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 the degree of Master of Business Administration

Examination Committee:

Dr !redric "illiam #$ierc%e& 'Chairman( Dr Truong )uang Dr Clemens Bechter

*ationality: ,re-ious Degree:

+ietnamese Bachelor of Economics .CMC /ni-ersity of Economics0 +ietnam Bachelor of English .CMC /ni-ersity of Education0 +ietnam The 1o-ernment of #$it%erland

#cholarship Donor:

Asian 2nstitute of Technology #chool of Management Bang&o&0 Thailand April 3444

ACKNOWLEDGEMENT

2 $ould li&e to express my deepest gratitude to my research ad-isor0 Dr !redric "illiam #$ierc%e& for his intensi-e support0 -aluable suggestions0 guidance and encouragement during the course of my study My sincere than&s are also due to Dr Truong )uang and Dr Clemens Bechter for their -aluable time as the members of the examination committee Their constructi-e suggestions $ere of great help in my completing this study 2 $ould li&e to express my sincere gratitude to all of my teachers at #5M6A2T for their teaching and guidance during my course 2 sincerely than& Mr /ong Tien Thinh and Mr Le Dinh Tuc for pro-iding me the opportunity to carry out the study and such -aluable information 2 appreciate the assistance of managers and staff of 7ang Dong ,lastic Company $ho $ere helpful in the collection of data 2 $ould li&e to specially express my than&s to all of my friends for their support and encouragement !inally0 2 heartily dedicate this study to my belo-ed parents and my husband0 *guyen Thanh Long $ho ha-e al$ays sacrificed to encourage and support me during my study at A2T

ii

ABSTRACT

7ang Dong ,lastic company is one of the most successful companies in terms of high mar&et share 2t has produced plastic products of -arious &inds in $hich ,+C films is the core product of the company The ,+C films product accounts for 89: of the mar&et share .o$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 the study $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 the most appropriate de-elopment strategy for the company !inally some recommendations are suggested for the company to be able to implement the proposed strategy

iii

Table of Content
C!a"te# T$tle Title ,age ACKNOWLEDGEMENT ABSTRACT List of Tables 1 INTRODUCTION 3 3 Bac&ground 3 < ,roblem statement 3 = 5b;ecti-es 3 > #cope and limitations of the study 3 ? Methodology and frame$or& of the study 3 @ 5rgani%ation of the study 2 LITERATURE REVIEW < 3 #trategic management perspecti-e < < Definition of strategy < = The process of strategic management < > #tructural analysis of the competiti-e en-ironment: < ? #electing de-elopment strategies ! E"TERNAL ENVIRONMENT ANAL#SIS = 3 Macro6en-ironment analysis ? ? @ A 3< 1$ 3@ Pa%e i ii iii vii 1 3 3 3 < < >

= < Current situation and trend of in-estment of ,lastic 2ndustries in Asian nations 34 = = Current situation of +ietnam plastic industry = > De-elopment of +ietnam plastics industry of <99? i<< <?

= ? 2n-estment potentials = @ 2ndustry en-ironment analysis = 8 #ummary of opportunities and threats for 7ang Dong ,lastic company % INTERNAL ENVIRONMENT ANAL#SIS > 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 !inance > A Conclusions on strengths and $ea&nesses of 7ang Dong ,lastic Company DEVELO&MENT STRATEG# DESIGN ? 3 !oundations of 7ang Dong plastic companyBs strategy ? < #trategic options for 7ang Dong plastic company $ CONCLUSION AND RECOMMENDATIONS @ 3 Conclusion @ < 7ecommendations RE'ERENCES

<A =3 =< !% => =? =? =A >? >8 >4 ?9 1 ?3 ?<

?? ?@ (

L$ t of F$%&#e
!igure 3 3 6 !rame$or& of the #tudy !igure < 3 6 The Determinants of Company ,erformance !igure < < 6 #trategy !ormulation ,rocess !igure < = 6 7equirements for Competiti-e #uccess !igure < > 6 The !i-e !orces Model !igure < ? 6 The ,orter Model Applied for the +ietnam ,lastic 2ndustry !igure < @ 6 De-elopment #trategies !igure = 3 6 1D, during the ,eriod of 34496344A !igure = < 6 1D, 1ro$th 7ate in the ,eriod of 34496344A !igure = > 6 Asean Thermoplastics Consumption by Type !igure = ? 6 The Competitors in the !ield of ,roducing ,+C !ilms !igure > 3 6 7ang Dong ,lastic CompanyBs 5rgani%ational Chart !igure > < 6 ,rocess of ,roducing ,+C !ilms !igure > = 6 ,rocess of ,roducing ,+C Leathers !igure > > 6 ,rocess of ,roducing #heets for 7oofing and ,+C0 ,E Boards !igure > ? 6 ,rocess of ,roducing ,et Bottles !igure > @ 6 Current ,roduct #tructure of 7ang Dong ,lastic Company !igure > 8 6 #ales 7e-enue !igure > A 6 *et 2ncome '344>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 = ? 8 A 4 3< 3= 3A 3A <3 =< =@ =4 >9 >3 >3 >> >? >@ >@ >A ?>

-i

L$ t of Table

Table < 3 C 1eneric #trategies Table < < C ,roduct D Mar&et D Distincti-e Competence 6 Choice and 1eneric Competiti-e #trategy Table < = C Alternati-e Directions for De-elopment Table = 3 C The Economic 1ro$th 7ates ':( Table = < C 3448 Asean ,er Capita Thermoplastics Consumption Table = = C ,lastic ,roduct #tructure Compared $ith Thailand and Malaysia Table > 3 C Labor !orce of 7ang Dong ,lastic Company Table > < C ,rice List of ,+C !ilms ,roducts According to Methods of ,ayment Table > = C 7ate bet$een #ales 7e-enues and Ad-ertising Costs Table > > C !ixed Assets Turno-er Table > ? C Total Assets Turno-er Table ? 3 C Direction for 7ang Dong ,lastic CompanyBs #trategy De-elopment

3>

3> 3? <9 <3 <= =A >8 >A >4 ?9 ?>

-ii

C'APTER (
(
()(

INTRODUCTION
Ba*+%#o&n,

2n the past <9 years and in the follo$ing years0 together $ith the expeditious de-elopment of scientific and technical areas such electronic0 communication0 biotechnology ad-ance in the $orld0 the plastics ha-e also had outstanding technological progress As plastic products in these days are ser-ing not only for family life acti-ities but in all economic sectors0 through the experience of de-eloping countries it is pro-en that if the gro$th ration of the national economy is 3:0 the plastic industry $ill de-elop accordingly from <: to =: 2n the next 39 years0 according to a forecast of economic experts0 our countryEs economy can gro$ stable at a rate of 8:6A: or more Therefore0 the annual gro$th rate of the plastic industry $ill also be in the range of <9:6<?: consequently The center of the de-elopment of the plastic industry as $ell as the center of the plastic industry is no$ concentrated in .o Chi Minh City $ith producti-ity of o-er 89: output of the country $ith plastic products of -arious &ind This situation leads to the benefits for consumers and the profit reduction for producers 2n addition0 the plastic products ser-e mainly for consuming household utensils at the rate of about @?: of the total output ,lastic products for other economic areas are not much0 remar&ably are the pac&aging products co-ering <9: of the total output0 plastic product or electric and electric industry and for other production industries are -ery little The plastic industry of +ietnam is on the threshold of a ne$ and highly promising but also of the challenging era of de-elopment +ietnam ,lastics industry has gained such a high de-elopment .o$e-er0 due to the lo$ start0 the per capita of < A &g is still not comparable $ith that of 3996<99 &g per annum in other de-eloped countries *ot only the per capita is too lo$ but product structure accounts for the lo$ le-el of +ietnam ,lastic industry in comparison $ith other countries Moreo-er0 most of the manufacturers are of small and medium si%e and the number of big6si%ed manufacturers are -ery fe$ This situation results from the lac& of the management at the macro le-el 2t is clear that the +ietnam ,lastic 2ndustry needs a de-elopment strategy in the long run This problem $ill be illustrated more clearly through the case of 7ang Dong ,lastic Company 7ang Dong ,lastic Company has faced $ith -arious difficulties especially the lac& of the -ision and the limitation of information about foreign mar&et and competitors for strategic management in the long term ()P#oble. tate.ent

Based on the examination and analysis the external and internal en-ironment0 the study $ill formulate the de-elopment strategy for the 7ang Dong ,lastic Company in the long term ()/ Ob0e*t$1e

The study is an attempt to establish the de-elopment strategy for the 7ang Dong ,lastic Company The follo$ing are the specific ob;ecti-es of the study: To re-ie$ literature dealing $ith the strategic management process0 especially the process 3

of strategy formulation To identify strengths and $ea&nesses as $ell as opportunities and threats that the 7ang Dong ,lastic Company has been faced $ith To assess the current situation of the company to de-elop its competiti-e profile To formulate the de-elopment strategy for the 7ang Dong ,lastic Company in the long term ()2 S*o"e an, l$.$tat$on of t!e t&,3

The study is about the 7ang Dong ,lastic Company 2t aims at the formulation of the de-elopment strategy for the company in the long term The depth of the study depends partly on the a-ailability of the data of +ietnamEs economic situation and plastic industry in general0 especially of 7ang Dong Company 2t depends on the 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 $ith the literature re-ie$ $hich concerns the strategic management process0 particularly the process of strategy formulation 2t refers to the concepts and principles of the ,orter Model to analy%e the competiti-e en-ironment of the industry Data for the study are collected from < main sources: ,rimary data: 2nter-ie$s $ith by persons of +2*A,LA#T and the 7ang Dong ,lastic Company as $ell as other plastic companies #econdary data: Annual reports and other rele-ant data about the 7ang Dong ,lastic Company 7ele-ant data about the plastic industry and the +ietnam economy $ill be collected from Ministry of 2ndustry0 +2*A,LA#T0 the *ational #tatistics 5ffice0 .o Chi Minh City #tatistics 5ffice0 .o Chi Minh Department of 2ndustry and Commerce0 from ne$spapers0 maga%ines and from 2nternet and media as $ell The frame$or& of the study can be illustrated by !igure 3 3

<

,75BLEM

L2TE7AT/7E 7E+2E" #T7ATE1F ,75CE##

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

#canning external en-ironment

Analy%ing competiti-e

#canning internal en-ironment

E-aluating current performance results

5pportunities Threats

#trengths "ea&nesses

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

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

'i)*+e 1,1 - '+a.e/o+0 of t1e St*23

()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 the study Chapter < summari%es the literature re-ie$ and contains the fundamental ideas on strategy0 strategic management0 strategy formulation process as $ell as the ,orter Model for analy%ing industry Chapter = pro-ides and analysis of external factors to identify the companyEs strategic position as $ell as strategic orientations and in-estment opportunities for the +ietnam plastic industry in the coming years Based on the ,orter model for examining the plastic industry en-ironment0 the opportunities and threats for the 7ang Dong plastic company is found out Chapter > includes the current analysis of the 7ang Dong ,lastic Company in terms of organi%ational structure0 production0 sales0 mar&eting and finance The goal is to identify strengths 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 proposed strategy

>

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 companyBs success: the industry $here it is based0 the country 'or countries( $here it is located0 and its o$n resources0 capabilities and strategic 2t is illustrated in !igure < 3: 2ndustry context *ational context Company resources, capabilities & strategies

Company performance

'i)*+e 2,2 - T1e Dete+.i4a4ts of Co.5a43 &e+fo+.a46e

Source: Hill / Jones 1995

Before mentioning the strategic management process in greater detail0 $e need to define: G"hat is strategyHI -)Def$n$t$on of t#ate%3

7eflecting the military roots of strategy0 The American .eritage Dictionary defines strategy as Gthe science and art of military command as applied to the o-erall planning and conduct of large 6 scale combat operationsI 'Boston: .oughton C Mifflin0 344<( The planning theme remains an important component of most management definitions of strategy Chandler defined strategy as Gthe determination of the basic long6term goals and ob;ecti-es of an enterprise0 and the adoption of courses of action and the allocation of resources necessary for carrying out these goalsI 'Cambridge0 Mass : M2T ,ress0 34@<( The main idea in ChandlerBs definition is that strategy in-ol-es a rational planning process The organi%ation is depicted as choosing its goals0 identifying the courses of action 'or strategies( that best enable it to fulfill its goals0 and allocating resources accordingly )uinn of has defined strategy as Gthe pattern or plan that integrates an organi%ationBs ma;or goals0 policies0 and action sequences into a cohesi-e $hole '.ill D Jones 344?( .o$e-er0 planning6based definitions of strategy ha-e been strongly critici%ed A ne$ approach based on .enry Mint%bergBs definition of strategy as Ga pattern in a stream of decisions or actionsI the pattern being a product of $hate-er intended planned strategies are actually reali%ed and of any emergent 'unplanned( strategies 'Management #cience0 <>6 348A(

-)/

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 The fi-e components are '3( selection of the corporate mission and ma;or corporate goalsK '<( analysis of the organi%ationBs external competiti-e en-ironment to identify opportunities and threatsK '=( analysis of the organi%ationBs internal operating en-ironment to identify the organi%ationBs strengths and $ea&nessesK '>( the selection of strategies that build on the organi%ationBs strengths and correct its $ea&nesses in order to ta&e ad-antage of external opportunities and counter external threatsK and '?( strategy implementation The tas& of analy%ing the organi%ationBs external and internal en-ironment and then selecting an appropriate strategy is normally referred to as strategy formulation 2n contrast0 strategy implementation typically in-ol-es designing appropriate organi%ational structures and control systems to put the organi%ationBs 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 interrelated acti-ities: '3( E-aluation of: the corporationBs current performance results in terms of return on in-estment0 profitability0 etc0 and the corporationBs current mission0 ob;ecti-es0 strategies0 and policies

'<( E-aluation and e-aluation of the corporationBs strategic managers C board of directors and top management '=( #canning of the external en-ironment to locate strategic opportunities and threats '>( #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 D .unger0 34AA( The abo-e strategy formulation process can be di-ided into sub6stages0 as illustrated in figure < <: The first is the situation analysis Beginning $ith an e-aluation of current performance and ending $ith the re-ie$ and possible re-ision of mission and ob;ecti-es The second is the process of generation0 e-aluation0 and selection of the best alternati-e strategy 2n order to build up an appropriate competiti-e strategy0 it is necessary for the competiti-e en-ironment analysis 6 an industry structure analysis @

#can external en-ironment

5pportunities Threats

E-aluate current performance results

Examine and e-aluate the current Mission 5b;ecti-e #trategies ,olicies

E-aluate strategic managers

Analy%e the competiti-e en-ironment Entry Buyers #uppliers #ubstitutes Competitors #can internal en-ironment

Analy%e strategic factors in light of current situation

De-elop: Mission 5b;ecti-es

#trengths "ea&nesses

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

1E*E7AT25*0 E+AL/AT25*0 A*D #ELECT25* 5! T.E BE#T #T7ATE1F 'i)*+e 2,2 - St+ate)3 'o+.*latio4 &+o6ess
(Source: Wheelen / Hunger, 1988)

-)2

St#&*t&#al 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 it operates0 or be able to reshape the industry en-ironment to its ad-antage through its chosen strategy Companies typically fail $hen their strategy no longer fits the en-ironment in $hich they operate0 as illustrated in !igure < = Reshape environme nt by choice of strategy Creates a ne$ en-onment $here there is a fit bet$een strategy and en-ironment

Competiti ve success requires

Fit with environme nt

'i)*+e 2,! - Re7*i+e.e4ts fo+ Co.5etitive S*66ess A formal strategic industry analysis can be used to identify en-ironmental opportunities and threats 5pportunities arise $hen en-ironmental trends create the potential for a company to achie-e a competiti-e ad-antage Threats arise $hen en-ironmental trends endanger the integrity and profitability of a companyBs business ,orterBs frame$or&0 &no$n as the fi-e forces model helps managers in this analysis This model focuses on fi-e forces that shape competition $ithin an industry: '3( the ris& of ne$ entry by potential competitors0 '<( the degree of ri-alry among established companies $ithin an industry0 '=( the bargaining po$er of buyers0 '>( the bargaining po$er of suppliers0 and '?( the closeness of substitutes to an industryBs products0 as sho$n in !igure < > The tas& facing strategic managers is to determine $hich of these forces are of greatest importance to the organi%ation and $hich can be influenced by the strategic decisions of management and to recogni%e opportunities and threats as they arise and to formulate appropriate strategic responses as $ell ,orter argues that Gcompetition in an industry is rooted in its underlying economics0 and competiti-e forces exist that go $ell beyond the established combatants in a particular industryI ',orter0 34A9( .e further suggests that to compete effecti-ely a company should stri-e to find a position $here it is best able to defend itself against these competiti-e forces or can influence them its fa-or The tas& of the strategist is therefore to determine $hich of these forces are of greatest importance to the organi%ation and $hich can be influenced by the A

strategic decisions of management Each of these forces is no$ considered in greater detail Risk of entry by potential competitors

argaining power of suppliers

Rivalry among Established Firms

argaining power of buyers

Threat of substitute products

'i)*+e 2,% - T1e five 'o+6es Mo2el Potent$al *o."et$to# The strength of competiti-e force of potential ri-als is largely a function of the height of barriers 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 ,orter lists 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

2n the +ietnam plastic industry0 the ma;ority of the plastic companies is in small C scale production All present0 the +ietnam plastic industry is still characteri%ed $ith lo$ technology and obsolete equipment and the ma;ority of plastic products produced in +ietnam is household plastic $ares Brea&ing into the field of producing plastic products does not require much capital Entry barriers for the +ietnam plastic industry are lo$ R$1al#3 a.on% E tabl$ !e, Co."an$e The degree of ri-alry is li&ely to be based on the follo$ing: 2ndustry gro$th !ixed 'or storage( costs D -alue added 2ntermittent o-ercapacity ,roduct differences Brand identity #$itching costs Di-ersity of competitors Exit barriers

The extent of ri-alry among established companies $ithin an industry is largely a function of three factors: '3( industry competiti-e structure0 '<( demand conditions0 and '=( the height of exit barriers in the industry There are many producers in the +ietnam plastic industry at present Also there is the o-ersupply of many plastic products such as household plastic $ares0 ,, bags0 ,ET bottles0 etc Consequently the competition bet$een competitors in the plastic industry becomes more and more aggressi-e T!e Ba#%a$n$n% Po5e# of B&3e# Buyers can be -ie$ed as a competiti-e threat $hen they force do$n prices or $hen they demand higher quality and better ser-ices '$hich increase operating costs( "hether buyers are able to ma&e demands on a company depends on their po$er relati-e to that of the company According to ,orter0 buyers are most po$erful in the follo$ing circumstances: Buyers are fe$ in number and large and the supply industry is composed of many small companies Buyers purchase in large quantities The supply industry depends on the buyers for a large percentage of its total orders The buyers can s$itch orders bet$een supply companies at a lo$ cost0 thereby playing off companies against each other to force do$n prices 39

2t is economically feasible for the buyers to purchase the input from se-eral companies at once 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 at present They compete strongly against each other 2n addition0 the main product of the +ietnam plastic industry is household plastic $ares As a result0 there is a -ariety of plastic products in the mar&et and the customers ha-e many options in choosing plastic products The buyers are therefore quite po$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 company must pay for input or reduce the quality of goods supplied0 thereby depressing the companyBs profitability As $ith buyers0 the ability of suppliers to ma&e demands on a company depends on their po$er relati-e to that of the company According ,orter0 suppliers are most po$erful in the follo$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 suppliersB product is an important component to the buyerBs business The suppliersB product is differentiated #uppliers can integrate for$ard At present0 the +ietnam plastic industry depends completely on source of ra$ materials from abroad 2t is therefore the supplier po$er is so strong T!e T!#eat of S&b t$t&te P#o,&*t The existence of close substitute presents a strong competiti-e threat0 limiting the price a company 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 < ?

33

,5TE*T2AL E*T7A*T# Threat of Entrants Lo$

.igh #uppliers Bargaining ,o$er

.igh C!"#ET$T$%E R$%&'R( A17E##2+E Bargaining ,o$er Buyers

Lo$

Threat of #ubstitutes

#/B#T2T/E# 'i)*+e 2, - T1e &o+te+ .o2el a55lie2 fo+ t1e Viet4a. 5lasti6 i42*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$n in !igure < 8 The %ene#$* t#ate%3 to be pursued0 i e the basis on $hich the organi%ation $ill compete or sustain excellence The alte#nat$1e ,$#e*t$on in $hich the organi%ation may choose to de-elop The alte#nat$1e .et!o, by $hich any direction of de-elopment might be achie-ed "hereas decisions on generic strategy0 direction0 and method are not independent of each other0 they do benefit from separate discussion !or example0 an organi%ation pursuing cost leadership may choose to achie-e this $hilst pursuing a strategy of mar&et de-elopment .o$e-er0 this still lea-es a further choice as to $hether entry to ne$ mar&ets is best achie-ed by acquisition of companies already operating in those mar&ets0 through the companyBs o$n efforts or ;ointly $ith other organi%ations -)4)( Gene#$* t#ate%$e

According to ,orter0 the competiti-e strategies $ill be designed based on the choice from the 3<

three basic competiti-e approaches: cost leadership0 differentiation0 and focus ',orter0 34A?( These strategies are sho$n in Table < 3 A cost leadership strategy0 $here Ga firm sets out to become the lo$6cost producer in its industryL a lo$6cost producer must find and exploit all sources of cost ad-antage Lo$6cost producers typically sell a standard product and place considerable emphasis on reaping scale or absolute cost ad-antage from all sourcesL 2f a firm can achie-e and sustain o-erall cost leadership0 then it $ill be an abo-e6a-erage performer in its industry pro-ided it can command prices at or near the industry a-erageI ',orter0 34A?(

DE+EL5,ME*T #T7ATE12E# "hat basic H "hich direction .o$H

/E)ER$C ,TR&TE/$E, Cost leadership Differentiation !ocus

&'TER)&T$%E *$RECT$!) "ithdra$al Consolidation Mar&et pennetration ,roduct de-elopment Mar&et de-elopment Di-ersification

&'TER)&T$%E "ET+!*, $nternal development &cquisition -oint development . alliances

'i)*+e 2,$8 Develo5.e4t st+ate)ies

(Source: Johnson / Scholes, 1993)

A differentiation strategy0 $hich ,orter defines as see&ing Gto be unique in its industry along some dimensions that are $idely -alued by buyersL 2t is re$arded for its uniqueness $ith a premium priceL A firm that can achie-e and sustain differentiation $ill be an abo-e C a-erage performance in its industry if its price premium exceeds the extra costs incurred in being uniqueL The logic of the differentiation strategy requires that a firm choose attributes in $hich to differentiate itself that are different from its ri-alsI ',orter0 34A?( These t$o generic $ays can be combined $ith the mar&et scope in $hich the firm tries to achie-e competiti-e ad-antage This leads to the focus strategy0 according to ,orter0 $hich is based on Gthe choice of a narro$ competiti-e scope $ithin an industry The focuser selects a segment or group of segments in the industry and tailors its strategy to ser-ing them to the 3=

exclusion of othersI ',orter0 34A?( There are t$o -ariants here0 Gin cost focus a firm see&s a cost ad-antage in its target segment0 $hile in differentiation focus a firm see&s differentiation in its target segmentI ',orter0 34A?( Table 2,1 - Ge4e+i6 st+ate)ies C5M,ET2T2+E AD+A*TA1E

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

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 on product0 mar&et0 and distincti-e competences C choices that reinforce each other Table < < summari%es the choice appropriate for each generic strategy Table 2,2 - &+o2*6t 9 Ma+0et 9 Disti46tive 6o.5ete46e - C1oi6e a42 )e4e+i6 6o.5etitive st+ate)3 Cost leadership Differentiation .igh ,roduct differentiation Lo$ 'principally by price( 'principally uniqueness( .igh Mar&et segmentation Lo$ 'mass mar&et( !ocus Lo$ to .igh by 'price or uniqueness(

Lo$

'many mar&eting 'one or fe$ segment( segments( and Any &ind distincti-e competence #ales and mar&eting
(Source: Hill / Jones, 1995)

Distincti-e competence

Manufacturing and 7esearch materials management De-elopment

of

3>

-)4)-

St#ate%$* ,e1elo".ent ,$#e*t$on

Based on sets of GproductDmar&etI choice0 there are different directions for companiesB strategy de-elopment These directions are sho$n in Table < = Table 2,! - Alte+4ative 2i+e6tio4s fo+ 2evelo5.e4t ,resent "ithdra$al MA7MET ,resent Consolidation Mar&et penetration ,roduct de-elopment *e$

*e$

Mar&et de-elopment

Di-ersification

(Source: Ansoff, 1987)

3?

C'APTER / / E8TERNAL ENVIRONMENT ANALYSIS

This chapter presents an analysis about the macro en-ironment in $hich 7ang Dong Company operates as $ell as the industry en-ironment to identify opportunities and threats for 7ang Dong company /)( /)()( Ma*#o9en1$#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 the en-ironment '.illDJones 344?( After decades of $ar and political uphea-al0 the go-ernment and people of +ietnam ha-e settled do$n to the important tas& of promoting economic gro$th in the country To this end0 the once diplomatically isolated socialist country has embar&ed on an ambitious Gdoi moi G 'economic reno-ation( policy 7ecogni%ing that rapid economic de-elopment required foreign capital and technology0 the +ietnamese go-ernment opened its doors to o-erseas in-estors in 34A8 2mplementing the G reno-ation and open door policyI0 +ietnam has expanded and consolidated its political and economic relations $ith many countries in the $orld Along $ith this0 the lifting up of /# embargo in 344> and +ietnam 6 a member of A#EA* in 344? ha-e impro-ed the restoration and de-elopment the +ietnamese economy to be more fa-orable This also facilitates the +ietnamBs international trade0 encourages foreign and domestic in-estors as $ell as creates chances and challenges for domestic businesses The liberali%ation of +ietnamBs economy has pro-ided numerous business opportunities for entrepreneurs and multinationals to expand their operations and see& ne$ mar&ets To support the economic liberali%ation and encourage the pri-ate sector0 the +ietnamese go-ernment has promulgated a series of economic la$s such as La$ on !oreign 2n-estment0 Company La$0 La$ on ,ri-ate Business0 etc !oreign and domestic in-estors must be a$are that ne$ la$s and decrees ear issued frequently by the +ietnamese go-ernment as part of comprehensi-e program to introduce la$s and regulations in a number of areas Existing la$s and regulations are also sub;ect to amendment or re-ie$ This has formed a quite fa-orable en-ironment for doing business 2n-estment in the plastic industry has been attracti-e to foreign and local businessmen due to the follo$ing reasons: the mar&et for -arious plastic products in +ietnam is booming rapidly0 the profit margin in this industry is high0 the brea&6e-en time is short0 and designs of product are easily adapted 2n addition0 the legal system is no$ much refined0 procedures are simplified and a de-elopment strategy for the +ietnam ,lastic 2ndustry to the year of <99? has been appro-ed by the Ministry of 2ndustry in the middle of 344? 2t is readily seen that +ietnamese production and trading businesses ha-e made considerable contribution to the fast changes of the local plastic industry .o$e-er0 one can see a basic 3@

shortcoming of this industry0 namely the de-elopment $ithout a master plan This situation has led to ample in-estment in the production of plastic home appliances0 and consequently the production capacity to this regard has outplaced the demand !acing such a situation0 many companies has had to play tric&y games to$ard the consumers by producing lo$er quality products to cut do$n the production costs and to raise their competition 7ang Dong ,lastic company has also been faced $ith the similar situation Therefore0 on the legal aspect0 one of the problems for the +ietnam ,lastic 2ndustry no$ is issuing documents for standardi%ing and controlling the quality of plastic products As Mr ,ham 1ia Duoc0 1eneral Director of +ietnam ,lastics Corporation and president of +ietnam ,lastic Manufactures Association0 said at the ,ress Conference on +ietnam ,lastics 2ndustry /pdate N +ietnam ,lastic !airB4@ G #tandardi%ation of the local plastic production is a ma;or problem that $e $ill ha-e to o-ercome in order to increase our output and impro-e our products The +ietnam ,lastic Manufacturers Association $ill ha-e to issue rules banning all production of plastic that do not meet international standardBB Despite rapid de-elopment0 the local plastic industry is still $ea& in 7 N D field #e-eral companies are hea-ily dependent on the designs of other companiesB products0 including foreign ones 2n the mean$hile0 the protection of industriesB patents has not been ta&en seriously on the part of the concerned state agency ,reparations0 therefore0 must be made no$0 if it is not to lag behind /)()E*ono.$* %#o5t!

The rate of gro$th in the economy also has a direct affect on the le-el of opportunities and threats that companies face After 39 years of reno-ation0 +ietnam has got out of its socioeconomic crisis +ietnamBs economy has continually0 rapidly and steadily gro$n "ith the annual gro$th rate of A:6A ?:0 as presented in !igure = 30 1D, has increased from /#D 3< A billion in 3449 to /#D <> @ billion in 344A Especially0 in 344@ despite great losses caused by storms and floods0 +ietnamBs 1D, increased 4 => o-er 344? 'see !igure = <( 2n 344A0 1D, gro$th rate $as only @: compared to 4 ?: in 3448 The slo$ing do$n of the economic gro$th may be resulted from some of the main reasons: !D2 in 344A $as only about /#D 30899 million lo$er than !D2 in 3448 '/#D < 8 billion( Export remained unchanged 2n 344A export $as about /#D 4 = billion The competiti-eness of the goods $as $ea& due to the quality of the goods and the de-aluation of the currency 2mport also decreased '=8: increase in 344@0 3 3: in 34480 and unchange in 344A( There $as more unemployment There $as o-er A ? million people unemployed 'about 3 < million in the city and 8 = million in the urban areas( '#ource: Ministry of ,lanning and 2n-estment6 De-elopment #trategic 2nstitute( 2n spite of Asian crisis0 1D, is expected to gro$ ?6@: up to the year of <999 !rom the figure = 30 these figures pro-e that +ietnamBs economy is still on a pretty stable de-elopment According to economic experts at the 8th Asia ,lastics !orum in *e$ Delhi '2ndia( on 8 th March0 34480 the +ietnamese economy is still expected to gro$ in the year ahead 2t is 38

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

GD& 2*+i4) t1e 5e+io2 of 1::;-1::( 30 25 20 15 10 5 0

Billio4 USD 21.2 23.2 24.6

12.8

13.6

14.8

16

17.7

19.4

1990 1991 1992 1993 1994 1995 1996 1997 1998 #ea+

'i)*+e !,1 GD& 2*+i4) t1e 5e+io2 of 1::;-1::(

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

GD& )+o/t1 +ate i4 t1e 5e+io2 of 1::11::( 10 8 <= > 6 4 2 0

1991 1992 1993 1994 1995 1996 1997 1998 6 8.6 8.1 8.8 9 9.34 9.5

#ea+

'i)*+e !,2 GD& )+o/t1 +ate i4 t1e 5e+io2 of 1::;-1::(

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

3A

/)()/

Inflat$on #ate

2nflation can destabili%e the economy0 producing slo$er economic gro$th higher interest rates and -olatile currency mo-ements ' .ill D Jones 344?( 2nflation has gone do$n from high rate of @A : in the early 3449Bs to ?9: in 344@0 a significant decline from 3< ?: in 344? and >: in 344A This inflation is the lo$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 ? <: in 344= is still at high degree 2t $as 3<: in 344> and has increased a little in 344?0 around 3< ?: and then decreased to >: in 344A This sho$ed that though gaining high gro$th rate0 actually the +ietnamese economy has not been stable !or fear of declining li-ing standard for the -ast ma;ority of the rural population leading to social instability0 the go-ernment has made a priority to &eep inflation under 39: annually0 though this $as achie-ed in an economy $hich $as gro$ing as fast as 4 ?: a year and $here the instruments to maintain inflation are limited The &ey characteristic of inflation is that it ma&es the future less predictable 2n an inflationary en-ironment0 it may be impossible to predict $ith any accuracy the real -alue of returns that can be earned from business #uch uncertainty ma&es companies less $illing to in-est ' .ill D Jones0 344?( .igh inflation therefore is a threat to business in general0 to 7ang Dong plastic company in a particular0 in their plans of in-estment Aiming to integrate into the de-elopment trend of $orld and +ietnamese plastic industries0 7ang Dong ,lastic company has already built up its in-estment plan of 3?6<9 million /#D $orth As a result0 it needs significant capital 2n the high inflationary en-ironment0 it $ill be difficult for the company to in-est /)()2 Inte#e t #ate

The le-el of interest rates can determine the le-el of demand for a companyBs products 2nterest rates are important $hene-er consumers routinely borro$ money to finance their purchase of these products '.ill D Jones0 344?( 2n addition0 currency exchange rates define the -alue of different national currencies against each other Mo-ement in currency exchange rates has a direct impact on the competiti-eness of a companyBs products in the global mar&etplace '.ill D Jones0 344?( 2n recent years interest rates are relati-ely stable 2n the early of 344@0 the +ietnamese Central Ban& had issued the decision of decreasing interest rates The current rates are 3 <: per month for short6term loans0 9 4? per month for long6term loans and ? ?6@ ?:per year for loans in /#D The decreased interest rates aim to bring more fa-orable en-ironment for companies0 especially companies operating in the plastic industry $hich often ha-e large loans from ban&s to run their businesses that often require large capital /)C&##ent $t&at$on an, t#en, of $n1e t.ent of Pla t$* In,& t#$e $n A $an nat$on )

The economic gro$th rates for the -arious A#EA* countries compared $ith the global0 industriali%ed countries0 1ermany and Japan are displayed in Table = 3 !orecasted economic gro$th for 344@ is most probably o-erstated0 ho$e-er the A#EA* rates of gro$th are <6? times the rate of gro$th compared to the global a-erage The cyclic nature of economic gro$th is illustrated by the 1erman bind Japanese data Most probably the 344@ forecasts for A#EA* countries are o-erstated as there has been a slo$do$n reflecting the do$nturn 2n the electronics industry $orld$ide *e-ertheless0 the gro$th in A#EA* is expected to be maintained until the end of the millennium and beyond A#EA* is one of the 34

main engines of gro$th globally together $ith China Table !,! ? T1e E6o4o.i6 G+o/t1 Rates <=> Co&nt#3 2ndonesia Malaysia ,hilippines #ingapore Thailand +ietnam 2ndustriali%ed countries "orld 1ermany Japan
Source: $he Sing!%ore!n &ountr' (e%ort on the 7th Asi!n Pl!stic )oru", 1997

(::/ 8= A= <3 39 3 A= A3 94 < 63 < 69 <

(::2 8? 4< >> 39 3 A8 AA <@ <8 << 9?

(::4 8@ 4= >A A4 A@ 4 <3 <@ <3 9?

(::6 8A A? ?? A A= 4 => <> <> 34 <?

(::; 88 A ?8 8? A 4? <@ <@ <? <?

Thermoplastics consumption in A#EA* by country is sho$n in !igure = = Thailand is the largest consumer follo$ed0 in ran& order0 by 2ndonesia '3 =MT(0 Malaysia '499MT(0 ,hilippines '=@?MT( and #ingapore '=?9MT( +ietnam consumes6the least amount of plastics in A#EA* Consumption of plastics by type is sho$n in !igure = > As $ith the $orld pattern

Asea4 T 1e+.o5lasti6s Co4s*.5tio4 b3 Co*4t+3

T ailand 33% Vietnam 4% Malays ia 20%

Singapore 7%

T e! " ilippines 8%

Indones ia 28%

'i)*+e !,!8 Asea4 T1e+.o5lasti6s Co4s*.5tio4 b3 Co*4t+3

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

<9

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

ASEAN T1e+.o5lasti6s Co4s*.5tio4 b3 T35e

"V$ 19% %&S'S%( )t er 4% 3% #T" 3% "# 35% "S 9% #"S 2%

"" 25%

'i)*+e !,%8 Asea4 T1e+.o5lasti6s Co4s*.5tio4 b3 T35e

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

There ha-e been considerable in-estments in $orld6scale crac&ers and polyolefin plants in the region 2n 344? ne$ facilities $ere completed in 2ndonesia and Malaysia $hich has brought the region into a net export to a surplus position of plastic resins During 344@ the supply has exceeded demand ma&ing the region a net exporter for the first time Table = < gi-es the plastics consumption per capita for the A#EA* countries The data indicates that there is still much gro$th potential for thermoplastics consumption in most A#EA* countries except for #ingapore The latter is a mature mar&et $ith per capita consumption comparable to the fully industriali%ed nations Table !,% ? 1::@ Asea4 &e+ Ca5ita T1e+.o5lasti6s Co4s*.5tio4 C5/*T7F 2ndonesia Malaysia ,hilippines #ingapore Thailand +ietnam A#EA* A-erage ,E7 CA,2TA ,LA#T2C C5*#/M,T25* 'M1( @8 >> ? @ 333 <? ? <A 33 3
Source: &ountr' (e%ort*Sing!%ore (1997)*7th Asi! Pl!stics )oru"

According to the country report0 the #ingapore ,lastics industry0 $hich for this dissertation is <3

defined as resins manufacturing0 compounding and fabricating sectors0 continued to expand during 3448 ,lans for the future of the resins manufacturing sector0 $hich are currently being implemented0 $ill ensure gro$th into the next century The compounding sector has also expanded rapidly and this gro$th is also expected to continue 2n the country report on the Malaysian ,lastics industry0 after experiencing a strong gro$th a-eraging 3?6<?: a year o-er the last @ years0 the plastics industry maintained a moderate gro$th of about 39: in 3448 The moderation in the gro$th of the plastic industry is mainly attributed to a slump in the electronics industry $hich has affected the demand for plastic parts and components 1ro$th in the export sector has also slo$ed do$n due to &eener competition from other lo$ cost emerging countries ,lastic products especially household items and stationaries are flooding into the Malaysian mar&et from the other lo$er cost Asean countries namely 2ndonesia0 Thailand and +ietnam The Malaysian plastics industry is expected to continue its sustainable gro$th in the next fe$ years due to the rapid gro$th of the Malaysian economy0 a pic&6up in the electrical and electronics sector0 stronger /# economy and higher demand from the custom in;ection moulding and automoti-e sub6sectors $ithin the country The industry is expected to transform from a consumer6based and export oriented industry0 characteri%ed by high usage of engineering thermoplastics0 use of high technology and sophisticated machines and high s&illed manpo$er 1ro$th rate 'compounded a-erage annual( until the end of millennium for the plastics industry globally are expected to be in the range >6@: per annum $hilst in A#EA* the gro$th rates are expected to be 3<63?: per annum /)/ C&##ent $t&at$on of V$etna. "la t$* $n,& t#3

+ietnam plastics industry has not yet had the capability to manufacture plastics materials0 equipment and machinery as this is still a processing industry thus all are mainly imported 2n order to encourage the fast de-elopment of the plastics industry the 1o-ernment applied a fa-orable tax incenti-e for the import of plastics materials0 equipment and machinery The year of 34?4 $as a milestone for +ietnam plastics industry $ith the founding of the first plastics plant0 the T.2E/ *2E* T2E* ,.5*1 plastics company and $as continuously de-eloped up till 348? The output then reached about ?90999 tonnes per annum $ith a per capita of 9 > &g !ollo$ing $as a lasting recession0 the plastics industry started to de-elop again in 34AA .o$e-er0 till the end of 34A40 the capacity reached the same le-el as of 348? and then it began to be a booming sector in line $ith the highly de-eloped plastics industry in many countries #ince 34490 $ith the ODoi MoiO policy0 +ietnam plastics industry has de-eloped strongly $ith an annual gro$th of <?: 6=9: 2n 344>0 the capacity reached <990999 tonnes $ith a per capita of < A &g 2n 344?0 based on the uncompleted statistic0 +ietnam plastics industry achie-ed around <?90999 tonnes '= =&g per capita( Although +ietnam plastics industry has gained such a high de-elopment0 ho$e-er0 due to our <<

lo$ start0 the per capita of < A &g is still not comparable $ith that of 399 6<99 &g per annum in other de-eloped countries such as /#0 Japan0 1erman0 and in de-eloping countries li&e Tai$an 6 89&g0 #outh Morea 6 =@ &g0 Malaysia 6 <A &g0 Thailand 6 3@ &g and 2ndonesia 6 A &g *ot only the per capita is too lo$ but product structure spea&s of the lo$ le-el of +ietnam plastics industry in comparison $ith other countries The ma;or quantity of plastics products is the household and consumer product 'about @?:(0 the high technology plastics products ser-ing other industries such as electrical 0 electronics and -ehicular industries are not many Append is the comparison $ith Thailand and Malaysia: Table !,! ? &lasti6 5+o2*6t st+*6t*+e 6o.5a+e2 /it1 T1aila42 a42 Mala3sia De *#$"t$on V$etna. <=> .ousehold ,roducts ,ac&aging 2ndustry Electric and Electronic 2ndustries Construction materials 2ndustry Automobile 2ndustry Agricultural 2ndustry 5ther 2ndustries @? <9 *ot many A *ot many *ot many 8 399 T!a$lan, <=> 3? >= 4 39 = > 3@ 399 Mala3 $a <=> 39 >9 <9 39 ? ? 39 399

Source: ietn!" countr'+s re%ort !t the 7th Asi! Pl!stics )oru" in ,e- .elhi (/n0i!) on 7th 1!rch, 1997

At present0 the distribution of plastics production in +ietnam is not equally located $ith A9: in .o Chi Minh City0 3?: in the northern pro-inces and ?: in the central region Most of these manufacturers are of small and medium si%e and the number of big6si%ed manufacturers are -ery fe$ 2n summary0 the features of +ietnamBs plastic industry can be listed as follo$s : () V$etna. !a not been able to .an&fa*t&#e "la t$* .a*!$ne#3 fo# "la t$* $n,& t#3) .ate#$al ? e@&$".ent an,

/p to no$0 +ietnam still ha-e to rely 399: on the import of materials0 chemicals0 plastic processing machinery and equipment $hich are tax exempted !or plastic products $hich are on sub contract and manufactured for export are granted tax exemption <=

-) V$etna.A "la t$* $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 $ell as the center of the plastic industry is no$ concentrated in .o Chi Minh City $ith producti-ity of A9: output of the country $ith plastic products $ith -arious &inds and the appliance of ne$ technology0 $hilst the *orth 3?: and the Central ?: 2t is necessary to ad;ust this ratio by policies of orientation and in-estment incenti-e so that by <99?0 the #outh $ill obtain @9: of the total output0 the *orth =9: and the Central 39: /) V$etna.A "la t$* "#o*e $n% .a*!$ne#3 $ ob olete) +ietnam has no$ only concentrated on processing goods $ith <96year6old to =96year6old technological processes li&e extension0 in;ection and calendering Consequently0 it is difficult for +ietnamese plastic products to be exported and compete $ith foreign products 2) Mo t of "la t$* .an&fa*t&#e# a#e of .all an, .e,$&. $7e) +ietnamBs plastic industry is characteri%ed by small and medium6scale production Therefore the capacity to in-est and de-elop in large scale to high quality products is -ery limited The plastics products ser-e mainly for consuming household utensils at the rate of @?: of the total output ,lastics products for other economic areas are not much0 remar&ably are the pac&aging products co-ering <9: of the total output0 building materials about A: 0 plastic products for electric and electronic industry and for other production industries are -ery little !rom the analysis abo-e0 the strengths and $ea&nesses of the +ietnam plastic industry can be found as follo$s: St#en%t! +ietnam has started $ith the setting up of t$o oil6refinery %ones in the #outh This $ill be the source of production of plastics materials +ietnam has embar&ed on a pro;ect to lin& the national electricity net$or& to pro-ide better po$er supply to the $hole country 2n the coming years0 $ith the installation of ne$ thermo6electric and hydro6electric plants0 po$er supply $ill reach the most remote regions of the country0 thereby creating opportunities and challenges to plastics industry to cater the energy and communication sectors The in-estment en-ironment for the plastic industry is no$ more fa-orable and attracti-e to both domestic and foreign in-estors Legal system is no$ much refined0 procedures are simplified0 the le-el of &no$ledge of the management organi%ations and officers in charge of in-estment are no$ impro-ed +ietnam plastic industry has de-eloped at high gro$th rate 2t promises a bright prospect in the future +ietnam has potential of labor and mar&et for the de-elopment of its plastic industry <>

Wea+ne e 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 beginning stage /p to no$ +ietnam has to rely 399: on the import of ra$ materials0 chemicals0 plastic processing machinery

Through the abo-e0 it could be seen that +ietnam $ith a population of more than 89 million0 is a ne$ emerging and potential mar&et .o$e-er0 $e can not de-elop this potentiality unless $e orientated its de-elopment and $ith proper in-estments /)2 De1elo".ent of V$etna. "la t$* $n,& t#3 of -BB4

2n the next 39 years0 according to the predication of economic specialists0 +ietnam economy can gro$ stably at a rate of 8 6 A: per annum or more The plastics industry $ill de-elop accordingly at <9 6 <?: per annum 2f the gro$th rate is at <?: per annum by the year <99?0 the plastics output of our country $ill reach 3 ? million tonnes or @ folds from itEs current rate $ith a per capita output of 3@&g 'equi-alent to that of Thailand in 344=( This annual gro$th is quite modest in comparison $ith that of #outh East Asian region0 2n order to cope $ith this gro$th rate from no$ up to the year <99?0 the industry ha-e to encounter plenty of challenges due to the near saturation of household plastics products supply0 higher quality products demand and $ith -ery competiti-e mar&et competition 2n order to sustain its de-elopment0 the plastics industry ha-e to impro-e $ith in-estment in manufacturing plastic products for construction0 pac&aging and other industries 2n addition0 at this stage0 besides in-estment in increasing quantity of plastic products0 $e must de-elop manufacturing plastics materials0 semi6finished products0 moulds and dies0 plastics equipment At the +ietnam ,lastic !airB4@ in .o Chi Minh city '+ietnam( as Mr .uynh ,huc AnhC +ice ,resident of +ietnam ,lastic Manufacturers Association6to enhance the de-elopment of plastics industry0 +ietnam ,lastics Manufacturers Association together $ith +inaplast and other organi%ations ha-e a strategic plan $or&ed out to sprout +ietnam plastics industry to the year <99?0 $hich has been appro-ed by the former Ministry of Light 2ndustry0 no$ &no$n as Ministry of 2ndustry The orientations of strategy is: To increase the ratio of high quality and hi6tech plastics products to replace imported products thus to fulfill the function of being a satellite industry to strongly support other industries such as pac&aging of -ariety and high quality0 meeting the de-eloping demand of other industries li&e di-erse and high quality pac&aging0 high quality plastics construction materials0 plastics technical components for assembly of electronic and electric products0 automobiles0 motorcycles0 high6tech equipment0 etc $hich $ill gi-e rise to structural change in product lines

<?

The structure of plastic products for the year <99? is expected as follo$s: ,ac&aging Construction materials .ousehold products Electronic0 electric0 automobile0 mechanical industries 5ther products =9: <9: <9: 3?: 3?:

To increase the industryEs producti-e capacity and to step up in-estment to ensure a reasonable regional distribution and get use of labor effecti-ely The structure of plastics output of the $hole country after the year of <999 is pro;ected as follo$s: The #outh The *orth The Central @9: =9: 39:

To sustain the gro$th rate of <96<?:0 the plastic industry has to in-est in manufacturing plastic products required by other industries such as pac&aging0 construction materialsL 2t is not easy at all for the plastic industry to reach such a target $ithout the support from the go-ernment as household plastic products ha-e nearly met the mar&et demand and in-estment in manufacturing products $ith higher technology content requires primarily much more in-estment capital than $hat the industry can afford at present as $ell 2n addition0 in the current phase0 not only the +ietnam plastic industry has to ma&e further in-estment to increase the output of plastic products0 but it should in-est in de-eloping the production of plastic materials0 plastic semi6products as $ell as in ma&ing mould and equipment for the industry in order to meet the general target Apart from this0 the center of the de-elopment of the plastic industry as $ell as the plastic industry is no$ concentrated in .o Chi Minh city $ith the producti-ity of o-er 89: output of the country $ith plastic products of -arious &ind and the appliance $ith ne$ technology 2n addition0 one of the features of +ietnam ,lastic industry can be concentrating in one geographical area As a result0 the structure of plastic output of the $hole country after the year of <999 is pro;ected as abo-e due to the important position of .o Chi Minh city in the countryBs economy 2t can be said that +ietnamBs plastic output is processed almost entirely in .o Chi Minh city Most plastic establishment of the central go-ernment as $ell as pri-ate concern are based in .o Chi Minh city The producers in .o Chi Minh city has easy to access to ra$ materials0 s&ill labor and moulds as $ell as ne$ technology from abroad .o Chi Minh city is also potential mar&et for plastic products To impro-e the quality of plastics products to meet the demand of high quality consumer products of the country0 then to increase the quantity and expand -arieties of export plastics products in order to absorb the abundant supply of local labor and to earn more <@

foreign currency for rein-estment 2n this matter0 $e should learn the experiences of A#EA* countries 5ur target is that by the year of <99?0 earnings from the export of plastics products should come to /#P3<9 million and the share of exports in the total plastics production should increase from 9 ?: as it is no$ to ?: by then To in-est in producing plastics materials0 plastics semi6finished products0 plastics mould and production equipment At present $e ha-e t$o ;oint -enture pro;ects on producing ,+C plastics po$der 'totally about 3@90999 tonnes per year(0 t$o pro;ects on D5, $ith the $hole capacity of A90999 tonnes per year has been appro-ed by the 1o-ernment and in a fe$ year to come0 domestic6produced plastics material $ill appear in the local mar&et for the first time0 beside0 se-eral pro;ects on producing plastics products li&e B5,, membrane for pac&aging0 ,#0 ,+C0 ,*MA0 multiplamen0 ,, and ,olyester are being studied for de-elopment as $ell as pro;ects on ma&ing mould in +ietnam are also being $or&ed out .o$e-er0 considering the de-elopment of the industry to the year <99?0 further in-estment should be made mainly in the form of ;oint -enture or 399: foreign6o$ned pro;ects The plastics industry of +ietnam is on the threshold of a ne$ and highly promising but stable era of de-elopment as they $ill guarantee steadfast steps for$ard as arising from ob;ecti-e requirements of a mar&et economy 'Address by Mr .uynh ,huc Anh6 +ice ,resident of +ietnam ,lastic Manufacturers Association6on the /pdate of +ietnam ,lastic 2ndustry and Directions to$ards Fear <99?(

2n order to reali%e the strategy0 1o-ernment as $ell as all manufacturers of +ietnam need an untiring and endless effort $ith a readiness to exchange0 cooperate and bring an opportunity for foreign in-estments /ntiringly absorbing speciali%ed plastics scientific and technical information in order to upgrade the plastics industry0 one of precious and important sources of information is through international exhibitions The +ietnam plastics industry has been identified by the Ministry of 2ndustry as a OcoreO to pro-ide the impetus for gro$th of the manufacturing sector as $ell as the 7epublicEs national de-elopment /nder the Master ,lan0 by the year <99?0 the domestic consumption is expected to reach 3 ? million tonnes $ith a per capita output of l?&g This means that $ithin this 39 years0 the consumption $ould increase by ? folds from the present rate To sustain the industryEs gro$th0 a total in-estment of /#P3 billion $ould be required in the next decade 5f this0 state6o$ned enterprises are expected to in-est about /#P=99 million0 $ith the rest coming from foreign and other sectors 2n-estments in ra$ materials0 equipment and moulds are expected to hit LJ#P3?9 million The industry is expected to maintain its double6digit gro$th rates from no$ until the year <99? in line $ith our 1ross Domestic ,roduct gro$th "ith the industry poised to expand -igorously0 the future prospects for the industry remains extremely bright for both foreign and domestic in-estors !or the industry to maintain its gro$th path0 manufacturers should constantly update themsel-es on the latest technological ad-ancement0 mar&et trends and other related de-elopments

<8

/)4 /)4)(

In1e t.ent "otent$al Fo#e$%n $n1e t.ent

As Mr Truong Quan +u 6 Managing Director of +ietnam ,lastic Corporation6some main points on the in-estment in +ietnam plastics industry during the last fe$ years are highlighted as follo$s: 2n the last fi-e years0 the plastics industry ha-e been able to &eep up its a-erage gro$th rate of <8: per annum and there is a positi-e tendency to increase higher in 3444 This clearly demonstrates +ietnam has the appropriate policies for in-estment $hich ha-e been fine from time to time to suit and encourage more in-estments in this gro$ing industry Apart from this0 the industry also has the orientations on in-estment and constantly ad-ised the 1o-ernment in order that these can be effecti-ely reali%ed /p to no$0 the foreign in-ested capital has increased to nearly /#D =9909990999 including pro;ects of big in-ested capital that ha-e materiali%ed0 such as those in the production of ,+C 7esin0 D5, 5il0 etc Besides their direct in-estment in +ietnam0 the foreign companies ha-e also contributed indirectly to enhance the plastics industry to de-elop faster through cooperati-e and business programs li&e exchanging of information0 training0 trading of materials0 equipment and machinery $ith fa-orable terms !urthermore0 other form of cooperation are granted such as processing and manufacturing of products for export0 renting of equipment0 mould and dies0 etc Local in-estment de-elops in line $ith that of foreign for pro;ects that ha-e been orientated .o$e-er0 the local in-estment focus mainly on small and medium pro;ects0 traditional and no hi6tech products and $ith small capital O#$entat$on on $n1e t.ent $n V$etna. "la t$* $n,& t#3

/)4)-

+ietnam expect to achie-e the producti-ity of 39 &g per capita in the year of <999 and 3@ &g per capita consumption in the year of <99? 2n order to achie-e 3 ? million tones of plastics products in the year of <99?0 the industry needs around 3 billion /#D of $hich ?9: is expected from foreign direct in-estment The orientations are as follo$s: O#$entat$on On P#o,&*t$1e St#&*t&#e The producti-e structure is di-ided into fi-e aspects: 7a$ Materials0 ,ac&aging ,roducts0 Construction Materials0 .ousehold Appliances and .i6Tech products Ra5 Mate#$al : Essentially the products of petrochemical industry to pro-ide solid platform for the de-elopment of the plastics industry Pa*+a%$n% P#o,&*t : 2ncluding pac&aging for food0 fertili%er0 chemicals0 cement and other industry sectors 2n 344?0 pac&aging products attain <?: of the total plastics output <A

and is expected to increase to =9: by the year <99? Con t#&*t$on Mate#$al : 2ncluding plastic materials for construction such as products for interior decoration0 sanitary0 pipes0 etc 2n 344?0 plastic materials for construction share is <9: of the total output and is expected to reach =9: in ten years 'o& e!ol, Pla t$* A""l$an*e : 2t is no$ ha-ing ?9: of the total output and $ill decrease to <9: by <99? '$%!9Te*! P#o,&*t to achie-e <9: Currently $ith ?: of the total output and by <99? is expected O#$entat$on On E*ono.$* Re%$onal St#&*t&#e The current de-elopment of plastics industry is not proportionate in the *orth Central and #outh The #outh region including .o Chi Minh City and surrounding pro-inces obtains A9: of the total national output of plastic products0 $hilst the *orth 3?: and the Central ?: 2t is necessary to ad;ust this ratio by policies of orientation and in-estment incenti-e so that by <99?0 the #outh $ill obtain @9: of the total national output0 the *orth =9: and the Central 39: O#$entat$on On Po e $1e St#&*t&#e The ma;ority of medium and small si%e enterprises concentrate mainly on plastic processing This sector of the industry has good potential to further de-elop $ith pri-ate and ;oint stoc& enterprises The 1o-ernment $ill in-est only in big6scale pro;ects ta&ing an important role in the national economy such as in-esting in the production of ra$ materials and chemicals ,resently0 pri-ate enterprises contribute ?9: of the producti-ity of the $hole industry0 and expected to increase to @?: by <999 and A9: by <99? In *on*l& $on0 the in-estment en-ironment for plastic industry is much impro-ed +ietnamese 1o-ernment has promulgated OThe La$ on !oreign 2n-estmentO in +ietnam and under la$ documents to guide state run companies0 local and o-erseas partners to carry out promptly the procedures accordingly to the regulations and effecti-ely in the cooperation of in-estments +ietnam has started $ith the setting up of t$o oil6refinery %ones in the #outh of $hich $ill be the source of production of plastic materials #ince 344>0 +ietnam has embar&ed on a pro;ect to lin& the national electricity net$or& to pro-ide better po$er supply to the $hole country 2n the coming years0 $ith the installation of ne$ thermo6electric and hydro6electric plants0 po$er supply $ill reach the most remote regions of the country0 thereby creating opportunities and challenges to plastic industry to cater the energy and communication sectors

<4

The booming de-elopment of the ci-il and industrial construction is another foundation for gro$th of the plastic industry Besides the demand of plastic products for interior decoration0 drainage0 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 <9 plants manufacturing ,, $o-en bags $ith about 3? million bags per year and the total estimated in-estment is /#D 399 million +ietnam presently has one plant manufacturing ,, $o-en bags in .au 1iang pro-ince $ith the capacity of 3> million per annum "ith the establishment of A foreign automobile assembling plants as $ell as se-eral electronic plants and the demand to import =990999 motorcycles0 about A990999 tele-ision set per year0 the prospect for plastic industry is good The plastic industry also has to ser-e the gro$ing demand both in the quantity and quality for a population of nearly 399 million by the turn of the century as $ell as to support the production of agriculture0 industrial plants0 husbandry0 pac&ing for domestic consumption and export0 infrastructure and etc Basically0 there are three forms of in-estment cooperation $ith foreigners0 $hich are: 3 Contractual business cooperation -enture < Joint6-enture enterprise or company0 both referred to as ;oint -enture = Enterprise $ith 399 per cent foreign capital Besides0 foreign companies can ha-e cooperation of in-estment $ith +ietnamese businessmen by $ay of subcontract0 rental of equipment0 supply of mould and dies0 etc 2n the address by Mr Truong Quan +u C Manager of +ietnam ,lastic Corporation6on 5rientation for ,lastics 2n-estment at the +ietnam ,lastics !airB4@0 +2*A,LA#T and +ietnam ,lastics Manufacturers Association '+,MA( submitted to the +ietnam go-ernment the list of encouraged and restricted pro;ects calling for foreign capital in +ietnam 2t pro-ides the local and foreign in-estors $ith information regarding the orientation and policy of +ietnam There are fi-e groups of plastic products "ith priority in the coming years0 +ietnam plastics industry is calling for foreign in-estments into the follo$ing pro;ects R ,ro;ects of production of ra$ materials0 chemicals for plastic industry $ith prior usage of domestic material sources $hich are the produce of +ietnam petrochemical industry in the future R ,ro;ects of production of plastic parts for automobile0 motorcycle0 electric and electronic and other industries R ,ro;ects $ith high labor employment or pro;ects directly and indirectly to produce products for export

=9

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 and machinery for plastics industry /)6 /)6)( In,& t#3 en1$#on.ent anal3 $ Potent$al *o."et$to#

Being the local leader in plastic business scale0 production technology and scope of acti-ities0 brand loyalty ma&es difficult for ne$ entrant to ta&e mar&et share a$ay from 7ang Dong ,lastic Company At present0 ,+C filmsB mar&et share is 89 :6see !igure > A Moreo-er the Company has en;oyed a thirty6year prestige and quality recogni%ed by local and foreign customers Brand loyalty therefore reduces the threat of entry by potential competitors The Company has o$ned production facilities settled in ma;or areas in the country as .o Chi Minh City0 .a *oi0 Da *ang0 Mhanh .oa and Can Tho $ith substantial experienced labor The Company has applied Japanese ad-anced technology to produce ,+C films $ith lo$er price 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 $ !$%! fo# ,o.e t$* "otent$al *o."et$to# .o$e-er0 +ietnam has been a member of A#EA*0 foreign potential competitors are threats to the Company To maintain the current mar&et share0 7ang Dong ,lastic Company should ha-e research0 in-estment on ne$ techniques and technologies to impro-e the quality and application features of the product meeting A#EA*0 2#5 standards /)6)R$1al#3 a.on% e tabl$ !e, *o."an$e

As mentioned abo-e0 at present 7ang Dong ,lastic Company has maintained its first position in producing ,+C films 2n .o Chi Minh city0 there are o-er =9 state and pri-ate companies producing ,+C films 2ts main competitors are Tan Tien0 *goc *ghia0 Bao +an0 etc 2n addition0 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-e for 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 only 7ang Dong is in good position to manufacture and supply regularly ,+C films $ith high quality0 large -olume and in $ide range 7ain$ear and bags customers could purchase ,+C films in large quantities from many different companies but only 7ang Dong ,lastic Company can pro-ide the products $ith best quality to them The b&3e# "o5e# t!e#efo#e $ not @&$te "o5e#f&l) =3

/)6)2

Ba#%a$n$n% "o5e# of &""l$e#

7ang Dong ,lastic Company got the direct import6export license *o 369<69=?D1, issued by the Ministry of Trade on @ August 344= 7a$ materials are a-ailable in the mar&et and suppliers could be Thai0 Japanese0 Morean and Tai$anese companies The ba#%a$n$n% "o5e# of &""l$e# no5 $ not t#on%) /)6)4 S&b t$t&te "#o,&*t

As analy%ed abo-e0 ,+C films are in great demand They are applied for rain$ear and commodities pac&aging The mar&et for 7ang Dong ,+C films is potential in the future Therefore t!e t!#eat of &b t$t&te $ lo5) 2n summary0 the en-ironment of the field of producing ,+C films can be sho$n through the competitors in !igure = ? ,5TE*T2AL E*T7A*T# Threats of Entrants To be reduced

#uppliers

*ot strong Bargaining ,o$er

C!"#ET$T$%E R$%&'R( *5T )/2TE 2*TE*#2+E

*ot quite po$erful Buyers Bargaining ,o$er

Lo$

Threat of #ubstitutes

#/B#T2T/E# 'i)*+e !, /); T1e Co.5etito+s i4 t1e fiel2 of 5+o2*6i4) &VC fil.s

S&..a#3 of o""o#t&n$t$e an, t!#eat fo# Ran% Don% Pla t$* *o."an3

Based on the situation analysis abo-e0 opportunities and threats for 7ang Dong ,lastic Company are found as follo$s: O""o#t&n$t$e =<

,olitics in +ietnam is stable and the countryBs economy continues maintaining a high gro$th rate This is a fa-orable context for 7ang Dong ,lastic Company to de-elop "ith the normali%ation of the /#6+ietnam relations and being a member of the A#EA*0 the gro$th of the +ietnamese plastics industry can be further enhanced to achie-e the <?: annual gro$th rate !or plastic processing machinery and equipment0 import tax is exempted Moreo-er0 plastics products $hich are on sub contract and manufactured for export are granted tax exemption The threat of substitute products is lo$ Mar&et potential is large ,+C films products are in great demand no$

T!#eat Being a member of A#EA*0 tariffs are reduced 7ang Dong ,lastic Company has therefore faced $ith fierce competition from foreign competitors /nfair competition from other domestic companies ,lastic products from Thailand0 China ha-e got good image on the international mar&et 2t is difficult for the Company to export plastic products to foreign mar&ets

==

C'APTER 2 2 INTERNAL ENVIRONMENT ANALYSIS

This chapter is to focus on the strengths and $ea&nesses of 7ang Dong ,lastic Company in order to locate the companyBs competiti-e position 2)( '$ to#3 of Ran% Don% "la t$* *o."an3

7ang Dong ,lastic Company is a state6run business0 re6established according to Decision *o =AA issued by the go-ernment 'formerly the Council of Ministers( and >?<DTCLS on 8 May 344= issued by the Ministry of 2ndustry 'formerly Ministry of Light 2ndustry( After liberation0 /!2,LA#T2C C5 0 original name of the company0 $as con-erted to 7ang Dong ,lastic !actory and &ept up manufacturing main products: ,+C films and leathers0 roofing sheets and boards The factory supplied mostly state6run trading businesses and others according to state6assigned targets 2n 34A?0 under a mar&et6oriented policy0 the factory supplied its products mainly to .o Chi Minh City and southern pro-inces mar&ets To cope $ith its gro$ing mar&et6oriented business acti-ities 7ang Dong ,lastic !actory $as appro-ed by the Ministry of Light 2ndustry to change its name to 7ang Dong ,lastic Company 2n 3443 the company $as granted a direct import6export license 2n 34490 the company established Li ,hu Dong Joint6-enture Enterprise ';oined $ith Tai$an6based !ull Dexterity 2ndustrial Co 0 Ltd ( $hich speciali%es in high quality ,+C0 ,/ coated fabrics and leathers for export The enterprise in-ests on ne$ machinery and technologies0 add6on equipment to synchroni%e the production of ,ELD films0 ,+C flooring tiles0 ,ET bottles0 and plastic pac&ages laminating 7ang Dong ,lastic Company $as founded by /nion !inancial de LBindochine in 34?>0 built up and controlled by a !rench entrepreneur operating in the field of producing plastic products as 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 $as renamed as /!2,LA#T2C due to more in-estment The main products in this period include films for raincoats0 leathers0 simili0 toles0 hard and soft plastic boards0 etc !rom 3449 to 344@ the companyBs production scale $as enlarged to meet the demand of customers in the $hole country $ith the merger and production start6up of four plants in .oc Mon0 .o Chi Minh City0 .anoi0 *ha Trang and three branches $ere ne$ly established in .anoi0 Mhanh .oa and )uang *am Besides its traditional products lines 7ang Dong ,lastic Company di-ersified its products and launched ne$ lines: ,ET bottles0 ,ELD films0 ,+C flooring0 ,E and ,, boards0 -arious pac&aging designs for foodstuffs0 drin&s0 interior decoration0 etc That $as a period of business strengthening0 synchroni%ation0 up6grading of production and technology0 of de-eloping and expanding the $hole mar&et in the country and of mar&et expansion for exportation to Asian and other countries 7ang Dong ,lastic Company is member of: =>

+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 of consumers productsB manufacturers recei-ing support operating under direction and super-ision of the Ministry of 2ndustry0 stimulating coordination and cooperation $ith Association of ,lastic Manufacturers0 Textile and 1arments0 !oot$ear 2ndustries maintaining regular business relations $ith $ell6established organi%ations and groups in countries ha-ing de-eloped plastic industry O#%an$7at$onal t#&*t&#e T!e *o."an3A o#%an$7at$onal t#&*t&#e *!a#t an, $t f&n*t$on :

2)/ 2)/)(

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

=?

1E*E7AL D27ECT57

L2 ,./ D5*1 Joint 6 +enture Enterprise

Executi-e Director

Executi-e Director

Investment Department

Technical Department

Office

Finance and Accounting Department

Personnel Department

General Department

Trading Department

ha Trang Plastic Factor!

ha Trang Paper Plastic Factor!

Plastic Factor! o"#

Plastic Factor! o"$

Po%er &ngineering Factor!

Plastic Factor! o"'

Finished goods stock

Materials stock

and distribution center

Promotion

Materials trading store

Hanoi branch

D27ECT5 7 'IGURE %,18 RANG DONG &LASTIC COM&AN#AS ORGANIBATIONAL CCART

The functions of the management0 the departments0 factories0 stores and branches are as follo$s: The 1E*E7AL D27ECT57 is in charge of the success of running the $hole company to achie-e its goals L2,./D5*1 Joint6-enture Enterprise 'L2/!/LL6LTD ( reports directly to the 1eneral Director about manufacturing and trading acti-ities The t$o EQEC/T2+E D27ECT57# assist the 1eneral Director 6 one controlling production units and technical acti-ities0 and the other controlling trading0 stores and branches The 5!!2CE of the company includes administration0 medical clinic0 guards and reception !2*A*CE and ACC5/*T2*1 DE,A7TME*T is responsible for recording all transactions in business operations0 issuing annual financial documents such as balance sheet0 income statement0 pro-iding indices about the situation of the company ,E7#5**EL DE,A7TME*T is responsible for personnel management $ages0 plan of training employees0 etc The office of the company0 !inance and Accounting Department0 ,ersonnel Department and 1eneral Department all report directly to the 1eneral Director 2*+E#TME*T DE,A7TME*T is responsible for planning in-estment and formulating de-elopment strategy for the company TEC.*2CAL DE,A7TME*T is responsible for technical aspects of production such as researching and managing production technology0 determining technical standards for products0 etc *ha Trang ,lastic !actory0 Binh Minh ,aper ,lastic !actory0 ,lastic !actory *o 36<6?0 and .oc Mon ,lastic !actory are places $here production acti-ities occur They are responsible for producing finished products ,5"E7 E*12*EE72*1 !ACT57F is responsible for supplying temperature energy0 electricity po$er and $ater and for machinery equipment repairing and maintenance The functional departments and production units are directly managed by the one Executi-e Manager under the leadership of the 1eneral Director T7AD2*1 DE,A7TME*T is responsible for buying ra$ materials and sales acti-ities ,75M5T25* and D2#T72B/T25* CE*TE7 is in charge of introducing and selling the companyBs products This is also a place collecting the information from the customers MATE72AL# T7AD2*1 #T57E is in charge of trading materials $hich the company imports from abroad The other Executi-e Manager controls Trading Department and the functional stoc&s0 stores and branch under the leadership of 1eneral Director 7ang Dong ,lastic Company has not established the Mar&eting Department 2n practical0 in =8

the most recent year0 mar&eting acti-ities in terms of managing the agent net$or& are left to the 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? )uantity Total labor force Direct labor Managerial staff 5ther ?89 >49 8< A 7ate 399 A? 4@ 3< @= 3 >3 344@ )uantity @>9 ?=< 4A 39 7ate 399 A= 3< 3? =3 3 ?8 3448 )uantity 8>> @=< 333 39 7ate 399 A= 8 3> 4 3>

2n 34480 total labor force increased to 8>>0 in $hich direct labor force accounts for A= 8:0 decreasing 9 ?: comparing to 344@ .o$e-er0 direct labor force in 3448 increased more 399 and more 3= managerial staff comparing to 344@ This pro-es that the company has in-ested into the technology and has expanded into trading acti-ities 2t has also impro-ed the le-el of technical &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 2)2)( P#o,&*t$on at Ran% Don% Pla t$* *o."an3 P#o,&*t$on "#o*e

The company has a closed6loop production technology process from mixing materials0 assembling to recycling The process of producing ,+C films is described in !igure > < !igure > = illustrates the process of producing ,+C leathers

=A

,+C 7esin ,5"DE7

ADD2T2+E MATE72AL#

M2QED E)/2,ME*T

.EAT2*1

75LL2*1

,72*T2*1

!2*2#.ED 155D#

)C#

#T57E.5/#E

'i)*+e %,2 - &+o6ess of 5+o2*6i4) &VC fil.s

=4

,+C 7E#2* ,5"DE7 T C.EM2CAL# T ADD2T2+E MATE72AL# M2Q2*1

1L/2*1

MATE72AL# 1L/ED .EAT2*1

75LL2*1

,72*T2*1

#TEAM2*1

!2*2#.ED 155D#

)C#

#T57E.5/#E

'i)*+e %,! - &+o6ess of 5+o2*6i4) &VC leat1e+s

>9

!igure > > and !igure > ? present the process of producing sheets for roofing and ,+C0 ,E boards and of producing ,ET bottles

MATE72AL# '7E#2* ,5"DE7 T C.EM2CAL#(

MATE72AL# ',ET ,LA#T2C(

.21. #,EED M2Q2*1

D7F2*1

,5"DE72*1

C5M,7E##2*1

7A" MATE72AL# C5M,7E##2*1 .EAT T7EATME*T !2*2#.ED 155D# BL5"2*1 )C# )C#

#T57E.5/#E

#T57E.5/#E

'i)*+e %,% ? &+o6ess of 5+o2*6i4) s1eets fo+ +oofi4) a42 &VCD &E boa+2s

'i)*+e %, - &+o6ess of 5+o2*6i4) &ET bottles

>3

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 consumers since the 34@9Bs At present0 ,+C0 ,E leather and films relate to 7ang Dong 6 /!2,LA#T2CK a brand name attached to products of first class quality All manufacturers of consumersB goods for local and export mar&et 'garments0 bags0 foot$ear0 pac&aging ( trust in 7ang Dong genuine materials used for their yearly local production 2n +ietnam only 7ang Dong is in good position to manufacture 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 $hole country They are much appreciated for their unri-aled excellent features as light$eight0 easy to install0 sun6proof and long6$earing in construction engineering0 decorating and ad-ertising $or&s Either end6consumers or materials purchasers cordially adopt ne$ 7ang Dong products such as ordorless films0 raincoats0 plastic flooring tiles and sponge leather Especially ,ET bottles0 t$o6stage processed through #$iss and 1erman machinery and technology0 $hen coming into the mar&et in 344>0 entirely satisfied -arious technical 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 39 million sq meters

6 B5,,0 ,E multi6layers films laminating and printing 6 ,, $o-en bags 39 million pieces o-er ?9 million pieces

6 ,ET containers0 bottles

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 of 7ang Dong ,lastic Company ha-e en;oyed the confidence of the mar&et0 both domestic and o-erseas mar&ets PVC films.

><

At 7ang Dong ,lastic Company0 to produce ,+C films0 high quality ra$ materials that ha-e been proceeded on the most ad-anced equipment and Japanese ad-anced calendering technology The products are $ith rich patterns and colors0 plain0 embossed finishing0 customi%ed designs "ith the $idth of 3 =8 meters0 thic&ness of 9 9@mm up to 9 <9mm and length of 399 metersDone roll0 ,+C films are used for rain$ear0 table6clothe and commodities pac&aging The quality of 7ang Dong ,+C films is highly appreciated not only in domestic mar&et but also in o-erseas mar&ets Today0 $here-er in the Me&ong Delta0 Central +ietnam or in the *orth +ietnam frontier0 customers are placing strong confidence in 7ang Dong products Moreo-er0 there is no country border for 7ang Dong productsB quality and prestige since the company has been a$arded GThe 2nternational Best Trade *ameI0 GArch of Europe for Excellence 2n Corporate and )uality 2mageI by the European !irst Class Business Club and J Ban 2MA1E*A72E 6 #pain in 344@ and 3448 successi-ely !rom its o$n experience0 7ang Dong ,lastic Company has had the follo$ing formula for its success : Modern Machinery and Technology T .igh 1rade 7a$ Materials T #&illed Labor U .igh )uality ,roduct PVC leathers. This is one of the companyBs traditional products ,+C leathers are produced by ad-anced calendering technology0 processed and hot6laminated on fabrics $ith cotton or synthetic base They are high quality products in -arious elegant colors and patterns $hich are consumed $idely in domestic and o-erseas mar&ets ,C leathers are processed to ma&e foot$ear0 bags and sac&s0 ;ac&ets0 handbags0 furniture upholstery PU - PVC coating leathers by LIUFULL-LTD. They are processed on Japanese production line and by ad-anced coating technology They are a-ailable in t$o series as sponge and non6sponge leathers $hich are in -arious elegant colors and patterns0 long6lasting and all6$eather6resistant ,+C and ,/ coated leathers are applied for apparels manufacturing as ;ac&ets0 coats0 handbags0 etc Tarpaulin fabrics are processed to ma&e tents0 umbrellas0 ;ac&ets0 etc PP sheets. They are manufactured $ith -arious colors by the same technology and equipment for ,E boards ,, sheets are suitable for stationery clip file0 document sheet co-er0 export beam light reflecting case and construction materials PVC corrugated sheets for roofing. They are exclusi-ely blended from ,+C6# main materials: $ith additi-es0 especially the products $ith the features of anti6/+ rays0 $eather high temperature6resistant 'up to @9 9(0 anti6insect0 anti6moisture0 and fire6resistant They are in -arious colors0 high light diffusion 'transparent sheet( or good light6barrier 'opaque sheet(0 light $eight and easy installation as $ell They are a-ailable in rounded6top $a-es or flat6top $a-es for arch6shaped or flat top >=

roofing and decorating0 rain6proof or sunlight6proof panel0 partitioning0 interior decoration0 plant construction PVC, P boards. They are processed on ad-anced extrusion line in -arious elegant colorsK $ood0 ceramic0 di-erse textures embossing and easy installation as $ell The products $ith chemicals6resistant and long6$earing0 roofing0 partitioning0 doors0 ad-ertising displays0 interior decoration and others P , P !D, "#PP $lastic $ac%aging. .oc Mon ,lastic !actory0 one factory6member of 7ang Dong ,lastic Company0 is equipped $ith Japanese and Morean ad-anced production lines 2t speciali%es in laminating0 manufacturing ,E0 ,E.D0 B5,,0 plastic pac&ages $ith single or multi6layers0 in 3 or @6colors printed patterns and designs according to the customerBs request "ith an annual output of approximately 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 "ith the motto of production moderni%ation and synchroni%ation0 7ang Dong ,lastic Company in-ested one ,E0 B5,, laminating machinery line and one three6side cutting and sealing machinery line in 3448 to meet the demand of the customers P T containers. ,ET bottles ha-e excellent features meeting international sanitary standards0 colored or transparent0 supplied $ith nice6shaped and good gas6retaining lids0 and unbrea&able The bottles can be recycled se-eral times for specific applications as insecticides0 chemicals containers ,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&0 etc
&lasti6 &a60a)es 1%= Ot1e+ 5+o2*6ts != Leat1e+ 1%=

ET bottles $=

S1eets a42 boa+2s 21=

'il. %2=

'i)*+e %,$ - C*++e4t 5+o2*6t st+*6t*+e of Ra4) Do4) &lasti6 Co.5a43

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

>>

PVC flooring tiles They are calendered and compressed by modern hydraulic machinery line As a result0 the products ha-e strong structure The products are a-ailable in -arious sophisticated patterns0 nice colors0 thin and light6$eighted and easily installed They are applied for interior decoration as flooring0 $alling and ceiling PVC synthetic car$ets. They are manufactured by Japanese ad-anced calendering machine The carpets resist to moisture0 insect de-astation0 fire and hard6$earing a-ailable in rich colors and patterns They are 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 the strategy of technology in-estment and of s&illed labor training in-estment .o$e-er0 due to the lac& of capital0 the company has stilled produced some &inds of products $ith old technology 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<63448 and net income '344>63448( of 7ang Dong ,lastic Company are depicted in !igures > 8 and > A

2 ; 2;; 1 ; Sales 1;; ; ;

1::2 1::! 1::% 1::

1::$ 1::@

'i)*+e %,@ - Sales +eve4*e <U4it8 billio4 of VND>

>?

@ $

% ! 2 1 ; 1::% 1:: 1::$ 1::@ Net 46o.e

'i)*+e %,( - Net i46o.e <1::%-1::@> <U4it8 billio4 of VND> !rom 344< up to no$0 the companyBs sales ha-e increased #ales in 3448 $ere multiplied by nearly more than = times compared $ith that of 344< #imilarly0 net income has risen steadily year by year .o$e-er0 comparing to 344@0 net income in 3448 increased slightly This $as explained that in 344@ and 34480 price of plastic ra$ materials in the $orld mar&et has increased rapidly 6 for example the a-erage price of ,+C po$der in 344@ $as @?4/#DD3 ton but e-en on March 3448 to A?9/#DD3 ton This made manufacturing costs increased to >: Moreo-er due to hard competition and based on its pricing policy0 the company can not increase the price of their products This sho$s a $ea&ness of the +ietnamese plastic industry in general0 of the company in particular 6 depending on the external sources of ra$ materials According to Mr *guyen Cong Chuong0 the companyBs 1eneral Director0 7ang Dong ,lastic Company presently accounts for about 89: of ,+C films mar&et as depicted in !igure > 4 5ther companies =9: 89: 7ang Dong ,lastic Company

'i)*+e %,: - St+*6t*+e of &VC fil.s .a+0et s1a+e >@

2)6 2)6)(

Ma#+et$n% P#$*$n% "ol$*3

The company has paid much attention to price policy and the quality of the products as $ell The high profit in the field of producing ,+C films has attracted many producers !ierce competition therefore occurs in the form of quality and price although the mar&et for ,+C films is large *o$ price competition of 7ang Dong ,lastic Company has been based on production on a large scale0 modern machinery and lo$ inputs costs !or the products consumed on the domestic mar&et0 price set is mainly based on manufacturing costs0 profit and budget 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 according to methods of payment Table %,2 - &+i6e list of &VC fil.s 5+o2*6ts a66o+2i4) to .et1o2s of 5a3.e4t Pa3.ent on ,el$1e#3 <P#$*e of VND> Defe##e, "a3.ent <P#$*e of VND> <=89 <=49 ==49 >399 >39? ><?9 PLASTIC PRODUCTS PROMOTION AND DISTRIBUTION STORE <>99 <>89 =>?9 >389 >34? >=<9

PRODUCT

UNIT

*3 5. 939 x 3=8 x 399 *3 5. 93< x 3=8 x 399 *3 5. 93= x 3=8 x 399 *3 5. 93> x 3=8 x 399 *3 5. 93? x 3=8 x 399 *3 2. 93? x 3=8 x 399

<=39 <=89 ==@9 =449 >94? ><99

Sources: $r!0ing .e%!rt"ent 2 (!ng .ong

,rice set is based on mar&et price research The Company determines the different price list in different periods and it also depends on the price of ra$ materials each period The Company al$ays informs the price each period to the distribution store on time .o$e-er0 the Company has not stimulated product consummation as ha-ing not used the policy of discount and commission for customers purchasing in bul& 2)6)D$ t#$b&t$on net5o#+ :

The current distribution of 7ang Dong ,lastic Company is illustrated in !igure > 39 7ang Dong ,lastic Company has a distribution net$or& spread from .anoi to #outhern

>8

pro-inces The customers can buy 7ang Dong ,lastic CompanyBs products through its stores and 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 7ang Dong ,lastic Company

,romotion and Distribution #tore

Commerce Company

,roduction /nits

"holesaler

7etailer

C/#T5ME7#

'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 the ad-ertising Table > = illustrates the rate bet$een sales re-enues and ad-ertising costs Table %,! - Rate bet/ee4 sales +eve4*es a42 a2ve+tisi4) 6osts YEAR SALES REVENUES <Un$t: <(> VND> 344? 344@ 3448 3=4 <?@ ?=@ ><? 3A3 =@? ?4< <=3 <<3 <=? 4?8 4A< ADVERTISING COSTS <Un$t <-> VND> 3>? ?<? 999 3?9 =>< 999 =@< @?> 999 9093 909A 903@ RATE <=> <-> : <(>

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 the ad-ertising cost increased steadily year by year This illustrates ad-ertising acti-ities and

>A

promotion policy ha-e not been paid much attention 2); 2);)( F$nan*e F$Ce, a et t&#no1er

2n 3448 most financial sources are self6support capital from the company The company has ta&en the ad-antage of financial sources from the ban& or has imported ra$ materials by payment on installment and has made the collection of accounts recei-able more quic&ly in order to guarantee capital for the trading and manufacturing acti-ities and in-estment of the company The company has also applied the financial management measures to impro-e fixed assets turno-er !rom Table > >0 the company has increased the fixed assets turno-er to > @ times in 3448 Table %,% - 'iEe2 assets t*+4ove+ Criteria #ales re-enues !ixed assets !ixed assets turno-er 344? 3=4 <?@ ?=@ >>> >8 =34 <>< 894 <4 344@ 3A3 =@? ?4< ?43 >A ??3 @9A 9>3 =8 3448 <<3 <=? 4?8 4A< >8 @39 ??< ><@ >@

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

The company has impro-ed the le-el of accounting &no$ledge by sending some units to ta&e the training course .o$e-er0 the company has had some financial difficulties as follo$s: Due to operation expansions all o-er the country0 the company has had the lac& of capital The company must therefore ha-e the loans from the ban& 2n 3448 the Company has paid interest of < billion +*D to the ban& This affected the profitability of the company Moreo-er the Company has had the difficulty in collecting accounts recei-able 2);)Total a et t&#no1e#

Table > ? indicates that the company has performed better year by year0 total assets are used more effecti-ely in generating its sales 2n 3448 total assets turno-er increased to < 3 dues to using $or&ing capital effecti-ely 2n summary0 total assets turno-er is good

>4

Table %, - Total assets t*+4ove+ Target #ales re-enues Total assets Total assets turno-er 344? 3=4 <?@ ?=@ >>> 4> 9A3 =A= @34 3? 344@ 3A3 =@? ?4< ?43 44 <83 ?3? ><4 3A 3448 <<3 <=? 4?8 4A< 398 ?AA A=@ 999 <3

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

2)D

Con*l& $on on t#en%t! an, 5ea+ne e of Ran% Don% Pla t$* Co."an3

Through internal analysis and comparing $ith other competitors0 the strengths and $ea&ness of 7ang Dong plastic company are listed as follo$s: #T7E*1T.# "EAM*E##E#

The local leader in plastic business scale0 Mar&eting acti-ities ha-e not paid much production technology and scope of acti-ities attention yet The company has produced ,+C films products by Japanese ad-anced technology #ubstantial s&illed labor force and good Depending on imported sources of ra$ management of top6managers materials This is a common problem of all domestic plastic producers The company currently accounts for 89: of Limitation of information about foreign ,+C films on domestic mar&et share mar&et and competitors Mar&et research has not been paid attention A thirty 6year prestige and quality recogni%ed by local and foreign customers ,+C films products of 7ang Dong plastic company has a high brand loyalty Close cooperation $ith associations of plastic manufacturers0 textiles and garments0 foot$ear industries0 7ang Dong is maintaining regular business relations $ith large organi%ations and group in countries ha-ing already de-eloped plastic industries "ide distribution net$or& all o-er the country Total assets are used more effecti-ely in generating its sales

?9

C'APTER 4 4
4)(

DEVELOPMENT STRATEGY DESIGN

Fo&n,at$on of Ran% Don% "la t$* *o."an3A t#ate%3

2n order to recommend a right strategy for 7ang Dong ,lastic company0 firstly it is necessary to ans$er three questions $hich are at the heart of the companyBs strategy choice because they help to indicate the sources of the companyBs competiti-e ad-antage o-er its ri-als and determine ho$ the company $ill compete in its business These three questions are: "hat is to be satisfiedH 'Customer needs and product differentiation( At present0 7ang Dong ,lastic company produces ,+C films $ith the $idth of 3 =8 meter0 the thic&ness of 9 9@mm up to 9 <9mm and the length of 399 meter for one roll used for table6 clothe0 commodities pac&aging and ma&ing rain$ear As mentioned0 the competition in the field of producing ,+C films no$ becomes more and more aggressi-e The company has tried to differentiate its products by producing ,+C films in rich patterns and colors0 plain0 embossed finishing0 customi%ed designs $ith continuously quality impro-ement The products ha-e been processed by Japanese ad-anced calendering technology As a result0 the difference has gi-en the Company a competiti-e ad-antage 2n summary the product differentiation at 7ang Dong ,lastic company is based on the product quality and the rich patterns and colors "ho is to be satisfiedH 'Customer groups and mar&et segmentation( The Company operates $ith 3< member6units including factories0 regional branches and center0 stores o-er the *orth0 Central and #outh of +ietnam and one ;oint6-enture enterprise located in .o Chi Minh city 7ang Dong ,+C films ser-e mainly for the domestic mar&et '8A: in the #outh0 38: in the *orth and ?: in the Central( and also for foreign mar&et ,+C films ha-e been sold to the companies0 factories and production units for their ma&ing pac&aging0 rain$ear0 etc The main customer is .a *oi ,lastic Materials 1eneral Trading #tore and other customers as .oan Miem company of Commerce and #er-ices6.a *oi0 338 Ly Thuong Miet #toreL They ha-e been the companyBs loyal customers due to its largest scale of production Also a small quantity of consumers can buy the companyBs products from its agents and its distribution store Due to high transportation costs0 ,+C films products ha-e not been consumed much in the Central area of +ietnam Moreo-er0 customers in the Central area are accustomed to products of local production units .o$ customer needs are to be satisfiedH 'Distincti-e competences( 7ang Dong ,lastic company has al$ays concentrated on the technology and substantial experience labor $ith customi%ed designs and rich patterns and colors to satisfy customer needs As analy%ed before $ith the Japanese ad-anced calendering technology and the -ariety of patterns and colors0 the Company has achie-ed the brand loyalty for ,+C films 2n the competiti-e en-ironment0 the Company recogni%es the ad-anced technology and the distincti-e features of its products to be competiti-e ad-antage for the company to maintain its current first position ?3

4)-

St#ate%$* o"t$on fo# Ran% Don% "la t$* *o."an3

5ptions about the de-elopment strategy for 7ang Dong ,lastic company are deri-ed from solutions 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% Pla t$* *o."an3

A selected generic strategy is the result from the CompanyBs ma&ing consistent choices on product0 mar&et and distincti-e competences Based on 7ang Dong ,lastic companyBs product differentiation0 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 Company Cost leadership strategy The lo$6cost strategy requires 7ang Dong ,lastic company to be good at materials management and to ha-e cost minimi%ation in 7esearch and De-elopment0 ad-ertising0 etc At present the Company has to rely 399: on the import of ra$ materials As analy%ed in the parts of = @ N > @ <0 the bargaining po$er of suppliers no$ is not strong The suppliers could be Thai0 Japanese0 Morean and Tai$anese companies 5ne more ad-antage is that 7ang Dong company has the right to import directly from abroad Though the cost of ad-ertising $as lo$ '9 3@: in 3448(0 the company has got good image on customers Based on the analysis of 7ang Dong ,lastic companyBs current situation6product differentiation0 mar&et segmentation and distincti-e competence6the cost leadership strategy is suitable for the Company for the reasons as follo$s: 2n order to meet the domestic mar&et all o-er the country0 7ang Dong ,lastic company must increase the production capacity by using ad-anced technology and its special s&ills Being the local leader in plastic business scale0 production technology and scope of acti-ities and a reliable supporter of consumersB products manufacturers0 the company has had the experience $ith ne$ technology and mar&et Moreo-er its cost ad-antage is gained through the regular suppliers of ra$ materials 2n the competiti-e en-ironment0 the rate bet$een sales re-enues and ad-ertising costs $as only 9 3@: in 3448 As discussed abo-e0 the company has had a long de-elopment history ,+C films relate to 7ang Dong company: a brand name attached to products of first class quality 2n +ietnam only 7ang Dong is in good position to manufacture and supply regularly ,+C films and other plastic products $ith high quality0 large -olume and in $ide range Differentiation strategy !ollo$ing differentiation strategy0 7ang Dong ,lastic company has some disad-antages as

?<

follo$s: 2n +ietnam0 only 7ang Dong is in good position to manufacture and supply regularly ,+C films $ith high quality0 large -olume and in $ide range The product differentiation is based on the product quality and the rich patterns and colors0 plain and embossed designs to meet customerBs satisfaction As a result0 under 7ang Dong brand0 ,+C films spread their reputation in the companyBs target mar&et6the *orthern and #outhern regions Differentiating ,+C films by in-esting in inno-ation0 upgrading0 and moderni%ation of machinery and equipment to synchroni%e and increase production capacity .o$e-er0 the mar&eting acti-ities ha-e not been paid much attention The Company therefore finds it difficult 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 $hich may be defined geographically0 by type of customer0 or by segment of the product line ',orter0 Competiti-e #trategy0 p >@( 2t is difficult for 7ang Dong ,lastic company to follo$ focus strategy for the reasons as follo$: *o$ the company has a distribution net$or& o-er the *orth0 Central and #outh of +ietnam Moreo-er the companyBs 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 Chi Minh City0 .a *oi0 *ha Trang and three branches $ere ne$ly established in .anoi0 Mhanh .oa0 and )uang *am As a result the focus strategy does not enable 7ang Dong ,lastic company 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% Pla t$* *o."an3

5ptions about direction for the 7ang Dong ,lastic companyBs de-elopment strategy is relied on the combination choice bet$een product and mar&et 7ang Dong ,lastic company no$ is in the strong competiti-e position and mar&et for ,+C films gro$s highly0 the Company aims to maintain its current mar&et share '@9:( by gro$ing $ith the mar&et 2n addition ,+C films products ha-e been exported to foreign mar&ets The Company therefore needs to impro-e the products more and more in order to be more reliable to present mar&et and to loo& for ne$ mar&ets "ith regards to ,+C films0 7ang Dong ,lastic company should follo$ the direction of consolidation and mar&et penetration At present0 7ang DongBs ,+C films are much appreciated for their unique excellent features and first6class quality This is opportunities for the Company to gro$ in terms of product de-elopment The directions for strategy de-elopment can be summari%ed in Table ? 3

?=

Table ,$ - Di+e6tio4 fo+ Ra4) Do4) &lasti6 Co.5a43As st+ate)3 2evelo5.e4t PVC f$l. PRODUCT

,resent MARKET *e$

Consolidation ,roduct de-elopment

Mar&et penetration

4)-)/

Met!o, fo# Ran% Don% Pla t$* *o."an3A

t#ate%3 ,e1elo".ent

As mentioned in the history of 7ang Dong ,lastic company0 it $as founded by /nion !inancial de LB indochine before 34?> under the name of 7ang Dong factory and ta&en o-er by a Chinese group after 34?> under the name of /!2,LA#T2C 2n T.E ,LA**ED EC5*5MF0 7ang Dong ,lastic company has operated under the control and allocation of the 1o-ernment #ince 34A4 in the mar&et economy0 the company has operated and de-eloped by internal de-elopment0 the &ey method for strategy de-elopment Also on *o-ember 34490 the Company established Li ,hu Dong ;oint6-enture enterprise $hich speciali%es in high quality ,+C0 ,/ coated fabrics and leathers for export D27ECT25* Consolidation ,roduct de-elopment Mar&et penetration C5#T LEADE7#.2, DE+EL5,ME*T #T7ATE1F

MET.5D# 2nternal de-elopment Alliances

'i)*+e ,1 Develo5.e4t st+ate)3 2esi)4e2 fo+ Ra4) Do4) &lasti6 6o.5a43 2n summary0 7ang Dong ,lastic company $ill de-elop on the basis of the cost leadership strategy $ith the directions of consolidation and product de-elopment for present mar&et and of mar&et penetration for ne$ mar&et by the methods of internal de-elopment and alliances designed in !igure ? 3 ?>

C'APTER 6
6
6)(

CONCLUSION AND RECOMMENDATIONS

Con*l& $on

Fo# t!e V$etna. Pla t$* $n,& t#3 2n the past fi-e years0 the plastic industry ha-e been able to &eep up $ith its a-erage gro$th rate of <8: per annum and there is a positi-e tendency to increase higher in 3444 2n the next fi-e years0 according to the forecast of economic experts0 +ietnamBs economy can gro$ stably at the rate of 8:6A: or more The annual gro$th rate of the plastic industry $ill also be in the range of <9:6<?: .o$e-er such an annual gro$th rate is quite modest compared to that of #outheast Asian countries Most of +ietnamese plastic manufacturers are of small and medium si%e0 the big6si%e ones are -ery fe$ Therefore the capacity to in-est and de-elop in large scale to high technology plastic products is -ery limited The plastic products ser-e mainly for consuming household utensils at the rate of about @?: of the total output ,lastic products for electric and electronic industries and for other production industries are -ery little Despite rapid de-elopment0 +ietnam plastic industry is sill $ea& in the field of moulds and designs #e-eral companies are hea-ily dependent on the designs of other companiesB products0 including foreign ones Apart from this0 obsolete technology and dependent sources of ra$ materials are obstacles that +ietnam plastic industry must deal $ith on its $ay to de-elop 2t is readily seen that +ietnamese production and trading businesses ha-e made considerable contribution to the fast changes of the local plastic industry .o$e-er one can see a basic shortcoming of this industry0 namely the de-elopment $ithout a master plan This situation has led to ample in-estment in the production of plastic home appliances !acing such a situation0 many a company has produced lo$er quality products to cut do$n the production costs and to raise the competiti-eness Therefore unfair competition in the plastic industry in general and in the field of producing ,+C films in particular is also the &ey problem that +ietnam plastic industryBs managers should be concerned $ith and de-elop solutions to ensure the de-elopment in the future +ietnam plastic industry has achie-ed remar&able performance recently and no$ de-eloping at high gro$th rate 2t promises a bright prospect in the future

Fo# Ran% Don% Pla t$* *o."an3 The company presently accounts for about 89: of ,+C films mar&et This is the core product of the company $ith first class quality processed by ad-anced technology that helps the company to achie-e the brand loyalty and high mar&et share in local segment of the mar&et 2n order to maintain and consolidate its current first position0 7ang Dong ,lastic company should continuously upgrade its technology and product quality ??

Due to high demand for the product0 in the past years0 7ang Dong ,lastic company has not paid much attention to the mar&eting acti-ities Moreo-er0 in the strong competiti-e en-ironment0 the company has met unfair competition from small6scale plastic production units and pri-ate companies The company therefore should pay much more attention to the mar&eting acti-ities as $ell as mar&et research to be more successful in the future The mar&et for ,+C films is potential in the future This implies both opportunities and challenges for ,+C films 5n the one hand0 the company therefore should increase the production scale for the product and expand the operation and loo& for ne$ foreign mar&et 5n the other hand0 ne$ entrants can brea& into the mar&et This situation $ill lead the competition hea-ier As analy%ed abo-e0 the most appropriate strategy for the company to follo$ in the future is to de-elop on the basis of the cost leadership strategy $ith the directions of consolidation and product de-elopment for present mar&et and of mar&et penetration for ne$ mar&et by the methods of internal de-elopment and alliances 6)Re*o..en,at$on

Fo# t!e Go1e#n.ent 2n-estments in the plastic industry require significant capital The biggest problem for the plastic industry is capital shortage The go-ernment therefore should support the companies by capital tax exemption !or unfair competition0 the 1o-ernment should issue the regulations on the protection of industrial patents0 standards of plastic products and control strictly the quality of plastic products To increase the ratio of high quality and hi6tech plastic products to replace imported products0 the 1o-ernment should establish and maintain the sector of producing moulds and ra$ materials for plastic products As analy%ed inn the orientation in the de-elopment of +ietnam ,lastic industry to the year of <99?0 in order to sustain its de-elopment on the one hand the plastic industry must impro-e in-estment in manufacturing plastic products for construction pac&aging and other industries 2n order to encourage in-estment in the areas that need large in-estment capital but $ith little profit0 the 1o-ernment should pro-ide tax exemption0 gi-e more information and gi-e pri-ilege as $ell 5n the other hand the 1o-ernment as $ell as manufacturers of +ietnam need an untiring and endless effort $ith a readiness to exchange0 cooperate and bring an opportunity for foreign in-estments and absorb speciali%ed plastics scientific and technical information in order to upgrade the plastic industry

Fo# Ran% Don% Pla t$* *o."an3 As discussed abo-e0 mar&eting acti-ities and limitation of information about foreign ?@

mar&et and competitors are the main $ea&nesses of 7ang Dong ,lastic company 2n order to implement the proposed strategy0 the company should establish a mar&eting department $hich is responsible for mar&eting acti-ities as ad-ertising0 researching consumer and competitor beha-ior and ne$ product de-elopment research as $ell 2n addition the company should ha-e budget for mar&et research especially researching mar&et and competitorsL !rom that the company $ill ha-e strategic master de-elopment plan for the company in the long term The company should follo$ the bac&$ard integration strategy to impro-e the close relationship $ith foreign suppliers of ra$ 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 companyBs scale to meet the demand of the $hole country especially in .anoi0 .ai ,hong0 *am Dinh0 and #outh China large mar&ets 2n order to integrate into the de-elopment trend of $orld and +ietnamese plastic industries0 7ang Dong ,lastic Company should ha-e an in-estment on ne$ equipment and technologies to impro-e the quality and application features of the products0 meeting A#EA*0 2#5 standards The 7ang Dong ,lastics company should impro-e human resource management by training0 upgrading0 and updating the s&ills of engineers0 technicians0 managers through short 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 trading0 mar&eting researches0 information exchange0 plastic international forums as $ell as labor training

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,ham 1ia Duoc0 7eport on production6trade of +ietnam ,lastics Corporation '+2*A,LA#T(0 January0 344A ,ham 1ia Duoc0 7ole of plastics industry in de-eloping the national economy to the year <99?0 March0 344? ,orter0 M E 0 Competiti-e Ad-antage0 !ree ,ress0 34A? Tran Thai .oang0 7esearch study #M 4@68<0 344@ Truong Quan +u0 5rientation for plastics in-estment in +ietnam0 March0 344? Truong Quan +u0 ,otential in-estment for +ietnam ,lastics industry in coming years0 +ietnam ,lastics !airB4@0 .CMC0 +ietnam

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