabilities, and the responsiveness of features versusthe business process of the business You can even send surveys to businesses that havedeployed solutions of selected software vendors to evaluate the implementationprocess, customer care services

- Coordination of many departments: DMS system requires coordination between

IT, Sales, Marketing, Logistic, Manufacturing, If the roles and responsibilities ofeach department are not specified, it will result in the extruders pushing each other.Especially for large enterprises with branches and distributors participating in theDMS, it is required that the configuration of the unit tree of the software must haveclear decentralization, ensuring confidentiality, information between branches,distributors

- Training and coaching end-users: there are a number of businesses that reflect

the resignation rate of salesman greater than 30% after implementing DMS due tomany reasons such as when the DMS software system has not been applied, salesmanlikes to sell, sell, like coffee, coffee can create virtual data to achieve KPIs, Butwhen using DMS, all salesman's activities are closely monitored: required to check-in,take pictures, manage the area to adjust the route, most Salesman's actions are closelymonitored, salesman feels their freedom is lost and that is one of the main reasons theyquit their jobs Therefore, before the DMS is deployed, awareness training is alwaysextremely important In addition, the project team needs to convey to salesman thevalues that the new system can support them, so that they understand DMS software is

a tool to support sales and increase sales

CHAPTER 2: CURRENT SITUATION OF TECHNOLOGY APPLICATION IN

THE DISTRIBUTION SYSTEM MANAGEMENT

AT HABECO TRADING ONE MEMBER COMPANY LIMITED

2.1 Overview of beer industry in Vietnam

Vietnam represents itself as one of the largest beer markets in the world Thetotal domestic beer consumption volume of year 2017 was 4 billion liters, which wasaccounting for 2.1% of the total production of global beer industry In the same year,Vietnam ranked 10th in the world, and 3rd in Asia (after China and Japan) in terms ofbeer consumption In the following year, average beer consumption per Vietnameseperson at all ages is approximately 43 liters If we reframe the statistics for the agefrom 15 to 60 years old (working age), each single person drank approx 86 to 87 litersper year according to FPTS report According to VIRAC report, the year 2019 setanother record for the country beer production and consumption i.e 4.6 billion liters ofbeer was consumed out of 5 billion liters of country total beer production Thisincreasing trend of beer production and consumption resulted from the fact that moreand more Vietnamese young people spend more on dining out and enjoy drinking outfor new experience and socialization As such, analysis and assessment of AC Nielsenalso revealed that beer consumption by value growth was more positive than other fast-moving products in Vietnam

Figure 5: Situation of production and consumption of beer industry 2010 –2019

Source : Virac & GSO Report (2020)

Out of the total consumption volume, canned beer got the biggest market share of66.8%, bottled beer 29.9% and there remaining consumption was shared between draftbeer 3.1% and the last 0.1% was fresh one

Together with increasing domestic beer consumption, imported beer also increased8.9% vs 2018 with more than 37 million liters, which was imported mainly fromNetherlands (25%), Mexico (17%) and Belgium (16%) However, the consumptionvolume of imported beer was modest in comparison with domestic beer volume givenboth local and foreign invested beer companies have already secured their bigger marketshares with cheaper price (vs imported beer), which his more suitable for localconsumer

Despite huge domestic consumption, Vietnamese beer has yet established itsbrand name internationally and the export volume of 2018 has slightly reduced inrecently year The main reason is that Vietnam’s beer quality has not been highlyappreciated and not created a brand on the

international market Equatorial Guinea

(about 20%) is the largest market for

Vietnamese beer In which Mexico and the

Netherlands are the two biggest beer

suppliers in Vietnam

As being showed in Figure 7, Sabeco

has the biggest market share of 43%,

followed by Heineken 23% and Habeco

14%

Challenges to the Vietnamese beer market in 2020:

- Law on Prevention of harmful effects from alcohol (Decree 100): come into effect

on 1st Jan 2020 with zero tolerance to alcohol consumption during driving car,motorbike and bicycle Such regulatory challenge played its part in changing people’sdrinking habit Consequently, the beer industry growth rate is forecasted to move from2-digit of previous years to 6% to 7% growth rate in the coming year despite a millionVietnamese people can consume alcohol drinks legally Stock market also reflect thisreduction trend with two local biggest beer companies being Sabeco and Habeco

Figure 7: Beer market share in Vietnam

Source: Euro Monitor Report (2019)