ASSIGNMENT 1 FRONT SHEET Retake

Qualification BTEC Level 5 HND Diploma in Business

Unit number and title Unit 32: Business strategy (574)

Assignment due Assignment submitted August 6, 2020

Learner’s name Nguyen Thi Hien Thao Learner’s code GBD18551

Class GBD0703A Assessor name Badraoui Badr

Learner declaration:
I certify that the work submitted for this assignment is my own and research sources are fully acknowledged.

Learner signature Thao Date August 6, 2020

Grading grid

P1 P3 M1 M3
 Grading
Assessment criteria Assessor’s Feedbacks
(achieved or not)

LO1 Analyze the impact and influence which the macro environment has on an organization and its business
strategies.
P1. Applying appropriate
frameworks analyze the
impact and influence of
the macro environment
on a given organization
and its strategies.

LO3 Evaluate and apply the outcomes of an analysis using Porter’s Five Forces model to a given market sector

P3. Apply Porter’s Five

Forces model evaluate
the competitive forces of
a given market sector for
an organization.
M1. Critically analyze
the macro environment
to determine and inform
strategic management
decisions.

M3. Devise appropriate

strategies to improve
competitive edge and
market position based on
the outcomes.
Summative feedbacks:

Assessor’s Signature Date

Table of Contents
I. Introduction ....................................................................................................................................... 6
II. Strategic of Vinamilk’s company........................................................................................................ 6
1. Mission ........................................................................................................................................... 7
2. Vision .............................................................................................................................................. 7
3. Objective ........................................................................................................................................ 7
4. Role of business strategy ................................................................................................................ 7
III. PESTLE framework ......................................................................................................................... 8
1. Political factor .................................................................................................................................8
2. Economics Environment ................................................................................................................. 8
3. Social-Cultural Environment............................................................................................................ 8
4. Technological Environment ............................................................................................................. 8
5. Environment factor ......................................................................................................................... 9
6. Legal factor ..................................................................................................................................... 9
IV. Porter’s 5 forces model .................................................................................................................. 9
1. Rivalry competition among existing competitors ............................................................................ 9
2. The bargaining power from customers ........................................................................................... 9
3. Threat of substitute products ....................................................................................................... 10
4. Threat of new entrants ................................................................................................................. 10
5. Power of Suppliers ........................................................................................................................ 11
V. The opportunities and threats that the company facing from SWOT model ................................... 11
1. Strength ........................................................................................................................................ 11
2. Weak ............................................................................................................................................ 12
3. Opportunity ..................................................................................................................................12
4. Threat: .......................................................................................................................................... 12
5. The opportunities and threats that the company facing from SWOT model ..................................12
VI. Conclusion .................................................................................................................................... 13
References .............................................................................................................................................. 14
 I. Introduction

In recent years, dairy has become one of the fastest growing sectors in the food industry of Vietnam.
Along with the common trend of developing countries, Vietnam dairy’s demand is significantly increasing
as a crucial supplementary nutrition source. One of the most leading dairy companies in Vietnam,
Vietnam Dairy Product Joint-stock Company (Vinamilk). Being considered the leading producers of dairy
products in Vietnam, VINAMILK Corporation was established in 1976. In 2005, the company was officially
listed on the Ho Chi Minh Stock Exchange (HOSE). In average, its domestic revenue enjoys a gradual
increase of 20% - 25% every year. The company is currently in possession of 9 milk factories throughout
the country, 1 coffee factory located in the South, 1 general hospital. The three branches located in three
biggest cities, namely Ho Chi Minh City, Ha Noi and Da Nang City, are able to generate a total output of
504,000 tons of milk per year. There are 5 main brains; they are milk products and products from milk.
Milk product: sweetened condensed milk, fresh milk, milk powder, Product from milk: Ice-cream, cheese,
yoghurt. And many other products as: Tea, Coffee, and Fruit Juice…Vinamilk committed to providing the
best products for consumers. Vinamilk has invested in technological innovation to manufacture heathful
products. The quality is being improved to meet the needs of consumer. The material is selected
carefully. You are really comfortable to use Vinamilk Products. Nowadays, Vinamilk product is the most
popular milk product in Vietnam because of their reasonable price policy.

Vinamilk's dairy products are divided into many categories including liquid milk, powdered milk,
condensed milk, drinking and spoon yogurt, ice cream and cheese (Vinamilk's Homepage, 2011). The
company's products are also exported to many foreign markets such as Germany, USA, Canada and
China. And most amazing is Vinamilk claiming to have an 80% domestic market share with regard to
dairy products.
 II. Strategic of Vinamilk’s company

1. Mission

To become a world grade brand in food and beverage industry, where people put all their trust in
nutrient and health products (Vinamilk Annual Report, 2019).

2. Vision

To deliver the valuable nutrition to community with our respect, love and responsibility (Vinamilk Annual
Report, 2019).

3. Objective

Maintaining the No.1 position in the Vietnamese market and aiming to reach the Top 30 World’s Largest
Dairy Companies in terms of revenue, Vinamilk has identified a development strategy with three main
pillars for execution, including:

 Leading in highly applicable innovations.

 Consolidating the leading position in Vietnam’s dairy industry.
 Becoming the most valuable dairy company on the Southeast Asia.

4. Role of business strategy

Business strategies help Vinamilk business guide their future activities through analysis and forecast of
the business environment. Business is an activity always influenced by external and internal factors.
Business strategies help Vinamilk be both flexible and proactive to adapt to market fluctuations, while
also ensuring that businesses operate and grow in the right direction. That can help the company strive
to achieve the goal of empowering them in the market.

Business strategy also helps Vinamilk capture opportunities as well as full risks to the development of
enterprise resources. It helps exploit and use resources appropriately, promoting the strength of
Vinamilk.
III. PESTLE framework

1. Political factor

Vietnam is a country with a stable political institution that facilitates doing business in Vietnam.
Moreover, Vietnam is a peaceful country without war and terrorism. Top five of happy countries in the
world. The government has many policies to support the milk industry for running the business.
However, Vietnam is a mixed economy so the government stills play a big role in the market. Vietnam
government decrease the foreign trade barrier to attract more investment. Especially the government
has more tax policy to support the milk industry.

2. Economics Environment

Vietnam’s GDP trend increased day, it is a great opportunity for business. It means that income and life
will go up and the demand to spend money is high. However, the inflation rate is also high that means
the cost of production will increase. It will affect the price of Vinamilk products in the market. Vietnam is
a member of WTO is a big pressure for local businesses to compete with other foreign competitors. In
addition, it is also helps the company to expand the business scales and attract more foreign investment.

3. Social-Cultural Environment

Vietnam is a young population country; it will lead to the consumption of milk products in the market.
According to WTO, Vietnam's average income 1300 USD each person in 2010 and the buyer in the middle
class is high. Therefore, they are an important customer that the company should focus on. They will buy
the product not only for them but also for their children. The demand for improving health and beauty
increased so they need a product that can meet their satisfaction such as fresh milk.

4. Technological Environment

Milk Joint Stock Company Vietnam (Vinamilk) is still the leading enterprises of the milk processing
industry of Vietnam. Vinamilk leaders always factor in science and technology; depending on funding,
market demand, and product structure to convert technology investment timely. Therefore, the
customer will have a lot of information about the company, and the company can build trust and
customer satisfaction. It plays a big role in business therefore Vinamilk has a modern system from
European countries of advanced technology.
 5. Environment factor

Company focuses on the waste disposal system in order to reduce pollution. They are using reasonable,
saving natural resources, develop clean energy, renewable energy, and boosting recycling, reuse, and
waste reduction. The company also develops and uses safe and fresh material.

6. Legal factor

Vinamilk ensure the production, which is safety and health for the customer by using the modern
system. The company also follows the rule of food safety. Vietnam has many different tax rates so it will
make it difficult for any company. It also affects the price decision of the company.

IV. Porter’s 5 forces model

1. Rivalry competition among existing competitors: Medium

Dairy industry has the high growth rate about 15%

Market share: Vinamilk: 35% Dutch lady: 28% Imported milk like Abbot, Nestle: 22% Others: 19%

Dairy companies have upgraded their products. Vietnam consumers now tend to equate high price with
better quality and more nutritious ingredients. Therefore, milk companies have upgraded their products,
for example, from Friso to Friso Gold (Dutch Lady), Dumex to Dumex Gold (Dumex), Dielac to Dielac
Alpha with colostrum and Dielac Alpha Gold (VINAMILK)

Besides selling products, dairy producers also focus on developing services after sales. The most common
way is to establish free clubs or health counseling centers such as Enfa A+ of Mead Johnson, Anlene of
Fonterra, Calcimex of Dutch Lady or Gain Advance of Abbott, to give regular nutrition advice to their
customers as well as consultation on product consumption.

Cutting tax routines when Vietnam joins WTO and agree CEPT will pressure on Vinamilk in the future.

2. The bargaining power from customers: High

Users have a significant power on companies’ product quality. There are a variety of dairy products
available, which can be substitutes for each other. Price is not the most important factor to consumers in
their consumption decision. Therefore, companies have to compete with each other by the quality of
product and brand power, before competing by price.
Direct customers such as distribution agents or nutrition centers have a great impact on consumers’
purchasing decisions. Domestic dairy companies and sole agents of foreign dairy companies have to
compete to scramble for strategic distribution points, mainly by discount and commission for retail
agents. Such distribution points as nutrition centers, hospitals or pharmaceutical stores could have
considerable bargaining power, as they can influence users’ purchasing decisions through product
consulting and introduction.

3. Threat of substitute products: Low to Medium

The threat from substitute products is not high as milk is a drink full complement of essential nutrients
for human needs. However, market share competition can be seen among products in the industry. For
example, soy milk or other products like cereal or cocoa may pose threat to liquid milk products’ market
share, or the functional products, although, the functional products are very expensive.

4. Threat of new entrants: Low

The brand in the company Vinamilk is very difficult to confirm because product quality and
competitiveness of large companies. Each company has its own brand, its own characteristics that make
different for firms in the same industry. However, Vinamilk has created brand loyalty by continuous
advertising name and brand of the company. High technology is a high entry barrier for competitors.
Milk is the nutritional components of it are complex demands of modern technology; the handling of
hazardous substances increases the optimal level, new products while giving priority to Vietnam with
new features. Vinamilk factory, all the stages from design and construction of buildings to install
machinery, production lines are in compliance with international standards and Vietnam on food safety
and environmental hygiene. A milk production lines with an average value of about several tens of
billions, it is not a small investment, does not include the cost of building the plant, spending labor costs,
costs of raw materials and foreign. Human resources for processing milk are numerous, from the farm.
But resources are not high quality and there is also a significant barrier to the milk company. Moreover,
the government regulations also significantly affected the development of the company as open dairy
farms, developing processing technology and replacing the input materials imported from abroad. In the
future, the company Vinamilk will be able face new competitors from overseas market due to the
economy and the outstanding technical, capital and inputs. Hence competitive pressures will increase
from potential rivals’ new features.

5. Power of Suppliers: Medium

The volatility of raw milk market is a difficult one of the dairy companies. Therefore, the company has
developed Vinamilk the material with the dairy farm. In addition, Vinamilk also restrict import materials
from abroad and established distribution networks milk. Price competition is the strength of Vinamilk,
because the same products on the market have higher rates of Vinamilk.

V. The opportunities and threats that the company facing from SWOT model

1. Strength

 Vietnam dairy products joint stock Company, named as Vinamilk, is the leading enterprise in Vietnam
dairy industry. Vinamilk is a trustworthy brand mane in the domestic market which accounts for
about 39% of the Vietnam dairy market share. VNM has. Up to now, Vinamilk has 12 factories in
which there are two biggest factories in Asia and all Vinamilk’s factory is equipped high-technology
with international criteria in the manufacturing process. Therefore, with the large capacity and
advanced technologies, Vinamilk can take advantage of both high volume and quality products
against other competitors.
 Vinamilk has a wide distribution channel with 250 distributors, 200,000 retailers, and supply their
products to all over supermarket throughout Vietnam, so Vinamilk products can be easy to approach
to the users.
 Vinamilk has a good strategy to control the expenditure to share the price’s burden to the consumer
and also get more profit to generate from sales.
 Vinamilk invests highly in products’ differentiation in both fresh and processed dairy products, so it
creates the variable choices for consumers. Recently, Vinamilk adds more value to its products such
as pro beauty yogurt with supplemental collagen, soya milk with high fiber, Dielac formula powder
milk, and so on to make products satisfy the needed of all age group.
 2. Weak

 The imported dairy material constituted more than 70% so it is affected by the change in the price of
global dairy products.
 The strict competition from other domestic and foreign brand names in some main segments such as
the high competition with TH Milk, Dutch Lady in liquid Milk, the strongly compete with Mead
Johnson, Abbott, Nestle, and Dutch Lady in Powder milk.
 The proportion of people lives in rural areas high so it is affected by milk consumption.
3. Opportunity
 Domestic dairy yield just adapts 25% domestic demand, so that is the potential market for Vinamilk
to expanding its production process.
 Vinamilk is the trusted Vietnam brand name in high-quality, so it contributes to building the loyalty of
customers against other competitors.
 To enter 2 new factories into operation in which the Vietnam dairy factory in Binh Duong province
has the capacity equal the sum of 9 capacities of Vinamilk that make Vinamilk meet the increasing
demand of the Vietnam market.
 Expanding the capacity by investing in Mikara Company in New Zealand to help Vinamilk deal with
the shortage of imported milk because of the poor weather and the high increase in demand for
dairy products that lead the global milk production recently cannot satisfy the demand.
 Significant investment in dairy cattle herd is the opportunity for Vinamilk to be able to self-sufficient
in raw fresh milk.
 Strength in Vietnamese market open opportunity for Vinamilk success in exporting to other emerging
South East Asia market.

4. Threat:

 The exchange rate exposure is the factor affected by imported materials.

 Vietnam’s infrastructure is low that is a bit hard for widen distribution, especially the highland region
to keep the high-value products.
 5. The opportunities and threats that the company facing from SWOT model

 Opportunities
 The positive trend of customers towards milk usage

The development of the economy leads people to take more care of the health of their elderly, their
children, and themselves. Products from milk not only provide nutrients but also additional factors such
as vitamin C good for skin of young girls, calcium good for the bone of teenage, and so on. Besides, dairy
can be used in many different ways with different kinds of things.

 Increasing the average income per capita

Milk and other products from milk are not just a tonic, it became a normal drink for all of us at a
reasonable price. In several families, they buy blocks for usage in a long time for all the members of the
family, milk for the elderly, and for pregnant as normal. Day by day, dairy is not exclusive goods
anymore.

 Threats
 The severe competitive market after the commitment of Vietnam and WTO Involving in WTO is
an opportunity and a threat for all the companies in Vietnam. Along with the chance to expand
their market into the world, they also have to face with the competitor from all other countries.
Loving foreign products of Vietnamese customers is undeniable. Moreover, imported things are
famous for extreme effect despite really high prices and not so many distributors.

VI. Conclusion

The report has contributed to analyzing the potential of the Vietnam dairy market. At the same time, the
thesis creates a deep analysis of Vinamilk Ltd– the biggest domestic player in the dairy market. The
potential of the dairy industry in Vietnam is also based on the fact that the Vietnamese residents are
consuming a much lower amount of milk compared to other countries. This is an opportunity for milk
producers to open their markets from the cities to the countryside. Along with that, the awareness of
using dairy products is raising within the Vietnamese community, pushing the ability to achieve higher
sales and market shares.
References

- Home - Vinamilk. [online]

Available at: https://www.vinamilk.com.vn/en/
[Accessed 6 August 2020].
- Nguyen, V., 2020. BUSINESS ANALYSIS AND VALUATION A Case Of VIETNAM DAIRY PRODUCTS JOINT
STOCK COMPANY (VNM. [online]
Available at:
https://www.academia.edu/7811573/BUSINESS_ANALYSIS_AND_VALUATION_A_Case_of_VIETNAM
_DAIRY_PRODUCTS_JOINT_STOCK_COMPANY_VNM
[Accessed 6 August 2020].
- Vinamilk Annual Report 2017. [online]
Available at: https://www.vinamilk.com.vn/static/uploads/article/1522315764-
269930164207c4adda107dd3779158d4514dda30559796ef67db01adf8319d7b.pdf
[Accessed 6 August 2020].
- Vinamilk Annual Report 2019. [online]
Available at: https://www.vinamilk.com.vn/static/uploads/bc_thuong_nien/1585291614-
e5df6f54f1b460c71648e3b3974c13d41721ed54aaef4e256def7956f8cc7d38.pdf
[Accessed 6 August 2020].
- VIETNAM DAIRY PRODUCTS JOINT-STOCK COMPANY (VINAMILK) [online]
Available at: https://www.vinamilk.com.vn/static/uploads/download_file/1402901755-
603ba2f49305bff993da356b04002943069778fe3624d5ddb0a9497ed4fb0aab.pdf
[Accessed 6 August 2020].