ASSIGNMENT 2 FRONT SHEET

Qualification BTEC Level 4 HND Diploma in Business

Unit number and title Unit 1: Business and Business Environment

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 Introduction

Vinamilk is an abbreviation for Vietnam Dairy Products Joint Stock Company, a company producing and
trading milk and milk products as well as related equipment and machines in Vietnam. According to the
United Nations Development Program, this is the 15th largest company in Vietnam in 2007.

Listed on the Ho Chi Minh City Stock Exchange is VNM. The company is a leading enterprise in the dairy
processing industry, currently occupying 75% of the market share of milk in Vietnam. In addition to
strong domestic distribution with a network of 183 distributors and nearly 94,000 sales points covering
64 provinces and cities, Vinamilk products are also exported to many countries in the United States,
France, Canada, Poland, Germany and the Central region. Eastern, Southeast Asia ... After more than 30
years of launching consumers, till now Vinamilk has built 8 factories, 1 factory and is building 3 new
factories, with a variety of products, Vinamilk currently has over 200 pasteurized, pasteurized milk
products and products made from milk.

This report will point out the strengths and weaknesses as well as factors affecting the company
First is the competitive enviroment of the company

I. Competitive enviroment

1.Power of suppliers

Vinamilk is the dairy company that provide many product made from milk. Vinamilk has a lot of cow farm
and milk factory so they can operate the production by their own supply and dont need to use outside
resouces. Factories and farms of company are the biggest in Asia that meet all the international standard
(Global Gap). They can stand without any outside resources and impact from suppliers are not available
for them. Currently, Vinamilk has a total of 9 farms meeting Global G. A. P standards throughout the
country. The total number of dairy cows on the farm and breeding households is more than 120,000,
providing 850 tons of raw milk a day, equivalent to 3.2 million glasses of milk. The farm building is
calculated to connect science with the company's 13 processing plants across the country. Immediately
after milking, raw milk will be refrigerated and transported immediately to the production site with a
radius not exceeding 50km. Short travel time ensures the purity and natural flavor of fresh milk. At the
same time, with a closed production process, Vinamilk's products always ensure product quality in
accordance with the standards of the Ministry of Health as well as international standards. So power of
suppliers is low

2.Power of buyer

Althought Vianmilk is the biggest diary company but there still another dairy product from other brand
and customer have many choices to decide what to buy. Buyers can find themselves in a powerful
position if it’s easy to switch to another company because not only vinamilk is operating in Vietnamese
market so they have high position and power

3.Threat of new entrants

Vinamilk is a familiar brand and trusted by Vietnamese consumers for over 34 years. The Vinamilk brand
is associated with trusted and trusted dairy products and dairy products. This brand was voted as a
"famous brand" and was one of a group of 100 strong brands voted by the Ministry of Industry and Trade
in 2006. Vinamilk was also voted by the consumers in the "Top 10 Quality Vietnamese Products"
group. high ”from 1995 - 2009. Diversified product portfolio, high quality products but lower prices than
imported products of the same type and the largest market share in Vietnam among suppliers of similar
products. Vinamilk is the largest dairy company in Vietnam with a 37% market share, in which 45%
market share in liquid milk market, 85% market share of condensed milk and yogurt so Vinamilk is
almost be the “king” of milk Viet Nam, new entrants almost dont have any chance to competitive with
Vinamilk in this market.

4.Threat of substitutes and existing competitor

Milk is the daily product that provide canxi, protein and necessary nutrients for our health especially
young children. There are nothing can replace milk- a nature product but there are so many milk
company beside Vinamilk with competitive price and product,the risk of being replaced is very high.
Their competitors are TH True Milk, Dutch Lady, Nutrifood, Moc Chau,….
According to the chart, Vinamilk is dominate 55% of the milk market, half of Vietnamese milk market.
The second place belong to TH True Milk with 11% and 44% worse than Vinamilk. These number show
that a distance from the Vinamilk and TH milk is too insane even TH Milk is standing on the second place.

II. Macro enviroment impact analysis

There are so many factor that can affect to the company and it is divide into 6 factor follow PESTLE
structure

1. Political
Viet Nam is small country in the South East Asia with only one ruling party - Communist Party of
Vietnam. The stable political situation of Vietnam has the decisive meaning in creating and implementing
Vinamilk's marketing strategies.
- After the renovation period, Vietnam officially normalized relations with China in 1992 and with the
United States in 1995 joining the Arsenic bloc in 1995, Vietnam has established diplomatic relations with
171 countries. The most important turning point is that January 11, 2007 Vietnam officially became the
150th member of WTO.
These events have had a significant impact on market expansion as well as attracting investors,
increasing sales, ... from which to propose Vinamilk's marketing strategies

2. Economic
Macroeconomic stability, inflation curbed below 3%; unemployment below 4%; growth is estimated at
6.8% for the whole year. 2019 is the first year the main growth motivation has come from the processing
and manufacturing sector. The share of exports and investment of the domestic private sector has also
increased ... Vietnam maintains the highest growth rate in ASEAN and is among the best growing
economies in Asia. The foreign sector also set a new growth record with a total import-export turnover
of over US $ 482 billion and a trade surplus of US $ 7.2 billion. Thereby, it can be seen that the business
environment has many positive signals. In particular, the results of the survey of business trends in the
first quarter of 2019 compared to the fourth quarter of 2018 of the General Statistics Office had 85.1% of
businesses rated the trend as better and stable. At the same time, PMI (Purchasing Management index)
reached 56.6 points in November 2018, the highest among ASEAN countries; The sustainable
development index in 2018 increased by 11 places, ranking 57/176 countries

3. Social
Size and growth rate of the population: The country's average population in 2013 was estimated at
89.71 million, an increase of 1.05% compared to 2012. The population size increases relatively quickly,
opening up for Vinamilk's market. large schools, opportunities for product consumption and revenue
growth - In the country's total population this year, the urban population accounted for 32.36% of the
total population, up 2.38% over the previous year; rural population accounts for 67.64%, an increase of
0.43% . This is a favorable factor for the development of the dairy industry in our country and in fact
shows this great potential with the level of milk consumption. 30% year-on-year increase, strongly
concentrated in urban areas - the percentage of the population aged 60 and over in our country is
among the highest in the world and is expected to reach 10% of the total population in 2017 (the
threshold of aging population structure) living standards are increasingly being improved, which also
presents opportunities for dairy businesses in the market with great potential and developing like
Vietnam. In Vietnam, consumers have a habit of using sweets as well as canned or milk-related products.
Access to the source of information is easy through radio and newspapers. ,television….So marketing
activities, advertising and distributing products to customers become more convenient.One of the
characteristics of Vietnamese people's perception is that they often use what they feel comfortable with
in terms of prestige and quality, so they rarely change, so when Vinamilk creates trust with consumers, it
will have customer loyal to the product.

4. Technological
Factors of science and technology not only ensure the development of enterprises but also create
competitive advantages of enterprises - Currently, the production technology equipment used by
Vinamilk are of international standards. using modern packaging technology, importing technology from
well-known equipment suppliers such as: Pak trota (Sweden), APV (Denmark) - Synchronized lines of the
new generation, Currently, automatic control, or semi-automatic to meet the quality requirements of
food hygiene and safety - Using advanced technologies for raising the piano such as Ethernet network,
Bluetooth wireless connection technology, Wi-fi and remote radio identification technology with RFID
tags with automatic identification chips, sensor systems biology, surveillance cameras ... help the dairy
cow production increasingly improve.

5. Enviroment
The climate of Vietnam, which is humid and tropical in monsoon, will create challenges for the dairy
industry. Perishability, easy to degenerate ... of the milk if not stored and handled promptly. This
adversely affects the quality of the milk. From this, a specific strategy is required to preserve milk and
produce high quality products. Besides, there are many advantages to the nature of climate:
The climate is very favorable for farming, creating raw materials to supply for production. Vinamilk needs
to exploit this advantage thoroughly so that it will create enough raw materials to meet production
needs. This is an opportunity as well as a challenge for Vinamilk. If you catch and know it, this is really a
good thing. This will help Vinamilk reduce the price while the quality of milk remains unchanged
 6. Legal
Business registration certificate number: 0300588569
Issued date: November 20, 2003. Issuer: Ho Chi Minh City Department of Planning and Investment

III. Internal analysis

Vision "Becoming the number one symbol of belief in Vietnam on nutrition and health products for
human life" "

Mission “Vinamilk commits to bring the community the best and highest quality nutrition by our respect,
love and responsibility to human life and society”

Core values "Becoming the number one symbol of belief in Vietnam on nutrition and health products for
human life"

The infrastructure
- The company invests heavily in infrastructure. From 2010 to 2015
The company has invested VND 4500 billion to modernize its machinery, equipment and technology
for production and construction of new processing plants as well as houses
factories such as: Dairy Factory in Lang Son, Vietnam Dairy Factory, Chi
Hanoi branch, Da Nang branch .. and many other branches
- In addition, the company also expands the construction of dairy farms
High technology, meeting the company's clean material supply such as:
Nghe An dairy farm, Binh Dinh dairy farm, dairy farm
Lam dong ...

Human Resources
- The company has an enthusiastic and experienced team in the industry. Cities
Senior managers have an average of 20 years of experience in the field of manufacturing, distributing
and selling dairy products
- The company has trained marketing and sales teams with experience in analyzing, identifying consumer
tastes and trends, and assisting with
Direct sellers to better understand consumer tastes
- Has an experienced research and development team, to research the market, detect tastes and offer
new dairy solutions and products to the company

Technological development
- In the past time, the company has been constantly innovating technology, investing in high-tech
machinery lines imported from European countries such as the US, Germany, Italy .. to be installed and
guided by operation experts. world top
- In addition, the company has an international-standard production line to produce quality milk
products

Production process
- Apply strict production management process, good cost management
- Promote production, diversify products, give priority to commodities with high competitive advantages,
and have a stable market.
- Strictly complying with regulations on fire and explosion prevention and protection of company assets

Logistics input
- Being supplied from the company's dairy farms and purchasing milk from dairy farmers, the company
also imports more milk powder from Australia, New Zealand.

Logistics output
- In Vietnam, the company has a distribution network that is more competitive than other competitors
- Owning a wholesale distribution network of 250 independent distributors spread across 64 provinces
and cities nationwide with more than 135,000 retail locations. The company also sells directly to
supermarkets, offices, factories and nutrition advice points
- Building multimedia marketing campaigns. Advertise in the media and organize many marketing
promotion activities such as: Sponsoring communication programs, awarding scholarships to good
students and sponsoring programs for the poor
- Attentive after-sales customer service, dedicated to always listening to customers to improve product
quality.

IV. External analysis

In this part we will use SWOT model to identify an external macro factor

Strength (S)

Vinamilk is a familiar brand and trusted by Vietnamese consumers for over 34 years.
- Good and experienced leader and manager: Vinamilk has a team of good leaders, experienced and
ambitious proven by sustainable business profits.

- Diverse product portfolio, high quality products but lower prices than imported products of the same
type and the largest market share in Vietnam among suppliers of similar products

+ Vinamilk is the largest dairy company in Vietnam with a 37% market share, of which 45% market share
in liquid milk market, 85% market share of condensed milk and yogurt → Vinamilk has the ability to set
the market price. .

- Extensive distribution network, combining many modern and traditional distribution channels:

+ Vinamilk's extensive distribution and sales network is an essential element to its success, allowing
Vinamilk to win a large number of customers and ensure the launch of new products and strategies.
Effective marketing across the country. Currently, Vinamilk widely distributes in 64 provinces and cities
with 250 distributors and more than 135,000 points of sale nationwide.

Good relationship with suppliers, proactive source of raw materials and investment in the supply of cow
milk:

+ The company has been implementing direct dairy projects, in addition to providing support to dairy
farmers, to be more active in input materials. In addition, the company has a dairy project in New
Zealand (the country that exports the most raw milk to the Vietnamese market) in order to be more
active in the source of raw materials.

- Strong finance: While many businesses are facing difficulties due to loan interest rates, Vinamilk has a
quite safe capital structure, debt / total assets ratio is 16.7% (2009).

- Market-oriented research and development: Market-oriented research and development capacity.

Vinamilk's product research and development department actively conducts researches and cooperates
with market research companies to learn about sales trends and activities, consumer feedback and
media. information on food and beverage issues → providing products that best suit customers.

- Modern equipment and technology: Vinamilk uses modern production and packaging technology at all
factories. The company imports technology from European countries like Germany, Italy, and
Switzerland to apply it to the production line. Vinamilk is the only company in Vietnam that owns a
system of machines using Danish Niro spray drying technology. In addition, the company also uses
international-standard production lines provided by Tetra Pak to produce dairy products and other
value-added products.

WEAKNESS (W)
- Unable to take initiative in the source of raw materials: The source of raw materials has not been
proactively dependent on imported raw materials (60%) so input costs are strongly influenced by world
milk prices and exchange rate fluctuations.

- The market share of powdered milk is not high, not yet able to compete with imported milk powder
products from the US, Ucs, and the Netherlands. According to the latest report of BVSC, the domestic
powdered milk market accounts for 65% of imported milk products, Dutchlady 20% and Vinamilk 16%

Opportunity (O)
+ The import tax of milk materials is lower as committed to the WTO, this is an opportunity to reduce
production costs while the source of imported milk powder accounts for 75%.

- High potential customer force and great demand:

+ The dairy industry is in a growth phase, so Vinamilk has great potential for development. Moreover,
the demand for dairy products in Vietnam has been growing steadily. With the development of the
economy, consumers are more concerned about health and use more dairy products. The current
average consumption of Vietnam is 14l / person / year, lower than Thailand (23l / person / year) and
China (25l / person / year).

+ Vietnam has a young population structure (children account for 36% of the population) and the
population growth is over 1% per year, this is a very attractive market.

+ Per capita income increases over 6% / year

Threat (T)
- Market participation of many strong competitors:
+ The milk market is fiercely competitive with a lot of companies participating, especially the big dairy
companies in the world such as Nestle, Dutchlady, Abbott, Enfa, Anline, Mead Johnson, ..
+ The roadmap for reducing tariffs that Vietnam committed when joining WTO is to reduce the tax on
powdered milk from 20% to 18%, condensed milk from 30% to 25% → this is an opportunity for
Vinamilk's competitors to be easy. easier to penetrate the Vietnamese market

V.Conclusion

Vinamilk is the largest dairy food company in Vietnam over the years. The market dominance of Vinamilk
is very large and it is difficult to deprive Vinamilk's position over many years, plus a steady and strong
economy Vinamlik will be a worthy target for investment.

REFERENCES

Company’s information: +https://finance.vietstock.vn/VNM/ho-so-doanh-nghiep.htm

+ https://www.vinamilk.com.vn/en/

Company’s status and event: http://cafebiz.vn/