In the present age, we have witnessed a number of changes in almost all life aspects, especially in living standard. More particularly, it is in the customer buying behavior. In fact, it is a norm for citizen to access the modern life. Increasing in incomes leads to the fact that their understanding about the benefit of drinking milk is higher. Thus, Vietnamese’s milk market is one of the fastest develop market with a huge of domestic enterprises and multinational companies.
However, the total milk’s product in domestic market rates approximately from 20% to 25% of the demand, the rest must be imported from abroad.
TH True Milk was established on February, 24th, 2009 with the capital was 350 million USD from Joint Stock Commercial Banks of North Asia to build the milk processing technology, modern furniture and the distribution technology . It cannot be denied that TH True Milk Food Joint Stock Company has significant invested in an advanced management system and integrated production processes.
With this situation, the appearance of TH True Milk brand has created a bright point for the dairy industry in Vietnam when creating a milk process followed by international standard from planting grass, building barns and cattle feed processing, management veterinary control, processing and packaging, to the distribution of products to consumers. Farm system has applied advanced farming technology in the world. Beef has imported from countries known for dairy farming in New Zealand, Uruguay and Canada to ensure the best dairy breed for the best quality milk in Vietnam. With the big hit on Vietnam’s market, TH True milk has officially entered the competition with similar products of other dairy companies like Vinamilk, Nutifood or FrieslandCampina
Task 1: The strategy contents and terminology and significance of stakeholder analysis a/ Strategy content:
Vision: “TH Group aspires to be the leading manufacturer of Vietnam in the fresh food industry is derived from nature. With the significant investment and long- term combined with the most modern technology in the world, we are determined to develop into the brand of world-class food which is everyone’s favourite and the national pride”. Based on the state in this vision, it can easily see that TH Group aims to become the best leading food producers in Vietnam market about green product made from natural origin. To be more detail, this operation focus on milk and dairy products (TH True milk brand) in long -term. They want to build successful food market has reputation not only in Vietnam but also globalisation. Mission:
According to the official website of TH True milk, their mission is that: “In the spirit of closeness with nature, TH Group has always tried its best to cultivate crisis and soul of Vietnam by providing food products derived from nature – clean, safe, fresh and delicious and nutritious.” Each company has their own mission and TH True milk is not exceptional. Through TH True milk’s mission, TH Group has determined that TH target customer group is Vietnamese consumers whose demand for milk is not only clean but also added fresh maintenance, with the advantage of all the resources that their businesses can serve. In addition, this mission is also very brevity and could be the advantage for managers to create a good management style for TH True milk company in long term. Goals and objectives:
Goals and Objectives are the next two important elements in the foundation of any company. As I had mentioned in Mission, the objectives of T.H Group exactly is Vietnamese customers. With the advent of TH True Milk products, TH Milk Joint Stock Company is affirming the goal of becoming the leading manufacturer in Vietnam’s food industry clean natural origin. Furthermore, they want to become the well-known food branding which is not only in the country but also in all over the world
For any organization, it is necessary to understand deeply about their true values in order to combine with others elements to build their own foundation stronger. Core competencies “involve identifying a firm’s competencies”. . The core competencies must be unique, satisfy customers and
hard for others company to copy. T.H Group also showed some important factors that company used to create the value of company are the focus on investment, long-term production (in structure and technology) and apply the modern technologies in production. TH True Milk has just established for a short time, but the company has also quickly determined the strategic direction of their company, focusing on the following core competencies:
• Integrated production system from production main raw material (cow’s milk) with modern technology imported from abroad.
• Be active integration a long time ago.
• Build a milk brand is known for quality, quality criteria set up to be on Top
• Product the green goods quality and production system based on modern and advanced systems. Competitive advantage: (Strength of both T.H True Milk and Vinamilk) T.H True Milk
-”Clean” milk brand
-Modern production technology ( purchased from Israel and New Zealand) -Active integration by building dairy farms and its own distribution system -Current market share is expanding.
-Had own large distribution channels and various retailers
-Built the trust in customers in spite of introducing a short time.
*to be more details in Task 2 below*
-Do not have after sale service.
-Do not have experience in production.
-Production system cannot meet the demand for output.
-The current capital still use borrowed funds
• Scale to create a large market share in most segments of milk and dairy products. • VNM is a great brand with prestige.
• Have the ability to affect the market price of milk.
• There are reputable, trusted and loved the most in customers. • The distribution network and large retailers.
• Has the relationship sustainable strategic partnerships with suppliers. • Research capacity and develop better products.
Marketing of the company remains weak, leading to not create an effective message to promote to consumers about the company’s strengths. • Most materials are still imported.
• The price of dairy products now if compared with the developed countries in the world is still at high levels. This makes the audience part of domestic consumers have access to these products. • Market share of large, strong brand name, but if you compare the price of the product, the company is not competitive compared to other products. Although T.H True Milk have just existed in market share for a short time. However, it can be denied that, T.H had had their own position in each customer’s heart. TH True Milk declared a regular feature of dairy products (even Dutch Lady also VNM). The problem is that none of them are aware of the need to make this declaration on mass communication. TH True Milk made the first step ahead compared with rivals such as Dutch Lady or Vinamilk because they are the first company claims they are “clean milk”. That’s enough for a buzz and “media storm” to make a difference to position yourself in the mind of the consumer. HOW WOULD YOU CHANGE?
-TH Group would like to become one of top manufacturers and exporters in the world as well as the most well-known leaders in fresh food industry that are derived from nature. With the major investment and long-term combined with the most modern technology in the world, we are determined to become the brand of the world-class food not only in producing milk but also in delivering fresh food in over the world. – Becoming the strong brand that is the top choice of consumers for clean and fresh products in Vietnam as well as becoming a trademark of nutrition prestigious science and trustworthy with every costumer in Viet Nam.
b/ The significance of stakeholder analysis:
Every company, no matter if it a public limited company or a private company, a profit or non-profit company- always has their own stakeholders. According to Business Environment course book, stakeholders are the many different groups and individuals whose interests are affected by the activities of a firm. An organisation can affect or be affected by different stakeholders. Obviously, with regard to stakeholders, the management’s decision could be influenced by the power of stakeholders. Thus, stakeholders play a significant role in the business activities such as building the capital for a company in term of changing equipment or other activities like that. In theoretical, there are three kinds of stakeholders, which are internal stakeholders, external stakeholders and connected stakeholders.
In TH True Milk Company, the internal stakeholders can be the employees, managers or board members. All of them are the key of the company’s success because they spend a great deal of their time and energy in the organisation’s continued existence. In manager: they are the people who will make decision, point out the strategy and lead the organisation follow the right route in TH Group. They also the most important person who make the guideline for their subordinates. In employees: they have a major effect on the success of TH Group. When being motivated, they will usually be more productive, produce a better quality goods for improvement and guarantee that all objectives. Some methods TH Group has applied for their company in term of motivating the ability of workers are increasing in income, a chance to develop their skill, etc. External stakeholders are considered as some big parts of the society such as the government, authorities, communities or pressure groups. The central government has played an important role in the success of any business and TH True Milk is not exception through the passing of laws and policies. With a right strategy and good service to this kind of stakeholder, TH Group can affect them; persuade them to make a direction, changes that have good influence to the business of the company. A good example for this situation should be “From the drop of pure milk to the national strategy” project. Thanks to milk, Vietnamese brand made a big step into the world market. Prime Minister Nguyen Tan Dung expressed “The TH put into operation dairies that provide
essential products for citizen and contribute significantly to replace imported milk at this time as well as improving the business sector for the status of Vietnam’s dairy industry on the map of the world dairy industry.” The last but not least stakeholders are connected stakeholders. This group included a various different groups of people like: customers, shareholders/ owners, suppliers, bankers or even competitors. Like the other two kind of stakeholder, the company also must treat their connected group fairly with many attractive benefits or services so that they will invest in the company, or build up reputation for the company (especially some customers that are famous people or reporters). Also, with the very very new company like TH True Milk, they must show up strength to make some competitors look into the system would be realize their own way and from that on competitors will have to respect TH Group and prevent them from manipulate or even strike to the weakness that could lead to the cause of bad consequences to the business.
To sum up, stakeholder analysis can be easily understand as the study of identify all kinds of stakeholders that give an interest in a project and also affect to the consequences of it. This is used to develop a strategic view and institutional view of the human as well as the relationships between the stakeholders and learned what they care about most when they know about the T.H company. When issuing a stakeholder analysis, the participants in the project would likely found out the opportunities, bonds among individual when executing the project. Also the effects and that stakeholders might get or being affected by the project will be shown and the solutions to solve the bad problems. Some participants in the project might be divided into potential groups so that the project coordinators or managers will easily choose which group can go for the next level of the project. This is an effective way of getting different behaviors from different stakeholders and it might have some benefits for their life and their way of doing the job in reality.
Task 2: Organizational audit and external environment audit
1/ External environment audit
In external environment, there are two tools people usually used to analyse
all elements: Porter’s five forces and PESEL analysis. T.H Group has many interchanges within its environment that draws inputs from it and outputs goods and services to it. In addition, T.H Group is also affected by some environment trends which can be summarised in the PESTEL model; whereas the competitive environment will be reflected by Porter’s five forces. a/ Micro environment factors: (M. Porter)
Threat of new entrants:
Barriers to entry
With businesses that want to join the milk industry and any other aspects, capital has been a matter of controversy. Especially in milk industry, the capital requirement in production, research market and promotional product distributor is quite high barrier to entry. -Differentiation
Whenever talking about milk, some main brands which come up first in customers’ mind are Vinamilk, Dutch Lady, Nestle or Abbot. It shows the fact that all of them built a special position in the heart of consumers. In milk market, although T.H True milk is known as a big company with short run history, they made the customers’ trust and had many loyal customers. With the advantage in applying the modernist equipment to produce milk, it is very hard for any new entrant to come into this sector and compete with T.H True Milk recently. As the result, they are still being stable in market share. That requires new company have to make their great efforts and strong investment to surpass the existent barriers. Approach to distribution channels
These large dairy enterprises in Vietnam recently have their own system-wide distribution and professional. When businesses want to reach new distribution channels, they will have to face with much cost demands. Brand identify
In the dairy industry branding elements is a very important factor that influence to the company’s market share, thereby affecting revenue and profitability of the business. Competitive Rivalry in an industry
Current status of the competitors
Vietnam’s milk market share recently is approximately 3 million with the well-known milk label such as: Vinamilk, Ba Vi Milk, etc. The largest market share is Vinamilk with the highest market segments. However, the suppliers of Vinamilk only meet 25% of production (from cattle farms to purchasing of households). Vinamilk is still trying to maintain and increase their market share. Barrier to industry
For the dairy industry, the initial capital required a lot. In order to have 10 cows, the capital are necessary. Furthermore, the cost invests on systems and machines are required. Cattle raising also requires good cooling system, proper housing, automatic milking. The machines are very complicated to switch on. All of factors have created a big barrier in capital. Brand identify
Not only the new business but also existing enterprises are facing with this problem. It can be easily seen that the dairy market in Vietnam is dominated by familiar brands such as Vinamilk, Dutch Lady, Nestle, etc. All of them have become usual in daily life for a long time. This is one of the main pressures on other firms trying to get market share with the present brands. Switching cost
It has not switching costs of products in the consumer virtually or there is not significant low cost that a consumer can fully convert medical products that application. If this situation happens, the pressure of competition between firms would go up. Industry growth
Dairy industry is one of the industries with good growth when consumer demand is rising dramatically. It should be noted that characterizes of the dairy industry growth rate not only are stability and high profits, but also requires a relatively market share due to competitive pressure measurement is quite a big deal. A fight between the company’s market shares to compete always maintains the growth’s speed with develop of industry. Threat of Substitutes
Although clearly defined market segments, TH True Milk also need to be careful before these products can substitute for their product line, such as: * Drinking yoghurt
* Soy milk
* Butter and cream
* Other nutritional foods.
All kinds of substitutes make the competitive pressure coming from alternative products is quite large. Recently due to the world dairy market price fluctuations and continuously Vietnamese dairy industry relies heavily on foreign sources of supply to domestic market are also affected , dairy product prices tend to increase to shield consumers tend to search for alternative nutritional products as well as transfer to other consumer items in the country . Elements can be seen in all the large influence consumer decisions. Bargaining power of Suppliers
For the dairy market in Vietnam, the input source of materials mainly depend on imported raw materials from foreign capital accounted for more than 70% of input materials for the dairy industry (as reported of Habubank 2010). For source materials within country, mainly provided by dairy farmers to scale breeding households are lack of professionalism. However, the current trend scale dairy farming is gradually shifted to the farm model for businesses to begin backwards vertical integration. Thus, TH True Milk with supply mainly from investment projects worth 1.2 billion U.S dollar on dairy farming system in Nghe An province in closed process, according to the model adopted number of farms with around 22,000 cows, with modern technology, animal husbandry, food processing power. Bargaining Power of Buyers
The direct consumers potentially could cause a huge pressure for the company’s product quality. Currently dairy products are various and can be substituted for each other. Companies must compete with each other in quality and diversity of products and powerful brand and then compete on price. Quality
Considering the quality of the products currently on the market, Vinamilk or Dutch Lady brands are appreciated for the quality of products, but milk brand TH True Milk is one of the competition heavyweights with product line fresh milk from dairy cows raised in Nghe An milk without using imported milk powder. Price
About price, TH True Milk price is not available for rivals in the market, about 6% higher compared with the same products of Vinamilk. If considering the price, TH True Milk is higher than other milk brands in spite of product quality have been recognized but higher rates of main competitors need to care about TH True Milk because consumers could switch to consumption of alternative products.
b/ Macro environment factors:
The political environment for milk market is still stable, no institutions or regulations restricting to the development of the dairy industry. This creates opportunities for dairy industry development in Vietnam. Besides, with the support of state policy: encourage farming and dairy processing to facilitate farmers to provide inputs for the companies in the sector are large, the operating policies of the Government in health care, nutrition, milk used to encourage people to improve health, stature, wisdom for all people, especially children and the elderly; drinking campaigns, distribution of free milk companies in the same industry contribute to a potential market for Vietnam’s dairy industry. In addition, Vietnam joined the WTO is the opportunity for many other business help Vietnam Dairy chance to have access to raw milk supply from abroad much cheaper. Social
The consumers now are becoming much stricter with the products in terms of price, quality and manufacturer information. Especially when the market is flooded by many different milk brands and other information about dairy products that contain chemicals such as melamine. However, the dairy industry but also certain advantages: • Milk is essential consumer products
to people; spending habits raised dairy products had been formed. • The consumer market in Vietnam is still very fertile with the young population, the speed of fast population growth in the next few years, the current population of young and milk intake is still lower than with the world.
Vietnamese economy in the recent period (2008-2011) has many changes. In the context affected by the economic crisis and other global macroeconomic instability of the economy has caused negative impact on economic growth in Vietnam. In 2010, GDP growth reached just 6.78%, CPI growth rate reached 11.75% by 2011 GDP growth rate only 5.78%, while the CPI growth rate again measured up to 18.13%. However, forecasts to 2012, this ratio will drop to about 11-12% on the drug policy to curb; inflation begins to take effect and the economy will be more positive changes in the coming time. This promises to deliver favourable for the Vietnamese dairy sector where CPI is expected to increase in the coming time, will lead to consumer demand, increase due to milk the dairy market in Vietnam. This is also a potential market. Technology
With Vietnam dairy, equipments and facilities are exported from foreign. However, each business has their own methods, the trick of the trade. Thus, the quality in milk is different. One thing I want to mention is that consumers now seize the essence of the milk matter, they really care rather about the quality element as well as food safety. In addition, factors that help them to reduce operating costs lead to the fact that their businesses could set lower cost product that other competitors. This causes a pressure on businesses when they have to do research about the new modern technologies. Legal environment
Although the climate in Vietnam is suitable for raise dairy cows but the milk quality and capacity are not higher than that in temperate zone. Therefore, these businesses as well as households could enter and talk and initiate reconstruction Foreign Ministry seed varieties to improve capacity and quality of milk. In order to do that, businesses and households have to spend a lot of time as well as a huge of cost to care as well as further
improve these breeds appropriate for the climate in Vietnam. In addition, nowadays Vietnamese’ Government and people are also paying attention to environmental protection issues. If the dairy enterprise systems are waste disposal in the production line test, small household earnings care as well as appropriate investment for waste handling in the process of raising board. This not only pollutes the surrounding environment but also increases the risk of occurrence of a disease is able to spread out. Laws
The dairy industry is not affected by the laws’ influence. However, the trend may change in the next few years when law makes some adjustment to the listing milk price now. 2/ Organizational audit
Sources of company
a/ Tangible Resources:
T.H Group invested a large of money on an advanced management system and integrated production processes that follow international standards from planting grass, building barns, animal health care processing to the distribution to product for consumers. Financial Resources:
The most scale farm in Southeast Asia was formed in Nghia Dam district, Nghe An province with the total investment up to $1.2 million US dollars. According to Thai Huong- The Genaral Manager of North Asia Bank as a consultant and project finance investment, the farm area of 37,000 hectares is currently nurturing, caring breed cows that successfully imported completely from New Zealand, with nearly 20,000 cows. It is expected that by 2017 there will be 137,000 cows and it will be the source of abundant raw material to the processing plant of the modern dairy in order to help T.H could reach a maximum capacity of 500 million liters/year and meet 50 % of demand for dairy products in the domestic market. In addition, the company has a sugar factory and milk processing factories. Technological assets:
Another thing I would like to mention is that the company also invested an automatic milking system that is operated and automatic computerized
management of Afimilk (Israel). This system allows checking milk quality automatically, sorting without guarantying the quality of milk and this milk immediately was rejected. The automatic milking machines help to the limit of this common disease such as bovine mastitis place, and also help to control the quality of milk components are thoroughly implemented. Organizational resources:
In order to provide products to consumers quickly, safe and convenient, TH also developed retail chain stores of T.H True Mart.
AfiLite milk meter – production measure a meter, milk composition, accuracy and efficiency. This machine is browsed by the International Committee of storing data through ICAR animals, which is Ideal Software – recognition system based on the identification card inserted for each cow that has high accuracy and ensures data collected is reliable. One thing worth to mention is that TH application management software systems of Afikim AfiFarm Forum (Israel). Beef is wearing chip card (Afitag) leg to closely monitor the health, comfort and milk production.
b/ Intangible Resources:
Mr. Tran Bao Minh is CEO of T.H True milk now. He was previously Deputy CEO should VNM has extensive experience operating in the dairy industry as well as the understanding of it, that’s main rival TH True VNM is milk. Production staffs: The company employs about 900 local workers from all over our country with the lowest income is 3.2 million VND/labor. These employees are guided by experts and farmers technical Israeli dairy farming. Brands:
It is hardly to deny that the most intangible assets of T.H true Milk brand now is the brand of clean milk. TH True Milk declares their position is “pure milk”. Quality of TH True Milk is no different from the quality of the opponent. They have is a “different” is because the word “clean” in the “feel” of the mothers when they choose for their children TH True Milk (perceived quality). Skill and expertise:
Although T.H Group did not have much advantage to learn and experience, T.H True Milk always try to learn as well as decrease the drawback by hiring expert guidance, recruitment management. Typically in equipment, T.H Group has hired experts from Israel and machine in order to training Vietnamese farmers 2.1: The Value chain of T.H True Milk:
-Company produces the main raw material (milk).
-Self-produces raw material is sugar.
-Control the source of food for cattle.
-Preservation and Transportation
– Build dairy farm of T.H company in Thien Dan district, Nghe An province. – Imported fully from abroad with the number of 22000 cows and continued investment on 45000 cows (2013). -Acquisition Nghe An Tate & Lyle factory (2011).
-Food source: imported food combined with the main system that processes the grass of company. Milk will be transported into 4 small tanks with a capacity of 1000 liters. Through the dedicated filter in 37 degree C and then go through the cooling system to go into reservoirs in the temperatures of 3-4 degree C. Milk is transferred to the cool storage tank truck for transport to the processing factory. -Technology:
+Closed production cycle followed by international standards. +Buy technology management and automatic milking from Israel: Atitag, Atilite.
Sign the consulting contract with dairy farmers Afikim (Israel).
Learning and spread-out:
+There are professionals working from abroad.
+Manager who has experience in the dairy industry.
Manufacturing and processing
– Milk will process and package at the factory located in Hung Yen. -T.H True Milk use Tetra Pak packaging, Swedish corporation specialized in manufacturing paper by packaging carton. +Technology:
Automatic production line
Using approximately 900 local employees and a number of specialists from abroad Links with packaging suppliers and distributors of packaging products. -Institutional:
Import tax on domestic packages.
-Milk was produced in Hung Yen factory will be stored in a short time and then transported to main delivery locations. – used mainly trucks for transporting.
-Distributed directly to T.H true milk stores and large distributors. -Technology:
-The milk storage tank in the optimum temperature (3-4 degrees C).
Marketing and sales
– Fixed Price
-Build own distribution channels
– advertise on TV, magazines, outdoor posters, or even through company website. All of activities or PR are focused on image and information about food safety. Prices of product officially had on T.H company website.
-Distribution through retail outlets T.H True Mart and other distribution channels. -Staff:
Recruitment of senior executives from rival.
T.H true milk had more than 100 their own stores.
Combined with bank that issue payment cards.
T.H Group combined with North Asia Commercial Joint Stock Bank had preferential issue outstanding. Customers will be enjoyed some benefit when using card to pay bills such as buying product of T.H: fresh milk, fresh vegetable, meat, etc.
Through the value chain, the differentiation of T.H True Milk is increased a lot compared with other competitors. + Inbound logistic reflected on where to focus efforts for production inputs. Business strategy of T.H is to create high-products and to achieve that company focus on management and quality assurance through activities such as farm building, technology or recruitment from abroad. +Another thing I could mention is in marketing and sales activities. Value of T.H True Milk is created through strong promotional strategy that hit product quality through striking quality control and started to build its own system True Mart distribution serves
not only the current milk products but also the strategic development of the company’s new products, such as vegetables, fruits.
2.3: SWOT analysis:
1.Potential market is still growing (5-7%/year)
2.Economic and political are stability
3.Suppliers of raw materials from domestic are improved.
4.The young population structure and the speed of population are going up gradually. 5.Milk consumption became necessary.
1.Customers’tastes increase strictly more than ever before. 2.Exchange rate fluctuations affect input costs.
3.More and more competitors on the market
4.Impact of economic crisis on input cost and operating expenses. 5.Lending interest rate fluctuations.
1.”Clean” milk brand
2.Modern production technology ( purchased from Israel and New Zealand) 3.Active integration by building dairy farms and its own distribution system 4.Current market share is expanding.
5.Had own distribution channels
Expanding the current market share and exploit the new market (in rural). – S1S2S5O2O3O4:
Build “clean” milk brand. Develop the new product life of T.H True Milk (dairy products such as: yogurt, cheese, etc. – S2S3O2O3:
Reduce production costs in order to reduce the cost compared with competitors by investing in new grass- processing and in training staffs. – S1S4S5T1T3:
Focus on fresh milk market share and use the “clean” milk brand to create the trust of consumers. – S2S3T2T4:
Improve the existing production line to reduce production costs, reduce management costs by training existing workforce from foreign experts.
1.Do not have after sale service.
2.Do not have experience in production.
3.Production system cannot meet the demand for output.
4.The current capital still use borrowed funds
Build after sale service systems or customer care to maintain and create customer loyalty -W2O1O5:
Attract competitors’ staffs by the higher wage and welfare policies. -W3W4O1O2:
Attract more investments to expand production capabilities of the company (buy cows, a new production line) -W1T1T3:
Establish after sales service center
Contact suppliers outside in case of necessity. Find long-term supply contracts. -W4T4T5:
Consider to cut unnecessary costs, handling of project plans for production or inoperative.
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Available at: http://www.dna.com.vn/vi/tinh-huong-thuong-hieu/s/th-milk-vs.vinamilk/7 [Accessed 2 October 2013].
Tiền phong, 2013. TH True MILK: Từ giọt sữa sạch đến chiến lược quốc gia. [Online] Available at: http://news.go.vn/kinh-te/tin-1424952/th-true-milk-tu-giot-sua-sach-den-chien-luoc-quoc-gia.htm [Accessed 13 October 2013].
Cite this Business Strategy for T.H
Business Strategy for T.H. (2016, Nov 16). Retrieved from https://graduateway.com/business-strategy-for-t-h/