Vietnam Dairy Products Joint Stock Company

VINAMILK COMPANY
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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012

Table of Content
1. Company and product overview:............................................... 3 2. Market development: ........................................................... 3 3. Vision ........................................................................... 3 4. Intended Market: ............................................................... 3 5. Business model: ................................................................ 4 6. Decision Making Matrix ....................................................... 5 7. Environment Issues: ............................................................ 6 8. Critical Risk: .................................................................... 7 SWOT analysis: .................................................................. 7 9. References ...................................................................... 8 10. Appendix ..................................................................... 9

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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012

I.

Company and product overview:

VINAMILK is the manufacture, trading of milk and other dairy products as well as related equipment in Vietnam. It was founded in 1976 under the name of Southern Coffee-Dairy Company. Vinamilk started from a small scale dairy operation, which mostly have infant formula powdered milk (Hayes, 2007). After that, company renamed in 1978 and the last once is in 1993 with the name - Vietnam Dairy Company. Depend on UNDP (2007), VINAMILK was awarded about the WIPO Trophy for Innovative Enterprises. In the same year, top Vietnamese dairy company is VINAMILK, which made profit of 923 billion dong in the first 11 months ("Vinamilk profit exceeds target" 2008). In 2010, the first company was highlighted in 200 top performing small-and mid sized companies with annual revenue under US$1 billion, is VINAMILK. Vinamilk products are diverse and variety with over 200 items of milk and dairy products such as milk, milk powder, nutrition powder, fresh milk, cream, yogurt, cheese. Moreover, VINAMILK also produces other products such as soy milk, fruit juice, bread, coffee, bottled water, tea and chocolate dissolves to satisfy different types of customers.

II.

Market development:

Temporally, VINAMILK products not only focus in domestic market but also in foreign countries. In addition, company now exports to the Middle East, Cambodia, the Philippines and Australia. VINAMILK is a state owned enterprise with the State Capital Investment Corporation (SCIC), which is owned by the Government of Socialist Republic of Vietnam. The SCIC recently owns 47.6% of VINAMILK Company shares (Vietnam Dairy Products Joint Stock Company 2007).

III.

Vision

To become the leading Vietnamese trusted brand on nutrient and healthy products for human life and to be positioned one of 50 biggest dairy companies over the world (Vietnam Dairy Products Joint Stock Company 2007).

IV.

Intended Market:

In 2011, VINAMILK products were exported to 15 countries lead to the increasing market share to 30 percentages (Vinamilk CEO among Forbes' top 50 Asian businesswomen 2012). However, Company should expand their market in China, which has many advantages such as huge population (1.3 billion people) or cheap labor cost. According to China milk poisoning cases rise 2008, China milk caused illness or even dying. It mentions that there are 13,000 victims remain in hospital and about 104 of those who less than two years old were in a serious
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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012 condition. Therefore, with a system of powerful brands, VINAMILK can satisfy Chinese customers need.

V.

Business model:

VINAMILK Company applies two strategies out of nine such as exporting and franchising. Each method will be evaluated through advantages and disadvantages and then conducted by a decision matrix to choose the best strategy for VINAMILK Company. EXPORTING: Exporting strategy is the business model that goods and services were sold to the other countries. In this situation, China is the new market for company to exports many types of products. According to Deresky, H. and Christopher, E. (2008), to test out Chinese market, exporting is a low risk way to begin business expansion. ADVANTAGES Increased sales DISADVANTAGES Management mistakes: Company might not control and monitor all the managers Customers demand: Chinese customers might need more service such as delivery. It can lead to spend more cost to improve customer services. Warehousing can cost a lot of money to rent.

Increased profits

Easily to be withdrawal quickly Getting more Chinese experience Huge market expansion Company can test China market easily

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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012 FRANCHISING Franchising is the method that the franchiser allows the franchisee to use its brand name and business strategies. ADVANTAGES Marketing support DISADVANTAGES Difficult to manage all franchiser to ensure their products meet full quality standards Depend on reputation

Low cost to establish brand name Quickly entering the market Low investment budget: company does not to invest a lot of money to establish business in China market Company can have experience to apply franchise strategy easily to other countries Save money from marketing and investment budget

VI.

Decision Making Matrix

Get more experience (0.2) Low Investment Capital (0.25) Controlling Expanding the risk (0.3) market (0.15) Marketing support (0.1) Total (1)

Exporting

6 (1.2)

9 (2.25) 10 (2.5)

6 (1.8) 3 (0.9)

8 (1.2) 9 (1.35)

6 (0.6) 7 (0.7)

4 6.45

Franchising 5 (1)

Base on Decision Matrix, VINAMILK Company should apply Franchising method because it does not need to cost a lot of money to construct the process in China market. Moreover, Franchising is quickest way to expand the company market and also the great way to support marketing in a new market like China.

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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012

VII.

Environment Issues:

Political Risk: In Western Economy, there are strict rules to warranty the contractual obligations between businesses. However, China Economy is not as same as Western Economy. It was ruled under the communist so it can lead to bureaucracy. In this case, company might not control the entire product, manufacturing and maintaining processes. Consequently, it is difficult for VINAMILK Company to minimize the losses. Challenges in Scale: China is a big country with high population with 1.3 billion people. Therefore, many investors think that it is a great potential market. However, it actually is the complex market. According to Jayaraman 2009, there are 850 million people live in countryside with poor and hard life. Furthermore, about 247 million people who earn more than 5000 dollar income, but actually are the largest savers in the world. As a result, spending power is not strong enough to increase spending.

Income
Countryside Urban areas High income Low income

28% 15% 28% 13% 44%

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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012

VIII.

Critical Risk:

SWOT analysis: Strength: Opportunities: - Powerful brand name, huge market - Preferential policies from the share government on the dairy industry (invest 2000 billion dollar for dairy - Strengthening its distribution industry until 2020) quality and network coverage to expand its market share in the - Material supplies are stable market (VINAMILK also try to invest, build up the investment, construct - Diverse product and comparable the raw materials to satisfy price enterprises need - Advance production assembling - Joint to WTO: learn more - Skilled managers experience from other countries - Diversity product lines (150 types of product) - Strong relationship with partners - Experienced marketing teams Weakness: Threats: - Only focus on internal market share - China market is fluctuated (inflation, bureaucracy and so on - Marketing team only focus in Southen Vietnam - Competition with local companies

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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012

IX.

References:

Hayes, D. 2007, "Vinamilk performs", Dairy Industries International, vol. 72, no. 8, pp. 26-27. "Vinamilk profit exceeds target", 2008, Dairy Industries International, vol. 73, no. 1, pp. 11-11 Vietnam Dairy Products Joint Stock Company 2007, Financial Contents, VINAMILK, viewed 18 March 2012, < http://www.vinamilk.com.vn> Vinamilk CEO among Forbes' top 50 Asian businesswomen 2012, Vietnamplus, 3 Mar, viewed 20 March, 2012, <http://en.vietnamplus.vn/Home/Vinamilk-CEO-among-Forbes-top50-Asian-businesswomen/20123/24611.vnplus> China milk poisoning cases rise 2008, BBC NEWS, 22 Sep, viewed 19 March 2012, <http://news.bbc.co.uk/2/hi/7628622.stm> Deresky, H. and Christopher, E., 2008, International Management: Managing Across Border and Cultures, Pearson Education, Australia. Jayaraman, K 2009, Doing Business In China: A risk Analysis, Emerging Knowledge on Emerging Market, vol. 1, no. 1, pp. 55-58.

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[VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY ] January 1, 2012

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Appendix:
VINAMILK Products (Vietnam Dairy Products Joint Stock Company 2007) Fresh milk -Strawberry flavor -Chocolate flavor - Unsweetened, high-calcium and low-fat UHT Milk Flex Yoghurt - PROBI YOGURT MILK (NEW) - SWEETENED YOGURT - ALOE VERA YOGURT MILK - STRAWBERRY- FLAVOR YOGURT - FLAVORED YOGURT - UNSWEETENED YOGURT KEFIR - SUSU YOGURT MILK Drinking Yogurt Milk For Children: - Rich natural nutrients. - Having Prebiotic the substance to creates favorable environments for advantageous bacterium. For adults: - 4 flavors: Orange, Strawberry, Fruits and Green tea. - Enriched fresh cow milk, and added Probiotic, creating a good environment for useful micro-organism in intestines to develop strongly. Natural fruits flavors: Strawberry, Durian, coconut, taro, green-bean. - High nutritional values. - Plenty of Calcium and nutrients. - No preservative

VINAMILK ice-cream VINAMILK CHEESE

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