Enhancing customer relationship management at cadivi corporation

such as products, services, culture, market share, growth rate, customers, and distribution channel.. An effective complaint handling system can give benefits to business in several ways

MBAVB2

NGO KIM DUNG

ENHANCING CUSTOMER RELATIONSHIP MANAGEMENT

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME) Tutor’s name: Dr NGUYEN THI MAI TRANG

Ho Chi Minh City (2009)

I would like to give thanks to the following people for the help and support in the completion of this study

First and foremost I would like to give great thanks the Board of Rector of Vietnam and Belgium Joint-Venture Master Program, Solvay Brussels School and Hochiminh City Open University Special appreciation to Dr Tran Anh Tuan, Dr Nguyen Minh Kieu, Professor Jean-Pierre Baeyens and Professor Daniel Van Houtte, who have organized the favourable program and transferred valuable knowledge and experience to our Vietnamese students Many thank to Ms Bui Bao Tran and Mr Serge Bywalsky for every effort giving the most convenience to our class of MBAVB2

Special thanks to my tutor, Dr Nguyen Thi Mai Trang, for her enthusiastic, valuable comments and guidance throughout the writing of this project

High appreciation to Mr Nguyen Loc, MBA - Deputy Director of Cadivi Corp., who has facilitated me accessing to the company’s data and conducting a comprehensive survey in order to achieve the accuracy as well as the valuation in this study

Gratitude to my beloved family, S-series group, and classmates for supporting me during the course and complete this project

Hochiminh City, February 25", 2010

C—O

Tutor’s signature

Dr Nguyen Thi Mai Trang

TABLE OF CONTENTS

EXECUTIVE SUMMARY -222222222.221 1 mmrrrrrrrr 1

INTRODUCTION TO THE FINAL PROJECT .ccecccceseseneeseeeesaseesenstectenseeasees 2

Statement of the problem dddŸÝẮĂẮồ ƠỎ 3

Scope of the study "= ƠỎ 3

Nnit0nir.f0äini.S5 ri 00177 ố.ố 4 CHAPTER 1 - THEORETICAL FERAMEWORK eeneeeiiee 5 1.1 CRM defnition - — 6

1.4.2 The process ¬— ƠƠƠƠƠÐ 8

1.6 CRM performance effectiveness San in 8a Ơ 9 1.6.1 References for CRM performance effectiVeness .-.-. c-ceieeririerrree 9 1.6.2 Cus†omer OWaÏẨy ‹- «+ + sxtx*.41012 111 kg 010 0 0n 1000101103111 01 10

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2.1.3 CADIVI’s CuÏftIFE c5 ccs tr 1111111111 errirrg 15 2.1.4 Markets and CUStOMES 2 ccsccsscesssescssnccenseeesessccsscesseseseseeeeesessssseseessesseesass 16 2.2 Market share and ørOwWwth TAẲ€ - á- co HH HT HH ng gàng ng 16 2.2.1 Market Shares .ssssssssssesssessesssssssssnessnsssneesnossnsssnesssssscsnesssnessnesnecsnrensesssessnees 16 "Có An v.v 17 2.3 Distribution channi€Ì - -< «s9 v9 3091 1 0 Hà 9á 9g 010100 1 g1 18 2.4 First level distributor of CAIDTVI 22+ ©cs©c<czsEEkeEkEkEEkrkerkerkereecsee 19 2.4.1 First level đistributors ccccccee H Ô 19 2.4.2 First level dIstrIDufOT TI€€S <5 SH HH ng g6 081888 74 19 CHAPTER 3 —- SETUA TION ANAL,YSIS -Á SH HH HH 111811811 811 sec 21 3.1 External arnaÌWSÏS s- << TH họ nọ TH TH TH HT 7e 22 3.1.1 Political and legal nh 22

3.1.2 EconomIC ÍäCÍOTS - sọ TT TT ngờ 22 3.1.3 Social factors ố 23

3.1.4 Technological factors na S23 khien 23

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3.2.1 Practices of CADIVI’s implementing CRM -« H48 115181 sex 24 Eé\ 003i 25

3.3 Finding from the SUIVECY :ccsccssesseseecsessssensecesnenscescsntensesseeeeenesenessessesenes v41 se 27 EE6nn©9 oca an ố 28

3.3.2 II 6iJ0 an 31

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CHAPTER 4 - RECOMMEDATION ¬ 41

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4.1 Solution 1: Fixing unreasonable points of current CRÌM -cssss<csseexee 42 CN c8 o nnn 42

4.2 Solution 3: Building customer loyalty Don .cceseeereeeteeeneenesetsenenecsseteesenes 43 4.2.1 Build customer profile c ccccssessedeccescesseesessessessssesssssesnessssssesseescensenennenseneens 43, 4.2.2 Drive the best force to support currenf distribUufOTS ‹ <<-<-<<e+ 45

4.3 Solution 3: Upgrading customer service and prOdUCf -«e-eeerseeereerrer 48 4.3.1 Shorten delivery tiime -ereeeereerterrererrrriirriiiirierrrrirei Test 48

4.3.2 Re-form customer complaint handÌing - - «5s sen 48

_4.3.3 Improve customer comrmmuniCafiOI . + sesssc+srseettetsersrieeirrirrrie 52 4.3.4 Enhance employee’s knowledge and skills -: - " 53 4.3.5 DiVersifYy DTOUC - 5 52+ s10 11 HH H101000131111101111110101P 54

B — Feasibility amalysis .sssscssssssssssssssseresesesesseneesseneceneseesesssssoesssesenssnessrsseseneaes 55

4.2 Human resource — Effectiveness sssssssssssssssssssssssscssssccssssssseceessneseceesuseccessnseeessses 58

l@9)/9 00/3/9025 59 APPENDICES

REFERENCES

APPENDICES:

Appendix 1 — Questionnaires

Appendix 2 — Survey results

Appendix 3 — Customer complaint handling process

Appendix 4 - Action plan for enhancing CADIVI’s CRM

Appendix 5 — Timeline

: Satisfaction on customer complaint handling -+ersesesrseserer 32 : Satisfaction on customer inquiry responding — 33 : Satisfaction on information updating -cseeeeeeeesrsrerrriirieire 34 : Satisfaction on sales representative’s knowÏedge «-«-eeerreeerersrere 35 : Satisfaction on CADIVI’s product overaÏÏ -sseseesersrrrrrrrrrrrre 36 : Satisfaction on product feafUT€S -ccscerrserrrereerrrrriirriiiriiirreriie 37 : SWOTT analÌySIS . -s<=<ee+ TH ntnnrnnnnttrrittrr 39

: Comparison of market share of domestic civil electric wire and cable (%) 16 : Comparison of CADIVI”s growth rate (2%) -eereeeeerrrerrierrrrrrerie 17 : Sales by customer groups (Million USÌD) -eceeceeerreeirrrerrrrrree 17 : The percentage of sales by customer groups in 2008 (%) <« 18

: The percentage of changing purchase SỈZ€ -. -c-ecssneeeeeeerrerrterrereree 26

: Satisfaction on sales represenfafÏV€ - «sen 31 : Satisfaction on customer complaint handling . -e+-+-+sereeetstrsee 32 : Satisfaction on customer inguiry responding -. -«seeerrestrrrrrsrirmr 34

: Satisfaction on sales representative’s knowledge -«eceeeeeesrsree 36 _: Satisfaction on product tin 18 38

AS _ : Australian standards

ASTM: American Society for Testing and Materials

B2B _ : Business to Business

CADIVI: Vietnam Electrical Wires and Cables Corporation

CRM_: Customer Relationship Management

DIN | : German Institute for Standardization

FIFO: First-In First-Out

FTA :A marketing research and consultant company

GDP _ : Gross domestic product

GSO : General statistics office

IEC _ : International Electro-technical Commission

ISO _ : International Organization of Standardization

ISO 14000: An international standard that guides companies in managing their risks and

ISO 9000: An international standard that provides guidance in the development and implementation of an effective quality management system

JIS: Japanese Industrial Standards

PEST : Political — Economic — Social ~ Technological environment analysis

SWOT: Strengths — Weaknesses — Opportunities — Threads

TCVN : Vietnam National Standards

UL — : Underwriters Laboratories

USA: United States of America

WTO : World Trade Organization

EXECUTIVE SUMMARY

In order to increasing sales, many companies spend money on marketing activities As a result, they win a lot of customers and partners They keep creating costly marketing plans every month A year later, those companies realize that major of their sales come from new

customers, and they wonder what happen to old customers and where customers go There

are many reasons that a customer or client may leave a company, in which the following reasons are more often: price is too high or unfair, complaints are not solved, competitors offer is more attracting, and customer think company does not care about them

In fact, turnover can go further if company focuses their resources on building, nurturing, and developing the customer relationship Building this relationship means treating customers and clients as if they truly are partners and showing them that company truly cares about them It is important to try to satisfy customers with the right products and services, supported by the right promotion activities and provide available products and services at the right time and location

CADIVI is a joint-stock company that specializes in producing and supplying electric wires and cables Staying in B2B field, CADIVI realizes the importance of customer relationship and establishment Customer Relationship Management strategy However, their CRM exposed unreasonable points after implementing few months Company cannot satisfy their distributors completely, and loyalty of distributors has the trend to decrease The purpose of this study is helping CADIVI discover where their problems come from, and suggesting a sound solution

By using CADIVI’s sales reports of 2009 and survey, this study identified the situation of customer relation, and details of its problem This also brought a three—solution project which was based on establishing an effective communication channel — Customer Service Centre This tool will cost approximately US$ 2,500 however it makes the project

effective Following this plan, CADIVI can enhance the long-lasting relation with their valuable distributors

INTRODUCTION TO THE FINAL PROJECT

A—RATIONALE OF STUDY

The business of electric wires and cables is one of the most attractive fields in Vietnam It

has an impressive growth rate while quite competitive As a developing country, Vietnam has high GDP growth around 8% annually which is greatly contributed by the electric equipment industry with the growth rate of 16.8 to 23.7% during 2005-2007 In the downturn of the world economy since the middle of 2008, though the growth of Vietnam GDP decreased to 6.23%, the growth of electrical equipment industry was 8.3% This showed the attractiveness of electric wires and cables business in Vietnam

On the competition aspect, many new electric wires and cables companies have invested

and expanded their business in this area There are about 100 cable companies, which causes harsh competition in this market

Vietnam Electric Wire and Cable Corporation (CADIVI) was established in 1975 as a state-owned enterprise which specialized in manufacturing of electric wires and cables In September 2007, in accordance with government’s policy on equitization, CADIVI changed their business to a joint-stock company They entered the market economy without any subsidy from the government by then Hence, company has faced both internal and external challenges from the organization, shareholders, and market '

CADIVI achieved impressive results with the growth up to 32% in 2007, in which distributor group contributed a significant portion of 67% However, it was fallen to 8.94%

in 2008, and 5% only as report of the first three quarters of 2009 Further, a negative signal has been found in the revenue growth of distributors group It declined from 50% in 2006-

2007, to 18% in 2008 and 7% in 2009 These results were badly down in comparing to

itself and electrical equipment industry

B —-STATEMENT OF PROBLEM

Having become a joint-stock company since 2007, CADIVI has been aware the importance

of customer relationship and put an effort on building relationship with their distributors

However, as a state-owned organization for many years CADIVI has slowly adapted to

building and improving the customer relationship, especially with their distributors While

there are many reasons of sales decrease, customer relationship management may be the

key issue Customer lost in 2009 was very serious The number of distributors was shrunk from 185 in 2008 to 165 in 2009 whereas it continuously increased during the period 2005-

2008 Some distributors left CADIVI and others decreased the purchasing volume, refused

to buy again, and started looking for competitors’ information This shows that customer loyalty level of distributor was relatively low

C ~ STUDY OBJECTIVES

The objectives of this project are (a) to review the practices of implementing CRM to find out the unreasonable points, (b) to evaluate the level of customer loyalty, c) identify which elements are low satisfied in first-level distributors’ perception, and (c) to propose solutions to enhance the customer relationship management for CADIVI

D —- SCOPE OF STUDY

The project focuses on first level distributors in three key cities including Hochiminh city,

Hanoi, and Danang The proposal will be presented for the period from 2010 to 2015

number of customers and their purchase orders were obtained

Survey:

Survey method was combined of quantitative and qualitative Questionnaire was employed for collecting data The purpose of questionnaire is to identify the level of the customer satisfaction on products and services Survey was conducted by combining face-to-face interview, courier mail, fax, e-mail, and telephone interview to cover the focused distributors The results are presented in appendix 2

F - STRUCTURE OF THE PROJECT:

The aim of this chapter is to provide the insight to the study area as well as review of relevant literature in the area related to the project First, this chapter will present about customer relationship management (CRM) including CRM definition, CRM benefits, CRM system, CRM categories, and important factors for a successful CRM Then it will discuss other aspects of CRM such as customer satisfaction, customer loyalty, and

handling customer complaint

This chapter will represent general information about CADIVI CORP such as products, services, culture, market share, growth rate, customers, and distribution channel Especially the part of introduction to first level distributors and their needs will give a clearer picture about focused customer in this proj ect

This chapter will describe and analyze the current situation in concerned to the external

environment, and findings from the study and survey The external environment factors are political, legal, economic, and technical The survey is about customer satisfaction loyalty which is related aspects of CRM

According to the identified problems in the previous chapter, this chapter will propose three effective solutions, including fixing unreasonable implementing CRM, building customer loyalty bond, and improving customer services and products Then analyse the

feasibility of the proposed solution.

CHAPTER 1:

THEORETICAL FRAMEWORK

-1.1 CRM definition

1.2 CRM objectives 1.3 CRM typology 1.4 CRM architecture 1.5 CRM critical success factors 1.6 CRM performance effectiveness evaluation

1.7 Conclusion

The aim of this chapter is to provide the review of relevant literature in the area related to the project

second key word is “approach” It means that CRM is a way of thinking about and dealing

with customer relationships ”Creating, maintaining, and expanding customer relationships” are about entire customer cycle

On the other hand, CRM is strategic approach concerned with creating improved

shareholder value through the development of appropriate relationships with key customers and key segments CRM unites the potential of IT and relationship marketing

strategies to delivery profitable, long — term relationships (Payne, 2002)

1.2 CRM OBJECTIVES

CRM objectives have been defined by several authors as below:

% To increased revenue, improve global forecast and pipeline management, improve win probability, reduce cost of sales, increase sales representative productivity, and promote sales representative retention (Greenberg, 2001)

+% To increase business opportunities by: improving the process to communication with the right customers, providing the right offer for each customer, providing the right offer through the right channel for each customer, and providing the right offer at the right time for each customer (Wilson et al.,2002)

“& According to Ryals and Knox (2001), the CRM objectives for service applications are: service reduces costs and increases profitability, service improves service

delivery, service helps organizations to delight customers, and service helps

organizations differentiate their product

4 Objectives by Kim, Suh and Hwang: Kim et al (2003) for categories of objectives for CRM: customer knowledge, customer interaction, customer value, and customer satisfaction

1.3 CRM TYPOLOGY

must understand the importance of using these three components successfully

1.3.1 Operational CRM:

necessary

~The automation or support of business processes involving sales or service representatives

1.3.2 Analytical CRM:

clients

1.3.3 Collaborative CRM:

fax, phone, Internet, web, e-mail etc.)

(Kracklauer et al., 2004)

1.4 CRM ARCHITECTURE

point in the organization (Goldenberge, 2008)

Of the three, the people component can present the greatest challenge given the sensitivity

understand the point of these changes will be adverse to the change So, gaining people

support early on will be important factor in the ultimate success of CRM initiative, so be

sure to address the people issue at first priority

1.4.2 The process: ©

The firm considers the “process” component of CRM to be the most delicate of the issues

because the inappropriate use of automation will be only speed up errant procésses While many organizations have customer—facing business processes (e.g some processes that directly interface with the customer during the purchase, payment and usage the company’s products and services), their business process need to be updated or even replaced

1.4.3 The technology:

All too often, the “technology” component is disproportionate emphasis, sometimes to the detriment of the overall project There are two issues related to technology: dealing with software vendors and staying on top of technology trend

1.5 CRM CRITICAL SUCCESS FACTORS

“ Establish measurable business goals

It is critically important to define the specific business benefits that company expect CRM

project to deliver Many projects fail because they did not identify specific goals for their

business The company has to clarify exactly what they are trying to achieve with their CRM strategy Are they trying to increase average revenue per sale? Improve customer retention and loyalty rates? Lower customer acquisition costs? Improve forecast accuracy?

Improve customer response times? Improve sales close rates? The company must prioritize

what they want to accomplish and select the CRM technology accordingly

+k Organization commitment

The implementation of a CRM project involves everyone in the organization The commitment comes from the understanding the benefits of CMR For example, if sales force does not sell on completely the system's benefits, they may not input the kind of demographic data that are essential to the program's success

% Strong customer database

CRM initiatives must have a solid foundation of customer knowledge to succeed In many

‘organizations, this knowledge is fragmented in many sources and widely dispersed across

many functions There are both operational and analytical components to this customer

knowledge base Operational activities create and store new information about each experience with a customer Analytic activities use this information to analyze trends, measure progress, and determine new courses of action

*& Customer service

Customer service is a series of activities designed to enhance the level of customer satisfaction — that is, the feeling that a product or service has met the customer expectation

Good customer service is the lifeblood and the most effective tool of CRM plan Excellent

customer service is an integral part of CRM No company can contemplate implementing CRM if it does not offer excellent customer service

(Foss, 2002)

1.6 CRM PERFORMANCE EFFECTIVENESS EVALUATION

1.6.1 References for metrics of CRM effectiveness |

According different authors, the factors could be used to measure the performance

effectiveness of organization are vary They are summarized in below table:

Table 1-1: CRM performance effectiveness frame of reference

Several objective measures of customer loyalty that show a relationship with financial

performance are numbers of referrals, word of mouth, purchase again, purchase additional

products, increased purchase size, and customer retention and defection rates

With this knowledge, the study had a foundation for the proposed solution in chapter 4

Customer satisfaction can promote loyalty, meaning that a customer loyalty forms the basis

of a valuable relationship with a company

1.6.4 Customer complaint handling process

The importance of handling customer complaints

Handling customer complaints is very important Brand image will be affected strongly if customers become angry If a distributor has a problem, the company should do whatever

it takes to make things right If a product is defected, it should be replaced or the

‘customer's money should be refunded This should be standard procedure for any reputable

business, but those who wish to develop customer loyalty on a large-scale basis may also

go beyond the standard Involving customers by using their complaints as initiators for change is a masterstroke that makes the customer feels that he is being listened to If the company takes care of angry customers well enough, they will gain their loyal easily

An effective complaint handling system can give benefits to business in several ways:

Improved product quality and service delivery

Fewer mistakes and less time spent fixing them

Better understanding of customers’ needs

Greater customer loyalty

More customers through word of mouth advertising from satisfied clients

Less time and money spent, attracting customers

Improved business reputation

_ 4 A healthier bottom line |

Effective handling customer complaint process

Complaints should be handled effectively by having a policy of welcoming customer complaints, setting up a system to handle complaints effectively, training staff to handle

, complaints well, dealing with the complaints you receive immediately, ensuring the

process for making complaints is easy for customers, and regularly reviewing complaints record

Identifying complainers

When having problem with an enterprise’s products or services, each customer will react in

different way There are various kinds of complainers It is helpful for the enterprise to define all kinds of complainers they are dealing with, especially in B2B industry In this area, companies have few customers, so they can easily indentify the characteristics of

The following information should be figured out:

+ How often do they complain?

4 What do they do to complain? `

s How đo they express their complaint?

` According to Albrech (1995), there are five types of customers:

ve The meek customer: Generally, the meek customer will not complain

The aggressive customer: Opposite of the meek customer, the aggressive customer readily complains, often loudly and at length

pay more for it Like the Aggressive Customer, the high — roller Customer is not

benefit than what they require

“& The chronic customer: Most chronic complainant will accept and appreciate

efforts to make things right This customer wants an apology and appreciates it when you listen

After indentifying complainers and clarifying their behaviors, company can plan the suitable strategy to handling with these complainers

1.7 CONCLUSION

After discussion of this chapter, this study has a foundation for the two last chapters The overview of CRM and important factors impact to an effective CRM can be used as base to

give comments for CADIVI’s CRM Based on the theory of CRM, this study can clarify

clearly the problem of CADIVI in chapter three — situation analysis Before analyzing problem, it will be the part of introduction to CADIVI CORP and its business results.

CHAPTER 2:

OVERVIEW OF CADIVI CORP

2.1 CADIVI’s profile 2.2 Market share and growth rate 2.3 Distribution channel

2.4 First level distributor of CADIVI

supply to national economy as well as daily consumption and exporting In September

2007, CADIVI was equitized and became a joint-stock corporation

Being a leading electric wire and cable manufacturer, CADIVI pursues the slogan "Good Conduction - Safe Insulation — Power Saving" CADIVI products are produced and tested

in conformity with national standard TCVN and popular international standards such as IEC, ASTM, JIS, AS, BS, DIN, UL CADIVI is the first wire and cable manufacturer in

‘Vietnam obtained ISO 9002:1994 certificate in 1998, switched to ISO 9001:2000 in 2002, and upgrade to ISO 9001:2008 now

CADIVI always focuses on quality, style, price of products and be able to satisfy all customers requirements of electric wires and cables With the motto "transmitting power to

everywhere", CADIVI products have accompanied with electricity industry development

electric grid improvement; rural area energy projects CADIVI has been the leading brand

in the industrialization - modernization of Vietnam

2.1.2 Products and services:

Products of CADIVI include:

- Building wires and cables

s- Power cables

“4- Bare overhead conductor (copper and aluminium)

“+ Others: Magnetic wires, medium voltage cables, aerial bundled cables, service entrance cables, sector cables, duplex cables, control cables, water-blocked

cables, flame retardant cables, fire-resistant cables

For the most convenience in product distribution, CADIVI has developed a distributing

‘ system including 9 showrooms and shops and 185 first-level agents throughout Vietnam

For the power companies, electrical engineering construction companies, and civil engineering companies, CADIVI delivers products on field upon customers’ requests For overseas markets, CADIVI has exported to USA, The Philippines, Iraq, Taiwan, Laos, Myanmar, and Cambodia

Satisfying customers with the best products and services, all products of CADIVI are

guaranteed in 12 months from the date of putting in operation or 18 months from the date

of delivery along with the most convenient after-sales service

2.1.3 CADIVI’s Culture:

CADIVI culture is represented by behavioural disciplines set by the leaders, based on the

vision, mission, and values of the company

“& Vision: CADIVI has strived to become a leading electric wire and cable company

‘+ Mission: To bring the best, safest and the most saving solutions of electrical

transmission to the consumers; to maximize profits of shareholders and interest of employees; and to contribute to a better society

o With customers, CADIVI provides the true value, including the value in reliability of product quality and the value in advantages and satisfaction of

o With employees, CADIVI commits to provide a professional working

environment, development opportunities, income deserved with

contribution to the general achievements of the Company, and pride of the

company

o Shareholders can be confident in the development of the company, and

receiving high and sustainable interests in CADIVI

o More than ever, CADIVI’s value to society is giving employment opportunities and environmental friendliness

CADIVI has taken many years to create an active culture which will increase their business, and every member of CADIVI is aware of the company spirit: making the best effort in the work, creativity and efficiency improvement, setting the goals in conformity

‘ with company targets, solidarity, cooperation, assistance at work, friendliness in daily life,

directing the consumers to the slogan “Vietnamese use the Vietnamese high quality

commodities”, and achievement of each person is the achievement of CADIVI and vice versa

CADIVI’s operation and development has been based on three crucial segments of market: master market, project market and exporting market:

4k Master market include agents, distributors throughout Vietnam

“4 Project market is power companies, civil engineering, industrial construction contractors

- Exporting market includes overseas markets such as USA, Myanmar, and Laos 2.2 MARKET SHARE AND GROWTH RATE:

2.2.1 Market share:

Being the leading corporation in electric wire and cable manufacturing, CADIVI takes the

highest domestic market share, about 25% of the market while the competitors get 15% or

2.2.2 Growth rate:

CADIVI’s revenue has constantly grown with high rate in the period of 2005-2007 which

is even higher than the growth of GDP and electrical equipment industry CADIVI is the unique enterprise to be ranked in Top 200 of the largest domestic enterprises in the domain

of electric wire and cable studied and selected by the United Nations Development

Program UNDP (2007) However, its growth rate was fallen to 8.94% only and continuously low as 5% in first three quarters of 2009

Figure 2-2: Comparison of CADIVI’s growth rate (%)

(Source: Synthesize from Reports of GSO and CADIVI’s data)

Sales revenues by customer group

Figure 2-3: Sales by customer groups (Million USD)

66.79

The figures show that the sales by the group of distributors have risen significantly in during 2005 to 2008, meanwhile other groups of customer have been slight up, even down

Sales of distributors group have reached highest point at 66.79 million USD in 2008

Figure 2-4: The percentage of sales by customer group in 2008 (%)

7%

E4 Others

ñExports E1 Project

Distributors

(Source: CADIVI’s reports — Y2008)

The above results show that the customer group of distributors took the highest proportion

of total revenue of the-company (accounting for 66.80% in-2008) and had high annual | growth rate This demonstrated that distributor group, known as master market, is very important to CADIVI’s current business and developing strategy

2.3 DISTRIBUTION CHANNEL

CADIVI’s distribution channels include company’s showrooms, branches and distributor

system It has illustrated in the below chart This project will focuses on distributor system

which plays the most important role to CADIVI’s business —

Distribution channel is illustrated as below chart:

2.4 FIRST LEVEL DISTRIBUTORS OF CADIVI

2.4.1 First level distributors

CADIVI specifies the distributor system as the target market (master market) at present and in the future This is the most important market segment because it is the most quick and stable consumption The first-level distributors (Distributors) are the dealers who sign contract directly with CADIVI and distribute CADIVI products to sub-dealers and

consumers over the country

At present, CADIVI has 165 first level distributors to distribute products nationwide These first level distributors have managed tens of sub-distributors, and other retailers; thus the distribution system has developed vigorously and widely

2.4.2 First level distributors’ needs

According to CADIVI’s CRM plan of 2009, the demands of first level distributors are:

aL Quality in products

CHAPTER 3:

SITUATION ANALYSIS

3.1 External analysis 3.2 Finding from the study 3.3 Finding from the survey 3.4 SWOT analysis

’ 3.5 Conclusion

This chapter covers the aspects concerning external and internal environment analysis The findings of the study will be ‘presented Based on the findings, analysis of current CADIVI’s CRM problem and analysis in customer loyalty and customer satisfaction are

This is a new tax law that was applied in 2009 More or less, it has influences human resource management, especially low-income employees

a Import duty:

In 2009, electric cable goods are exempt from import duty This is a disadvantage for local manufacturers in Vietnam

3.1.2 Economic factor analysis

The year 2009 is a year of global economic crisis This crisis has affected all businesses in

se Economic growth rate

According to a Bloomberg’s article, the growth rate of Vietnam will reach 7% in 2010 In

2008, this indicator was 6.23% But if the growth is too fast while government does not

have an adequate support, the inflation rate will be high again

3.1.3 Social factor analysis

Vietnamese people, especially Ho Chi Minh citizens, have a significant change in taste and living condition In electric cable market, demands of accessories have increased remarkably

3.1.4 Technological factor analysis

Though Vietnam government encourages enterprises to invest in R&D activities, the

budget is low and mechanism has not been renewed Therefore, R&D activity cannot get high results Most technologies are imported and transferred from overseas equipment

3.1.5 Competitors:

According to the report of Electric wire and cable association, there are more than 100 small and large-scale companies specializing in producing electric wire and cable in Vietnam They can be categorized into three groups as follows

” Large-scale companies in the country such as Tran Phu and Tan Cuong Thanh (TCT)

“ Foreign invested companies and joint venture companies such as LS-Vina (Joint Venture Company with Korea) and Taya (100 % owned by Taiwan)

4 Other small- and medium-scale electric wire and cable companies such as Dai

Long, Thinh Phat, and Lien Dat These companies take an insignificant market

share due to their new establishment

As mentioned in the previous chapter, CADIVI’s competitors are large-scale electric cable manufacturers whose share is 15%, 13%, and 11% of domestic market Those competitors’ growth has increased and become quite competitive

3.2 FINDING FROM THE STUDY:

As mentioned in chapter 2, CADIVI has three operating markets that are distributor market, project market, and exporting market, in which distributor market is the key segment which takes the highest proportion in total turnover; however, its return has dramatically declined in the past nine months The sooner the causes of the decline are identified, the sooner the company will be able to recover and develop

CRM is an important tool to improve selling goods, especially in B2B marketplace CADIVI’s customer relation has tended to go down By analysing current CRM strategy, measuring customer loyalty and satisfaction, CADIVI can indentify its problem precisely CADIVI’s CRM strategy was planned in early 2009, it has been found some concerned issues after one-year implementing as follows:

3.2.1 Practices of CADIVI’s CRM strategy implementing

By interviewing with CADIVI’s Deputy Director and Department of Commercial, some

No binding agreement

There is no binding condition between CADIVI and distributors Therefore, distributors can be represented for others who are CADIVI’s competitors And if the offer from other suppliers is more attractive, those distributors may reduce orders to CADIVI With loyal customers, company can have a virtual lifetime contract with them, but CADIVI’s customer loyalty is not high enough

No prompt report of customer’s satisfaction

In today business, customer satisfaction is hard to maintain With all the competitions give customer more chances to increase their interest and expectation Under this effect, customer satisfaction is changing quickly Therefore, it is hard to sustain customer interest

in particular product or service

Current CADIVI’s CRM practice requires customer satisfaction report to be conducted on yearly basic; as that result, CADIVI’s customer data is not up-to-date on time

CADIVI’s customer relationship programme has only focused on groups of distributors by listing their demands, needs, etc This information is only helpful when building up a general strategy But the obstacles can be overcome while implementing if company can build a full profile of each customers In general, customers in the same groups will have same characteristics, and same demands But individual customers will have their own expectations based on their situation or infrastructure Their ways of communication are different too Without strong, full and “up-to-date” information, company cannot build an efficient customer relationship programme on each customers

The method for collecting data is secondary data via desk research, and interviewing with CADIVI’s managers The information is about the number of distributors, its company’s sales revenues And some specific factors are used ‘to measure customer loyalty of CADIVI They are number of customer defection, number of referrals, purchase again, purchasing additional products, increasing/ decreasing purchase size

Number of customer defection:

In 2008, CADIVI had 185 first level distributors CADIVI remained only 165 distributors

in 2009 In only 9 months, CADIVI lost 20 distributors Obviously, this leads to the decrease in turnover Customers decided to stop ordering, which is the visible signal to realize customer defection

Figure 3-1: ‘The number of distributors in latest 5 years

from new distributors reduced dramatically which was more than 60% in 2007 and 2008 This number shows that distributors’ belief toward CADIVI has been out of balance When customers lost their belief, they certainly do not present that product to anyone

~ Purchasing again: |

Although gaining 20 new distributors, only 80% of them repeated their purchase 73% of

old distributors agreed keeping their business with CADIVI This means company will

continue losing at least 20% of its current distributors which can bring up to 53%

(=80%*66.8%) of CADIVI’s revenue

Purchasing additional products:

Beside main products, CADIVI also provides many accessories for electric wires and

cables Buying additional products can show how customers care about supplier But the number of distributors purchased this item is still low, approximately 70% of distributors Decreasing purchase size:

Depend on latest sales reports, 49% of distributors have not increased their purchase size in

the past nine months and 15% of distributors have tended to cut down their purchase size

Once distributors decide to cut down the value of orders, their next step may be stopping

the purchase Tracking the purchase size of each distributor will show a full view of their

state, and help company adjust their plan timely

In fact, using this factor to analyzing customer loyalty is not correct completely Because

this factor also depends on many economy indicators, such as GDP growth rate, industry

Seeking competitive data:

According to feedback information from sales representatives, some distributors are now

seeking new suppliers And 85% of distributors are not willing to share competitive data anymore “One of differences between ordinary customers and loyal customers is that ordinary customers are seeking competitive data, but loyal customers are sharing competitive data” (Christensen, 2006) Competitive data that customers are looking forward to are competitive prices, their products/ services, their monthly promotion activities, etc Customers are not willing to share competitive information, which shows

that their belief on CADIVI begins to get loose

3.3 FINDING FROM THE SURVEY

Implementing CRM, CADIVI has put many efforts to improve customer satisfaction in the following aspects: customer service, sale representative, product features and price

With the above concerns, the survey has been conducted to measure the level of customer satisfaction at CADIVI

A survey was used to collect data The survey was conducted with distributors via face-to- face interview, telephone interview, courier, fax, and email The participants are representatives of their business such as the owners, the directors, the managers, and

salesperson at distributor’s organization The questionnaire is to obtain customer’s perception of the level of customer satisfaction on customer service, sales representative,

product and price

Of 45 questionnaires delivered, 40 responses were received

The results are demonstrated in the appendix 2 Excel software is used to analyze the data

3.3.1 Customer service:

company’s customer service, meet customer’s requirement on lead-time; on-scheduled delivery time; delivered goods in correct quantity as per order; delivered in good packing condition; sufficient warranty time and policy; sufficient warranty time and policy

The result has been found as follows:

“L Five of seven researched components have a high or medium mean, but two components needs to be deeply analysed where its means are low They are

delivery time and payment term

<The mean of seven components has showed as below:

Figure 3-3: Satisfaction on customer service

- Reasonable payment term Sufficient warranty time and policy Delivered in good packing condition Delivered goods in correct quantity as per order

On-scheduled delivery time Meet customer’s requirement on delivery time

Easy to contact the company’s customer service

| Delivery time |

delivery is heighted accordingly Delivery time is a critical factor in customer satisfaction,

like a commitment made by the company Based on the information collected from the

time

Table 3-1: Satisfaction on delivery time

25% of distributors conclude that CADIVI was unable to meet their expected lead-time

So, they replaced with competitor’s products Those distributors expect that the delivery should be reduced from 25 days to 20 days

The level of customer satisfaction on delivery time is illustrated in the below chart

Figure 3-4: Satisfaction on delivery time

Additionally, the qualitative survey has been conducted via interviewing with the key

distributors Some feedback has given that the reasons of looking for new suppliers are:

CADIVI’s delivery time is long, unavailability of stock and products All these are

required to meet end-customer requirements Therefore, CADIVI need to analysis to

._^~

improve this factor in their CRM plan.

Payment term

Payment term is another factor to evaluate the quality of customer service The result of the

question for reasonable payment is showed as follows:

Table 3-2: Satisfaction on payment term

According to the result, 13% of respondents are unsatisfied with CADIVI’s current

payment term Currently, CADIVI has offered a credit payment with the amount of 100,000 million VND within 30 days This condition is below customer expectations

which does not help much on reducing working capital to those distributors whose order

_ are 3-5 times larger than this credit amount In other hand, the distributors have to give longer credit to the sub-dealer and end customers They expect CADIVI increase the credit amount and time by double, means 200,000 Million VND for 60 — 90 days

The level of customer satisfaction on payment term is illustrated as the following chart

Figure 3-5: Satisfaction on payment term

3.3.2 Sales representative:

The second part of questions is to assess CADIVI’s sales representative The questions have asked distributor’s agreement on the following dimensions: efficiently solving the complaint; quickly handling my inquiry; adequately explaining the offer and promotion policy; salespeople are knowledgeable about products; courteous; well groomed; friendly The result of the research as follows:

low mean where CADIVI’s sales representative have problem with handling customer complaints/ enquiry, their knowledge of products and updating customer on company’s activities

‘The mean of seven components has showed as below:

Figure 3-6: Satisfaction on sales representative

Salespeople are friendly Salespeople are well groomed Salespeople are courteous Salespeople are knowledgeable about products

Adequately updating information about

company's activities Quickly resonding customer inquiry Efficiently handling cusomer complaint

Customer complaint handling

Handling complaint i isa straight way to customer’s mind The purpose of this question is evaluating the efficiency of handling customer complaint by sales representative The

below table show the result of this question: ˆ

Table 3-3: Satisfaction on customer complaint handling

Figure 3-7: Satisfaction on customer complaint handling

CADIVI has not assigned any department to receive, solve and respond to customer

complaints By current process, customers have directly ‘placed their complaint to—

CADIVF's sales representative The sales representative firstly contacted to the involved

departments to understand and find the solution to solve the problem Then transfer to customer services staff who always have to deal with many issues such as process order,

logistics, delivery, etc Each sales representative is responsible for 5-6 distributors which