ASSIGNMENT 1 FRONT SHEET Retake

Qualification BTEC Level 5 HND Diploma in Business

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

Assignment due Assignment submitted August 6, 2020

Learner’s name Hien Thao Learner’s code GBD18551

Class GBD0703A Assessor name Badraoui Badr

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

Learner signature Thao Date August 6, 2020

Grading grid

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

LO1Analyze the impact and influence which the macro environment has on an organization and its business
strategies.
P1. Applying appropriate
frameworks analyze the
impact and influence of
the macro environment
on a given organization
and its strategies.

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

P3.Apply Porter’s Five

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

M3.Devise appropriate
strategies to improve
competitive edge and
market position based on
the outcomes.

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

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

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

1. Mission

A mission statement defines what an organization is, why it exists, its reason for being. At a minimum,
the mission statement should define who the company's primary customers are, identify the products
and services the company produces, and describe the geographical location in which the company
operates (Entrepreneur Asia Pacific, 2020).

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

2. Vision

Vision is an abstract word that means different things to different people. Classically, a vision or vision
statement is a snapshot into the future. It should include aspirations of what type of company want to
be (Marc Emmer, 2018)

Vinamilk’s vision: Vinamilk will become a symbol of international stature in the food and drink sector,
that everybody can trust in safe and nutrition products. “To deliver the valuable nutrition to community
with our respect, love and responsibility” (Vinamilk Annual Report, 2019).

3. Objective

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

 Leading in highly applicable innovations.

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

4. Role of business strategy

Definition:A firm's business strategy defines how and where it competes, and its approach to doing so. A
business strategy typically specifies a firm's goals, the products and services offered and the markets
served, and the basis for competing (price, service, quality, etc.). A strategy may also define the
organization structure, systems, and policies that implement the strategy. In addition, the firm's will have
systems and policies which focus on operations and functions and are not truly "strategic" in nature.
Nevertheless, these operational policies can be important in determining business performance (Robert
A. Meyers, 2011).

Role of business strategy in general:

The overarching strategy is essentially the business structure and core functions. Business owners and
managers build departments to handle specific tasks and setup processes to execute the core operating
functions. This strategy runs the business on a daily basis. It’s the way in which products or services are
built or sold while maintaining operational objectives.

After the big picture strategy built, specific strategies are developed around each department and task.
How can the product improve? Where can we penetrate new markets? Questions of this nature are
constantly developing and contributing to a refined set of strategies (Zach Lazzari, 2019).

Role of business strategic in Vinamilk company

Vinamilk's business strategy creates a vision and direction for the whole organization. All people within a
company have clear goals and are following the direction or mission of the organization. Strategy can
provide vision and prevent individuals from losing sight of the whole company’s aims.

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

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

1. Political factor

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

2. Economics Environment

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

3. Social-Cultural Environment

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

4. Technological Environment

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

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

6. Legal factor

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

IV. Porter’s 5 forces model

1. Rivalry competition among existing competitors: Medium

Dairy industry has the high growth rate about 15%

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

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

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

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

2. The bargaining power from customers: High

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

3. Threat of substitute products: Low to Medium

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

4. Threat of new entrants: Low

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

5. Power of Suppliers: Medium

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

V. Industry life cycle

The life cycle is a systematic, quantitative assessment used by organizations to gauge environmental
performance. It is guided by the International Organization for Standardization (ISO 1404-44) and can
evaluate a broad spectrum of environmental impacts.

The Vietnam dairy sector operates in a fast-evolving environment. Consumers are more and more
concerned about the sustainability of food products and expect Vietnam companies in the agri-food
sector to be responsible corporate citizens. Increasingly, retailers and processors are seeking greater
transparency and accountability on environmental sustainability from their suppliers. In an effort to
meet these expectations and to clarify the path towards sustainable milk production in Vietnam,
Vinamilk commissioned a Vinamilk's Products Accompany with Lifecycle Nutrition.

VINAMILK’S PRODUCTS ACCOMPANY WITH LIFECYCLE NUTRITION (Vinamilk’s Annual Report, 2015):
VI. The opportunities and threats that the company facing from SWOT model

1. Opportunity
 Domestic dairy yield just adapts 25% domestic demand, so that is the potential market for Vinamilk
to expanding its production process.
 Vinamilk is the trusted Vietnam brand name in high-quality, so it contributes to building the loyalty of
customers against other competitors.
 To enter 2 new factories into operation in which the Vietnam dairy factory in Binh Duong province
has the capacity equal the sum of 9 capacities of Vinamilk that make Vinamilk meet the increasing
demand of the Vietnam market.
 Expanding the capacity by investing in Mikara Company in New Zealand to help Vinamilk deal with
the shortage of imported milk because of the poor weather and the high increase in demand for
dairy products that lead the global milk production recently cannot satisfy the demand.
 Significant investment in dairy cattle herd is the opportunity for Vinamilk to be able to self-sufficient
in raw fresh milk.
 Strength in Vietnamese market open opportunity for Vinamilk success in exporting to other emerging
South East Asia market.

2. Threat

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

 Vietnam’s infrastructure is low that is a bit hard for widen distribution, especially the highland region
to keep the high-value products.

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

 Opportunities
 The positive trend of customers towards milk usage

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

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

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

VII. Stakeholder analysis

1. Definition

A stakeholder is a party that has an interest in a company and can either affect or be affected by the
business. The primary stakeholders in a typical corporation are its investors, employees, customers, and
suppliers.

Stakeholders can be internal or external. Internal stakeholders are people whose interest in a company
comes through a direct relationship, such as employment, ownership, or investment. External
stakeholders are those people who do not directly work with a company but are affected in some way by
the actions and outcomes of said business. Suppliers, creditors, and public groups are all considered
external stakeholders (James Chen, 2020).

2. Stakeholders of Vinamilk company

Internal stakeholders: Managers, Employees, Shareholders, Customers.

External stakeholders: Banks and investors, Governments.

3. The significance of stakeholder analysis when formulating new strategy

Stakeholder analysis is a systematic methodology that uses qualitative data to determine the interests
and influence of different groups in relation to a reform. In business, a stakeholder is usually an investor
in your company whose actions determine the outcome of your business decisions. Stakeholders don’t
have to be equity shareholders. They can also be your employees, who have a stake in your company’s
success and incentive for your products to succeed. They can be business partners, who rely on your
success to keep the supply chain going. Understanding each stakeholder group clearly will help Vinamilk
know what to do to satisfied stakeholders, and it will give Vinamilk a huge advantage.

Managers are these people appointed by the company’s owner to supervise Vinamilk the day by day
with all of the activities of the company. It is easy to see that they need information about their
company’s current financial situation and what is expected as well. The manager of Vinamilk is always
interested in the financial statement in order to control Vinamilk operations such as the capital structure,
the bad debt. For example, Vinamilk has both short-term loans and long term loans. In detail, short-term
loans in 2009 about 1,601,363 VND, Vinamilk’s CEO Mai Kieu Lien had to make planning so as to pay full
loans on time. Moreover, the manager is used the financial statement to adjust the suitable investment
capital.

Employees as the core factor in the company because the work directly to Vinamilk activities day by day.
Furthermore, they have not only had a special interest in the company’s existence but also a major effect
on the success of Vinamilk. They should have a right to information about Vinamilk’s financial situation,
because of their future job, discussing matters of promotion, rankings and their wages, retirement
benefits, and reward and soon. Total assets, short-term, long – term debt, sales figures are the most
information they want to see. It is easy to see that the sales figures of Vinamilk increased from 8,380,562
VND in 2009 to 10, 821,195 VND in 2010. It means the employees believe in Vinamilk operation, thus
they want to try more in order to develop their business.

Shareholders of Vinamilk company who is Vinamilk’s owners, they want to assess how effectively
management is performing its function. Furthermore, they also need to know how profitability
management is running in Vinamilk’s operation and how much profit they can afford to withdraw from
the business for their own use. For instant, they want to know exactly the total assets, gross profit, and
profit before tax, and so on. It is clear that the right and dividend of shareholders depends on the
operating of Vinamilk and the value of dividend which is shown exactly on the profit and loss account.
 Vietnamese Customers who purchased Vinamilk’s product directly and customers need to know that
Vinamilk is a secure source of supply and is no danger of having to close down. For example, the Vinamilk
brand still keep prestige in the Vietnam market after melamine milk in Vietnam. Vietnamese customers
need detailed information about the continuance of Vinamilk in a long time, the suppliers are ensuring
the quality of milk power or not.

Banks and investors are important users with Vinamilk’s operation. Itis clear that Vinamilk‘s capital not
only from their stakeholders but also borrowing the banks or investors. A bank permits Vinamilk to
operate an overdraft, also provides long-term finance by granting a loan. The banks and investors who
pay attention to Vinamilk through financial statements in order to ensure that Vinamilk is able to keep
up with interest payment and eventually to repay the amounts advanced. For example, a bank
considering a short-term loan to Vinamilk would want to know the financial position of Vinamilk at the
time of the loan. It is easy to see that, if Vinamilk’s revenue is more and more decrease, banks don’t
want to lend their money to Vinamilk.

Inland Revenue and VAT authorities who need to know information from a financial statement such as
profits of Vinamilk to assess the tax payable from Vinamilk in the year. About Vietnam Governments and
their agencies, they are interested in the allocation of resources and, therefore, the activities of Vinamilk.
They also require information in order to provide the basis for national statistics. Moreover, Vinamilk has
to follow all the policies by Government including taxation, interest rate, exchange rate, business profit
tax, land-capital tax, income tax, and Quota in years. For example, the Government wants to see the
profit before tax because it is a core factor that influences the Vinamilk’s income tax. Besides, the
Government might change some appropriate strategies in the future in order to develop the food
industry.

VIII. Conclusion

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

- Home - Vinamilk. [online]

Available at: https://www.vinamilk.com.vn/en/
[Accessed 6 August 2020].
- Meyers, R., 2011. Complex Systems In Finance And Econometrics. [New York]: Springer
Science+Business Media, LLC.
- Nguyen, V., 2020. BUSINESS ANALYSIS AND VALUATION A Case Of VIETNAM DAIRY PRODUCTS JOINT
STOCK COMPANY (VNM. [online]
Available at:
https://www.academia.edu/7811573/BUSINESS_ANALYSIS_AND_VALUATION_A_Case_of_VIETNAM_
DAIRY_PRODUCTS_JOINT_STOCK_COMPANY_VNM
[Accessed 6 August 2020].
- Vinamilk Annual Report 2017. [online]
Available at: https://www.vinamilk.com.vn/static/uploads/article/1522315764-
269930164207c4adda107dd3779158d4514dda30559796ef67db01adf8319d7b.pdf
[Accessed 6 August 2020].
- Vinamilk Annual Report 2019. [online]
Available at: https://www.vinamilk.com.vn/static/uploads/bc_thuong_nien/1585291614-
e5df6f54f1b460c71648e3b3974c13d41721ed54aaef4e256def7956f8cc7d38.pdf
[Accessed 6 August 2020].
- VIETNAM DAIRY PRODUCTS JOINT-STOCK COMPANY (VINAMILK) [online]
Available at: https://www.vinamilk.com.vn/static/uploads/download_file/1402901755-
603ba2f49305bff993da356b04002943069778fe3624d5ddb0a9497ed4fb0aab.pdf
[Accessed 6 August 2020].