development strategy for vietnam plastic industry: a case study of rangdong plastic company

8/13/2019 DEVELOPMENT STRATEGY FOR VIETNAM PLASTIC INDUSTRY: A CASE STUDY OF RANGDONG PLASTIC COMPANY

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DEVELOPMENT STRATEGY FOR VIETNAM PLASTIC

INDUSTRY: A CASE STUDY OF RANGDONG PLASTIC COMPANY

by

Ly Thi Minh Chau

A research study submitted in partial fulfillment of the requirements for thedegree of Master of Business Administration

Examination Committee: Dr !redric "illiam #$ierc%e& 'Chairman(Dr Truong )uangDr Clemens Bechter

*ationality: +ietnamese,re-ious Degree: Bachelor of Economics

.CMC /ni-ersity of Economics0 +ietnamBachelor of English.CMC /ni-ersity of Education0 +ietnam

#cholarship Donor: The 1o-ernment of #$it%erland

Asian 2nstitute of Technology#chool of Management

Bang&o&0 ThailandApril 3444


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ABSTRACT

7ang Dong ,lastic company is one of the most successful companies in terms of highmar&et share 2t has produced plastic products of -arious &inds in $hich ,+C films is thecore product of the company The ,+C films product accounts for 89 of the mar&etshare .o$e-er0 in the competiti-e en-ironment0 7ang Dong ,lastic company has faced-arious difficulties especially the lac& of the -ision in the long term The ob;ecti-e of thestudy $ill therefore design a de-elopment strategy for the company in the long term

Based on the examination and analysis of the external and internal en-ironment0 the study$ill determine strengths0 $ea&nesses0 opportunities and threats '#"5T( Deri-ed from the#"5T and based on the general process of strategy formulation0 the study $ill de-elop themost appropriate de-elopment strategy for the company !inally some recommendations

are suggested for the company to be able to implement the proposed strategy


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=? 2n-estment potentials 3 .istory of 7ang Dong plastic company =>

>< Company missions =?

>= 5rgani%ational structure =?

>> ,roduction at 7ang Dong ,lastic company =

>? #ales and net income >?

>@ Mar&eting >8

>8 !inance >4

> Conclusions on strengths and $ea&nesses of 7ang Dong ,lastic Company ?9

DEVELO&MENT STRATEG# DESIGN 1

?3 !oundations of 7ang Dong plastic companys strategy ?3

?< #trategic options for 7ang Dong plastic company ?63448( >@

!igure >4 6 #tructure of ,+C !ilms Mar&et #hare >@

!igure >39 6 Distribution #ystem of 7ang Dong ,lastic Company >

!igure ?3 6 De-elopment #trategy Designed for 7ang Dong ,lastic Company ?>


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L$t of Table

Table

Table

Table


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C'APTER (

( INTRODUCTION

()( Ba*+%#o&n,

2n the past


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of strategy formulation

To identify strengths and $ea&nesses as $ell as opportunities and threats that the 7angDong ,lastic Company has been faced $ith

To assess the current situation of the company to de-elop its competiti-e profileTo formulate the de-elopment strategy for the 7ang Dong ,lastic Company in the longterm

()2 S*o"e an, l$.$tat$on of t!e t&,3

The study is about the 7ang Dong ,lastic Company 2t aims at the formulation of thede-elopment strategy for the company in the long term

The depth of the study depends partly on the a-ailability of the data of +ietnams economic

situation and plastic industry in general0 especially of 7ang Dong Company 2t depends onthe cooperation from the company and the +ietnam ,lastic Association '+2*A,LA#T( as$ell

()4 Met!o,olo%3 an, f#a.e5o#+ of t!e t&,3

The study begins $ith the literature re-ie$ $hich concerns the strategic managementprocess0 particularly the process of strategy formulation 2t refers to the concepts andprinciples of the ,orter Model to analy%e the competiti-e en-ironment of the industry Datafor the study are collected from < main sources:

,rimary data: 2nter-ie$s $ith by persons of +2*A,LA#T and the 7ang Dong ,lasticCompany as $ell as other plastic companies

#econdary data: Annual reports and other rele-ant data about the 7ang Dong ,lasticCompany 7ele-ant data about the plastic industry and the +ietnam economy $ill becollected from Ministry of 2ndustry0 +2*A,LA#T0 the *ational #tatistics 5ffice0 .o ChiMinh City #tatistics 5ffice0 .o Chi Minh Department of 2ndustry and Commerce0 fromne$spapers0 maga%ines and from 2nternet and media as $ell

The frame$or& of the study can be illustrated by !igure 33


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'i)*+e 1,1 - '+a.e/o+0 of te St*3

,75BLEM

L2TE7AT/7E 7E+2E"

#T7ATE1F ,75CE##

#2T/AT25* A*ALF#2#

#canningexternal

Analy%ingcompetiti-e

#canninginternal

E-aluating currentperformance

5pportunities

Threats

#trengths

1E*E7AT25*0 E+AL/AT25*0 A*D #ELECT25* 5! T.E BE#T #T7ATE1F

C5*CL/#25*# A*D 7EC5MME*DAT25*#


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()6 O#%an$7at$on of t!e t&,3

Chapter 3 presents an introduction including the rationale of the study0 and statement0 the

ob;ecti-es0 the scope and limitations as $ell as the methodology and frame$or& of thestudy

Chapter < summari%es the literature re-ie$ and contains the fundamental ideas on strategy0strategic management0 strategy formulation process as $ell as the ,orter Model foranaly%ing industry

Chapter = pro-ides and analysis of external factors to identify the companys strategicposition as $ell as strategic orientations and in-estment opportunities for the +ietnamplastic industry in the coming years Based on the ,orter model for examining the plasticindustry en-ironment0 the opportunities and threats for the 7ang Dong plastic company is

found outChapter > includes the current analysis of the 7ang Dong ,lastic Company in terms oforgani%ational structure0 production0 sales0 mar&eting and finance The goal is to identifystrengths and $ea&nesses of the company to depict its current competiti-e situation

Chapter ? presents the design of de-elopment strategy for the 7ang Dong plastic company

!inally0 Chapter @ includes recommendations on the implementation of the proposedstrategy


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C'APTER -

- LITERATURE REVIEW

-)( St#ate%$* .ana%e.ent "e#"e*t$1e

The central ob;ecti-e of strategic management is to assess $hy some organi%ations succeed$hy others fail Three broad factors determine a companys success: the industry $here itis based0 the country 'or countries( $here it is located0 and its o$n resources0 capabilitiesand strategic 2t is illustrated in !igure


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-)/ T!e "#o*e of t#ate%$* .ana%e.ent

The strategic management process can be bro&en do$n into fi-e different components Thefi-e components are '3( selection of the corporate mission and ma;or corporate goalsK '( the selection of strategies that build on theorgani%ations strengths and correct its $ea&nesses in order to ta&e ad-antage of externalopportunities and counter external threatsK and '?( strategy implementation The tas& ofanaly%ing the organi%ations external and internal en-ironment and then selecting anappropriate strategy is normally referred to as strategy formulation 2n contrast0 strategyimplementation typically in-ol-es designing appropriate organi%ational structures andcontrol systems to put the organi%ations chosen strategy into action

Based on the context of this study0 the focus $ill be on the strategy formulation process

The first six steps commonly found in strategy formulation are a series of interrelatedacti-ities:

'3( E-aluation of:

the corporations current performance results in terms of return on in-estment0profitability0 etc0 and

the corporations current mission0 ob;ecti-es0 strategies0 and policies

'( #canning of the internal corporate en-ironment to determine strategic strengths and$ea&nesses

'?( Analysis of the strategic factors from step '=( and '>( to pinpoint problem areas0 and

re-ie$ and re-ise the corporate mission and ob;ecti-es as necessary

'@( 1eneration0 e-aluation0 and selection of the best alternati-e strategy appropriate to the

analysis '#ource: "heelen .unger0 34(

The abo-e strategy formulation process can be di-ided into sub6stages0 as illustrated infigure


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'i)*+e 2,2 - St+ate)3 'o+.*latio4 &+o6ess

(Source: Wheelen / Hunger, 1988)

E-aluate

currentperformanceresults

Examine ande-aluate thecurrent

Mission

5b;ecti-e

#trategies

,olicies

E-aluate

strategicmanagers

Analy%e thecompetiti-een-ironmentEntryBuyers#uppliers#ubstitutesCompetitors

Analy%e

strategic factorsin light ofcurrentsituation

De-elop:

Mission

5b;ecti-es

#can internalen-ironment

#trengths"ea&nesses

#can externalen-ironment

5pportunitiesThreats

#2T/ATT25* A*ALF#2#

1E*E7AT25*0 E+AL/AT25*0 A*D #ELECT25* 5! T.E BE#T #T7ATE1F


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-)2 St#&*tal anal3$ of t!e *o."et$t$1e en1$#on.ent:

To succeed a company must either fit its strategy to the industry en-ironment in $hich itoperates0 or be able to reshape the industry en-ironment to its ad-antage through its chosenstrategy Companies typically fail $hen their strategy no longer fits the en-ironment in $hich

they operate0 as illustrated in !igure


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strategic decisions of management Each of these forces is no$ considered in greater detail

'i)*+e 2,% - Te five 'o+6es Moel

Potent$al *o."et$to#

The strength of competiti-e force of potential ri-als is largely a function of the height ofbarriers to entry The concept of barriers to entry implies that there are significant costs to;oining an industry The greater the costs that potential competitors must bear0 the greater are

the barriers to entry .igh entry barriers &eep potential competitors out of an industry e-en$hen industry returns are high

Clearly0 it is in the interests of existing firms to ha-e as high entry barriers as possible ,orterlists ma;or barriers to entry $hich are:

Economies of scale

,roduct differentiation

Brand identity

#$itching costs

Capital requirements

Access to distribution

Absolute cost ad-antages

1o-ernment policy

Excepted retaliation

4

Risk of entryby potentialcompetitors

Rivalry amongEstablished

Firms

Threat of

substituteproducts

argainingpower ofsuppliers

argainingpower ofbuyers


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2n the +ietnam plastic industry0 the ma;ority of the plastic companies is in small scaleproduction All present0 the +ietnam plastic industry is still characteri%ed $ith lo$ technologyand obsolete equipment and the ma;ority of plastic products produced in +ietnam is householdplastic $ares Brea&ing into the field of producing plastic products does not require muchcapital Entry barriers for the +ietnam plastic industry are lo$

R$1al#3 a.on% Etabl$!e, Co."an$e

The degree of ri-alry is li&ely to be based on the follo$ing:

2ndustry gro$th

!ixed 'or storage( costs -alue added

2ntermittent o-ercapacity

,roduct differences

Brand identity

#$itching costs

Di-ersity of competitors

Exit barriers

The extent of ri-alry among established companies $ithin an industry is largely a function ofthree factors: '3( industry competiti-e structure0 '


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2t is economically feasible for the buyers to purchase the input from se-eral companies atonce

Buyers ha-e the potential for bac&$ard integration

Buyers ha-e full information

As mentioned before0 there are many small producers in the +ietnam plastic industry atpresent They compete strongly against each other 2n addition0 the main product of the+ietnam plastic industry is household plastic $ares As a result0 there is a -ariety of plasticproducts in the mar&et and the customers ha-e many options in choosing plastic products Thebuyers are therefore quite po$erful

T!e Ba#%a$n$n% Po5e# of S&""l$e#

#uppliers can be -ie$ed as a threat $hen they are able to force up the price that a companymust pay for input or reduce the quality of goods supplied0 thereby depressing the companys

profitability As $ith buyers0 the ability of suppliers to ma&e demands on a company dependson their po$er relati-e to that of the company According ,orter0 suppliers are most po$erfulin the follo$ing circumstances:

The product that suppliers sell has fe$ substitutes and is important to the company

The industry supplied is not an important customer

The suppliers product is an important component to the buyers business

The suppliers product is differentiated

#uppliers can integrate for$ard

At present0 the +ietnam plastic industry depends completely on source of ra$ materials fromabroad 2t is therefore the supplier po$er is so strong

T!e T!#eat of S&bt$t&te P#o,&*t

The existence of close substitute presents a strong competiti-e threat0 limiting the price acompany can charge and thus its profitability

The plastic products no$ can be seen e-ery$here and used in -arious field 2t is clear to say

that the threat of substitutes is -ery lo$2n summary0 the current structure of the +ietnam plastic industry can be depicted through,orter model as in !igure


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'i)*+e 2, - Te &o+te+ .oel a55lie fo+ te Viet4a. 5lasti6 i4*st+3

-)4 Sele*t$n% ,e1elo".ent t#ate%$e

Companies ha-e to select a strategy that is most appropriate for de-elopment 5ptions about

de-elopment strategies in-ol-e decisions about three elements that are sho$n in !igure


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three basic competiti-e approaches: cost leadership0 differentiation0 and focus ',orter0 34?(These strategies are sho$n in Table


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exclusion of othersI ',orter0 34?( There are t$o -ariants here0 Gin cost focus a firm see&s acost ad-antage in its target segment0 $hile in differentiation focus a firm see&s differentiationin its target segmentI ',orter0 34?(

Table 2,1 - Ge4e+i6 st+ate)ies

C5M,ET2T2+E AD+A*TA1E

Broad target Cost leadership Differentiation

*arro$ target Cost focus Differentiation focus

(Source: Porter, 1985)

Each of the abo-e generic strategies results from the company is ma&ing consistent choices onproduct0 mar&et0 and distincti-e competences choices that reinforce each other Table

C!"#ET$T$%EC!#E


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C'APTER /

/ E8TERNAL ENVIRONMENT ANALYSIS

This chapter presents an analysis about the macro en-ironment in $hich 7ang Dong Companyoperates as $ell as the industry en-ironment to identify opportunities and threats for 7angDong company

/)( Ma*#o9en1$#on.ent anal3$

/)()( Pol$t$*al an, le%al fa*to#

,olitical and legal factors ha-e a ma;or effect on the le-el of opportunities and threats in theen-ironment '.illJones 344?( After decades of $ar and political uphea-al0 the go-ernmentand people of +ietnam ha-e settled do$n to the important tas& of promoting

economic gro$th in the country To this end0 the once diplomatically isolated socialist countryhas embar&ed on an ambitious Gdoi moi G 'economic reno-ation( policy 7ecogni%ing thatrapid economic de-elopment required foreign capital and technology0 the +ietnamesego-ernment opened its doors to o-erseas in-estors in 348 2mplementing the G reno-ation andopen door policyI0 +ietnam has expanded and consolidated its political and economicrelations $ith many countries in the $orld Along $ith this0 the lifting up of /# embargo in344> and +ietnam 6 a member of A#EA* in 344? ha-e impro-ed the restoration andde-elopment the +ietnamese economy to be more fa-orable This also facilitates the+ietnams international trade0 encourages foreign and domestic in-estors as $ell as createschances and challenges for domestic businesses

The liberali%ation of +ietnams economy has pro-ided numerous business opportunities forentrepreneurs and multinationals to expand their operations and see& ne$ mar&ets To supportthe economic liberali%ation and encourage the pri-ate sector0 the +ietnamese go-ernment haspromulgated a series of economic la$s such as La$ on !oreign 2n-estment0 Company La$0La$ on ,ri-ate Business0 etc !oreign and domestic in-estors must be a$are that ne$ la$sand decrees ear issued frequently by the +ietnamese go-ernment as part of comprehensi-eprogram to introduce la$s and regulations in a number of areas Existing la$s and regulationsare also sub;ect to amendment or re-ie$ This has formed a quite fa-orable en-ironment fordoing business

2n-estment in the plastic industry has been attracti-e to foreign and local businessmen due to

the follo$ing reasons: the mar&et for -arious plastic products in +ietnam is booming rapidly0the profit margin in this industry is high0 the brea&6e-en time is short0 and designs of productare easily adapted 2n addition0 the legal system is no$ much refined0 procedures aresimplified and a de-elopment strategy for the +ietnam ,lastic 2ndustry to the year of


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shortcoming of this industry0 namely the de-elopment $ithout a master plan This situationhas led to ample in-estment in the production of plastic home appliances0 and consequentlythe production capacity to this regard has outplaced the demand !acing such a situation0 manycompanies has had to play tric&y games to$ard the consumers by producing lo$er qualityproducts to cut do$n the production costs and to raise their competition 7ang Dong ,lastic

company has also been faced $ith the similar situation Therefore0 on the legal aspect0 one ofthe problems for the +ietnam ,lastic 2ndustry no$ is issuing documents for standardi%ing andcontrolling the quality of plastic products As Mr ,ham 1ia Duoc0 1eneral Director of+ietnam ,lastics Corporation and president of +ietnam ,lastic Manufactures Association0 saidat the ,ress Conference on +ietnam ,lastics 2ndustry /pdate N +ietnam ,lastic !air4@ G#tandardi%ation of the local plastic production is a ma;or problem that $e $ill ha-e too-ercome in order to increase our output and impro-e our products The +ietnam ,lasticManufacturers Association $ill ha-e to issue rules banning all production of plastic that do notmeet international standard

Despite rapid de-elopment0 the local plastic industry is still $ea& in 7 N D field #e-eralcompanies are hea-ily dependent on the designs of other companies products0 includingforeign ones 2n the mean$hile0 the protection of industries patents has not been ta&enseriously on the part of the concerned state agency ,reparations0 therefore0 must be madeno$0 if it is not to lag behind

/)()- E*ono.$* %#o5t!

The rate of gro$th in the economy also has a direct affect on the le-el of opportunities andthreats that companies face After 39 years of reno-ation0 +ietnam has got out of itssocioeconomic crisis +ietnams economy has continually0 rapidly and steadily gro$n "iththe annual gro$th rate of 6?0 as presented in !igure =30 1D, has increased from /#D3 o-er 344? 'see !igure =


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belie-ed that this expected high economic gro$th rate actually creates opportunities forindustries to de-elop0 especially for the plastic industry

'i)*+e !,1 GD& *+i4) te 5e+io of 1::;-1::(

( Source : ietn!"ese St!tistic #ffice )

'i)*+e !,2 GD& )+o/t +ate i4 te 5e+io of 1::;-1::(

( Source : ietn!"ese St!tistics #ffice )

3

GD& 2*+i4) te 5e+io2 of 1::;-1::(

12.8 13.6 14.8

16 17.7

19.4 21.2

23.2 24.6

0

5

10

15

20

25

30

1990 1991 1992 1993 1994 1995 1996 1997 1998

#ea+

Billio4

U

GD& )+o/t +ate i4 te 5e+io of 1::1-

1::(

6

8.68.1

8.8 9 9.34 9.5

6

0

2

4

6

8

10

1991 1992 1993 1994 1995 1996 1997 1998

#ea+


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/)()/ Inflat$on #ate

2nflation can destabili%e the economy0 producing slo$er economic gro$th higher interest ratesand -olatile currency mo-ements ' .ill Jones 344?( 2nflation has gone do$n from high rateof @ in the early 3449s to ?9 in 344@0 a significant decline from 3in 344 This inflation is the lo$est le-el since the introduction of the economic reform a

decade ago 2n +ietnam0 inflation $hich $as lo$ered from 38? in 344< to ?


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main engines of gro$th globally together $ith China

Table !,! ? Te E6o4o.i6 G+o/t Rates

Co&nt#3 (/ (2 (4 (6 (;

2ndonesia

Malaysia

,hilippines

#ingapore

Thailand

+ietnam

2ndustriali%edcountries

"orld

1ermany

Japan

8=

=

>

393

8


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polyolefins dominate '@3( $ith ,+C '34( and styrenics '3?( in second and third placerespecti-ely The amount of styrenic plastics used is slightly larger than the $orld a-erage

ASEAN Te+.o5lasti6s

Co4s*.5tio4 b3 T35e

"#

35%

#"S

2%

"S

9%

""

25%

"V$

19 %

&S'S(

4%)ter

3 % #T"

3%

'i)*+e !,%8 Asea4 Te+.o5lasti6s Co4s*.5tio4 b3 T35e

Source: $he Sing!%ore!n &ountr' e%ort on the 7thAsi!n Pl!stic oru", 1997

There ha-e been considerable in-estments in $orld6scale crac&ers and polyolefin plants inthe region 2n 344? ne$ facilities $ere completed in 2ndonesia and Malaysia $hich hasbrought the region into a net export to a surplus position of plastic resins During 344@ thesupply has exceeded demand ma&ing the region a net exporter for the first time

Table =< gi-es the plastics consumption per capita for the A#EA* countries The dataindicates that there is still much gro$th potential for thermoplastics consumption in most

A#EA* countries except for #ingapore The latter is a mature mar&et $ith per capitaconsumption comparable to the fully industriali%ed nations

Table !,% ? 1::@ Asea4 &e+ Ca5ita Te+.o5lasti6s Co4s*.5tio4

C5/*T7F ,E7 CA,2TA ,LA#T2C C5*#/M,T25* '1(

2ndonesia @8

Malaysia >>?

,hilippines @

#ingapore 333

Thailand


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defined as resins manufacturing0 compounding and fabricating sectors0 continued to expandduring 3448 ,lans for the future of the resins manufacturing sector0 $hich are currently beingimplemented0 $ill ensure gro$th into the next century The compounding sector has alsoexpanded rapidly and this gro$th is also expected to continue

2n the country report on the Malaysian ,lastics industry0 after experiencing a strong gro$tha-eraging 3?6


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lo$ start0 the per capita of


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-) V$etna. "lat$* $n,&t#3 $ nea#l3 *on*ent#ate, $n one %eo%#a"!$*al a#ea)

The center of the de-elopment of the plastic industry as $ell as the center of the plasticindustry is no$ concentrated in .o Chi Minh City $ith producti-ity of 9 output of thecountry $ith plastic products $ith -arious &inds and the appliance of ne$ technology0 $hilstthe *orth 3? and the Central ? 2t is necessary to ad;ust this ratio by policies of orientationand in-estment incenti-e so that by


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Wea+nee

Equipment and machinery of +ietnam plastic industry are still outdated

Mould technology has not been in-ested considerably

The industry of producing ra$ materials for the plastic industry is still at its beginningstage /p to no$ +ietnam has to rely 399 on the import of ra$ materials0 chemicals0plastic processing machinery

Through the abo-e0 it could be seen that +ietnam $ith a population of more than 89 million0 isa ne$ emerging and potential mar&et .o$e-er0 $e can not de-elop this potentiality unless $eorientated its de-elopment and $ith proper in-estments

/)2 De1elo".ent of V$etna. "lat$* $n,&t#3 of -4

2n the next 39 years0 according to the predication of economic specialists0 +ietnam economycan gro$ stably at a rate of 8 6 per annum or more The plastics industry $ill de-elopaccordingly at


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The structure of plastic products for the year


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foreign currency for rein-estment 2n this matter0 $e should learn the experiences ofA#EA* countries 5ur target is that by the year of


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/)4 In1et.ent "otent$al

/)4)( Fo#e$%n $n1et.ent

As Mr Truong Quan +u 6 Managing Director of +ietnam ,lastic Corporation6some mainpoints on the in-estment in +ietnam plastics industry during the last fe$ years are highlightedas follo$s:

2n the last fi-e years0 the plastics industry ha-e been able to &eep up its a-erage gro$thrate of


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and is expected to increase to =9 by the year


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The booming de-elopment of the ci-il and industrial construction is another foundation forgro$th of the plastic industry Besides the demand of plastic products for interior decoration0drainage0 plastic pac&aging for cement is another much demanded products 2n the next ?years0 cement industry $ill need about =99 million bags per annum0 that means there must be million per annum

"ith the establishment of foreign automobile assembling plants as $ell as se-eral electronicplants and the demand to import =990999 motorcycles0 about 990999 tele-ision set per year0the prospect for plastic industry is good

The plastic industry also has to ser-e the gro$ing demand both in the quantity and quality fora population of nearly 399 million by the turn of the century as $ell as to support theproduction of agriculture0 industrial plants0 husbandry0 pac&ing for domestic consumption andexport0 infrastructure and etc

Basically0 there are three forms of in-estment cooperation $ith foreigners0 $hich are:

3 Contractual business cooperation -enture


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R ,ro;ects of big in-estment capital

R ,ro;ects to design0 to ma&e moulds and dies and to produce spare parts0 equipment andmachinery for plastics industry

/)6 In,&t#3 en1$#on.ent anal3$

/)6)( Potent$al *o."et$to#

Being the local leader in plastic business scale0 production technology and scope of acti-ities0brand loyalty ma&es difficult for ne$ entrant to ta&e mar&et share a$ay from 7ang Dong,lastic Company At present0 ,+C films mar&et share is 89 6see !igure > Moreo-er theCompany has en;oyed a thirty6year prestige and quality recogni%ed by local and foreigncustomers Brand loyalty therefore reduces the threat of entry by potential competitors

The Company has o$ned production facilities settled in ma;or areas in the country as .o ChiMinh City0 .a *oi0 Da *ang0 hanh .oa and Can Tho $ith substantial experienced laborThe Company has applied Japanese ad-anced technology to produce ,+C films $ith lo$erprice and higher quality compared $ith other companies As a result0 t!e t!#eat of ent#3 $#e,&*e,)

2n summary0 t!e ba##$e# to ent#3 $ !$%! fo# ,o.et$* "otent$al *o."et$to# .o$e-er0+ietnam has been a member of A#EA*0 foreign potential competitors are threats to theCompany To maintain the current mar&et share0 7ang Dong ,lastic Company should ha-eresearch0 in-estment on ne$ techniques and technologies to impro-e the quality andapplication features of the product meeting A#EA*0 2#5 standards

/)6)- R$1al#3 a.on% etabl$!e, *o."an$e

As mentioned abo-e0 at present 7ang Dong ,lastic Company has maintained its first positionin producing ,+C films 2n .o Chi Minh city0 there are o-er =9 state and pri-ate companiesproducing ,+C films 2ts main competitors are Tan Tien0 *goc *ghia0 Bao +an0 etc 2naddition0 other pri-ate companies compete unfairly by setting lo$er price $ith $orse quality.o$e-er0 7ang Dong ,lastic Company $ith its philosophy GAl$ays BetterI constantly stri-efor better quality0 more reliability and competiti-e pricing 2n other $ords0 t!e *o."et$t$on $not @&$te $nten$1e)

/)6)/ Ba#%a$n$n% "o5e# of b&3e#

2n this field there are many other small producers that compete strongly against each other As,+C films relate to 7ang Dong: a brand name attached of first class quality 2n +ietnam0 only7ang Dong is in good position to manufacture and supply regularly ,+C films $ith highquality0 large -olume and in $ide range 7ain$ear and bags customers could purchase ,+Cfilms in large quantities from many different companies but only 7ang Dong ,lastic Companycan pro-ide the products $ith best quality to them The b&3e# "o5e# t!e#efo#e $ not @&$te"o5e#f&l)

=3


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/)6)2 Ba#%a$n$n% "o5e# of &""l$e#

7ang Dong ,lastic Company got the direct import6export license *o 369


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,olitics in +ietnam is stable and the countrys economy continues maintaining a highgro$th rate This is a fa-orable context for 7ang Dong ,lastic Company to de-elop

"ith the normali%ation of the /#6+ietnam relations and being a member of the A#EA*0the gro$th of the +ietnamese plastics industry can be further enhanced to achie-e the


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C'APTER 2

2 INTERNAL ENVIRONMENT ANALYSIS

This chapter is to focus on the strengths and $ea&nesses of 7ang Dong ,lastic Company inorder to locate the companys competiti-e position

2)( '$to#3 of Ran% Don% "lat$* *o."an3

7ang Dong ,lastic Company is a state6run business0 re6established according to Decision *o= issued by the go-ernment 'formerly the Council of Ministers( and >?0 builtup and controlled by a !rench entrepreneur operating in the field of producing plastic productsas pac&ages and bottles for containing shampoo and perfume under the name of 7ang Dong!actory

After 34?>0 this factory $as ta&en o-er by a Chinese group At that time0 the factory $asrenamed as /!2,LA#T2C due to more in-estment The main products in this period includefilms for raincoats0 leathers0 simili0 toles0 hard and soft plastic boards0 etc

!rom 3449 to 344@ the companys production scale $as enlarged to meet the demand ofcustomers in the $hole country $ith the merger and production start6up of four plants in .ocMon0 .o Chi Minh City0 .anoi0 *ha Trang and three branches $ere ne$ly established in.anoi0 hanh .oa and )uang *am Besides its traditional products lines 7ang Dong ,lasticCompany di-ersified its products and launched ne$ lines: ,ET bottles0 ,ELD films0 ,+Cflooring0 ,E and ,, boards0 -arious pac&aging designs for foodstuffs0 drin&s0 interiordecoration0 etc That $as a period of business strengthening0 synchroni%ation0 up6grading ofproduction and technology0 of de-eloping and expanding the $hole mar&et in the country andof mar&et expansion for exportation to Asian and other countries 7ang Dong ,lasticCompany is member of:

=>


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+ietnam ,lastics Manufacturers Association

+ietnam #hoes and Leather 2ndustries Association

+ietnam 1arments and Textiles 2ndustries Association

Association for De-elopment and 2n-estment

+ietnam Chamber of Commerce and 2ndustry

2)- Co."an3 .$$on

7elying on its potentials and ta&ing its ad-antages0 7ang Dong today is

ta&ing part in the plastic de-elopment in +ietnam0 becoming a reliable supporter ofconsumers products manufacturers

recei-ing support operating under direction and super-ision of the Ministry of 2ndustry0stimulating coordination and cooperation $ith Association of ,lastic Manufacturers0Textile and 1arments0 !oot$ear 2ndustries

maintaining regular business relations $ith $ell6established organi%ations and groups incountries ha-ing de-eloped plastic industry

2)/ O#%an$7at$onal t#&*te

2)/)( T!e *o."an3 o#%an$7at$onal t#&*te *!a#t an, $t f&n*t$on :

The organi%ational structure at 7ang Dong ,lastic Company is presented in figure >3 Thecompany is organi%ed in the form of functional structure

=?


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'IGURE %,18 RANG DONG &LASTIC COM&AN#S ORGANIATIONAL CART

Executi-e Director Executi-e Director

L2 ,./ D5*1

Joint 6 +enture Enterprise

Investment

Department

1E*E7AL D27ECT57

Technical

Department

Office Finance and

Accounting

Department

Personnel

Department

Trading

Department

Finished

goods

stock

General

Department

Materials

stock

Promotion

anddistribution

center

Materials

trading

store

Hanoi

branch

ha Trang

Plastic

Factor!

ha Trang

Paper

Plastic

Factor!

Plastic

Factor!

o"#

Plastic

Factor!

o"$

Po%er

&ngineering

Factor!

D27ECT57

Plastic

Factor!

o"'


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the most recent year0 mar&eting acti-ities in terms of managing the agent net$or& are left tothe Trading Department

2)/)- C#ent labo# fo#*e of t!e *o."an3 :

Table %, - Labo+ fo+6e of +a4) Do4) &lasti6 Co.5a43

Descriptions 344? 344@ 3448

)uantity 7ate )uantity 7ate )uantity 7ate

Total labor force ?89 399 @>9 399 8>> 399

Direct labor >49 ?4@ ?=< =3< @=< =8

Managerial staff 8< 34

5ther 3>3 39 3?8 39 3>

2n 34480 total labor force increased to 8>>0 in $hich direct labor force accounts for =80decreasing 9? comparing to 344@ .o$e-er0 direct labor force in 3448 increased more 399and more 3= managerial staff comparing to 344@ This pro-es that the company has in-estedinto the technology and has expanded into trading acti-ities 2t has also impro-ed the le-el oftechnical &no$ledge and s&ills for employees

Most managers at 7ang Dong ,lastic Company ha-e graduated from uni-ersities in t$o fields:technology and economics

2)2 P#o,&*t$on at Ran% Don% Plat$* *o."an3

2)2)( P#o,&*t$on "#o*e

The company has a closed6loop production technology process from mixing materials0assembling to recycling

The process of producing ,+C films is described in !igure >= illustrates the process of producing ,+C leathers

=


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'i)*+e %,2 - &+o6ess of 5+o*6i4) &VC fil.s

=4

ADD2T2+E

MATE72AL#

,+C 7esin

,5"DE7

M2QEDE)/2,ME*T

.EAT2*1

75LL2*1

,72*T2*1

!2*2#.ED

155D#

)C#

#T57E.5/#E


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'i)*+e %,! - &+o6ess of 5+o*6i4) &VC leate+s

>9

,+C 7E#2* ,5"DE7 C.EM2CAL#

ADD2T2+E MATE72AL#

MATE72AL#1L/ED

1L/2*1

.EAT2*1

75LL2*1

,72*T2*1

#TEAM2*1

!2*2#.ED 155D#

)C#

#T57E.5/#E

M2Q2*1


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2)2)- P#o,&*t

The plastic products manufactured by 7ang Dong ,lastic Company 'formerly /!2,LA#T2C(ha-e been on stream in the +ietnamese mar&et and en;oying confidence of the consumerssince the 34@9s

At present0 ,+C0 ,E leather and films relate to 7ang Dong 6 /!2,LA#T2CK a brand nameattached to products of first class quality All manufacturers of consumers goods for local andexport mar&et 'garments0 bags0 foot$ear0 pac&aging( trust in 7ang Dong genuine materialsused for their yearly local production 2n +ietnam only 7ang Dong is in good position tomanufacture and supply regularly plastic leather0 films $ith high quality0 large -olume and in$ide range

Also &no$n under 7ang Dong brand0 plastic boards and sheets spread their reputation o-er the$hole country They are much appreciated for their unri-aled excellent features aslight$eight0 easy to install0 sun6proof and long6$earing in construction engineering0decorating and ad-ertising $or&s Either end6consumers or materials purchasers cordially

adopt ne$ 7ang Dong products such as ordorless films0 raincoats0 plastic flooring tiles andsponge leather Especially ,ET bottles0 t$o6stage processed through #$iss and 1ermanmachinery and technology0 $hen coming into the mar&et in 344>0 entirely satisfied -arioustechnical and good sanitary safety standards required by manufacturers of mineral $ater0 pure$ater0 edible oil and cosmetics

Annual production capacity is as follo$s :

6 ,+C films @0999 MT

6 ,+C and ,/ leather ?0999 MT

6 ,+C boards and corrugated sheets =0999 MT

6 ,E films0 semi6rigid and odorless films 30999 MT

6 B5,,0 ,E multi6layers films laminating and printing 39 million sq meters

6 ,, $o-en bags 39 million pieces

6 ,ET containers0 bottles o-er ?9 million pieces

6 ,lastic flooring tiles 3< million pieces

2)2)/ P#o,&*t @&al$t3 :

,roduct quality is really a decisi-e factor for the de-elopment of the company The products of7ang Dong ,lastic Company ha-e en;oyed the confidence of the mar&et0 both domestic ando-erseas mar&ets

PVC films.

>


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At 7ang Dong ,lastic Company0 to produce ,+C films0 high quality ra$ materials that ha-ebeen proceeded on the most ad-anced equipment and Japanese ad-anced calenderingtechnology The products are $ith rich patterns and colors0 plain0 embossed finishing0customi%ed designs

"ith the $idth of 3=8 meters0 thic&ness of 99@mm up to 9


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roofing and decorating0 rain6proof or sunlight6proof panel0 partitioning0 interior decoration0plant construction

PVC, P boards.

They are processed on ad-anced extrusion line in -arious elegant colorsK $ood0 ceramic0di-erse textures embossing and easy installation as $ell The products $ith chemicals6resistantand long6$earing0 roofing0 partitioning0 doors0 ad-ertising displays0 interior decoration andothers

P, P!D, "#PP $lastic $ac%aging.

.oc Mon ,lastic !actory0 one factory6member of 7ang Dong ,lastic Company0 is equipped$ith Japanese and orean ad-anced production lines 2t speciali%es in laminating0manufacturing ,E0 ,E.D0 B5,,0 plastic pac&ages $ith single or multi6layers0 in 3 or @6colorsprinted patterns and designs according to the customers request "ith an annual output ofapproximately 39 million square meters 'to be increased in the coming years(0 pac&ages are

supplied $ith manufactures of detergents0 cleaners0 foodstuffs0 snac&s0 confectionery "iththe motto of production moderni%ation and synchroni%ation0 7ang Dong ,lastic Companyin-ested one ,E0 B5,, laminating machinery line and one three6side cutting and sealingmachinery line in 3448 to meet the demand of the customers

PT containers.

,ET bottles ha-e excellent features meeting international sanitary standards0 colored ortransparent0 supplied $ith nice6shaped and good gas6retaining lids0 and unbrea&able Thebottles can be recycled se-eral times for specific applications as insecticides0 chemicalscontainers ,ET bottles can be applied for containing pure $ater0 mineral $ater0 carbonated

soft drin&s0 fruit ;uices0 edible oil0 liquors0 cosmetics0 pharmaceutical0 chemicals0 baby mil&0etc

Seets a4

boa+s

21=

ET bott les

$=

&lasti6

&a60a)es

1%=

'il.

%2=

Ote+ 5+o*6ts

!=

Leate+

1%=

'i)*+e %,$ - C*++e4t 5+o*6t st+*6t*+e of Ra4) Do4) &lasti6 Co.5a43

Source: !ng .ong Pl!stic &o"%!n'

>>


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PVC flooring tiles

They are calendered and compressed by modern hydraulic machinery line As a result0 theproducts ha-e strong structure The products are a-ailable in -arious sophisticated patterns0nice colors0 thin and light6$eighted and easily installed They are applied for interiordecoration as flooring0 $alling and ceiling

PVC synthetic car$ets.

They are manufactured by Japanese ad-anced calendering machine The carpets resist tomoisture0 insect de-astation0 fire and hard6$earing a-ailable in rich colors and patterns Theyare applied for co-ering floor in interior decoration $or&s

7ang Dong ,lastic Company has al$ays tried to impro-e its product quality through thestrategy of technology in-estment and of s&illed labor training in-estment .o$e-er0 due tothe lac& of capital0 the company has stilled produced some &inds of products $ith oldtechnology and equipment e-en equipment of the decade of 34@9 Consequently0 the quality of

these products is not really excellent

2)4 Sale an, net $n*o.e

#ales re-enue in the period of 344?


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;

1

2

!

%

$

@

1::% 1:: 1::$ 1::@

Net 46o.e

'i)*+e %,( - Net i46o.e

!rom 344< up to no$0 the companys sales ha-e increased #ales in 3448 $ere multiplied bynearly more than = times compared $ith that of 344Moreo-er due to hard competition and based on its pricing policy0 the company can notincrease the price of their products This sho$s a $ea&ness of the +ietnamese plastic industryin general0 of the company in particular 6 depending on the external sources of ra$ materials

According to Mr *guyen Cong Chuong0 the companys 1eneral Director0 7ang Dong ,lasticCompany presently accounts for about 89 of ,+C films mar&et as depicted in !igure >4

'i)*+e %,: - St+*6t*+e of &VC fil.s .a+0et sa+e

>@

5ther companies

89

7ang Dong ,lastic Company


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2)6 Ma#+et$n%

2)6)( P#$*$n% "ol$*3

The company has paid much attention to price policy and the quality of the products as $ellThe high profit in the field of producing ,+C films has attracted many producers !iercecompetition therefore occurs in the form of quality and price although the mar&et for ,+Cfilms is large *o$ price competition of 7ang Dong ,lastic Company has been based onproduction on a large scale0 modern machinery and lo$ inputs costs !or the productsconsumed on the domestic mar&et0 price set is mainly based on manufacturing costs0 profit andbudget accumulation ,rice is set according to mar&et trends $hen fluctuation occurs Table>< presents the price list of ,+C films products from 7ang Dong ,lastic Company accordingto methods of payment

Table %,2 - &+i6e list of &VC fil.s 5+o*6ts a66o+i4) to .etos of 5a3.e4t

PRODUCT UNIT

Pa3.ent on

,el$1e#3

Defe##e,

"a3.ent

PLASTIC

PRODUCTSPROMOTION

AND

DISTRIBUTION

STORE

*3 5. 939 x 3=8 x 399 M 389

*3 5. 93? x 3=8 x 399 >94? >39? >34?

*3 2. 93? x 3=8 x 399 >


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pro-inces The customers can buy 7ang Dong ,lastic Companys products through its storesand branches These stores and branches represent the Company to introduce 7ang Dong,lastic products to industrial customers li&e textiles and garments0 foot$ear industries

'i)*+e %,1; - Dist+ib*tio4 s3ste. of Ra4) Do4) &lasti6 Co.5a43

2n summary0 the Company has paid attention to the problems of setting price and establishing

the distribution net$or& .o$e-er0 the Company has not paid much attention to thead-ertising Table >= illustrates the rate bet$een sales re-enues and ad-ertising costs

Table %,! - Rate bet/ee4 sales +eve4*es a4 ave+tisi4) 6osts

YEAR SALES

REVENUES

ADVERTISING

COSTS

RATE

:

344? 3=4999 903@

Sources: in!nce !n0 Accounting .e%!rt"ent 2 !ng .ong

!rom the table0 it pro-es that the cost for ad-ertising $as lo$ '903@ in 3448( though thead-ertising cost increased steadily year by year This illustrates ad-ertising acti-ities and

>

7ang Dong ,lastic

Company

C/#T5ME7#

"holesalerCommerceCompany

7etailer

,roduction/nits

,romotion andDistribution #tore


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promotion policy ha-e not been paid much attention

2); F$nan*e

2);)( F$e, aet tno1er

2n 3448 most financial sources are self6support capital from the company The company hasta&en the ad-antage of financial sources from the ban& or has imported ra$ materials bypayment on installment and has made the collection of accounts recei-able more quic&ly inorder to guarantee capital for the trading and manufacturing acti-ities and in-estment of thecompany

The company has also applied the financial management measures to impro-e fixed assetsturno-er !rom Table >>0 the company has increased the fixed assets turno-er to >@ times in3448

Table %,% - 'ie assets t*+4ove+

Criteria 344? 344@ 3448

#ales re-enues 3=4


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Table %, - Total assets t*+4ove+

Target 344? 344@ 3448

#ales re-enues 3=4


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4)- St#ate%$* o"t$on fo# Ran% Don% "lat$* *o."an3

5ptions about the de-elopment strategy for 7ang Dong ,lastic company are deri-ed fromsolutions for the three follo$ing issues:

"hat generic strategy $ill the company base on to de-elopH

"hich direction $ill the company de-elop inH

"hat method $ill the company use to de-elopH

4)-)( Gene#$* *o."et$t$1e t#ate%$e an, a #e*o..en,e, t#ate%3 fo# Ran% Don%

Plat$* *o."an3

A selected generic strategy is the result from the Companys ma&ing consistent choices onproduct0 mar&et and distincti-e competences Based on 7ang Dong ,lastic companys productdifferentiation0 mar&et segmentation and distincti-e competence in part ?30 no$ strategic

alternati-es are assessed to find out the most appropriate strategy for the CompanyCost leadership strategy

The lo$6cost strategy requires 7ang Dong ,lastic company to be good at materialsmanagement and to ha-e cost minimi%ation in 7esearch and De-elopment0 ad-ertising0 etc Atpresent the Company has to rely 399 on the import of ra$ materials As analy%ed in the partsof =@ N >@


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follo$s:

2n +ietnam0 only 7ang Dong is in good position to manufacture and supply regularly ,+Cfilms $ith high quality0 large -olume and in $ide range The product differentiation is basedon the product quality and the rich patterns and colors0 plain and embossed designs to meetcustomers satisfaction As a result0 under 7ang Dong brand0 ,+C films spread theirreputation in the companys target mar&et6the *orthern and #outhern regions

Differentiating ,+C films by in-esting in inno-ation0 upgrading0 and moderni%ation ofmachinery and equipment to synchroni%e and increase production capacity .o$e-er0 themar&eting acti-ities ha-e not been paid much attention The Company therefore finds itdifficult to pursue the differentiation strategy at a broad competiti-e scope

!ocus strategy

A focused company concentrates on ser-ing a particular mar&et niche $hich may be definedgeographically0 by type of customer0 or by segment of the product line ',orter0 Competiti-e

#trategy0 p>@( 2t is difficult for 7ang Dong ,lastic company to follo$ focus strategy for thereasons as follo$:

*o$ the company has a distribution net$or& o-er the *orth0 Central and #outh of +ietnamMoreo-er the companys production scale $as enlarged to meet customers demands in the$hole country $ith the merger and production start6up of four plants in .oc Mon0 .o ChiMinh City0 .a *oi0 *ha Trang and three branches $ere ne$ly established in .anoi0 hanh.oa0 and )uang *am As a result the focus strategy does not enable 7ang Dong ,lasticcompany to follo$ its chosen strategy

!rom the analysis abo-e0 it can be concluded that 7ang Dong ,lastics company should follo$

the cost leadership strategy

4)-)- D$#e*t$on fo# Ran% Don% Plat$* *o."an3

5ptions about direction for the 7ang Dong ,lastic companys de-elopment strategy is reliedon the combination choice bet$een product and mar&et 7ang Dong ,lastic company no$ isin the strong competiti-e position and mar&et for ,+C films gro$s highly0 the Company aimsto maintain its current mar&et share '@9( by gro$ing $ith the mar&et 2n addition ,+C filmsproducts ha-e been exported to foreign mar&ets The Company therefore needs to impro-e theproducts more and more in order to be more reliable to present mar&et and to loo& for ne$mar&ets "ith regards to ,+C films0 7ang Dong ,lastic company should follo$ the direction

of consolidation and mar&et penetrationAt present0 7ang Dongs ,+C films are much appreciated for their unique excellent featuresand first6class quality This is opportunities for the Company to gro$ in terms of productde-elopment

The directions for strategy de-elopment can be summari%ed in Table ?3

?=


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C'APTER 6

6 CONCLUSION AND RECOMMENDATIONS

6)( Con*l&$on

Fo# t!e V$etna. Plat$* $n,&t#3

2n the past fi-e years0 the plastic industry ha-e been able to &eep up $ith its a-eragegro$th rate of


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mar&et and competitors are the main $ea&nesses of 7ang Dong ,lastic company 2n orderto implement the proposed strategy0 the company should establish a mar&eting department$hich is responsible for mar&eting acti-ities as ad-ertising0 researching consumer andcompetitor beha-ior and ne$ product de-elopment research as $ell 2n addition thecompany should ha-e budget for mar&et research especially researching mar&et and

competitors !rom that the company $ill ha-e strategic master de-elopment plan for thecompany in the long term

The company should follo$ the bac&$ard integration strategy to impro-e the closerelationship $ith foreign suppliers of ra$ material to the company

The company should in-est into the ne$ product de-elopment through strategic alliances$ith foreign partners

The company should enlarge the companys scale to meet the demand of the $holecountry especially in .anoi0 .ai ,hong0 *am Dinh0 and #outh China large mar&ets

2n order to integrate into the de-elopment trend of $orld and +ietnamese plasticindustries0 7ang Dong ,lastic Company should ha-e an in-estment on ne$ equipment andtechnologies to impro-e the quality and application features of the products0 meetingA#EA*0 2#5 standards

The 7ang Dong ,lastics company should impro-e human resource management bytraining0 upgrading0 and updating the s&ills of engineers0 technicians0 managers throughshort and long term course in +ietnam and abroad

Also the company should intensify and $iden its relations $ith Asian0 European0 A#EA*and technology applications0 cooperation0 ;oint6-enture on manufacturing and trading0mar&eting researches0 information exchange0 plastic international forums as $ell as labortraining

?8


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REFERENCES

Ansoff0 . 20 Corporate #trategy0 348

Country report 6 2ndia0 the @th Asia ,lastics !orum0 +ietnam0 344@

Country report 6 2ndonesia0 the @ th Asia ,lastics !orum0 +ietnam0 344@

Country report 6 #ingapore0 the @th Asia ,lastics !orum0 +ietnam0 344@

Country report 6 Japan0 the @ th Asia ,lastics !orum0 +ietnam0 344@

Country report 6 ,hilippines0 the @th Asia ,lastics !orum0 +ietnam0 344@

Country report 6 China0 the @ th Asia ,lastics !orum0 +ietnam0 344@

Country report 6 Thailand0 the @ th Asia ,lastics !orum0 +ietnam0 344@

Country report on the #ingapore ,lastic 2ndustry0 the 8thAsia ,lastics !orum0 2ndia0 3448

Country report Japan0 the 8thAsia ,lastics !orum0 2ndia0 3448

Country report Malaysia0 the 8thAsia ,lastics !orum0 2ndia0 3448

Country report 2ndia0 the 8thAsia ,lastics !orum0 2ndia0 3448

.ill0 C Jones 10 #trategic Management0 .oughton Mifflin Company0 344?

.uynh ,huc Anh0 The update of +ietnam ,lastics industry and directions to$ards the year


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,ham 1ia Duoc0 7eport on production6trade of +ietnam ,lastics Corporation '+2*A,LA#T(0January0 344

,ham 1ia Duoc0 7ole of plastics industry in de-eloping the national economy to the year

development strategy for vietnam plastic industry: a case study of rangdong plastic company

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