Competitiveness

Analysis

Group 4
NGUYỄN ANH TÙNG, ĐỖ THỊ THANH TÙNG, THÁI LÂM THỦY TIÊN , LÊ THÚY HẰNG, TRẦN NGỌC
HƯƠNG BÌNH , NGUYỄN THỊ KIM NGÂN
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Contents
I. Introduction: ................................................................................................................................................................... 2
II. Theory and case study:................................................................................................................................................... 2
2.1 What is a competitiveness analysis? ........................................................................................................................... 2
2.2 Five Force Model .......................................................................................................................................................... 3
2.2.1: Theory ................................................................................................................................................................... 3
2.3 KEY SUCCESS FACTORS (KSFs) ...................................................................................................................................... 6
2.3.1 Theory .................................................................................................................................................................... 6
2.3.1 Case study ............................................................................................................................................................ 10
2.4 VRIN FRAMEWORK ............................................................................................................................................... 14
2.4.1: Theory: ................................................................................................................................................................ 14
2.4.2: Case study:.......................................................................................................................................................... 16
III. Summary:.................................................................................................................................................................. 18
IV. References ................................................................................................................................................................ 19
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I. Introduction:
In recent years, researchers have shown an increased interest in sustainable development of a business in the
competitive market. Competitiveness analysis has emerged a powerful platform for a firm to conduct an
appropriate strategy. In the new global economy, key success factors have become a central concern for a
large number of enterprises in the market. However, key success factors can be adversely affected under
certain conditions. A much debated question is how to instantly identify the changes in the economic
condition. To date, a wide variety of studies have been successfully examined the association between key
success factors of a specific industry and competitiveness of incumbents in that industry. The purpose of this
report is to investigate the factors that have a huge impact on competitiveness of an enterprise and give
examples. The report will also recommend a method in which the core competences is fully recognized and
protected.

II. Theory and case study:

2.1 What is a competitiveness analysis?
Definition: Identifying your competitors and evaluating their strategies to determine their strengths and
weaknesses relative to those of your own product or service
Competitiveness analysis is an important part in a business marketing plan. Through this process a
company can determine their weaknesses and strengths and based on that information to make their
products and services outstanding and acquire a larger market share.
How to conduct: Evaluating your competitors is achieved by placing them in strategic group according to
how they directly compete for the share of customer value. Industry key success factors and Porter's five
force model are tools to conduct analysis. For each competitor or strategic group, their product or
service, its profitability, growth pattern, marketing objectives and assumptions, current and past
strategies, organizational and cost structure, strengths and weaknesses, and size (in sales) of the
competitor's business should be consider and include.
Result: Competitiveness analysis provide answer to questions such as:

 Who are your competitors?

 What products or services do they sell?
 What is each competitor's market share?
 What are their past strategies?
 What are their current strategies?
 What type of media are used to market their products or services?
 How many hours per week do they purchase to advertise through the media used in this market?
 What are each competitor's strengths and weaknesses?
 What potential threats do your competitors pose?
 What potential opportunities do they make available for you?

The answer given help to determine strength and weakness of firm product and service compare to
competitors. New or adjusted strategic plan will be make and apply to fit the firm desire and vison.
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2.2 Five Force Model

2.2.1: Theory

The strength of the competitive forces operating in an industry are differ from each other. So, it is necessary to
have a tool to know exactly what strengths in each business are. Nowadays, five forces model is the most
powerful tool and widely used for diagnosing the principle competitive pressures which is established by
Michael E. Porter of Harvard University in the later 1970s.

The attractiveness of market and its overall profitability can mainly be defined by the market structure (Slater
& Olson, 2002). The market structure eventually impacts the strategic behavior of organizations, for example,
market success depends on the competitive strategy. Thus, the organizational success is therefore indirectly
dependent on the market structure. As indicated by Porter the “Awareness of these forces can able a firm stake
out a position in its industry that is less vulnerable to attack” (Porter, 1979, p.137).
Because of the reason that the model was created in 1979, it is questionable if the forces are still relevant. It
seems doubtful that the model of Porter, which is available for more than 35 years without any changes, is still
relevant for analyzing the balance of power inside an industry.
The most recent decades demonstrate that Information Technology (IT) became more and more important in
order to achieve competitive advantage. But the model of Porter does not include IT as a separate competitive
force, “IT was just considered as a method for supporting the five forces.” (Andriotis, 2004, p.134). One reason
for ignoring the IT forces could be the fact that the ‘old economy’ used Information Technology in order to
implement changes. But the times are changing, and the role of technology changed. Today new technology is
one of the most significant drivers for change (Downes, 1997).
To sum up, the five forces model was developed in 1979 and unaltered in the most recent decades. Moreover,
five forces model is the most powerful tool for diagnosing the principal competitive pressures in the marketplace
after evaluating five factors, based on Thompson & Gamble (2016).

1. Rivalry among existing firms

Competitive rivals are organizations offering similar products and services focusing the same customer groups.
The more competition inside the industry, the harder it will be to generate profits. This force includes kinds of
types of rivalry, for instance “price discounting, new product introductions, advertising campaigns, and service
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improvements” (Porter, 2008, p. 32). This force can be affected by industry development rate, fixed costs,
number of firms or competitor balance, switching costs between competitors, differentiation, or exit barriers
(Hubbard & Beamish, 2011; Slater & Olson, 2002; Johnson et al., 2008). The existence of entry barriers limits
the number of organizations in the industry and therefore influences the ‘Rivalry among Existing Competitors’
(Johnson et al., 2008). Moreover, organizations who enter a current market straightforwardly influence the
competitive advantages. The lower the barriers to entry are, the higher the threat of new entrants is. Porter
(1979) distinguishes between six significant barriers to enter the market: (1) Economic of Scale (2) Product
Differentiation, (3) Capital Necessities (4) Cost Drawbacks (5) Access to Distribution Channels (6) Government
Policy
2. Threat of new entrants
“New entrants to an industry bring new capacity, the desire to gain market share, and often substantial
resources.” (Porter, 1979, p. 138) The additional supply for the same demand decreases the profit of the market
participants. The lower the barriers to entry are, the higher the threat of new entrants is. “The height of barriers
to entry has been found consistently to be the most significant predictor of industry profitability” (Rothaermel,
2008, p. 215)
3. Bargaining power of suppliers
“Powerful suppliers can thereby squeeze profitability out of an industry unable to recover cost increases in its
own prices” (Porter, 1979, p.140). There are different factors which are determined as indicators for high
bargaining power of suppliers. For example, the industry is dominated by a few companies, therefore, it is more
concentrated than the industry it sells to, or the industry is not the most important customer of the supplier
group (Porter, 1979). The bargaining power of suppliers can be influenced by the size of the supplier, the number
of suppliers, and the availability of alternative customers (Slater & Olson, 2002).
4. Bargaining power of buyers
Bargaining power of customers is defined as how the customers influence on businesses of companies in the
industry (Porter, 2008). If the customers gain more bargaining power, they can require the companies to
improve service quality, reduce the prices, and increase selling networks. At the same time, the level of
bargaining power of customers will reduce the profitability level (Dalken, 2014). According to Slater and Olson
(2002), the bargaining power of customers is high when the customer base is enormous, or there are many
substitutes in the industry that allow the customers to switch easily.
5. Threat of substitute products
Finally, the company industry is also affected by substitute products or services. Porter (1979) identifies that the
existence of substitutes will limit profitability of the companies as it creates fair comparison in terms of products
or service prices. Dalken (2014) also highlights the characteristics of substitutes, whether they have the same
functions and utilizations to main product or service. Hubbard and Beamish (2011) indicate that the threat level
of substitutes depending on switching costs and the customers’ loyalty and addictions.

2.2.2: Case study

Table: Vietnam coffee market analysis
Analysis Result
1. Rivals The numbers of competitors in the coffee industry is
large.
=> The rivalry among existing firms is strong
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2. Suppliers Vietnam is the world’s second-largest coffee suppliers,

in which their similar materials mostly originated from
Daklak (Vicofa.org.vn)
=> The bargaining power of supplier is moderate

3. Buyers Vietnamese customers are price sensitive compared

to other countries, because of lower income
=> The bargaining power of customers is strong

4. Substitutes There are various substitutes in drinking market, in

which tea accounts for 36,97%.
=> Customers have more selections
=> The threat of substitute products is moderate to
strong

5. New entrants => The threat of new entrants is moderate to strong

The coffee chain stores model in Vietnam is (Not every startup will be succeeded)
growing approximately 7% per year (26000
stores - 2015), (Euromonitor, 2017) and still
increasing

Conclusion:
There is great relation between five forces and key success factors (KSFs). After analyzing external forces in
industry, using it to conduct the internal analysis inside the company, which make up the successful of the firm.
These factors known as KSFs. The better they perform these factors, the more successful they are.
Five forces are all inter-connected. It is emphasized that if one aspect is focused by neglected others, level of
risks will be increased. Working through the model aids strategy makers in assessing how to insulate the firm
from the most powerful forces, identify attractive areas for expansion, or alter the competitive conditions in
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order to offer more prospects for profitability. Porter, therefore, encourages firm to consider fully these
competitive analyses.
Analyzing five forces elements is vital to get overall understanding about business. Then, figuring out the
strengths and weaknesses of a company in the face of competition. Therefore, KSFs could be found out and
altered in case competitive conditions change.

2.3 KEY SUCCESS FACTORS (KSFs)

2.3.1 Theory
According to Thompson & Gamble, (2016) KSFs are those competitive elements which are required for an
organization to survive or expand in the industry. The specific strategy elements, product and service attributes,
operational approaches, resources and competitive capabilities that indicate the difference between profit and
loss- and between being a strong competitor or a weak competitor.
These vary from industry to industry, and over time within the similar industry, and in significance as drivers of
change and competitive conditions change.
* Relation between KSFs and competitiveness of incumbents in industry
Incumbents in markets generally have different competitive factors such as market share, reputation.
Determining the competitiveness of a firm on value and cost based on various analysis such as value chain
analysis, resource analysis, which are necessary but not sufficiency. So, conducting a firm’s overall competitive
strength based on its KSFs is needed. In detail, the overall competitive strength scores show the different
strength measures add up. (Thompson & Gamble, 2016) Obviously, the higher the overall weighted strength
rating, the stronger its overall competitiveness compared to rivals. The greater the difference between a
company’s overall weighted rating and the lower the scores of its competitors, the greater its potential net
competitive advantage. Additionally, the net competitive disadvantage of a company is also needed to be figure
out.
In facts, the competitiveness of a firm depends on KSFs. So, identifying exactly KSFs of this firm is a must. In
other words, if collecting wrong data about KSFs will lead to wrong answer about the competitiveness of
incumbents. Therefore, selecting exactly KSFs is a compulsory step to get the accurate result of competitiveness
of incumbents. (Thompson & Gamble, 2016)
Furthermore, the purposes of strength ratings are to provide guidance for designing offensive and defensive
strategies wisely. When a company has important competitive strengths in areas where one or more
competitors are weak, it is reasonable to consider offensive moves to exploit competitors’ weak points. When
a company has important competitive weaknesses in areas where one or more strong competitors, it is
reasonable to consider defensive moves to limit its vulnerability.
By understanding the threats from other aggressive companies, potential substitutes…you can make your
competitive strategies. With an aim to be competitive on the coffee business, you need to identify which your
competitive advantages are by using key success factors. After identifying what factors are, there is a certain
requirement to know which factors can be applied in the coffee industry. These key success factors will be an
important part in helping you avoid the threats from other competitive companies or potential substitutes.
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Knowing the importance of key success factors can increase your chances of being competitive on the market.
There are three questions you need to answer in order to find out your key success factors:
 On what basis do buyers of the industry’s product choose between the competing brands of
sellers? That is, what product attributes and service characteristics are crucial?
 The second question is that “Given the nature of competitive rivalry prevailing in the
marketplace, what resources and competitive capabilities must a company have to be
competitively successful?
 What shortcomings are almost certain to put a company at a significant competitive
disadvantage?
These are the most common key success factors that can decide a success of a coffee shop in the industry:

 Product performance
 Customer service performance
 Atmosphere & Decoration
 Relative cost position
 Location
 Distribution capability
 Marketing
 Consistency
 Relationship
 Long-term plan
According to Small Business’s article, customers were not going to choose any brands solely on their prices but
on the quality of the product. They also stated that there were some studies showed that customers were
more willing to pay higher prices as long as the quality accompanied with the product or service performance.
Also another insight from Business site wrote that having quality products helped in building trust with your
customers, fueling word of mouths recommendation and reducing customer complaints. Therefore, it is a
certain that “product performance” is one of the main important key success factors because it affects directly
to your business and your reputation. In such an industry like coffee industry, the quality of the coffee is the
center of your business. According to Hardground’s article – a community of enthusiastic engineers,
designers… who love coffee – both normal customers and professionals have answered in the surveys sent out
to them that the quality of the coffee was the reason why they came back and eventually became loyal to the
shop.
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Secondly, “customer service performance” also plays a key role in deciding whether your customers would
come back or not. In case you delivered the service by yourself or else you would need some helps from your
employees. The capability to perform from good to satisfying customer service can help grow your business by
increasing the amount of money customers would spend on your shop, their loyalty, the frequent amount of
them coming back to your shop and also your reputation in the eyes of the public, according to Performance
in People – UK customer service consultancy. On the other hand, if the business was delivered poorly,
according to the statistics taken from NewVoiceMedia, there was 56% of customers who would not use the
business again and also over 25% of them would tell about their bad experiences to their friends. This could
damage your reputation and long-term business.

The third factors would be the “atmosphere & decoration” that you created in your shop. It may not be the
first factor people think of when mentioning of key success factors in the coffee industry, but no one could
deny the fact that nowadays it becomes just as important as the quality of the product or customer service.
The atmosphere represents the image that you would prefer your customers to remember about your
business, besides your product or the service. According to The Balance SMB, atmosphere is the direct
contributor to customer experience, which takes part in determining the frequency that they would come
back. They also said that decoration could be a sign to attract your clientele. For instance, if your business
aimed to younger customers, you should set more lights and trendy fixtures to create a contemporary,
modern atmosphere.
According to Vietnam news in 2017, coffee prices in Vietnam dropped between $2.04 and $2.08 per kilo of
coffee beans, which was the highest prices for Vietnamese sellers at the time. As Vietnam was the second
highest coffee exporter in the world in 2018 from World’s Top Exports’ report, which indicates that Vietnam’s
coffee prices were more affordable to not just the Vietnamese but also to foreigners than from other
countries. Another counting system from The World Counts, there is almost 10 million tons of coffee being
consumed per year. This can be deduced that the coffee industry is really competitive and therefore if you
apply a good strategy with a “relative price position”, you can take up a larger proposition of the coffee
market and earn higher profit.
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Not just in the coffee shop business but also any other businesses, location is key. By choosing an ideal
location, you can identify your targeted customers. For instance, if your coffee business is mainly aimed to
those who are on their way to work and need to drink something to wake them up in the morning, you would
place your coffee stand on the most crowded, easy-to-notice area so these customers can drop by easily.
The quality of your coffee is really important, but there should also be a consideration for your “distribution
capabilities” because your coffee quality can be remained the same and consistent depends a lot on your
dealer network. In the coffee industry, the whole business is a chain of connection because if you have the
ability to harmonize with your coffee sellers, then you can get better quality coffee beans from the market
with a more reasonable price. Having good quality coffee beans and serving your customers well, then this will
make them happy and eventually become loyal to your brand.
Marketing plays an important role in building and maintaining your reputation, it also helps build the
relationship between the business and the customers. According to Loopy Loyalty, customers discovered a
coffee shop mostly through seeing the physical location and through word of mouth. Therefore, customers
who came to your shop frequently comes with a potential marketing opportunity because potential customers
are more likely to trust their friends and family, rather than the actual business. In nowadays, along with the
development of technology, marketing in the increasing popularity of social media helps spread the image of
coffee businesses quickly.
Having quality product is crucial, but to maintain it is also very important. Being consistent in the coffee
business helps building trust with your customers. For instance, your business aims to deliver bitter and sour
cup of coffee of all time, but your customers get different tastes every time they go to your shop. This would
damage the image you are building for your coffee business and make it impossible for customers to come
back. Being consistent also helps you form proper strategies so that your employees can master the tasks,
which benefits your resource management.
As any business usually starts as small, having good relationship with the local neighborhood is really
important in order to grow your business. One of the reasons is that you would not have to face market
rejection because you have built some trusts in your local customers. In the coffee business where word-of-
mouth marketing is really important, having local patrons can help reduce the marketing costs and increase
the chances of getting advertised directly to your potential customers. Having a good relationship with your
customers can build good feedbacks, which is the base of customer research, a crucial tool in forming better
performance. According to Alistair Dodds, co-founder and marketing director of EIC Marketing, once said
“Unlike cash, strong business relationships are not a diminishing resource – a properly maintained network
can only multiply.”
Any blooming businesses after a certain time will have to face declining phases. Therefore, you need to build a
long-term plan in order to avoid this to happen. Having a long-term plan can support you with a clear vision in
the future ahead by knowing what you want in three or five more years can help you form your short-term
plans better. A long-term plan allows you something to aim for and work hard on it so as to achieve your
goals. It also helps in defining how you want your customers or competitors perceive your brand on the coffee
market in a long-run.
Knowing the importance of key success factors can increase your chances of being competitive on the market.
There are three questions you need to answer in order to decide which factors that you should focus on. The
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first question is that “On what basis do buyers of the industry’s product choose between the competing
brands of sellers? That is, what product attributes and service characteristics are crucial? “. The second
question is that “Given the nature of competitive rivalry prevailing in the marketplace, what resources and
competitive capabilities must a company have to be competitively successful?” and the last question is “What
shortcomings are almost certain to put a company at a significant competitive disadvantage? “.

2.3.1 Case study

THE HIGHLANDS STARBUCKS
COFFEE COFFEE COFFEE
HOUSE

Key Success Factor/ Importance Strength Strength Rating Strength

Rating Rating
Strength Measure Weight

Quality/Product performance 0.1 8 7 8

(8x0.1) (7x0.1) (8x0.1)

Customer service capabilities 0.15 10 8 10

(10x0.15) (8x0.15) (10x0.15)

Relative cost position 0.1 7 8 6

(7x0.1) (8x0.1) (6x0.1)

Atmosphere & Decoration 0.1 9 6 9

(9x0.1) (6x0.1) (9x0.1)

Location 0.15 8 7 9

(8x0.15) (7x0.15) (9x0.15)

Dealer network/ Distribution 0.1 8 9 6

capability
(8x0.1) (9x0.1) (6x0.1)

0.1 9 9 7

Marketing (9x0.1) (9x0.1) (7x0.1)

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Consistency 0.1 9 9 9

(9x0.1) (9x0.1) (9x0.1)

Relationship 0.05 9 10 10

(9x0.05) (10x0.05) (10x0.05)

Long-term plans 0.05 9 9 8

(9x0.05) (9x0.05) (8x0.05)

Sum of importance weights / 1.0 8.6 8 8.25

strength rating

1. Providing good quality coffee

The Coffee House focus on one signature drink is Macchiato. The launch of Macchiato series, which is very
popular with young people.
Starbucks coffee also do really good at this part, their signature drink is Frappuccino that you cannot find a
true Frappuccino anywhere else. They also have a lot marketing campaign about their sessional drink to
attract more customer.
With Highland coffee, they have “Phin” café which is the most popular to Vietnamese people.
2. Customer service
A dominant feature of The Coffee House is to provide Feedbackstr app which helps TCH consider and compare
the productivity of all stores as well as exactly estimate the real performance. It also improve the relationship
between customers and TCH so as to increase the sale and notice promotion by sending voucher online
whenever a customer does the feedback.
1. Meet your customers where they want to be met. Overall, Starbucks has 35 million likes on its Facebook
page, 8 million followers on Twitter and 4.8 million followers on Instagram. Starbucks is constantly reaching
out to its customers on these platforms for feedback and engaging in conversation.
2. Think mobile, mobile, mobile! It's not surprising that 18 percent of Starbucks Card transactions come
through its mobile app. Consumers spend more time today connecting on their phone than on any other
device.
3. Focus on personalization. Starbucks recognizes that it's not just about the product, it's also about the
experience. Each Starbucks location you walk into has the same look and feel, yet is personalized to the
geographic area. Baristas serve your coffee to you by name. And if it isn't exactly what you ordered, they make
sure to correct it and ask how they can make your experience better. Just recently, Starbucks announced a
deal with Spotify where employees will make personalized playlists for each store location.
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Highlands has changed to self-serivice recently in order to reduce waiting time and follow the order. However,
it has no innovation or provides special things in customer service compare to other small coffee shops on
street.
3. Relative cost position
The Coffee House aims at the price of 30,000 - 60,000 VND / person - a reasonable cost, enough to entice
customers to sit regularly.
While Starbucks offer a drink with price of 40,000-110,000 VND per drink – quite high price for Vietnamese
people.
If Highlands Coffee has long been positioned in association with high-class brand associations for
businessmen, recent moves have shown that the brand tends to "be popularized." ", to serve more customers
which price between 30,000-70,000 VND
4. Atmosphere & decoration
The Coffee house is founded to build a place to connect and develop the relationship. All the shops have a
opening space, large sitting areas, unlimited free wifi and customers can stay for a long time, which provides
customers the most comfortable place to work or study.
Despite having well over 20,000 locations worldwide, Starbucks still manages to create unique stores that
combine their iconic style with details reflective of the culture and customs of the city in which it’s built
Most of Highlands coffee shops have an opening space which are suitable to work or study and sitting areas
are organized to optimize the number of customers.
5. Location
The Coffee House gets points by choosing a very suitable location for the target audience. The Coffee House
shops are always located in areas which are easy to find, convenient to park, in the center of the district,
which have eye-catching street view.
Starbucks usually choose a location that have a lot of people living around, with many trees and parking lots.
Highlands coffee prefer a coffee shop in shopping mall which is easy to access by their target customer – who
usually go to the coffee shop with their children.
6.Distribution
With the aim “ delivering happiness”, TCH have more than 100 retail stores now, specially in HN and HCM city
and tend to open more stores in other cities. Although it is harder to get access to customers in HN, it is a
potential market because they are willing to pay more.
Starbucks has only 59 coffee shops in 4 cities, mostly in HCM city and Hanoi. Starbucks’ general manager
highlighted that they didnot need to open too many stores but they focus on location more.
Highlands coffee has the highest number of coffee shops in Vietnam, more than 230 stores which are mainly
situated in shopping malls and buildings in HCM city and Hanoi.
7. Marketing
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The Coffee House: Although entering the market quite late, thanks to the right "Customer Insight" marketing
strategy and an understanding of the Vietnamese market, the brand has the right strategies and targets what
customers need, and expectation. With the Coffee House mission: "Starting from the customer and doing
everything based on the customer's mind" with the deep understanding of Customer Insight have helped The
Coffee House move forward, closer to the Top-of-mind destination for the brand of Coffee in the hearts of
consumers. This has led to The Coffee House immediately gaining awareness and interest from young people
since its debut
Starbucks is definitely a great place for a date. Knowing that, the company launched the "Meet me at
Starbucks" campaign in a social media campaign in 2014. Starbucks gave their customers the chance to win
free coffee for a year in exchange for the story of "How We Met"! The #HowWeMet hashtag has been used to
spread the contest and allow people to read stories that appeal to each other. The campaign is introduced
around the world, so people have to read the most interesting stories and see Starbucks from a whole new
perspective.
Through the Zalo application, Highlands has run an e-voucher program, encouraging customers to join and try
Phin coffee. The result is it has more than 22 million hits through Zalo Ads, more than 14,000 followers follow
Highlands Coffee's Zalo Official Account,

8. Consistency: Consistency is one of the absolute most important qualities of a great coffee program, which
depends on employees.
TCH keeps their fulltime employees by rewardind them 15% stock of the company and creates the best
creative working environment for them in order to make sure the consistency in quality of products as well as
customer service.
Starbucks said that they donot hire people because of their experience or qualification. Everyone who has
passionable for coffee has a chance to work in stores then they will be trained and promoted to become office
employees. They donot change the recipe of orginal beverage to adapt Vietnam market because they relised
that Vietnamese customers would love to enjoy the same taste as orginal products thanks to customer insight.
Highlands coffee’s customers feedback that most of their coffee shops provide the same quality of products,
which is a dominant feature of Highlands and helps it gain customer loyalty
9. Relationship
Content of Coffee House always takes customer story as the center, instead of paying attention to the
product. "Home" is not a place to come and go, "A House" is a place where you can be heard and shared.
"Home" is also a place to capture the emotions of you and your loved ones. Therefore, photos and posts
shared, confided, "Humans of The Coffee House" are very interested in the brand's investment. Every activity
in The Coffee House's marketing communication strategy closely follows the "Home" position and insights
from its target audience.
Starbucks cooperating with farmers to produce coffee in a way that benefits businesses, the community and
the environment. Their success is linked to the success of thousands of coffee farmers. They invest in lending
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programs for coffee growing communities and work directly with farmers. It is not only maintaining the quality
of the coffee; it also helps farmers have a better life with stable income.
With the slogan "Pride in Serving Vietnam", Highlands Coffee not only provides customers with excellent
products at reasonable prices but also willing to participate in meaningful activities for the community, and
Wild for Life is one of them. The objective of the campaign is to Prevent Illegal Wildlife Trafficking to protect
the wildlife and convey this meaningful message to the customers of Highlands Coffee!
10. Long-term plans
TCH focus on diversifying menu as well as applies new technology to serve customer. They also tend to open
more coffee shops in different countries and invest in producing coffee beans to control the quality of coffee.
Starbucks’ strategy is to invest long term and synchronise from looking for location, the right time to open
new store to invest infrastructure, people and service.
Highlands has a plan to become an international brand to bring Vietnamese coffee to the world because its
co-owner is Jollibeein Phillipine. However, Highlands also open more coffee shops in Vietnam to make sure all
Vietnamese will enjoy coffee in Highlands.

2.4 VRIN FRAMEWORK

2.4.1: Theory:
Once all the key success factors have been determining, all the strengths and weaknesses have been
found, the next step for a company is to think of the way to maintain that available advantages.

According to the Resource-based view (RBV) of strategic management, competitive advantage is

closely related to company’s internal characteristics (Spanos & Lioukas, 2001). More specifically, if a company
possesses and exploits valuable, rare, inimitable, and non-substitutable resources and capabilities, it will
achieve sustainable competitive advantage and above-average performance (Barney, 1991). In order to
understand the sources of the competitive advantage firms are utilizing numerous tools to analyze their
external (Porter’s 5 Forces, PESTLE analysis) and internal (Value Chain analysis, BCG matrix) (Jurevicius, 2013).
The resource-based view is used as the basis of these frameworks, including VRIN. The first detailed study of
VRIN was originally developed by Barney, J.B. (1991). According to him, the company’s resources are
categorized into 4 main sections: Valuable, Rare, Inimitable, and Non-Substitutable. In 1995, Barney has
introduced VRIO framework, which was the improvement of VRIN model. VRIO analysis stands for four
questions that ask if a resource is: valuable? Rare? Costly to imitate? And is a firm organized to capture the
value of the resources? (Jurevicius, 2013).
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A large and growing body of literature has investigated the performance of this four tests of resource’s
competitive power. As above-mentioned literature, VRIN is shorthand standing for Valuable, Rare, Inimitable,
Non-substitutable. The first two tests determine whether a resource or capability can support a competitive
advantage. The last two determine whether the competitive advantage can be sustained (Thompson, Peteraf,
Gamble, & Strickland III, 1940). This test is widely available and has been used in many investigational studies
with an aim to identify the firm’s resources and capabilities.

The framework is conducted by answering these following questions:

 Is the resource (or capability) competitively Value?

 Is the resource Rare—is it something rivals lack?
 Is the resource hard to copy (Inimitable)?
 Is the resource invulnerable to the threat of substitution of different types of resources and capabilities
(Non-substitutable)?
In the first question, a resource or capability can only be considered to be valuable to its own when it
is closely related to the company’s strategy, making the company a more effective competitor. This factor will
contribute enormously to the overall outcomes of company’s courses of action. In order to carry out a precise
evaluation and conclusion for this standard, a particular indicator is introduced: Whether the asset empowers
the company to fortify its commerce demonstrate by moving forward its client esteem recommendation and
and/or benefit formula? (Thompson, Peteraf, Gamble, & Strickland III, 1940). For the case of rarity, a resource
or capability, which passes this test, must be held by only a small number of firms in an industry or specific
competitive domain (Thompson, Peteraf, Gamble, & Strickland III, 1940). Resources and capabilities that are
widely utilized by several firms in the industry are known as common factors. Therefore, firms are
continuously seeking for a unique combination of resources and capabilities. These incomparable factors will
be evaluated in the third test: Inimitable test. The more difficult and more costly it is for competitors to
imitate a company’s resource or capability, the more likely that it can also provide a sustainable competitive
advantage (Thompson, Peteraf, Gamble, & Strickland III, 1940). For instance, a fantastic location (Nguyen Hue
walking street, near some universities or schools,) or motivated labor force can be clarified as differentiated
factors. The final test is the one used to identify whether the resource or capability is non-substitutable or not.
Even resources that are competitively valuable, rare, and costly to imitate may lose much of their ability to
offer competitive advantage if rivals possess equivalent substitute resources (Thompson, Peteraf, Gamble, &
Strickland III, 1940).
 16

Most of the companies are unable to have a resource or capability that passes all the four tests. For the first
standard, a core competence qualified for this will contribute to the company’s competitiveness; nevetherless,
there is no guarantee that it will become a competitive advantage. It is no more than competitive parity. If a
resource or capability can manage to overcome the first two tests, it will become a core competence for that
firm. However, it only lasts for a short term. With an aim of sustainable developing, an enterprise should
identify and protect the resources and capabilities passing all four tests, which are considered as sustainable
competitive advantages.

2.4.2: Case study:

For the purpose of illustration, the VRIN will be conducted based on four main courses of action so
as to perfectly understand the competitive advantage of resources and capabilities:

VRIN TEST
NON-
VALUABLE RARE INIMITABLE
SUBSTITUTABLE
KEY FACTORS

Temporary
Quality of product X X _ _ competitive
mix advantage
Temporary
Location X X _ _ competitive
advantage

Temporary
Customer service X
X X _ competitive
performance (maybe)
advantage
 17

Sustainable
Leadership and
X X X X competitive
vision
advantage

In the initial step, a firm need to analyze their valuable, rare, inimitable, and non-substitutable key factors. For
instance, we will take The Coffee House and three key success factors: “Product quality”, “Location”,
“Customer service performance”. “Quality” is the essential characteristic to draw customer to your coffee
shop. Coffee business is a high competitive industry due to a wide range of direct competitors and substitutes.
A remarkable product, which is the trademark of The Coffee House, is Macchiato series. By focusing on
quality, The Coffee House is continuously seeking to improve the quality of this drink series so as to generate
better customer satisfaction which derives an improvement in customer value proposition and higher profit.
Therefore, for The Coffee House, quality is considered as valuable and rare. The second key success factor is
“Location”. For a business to be far-reaching, location plays an extremely significant role and this factor is
probably unable to duplicate, which is recognized as inimitable. “Customer service performance” with point
accumulation application and special employee training system, this element is listed as valuable, rare and
inimitable. Lastly, we will evaluate the “leadership and vision”. All of the above factors This element is
qualified for all four tests which means it is a sustainable competitive advantage. The Coffee House should
protect this core compentency.

Table 4.1. VRIN test applied for some key success factors of The Coffee House

The next stage, the enterprise itself should ascertain it situation, whether they are organized to fully exploit all
resources and capabilities by utilizing these following question might be helpful:

a) Does your company have an effective strategic management process in organization?

b) Are there effective motivation and reward systems in place?
c) Does your company’s culture reward innovative ideas?
d) Is an organizational structure designed to use a resource?
e) Are there excellent management and control systems? ( (Jurevicius, 2013)

Thirdly, when a resource or capability is identified with has all four VRIN attributes, firm should protect it
using all possible means (Jurevicius, 2013). Conclusively, it is the source of the company’s sustainable
competitive advantage. Consequently, a firm should exert themselves to maintain it.

The final step is constantly review VRIN or VRIO resources and capabilities (Jurevicius, 2013). In long-term, a
large number of competitors can apparently replicate a resource or capability; as a result, it is no longer rare
or inimitable. At that time, the firm should repeat all the steps with an aim to identify alternative competitive
factors.
 18

III. Summary:
Overall, this study have significant implications for understanding of how key succes factors and company’s
competitiveness are related. Taken together, these frameworks suggest a role of core competences in
promoting the success of an enterprise. The methods introduced in this analysis may be applied for diverse
industries elsewhere in the world. Notwithstanding the relatively limited sample, this work offer valuable
insight into evaluating the position of a firm in a specific market. Finally, a number of important limitions need
to be considered. First, the study is limited by lack of information on many other key success factors. With
regard to the research methods, there are a few aspects that have not been fully understood. However, one of
the strengths of this study is that it represents a comprehesive examination of the whole steps in recognizing
competitive advantages of a company. Further investigation and experimentation into competitive analysis is
strongly recommended. More information on key success factors would help us to establish a greater degree
of accuracy on this matter.
 19

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