Improving performance of long-term dealers: a study of Sông Vàm Rice Company

Table of Contents Executive Summary................................................................................................................. 1 Acknowledgements .................................................................................................................. 2 LIST OF TABLES................................................................................................................... 3 LIST OF FIGURES................................................................................................................. 4 1.INTRODUCTION ................................................................................................................ 5 1.1 Sông Vàm Rice company .............................................................................................. 5 1.2 Organizational structure of Sông Vàm Rice ............................................................... 7 1.3 Mission of Sông Vàm Rice ............................................................................................ 9 1.4 Vision of Sông Vàm Rice............................................................................................... 9 2. Problem context .................................................................................................................10 2.1 Vietnamese rice industry.............................................................................................10 2.2 Analyzing the competitors of Sông Vàm Rice...........................................................11 2.3 Customer segment of Sông Vàm Rice........................................................................14 3. Symptom of Sông Vàm Rice. ............................................................................................14 4. Problem identification.......................................................................................................17 4.1 Possible problem 1: Slow in finding new dealers.....................................................18 4.2 Possible problem 2: Underperformance of long-term dealers. ...............................19 4.3 Possible problem 3: Some dealers stopped cooperation with Sông Vàm Rice by low sales revenues & profits. ............................................................................................22 5. Identifying main problem. ................................................................................................24 6. Problem justification. ........................................................................................................25 7. Exploration of causes.........................................................................................................28 7.1 Lack of a trade marketing plan..................................................................................28 7.2 Incentive policy is not enough to boost motivation of dealers. ................................30 7.3 Inefficient training programs for dealers..................................................................31 7.4 Lack of modern technology and software to manage performance of sales team and dealers..........................................................................................................................32 7.5 Identifying main cause. ...............................................................................................32 8. Alternative solution. ..........................................................................................................35 8.1 Alternative solution 1: Cooperating with a marketing agency................................36 8.2 Alternative solution 2: Recruiting a trade marketing manager..............................39 8.3 Alternative solution 3: Designing an effective trade marketing package for dealers by using current resources of sales and marketing department. ..................................44 8.4 Choosing the most suitable solution for Sông Vàm Rice .........................................48 9. Action plan of organization ..............................................................................................52 10. Conclusion ........................................................................................................................56 11. Supporting information ..................................................................................................57 APPENDIX.........................................................................................................................61 References...........................................................................................................................75 Executive Summary Sông Vàm Rice is a company working in the rice industry. It was established in 2016, the main business of the company is providing hygiene and speciality rice (products without pesticide residuals) for customers in Ho Chi Minh city. The company developed its distribution channel with the strategy: Focusing on cooperating with dealers. However, the actual performance of dealers channel in 2019 was lower than the target of CEO. This affected sales revenues, profits and relationships between Sông Vàm Rice and its dealers. This study used secondary data, primary data of the company to explore the main problem it is facing: “ Underperformance of long-term dealers”. In which, the root cause was identified that the company lacked of a trade marketing plan to support long-term dealers. Therefore, we proposed three alternative solutions to deal with the main problem by using qualitative research and quantitative research. These solutions could help the company improving performance of long-term dealers and build a sustainable relationship with them. 1 Acknowledgements I would like to say thank you very much to Dr. Nguyen Thi Mai Trang. She is a dedicated teacher. Without her encouragements and guidance, I couldn’t complete the THESIS well. It was a pleasure for me to be your student in MBA class. Besides that, I would like to send my appreciation to other lecturers in ISB who taught me valuable knowledge and lessons in the course. I would like to say thank you my family: parents, my younger brother, my aunts and especially my wife who supporting me during MBA course. 2 LIST OF TABLES Table 1: Value proposition evaluation between Sông Vàm Rice and other competitors. Table 2: Competitive strength assessment between Sông Vàm Rice and other competitors. Table 3: Comparing actual performance against target of CEO in 2018 and 2019. Table 4: Performance of 3 types of dealers and sales target of CEO in 2019. Table 5: Reasons to stop cooperation of dealers. Table 6: Effectiveness of marketing activities to support a dealer in Binh Thanh district in 2019. Table 7: Incentive policy for dealers of Sông Vàm Rice. Table 8: Costs & benefits of solution 1. Table 9: Costs & benefits of solution 2. Table 10: 9 trade marketing packages were created by Orthogonal Design in SPSS. Table 11: Part-Worth scaling (Utility) for each factor level. Table 12: Relative importance of each attribute. Table 13: Costs and benefits of solution 3. Table 14: Action plan of Sông Vàm Rice. Table 15: Secondary data collection. Table 16: Primary data collection. 3 LIST OF FIGURES Figure 1: Organizational structure of Sông Vàm Rice. Figure 2: Sales & marketing department of Sông Vàm Rice in Ho Chi Minh city. Figure 3: Strategic group mapping. Figure 4: Average sales quantity/channel/month of Sông Vàm Rice from 2017 to 2019. Figure 5: Proportion of each channel in average total sales quantity/month of Sông Vàm Rice in 2019. Figure 6: Comparing average actual performance/month against average target performance/month of CEO for dealers channel in 2017, 2018 and 2019. Figure 7: A diagram of symptom and possible problems of Sông Vàm Rice. Figure 8: Value chain of Sông Vàm Rice. Figure 9: A model of key factors affecting relationship satisfaction. Figure 10: Final cause-effect map of Sông Vàm Rice. Figure 11: Trade marketing model. Figure 12: New structure of sales and marketing department after recruiting a trade marketing manager. Figure 13: Trade Marketing Planning Framework. 4 1.INTRODUCTION 1.1 Sông Vàm Rice company Sông Vàm Rice was established in 2016 with the purpose of business is bringing hygienic rice for customer’s family. The main business of Sông Vàm Rice is producing, manufacturing and distributing hygienic and speciality rice. Main market of Sông Vàm Rice concentrated on big cities in Vietnam such as Ho Chi Minh city, Ha Noi and Da Nang. Initially, the company developed distribution channels in Ho Chi Minh city. Beside that, It had built two rice stores, one in Long An province and one in Ho Chi Minh city since 2017 to introduce and display the products to the customers. The factory of Sông Vàm Rice is located in Tan Tru district, Long An province. In the value chain of Sông Vàm Rice, high quality of materials is one of the most important factor affecting the success of business. This could help the company producing high quality rice (rice with purity, color, fragrance and degree of stickiness) and guarantee the hygiene of the product for the customers ( rice without pesticide residuals). Therefore, the company put many efforts to establish a sustainable relationship with farmers in Long An province and Mekong Delta to grow hygienic rice in these areas. Agriculture engineers of the company will consult the efficient process to grow rice for the farmers and supervise activities during harvest. The company will sign long-term contract with leaders of cooperative farmers groups to buy all paddy when harvest comes, usually the price offered by Sông Vàm Rice for farmers was higher than the price of the market from 500,000 VND/ton. This would help the farmers gaining more sustainable benefits. Meanwhile, Sông Vàm Rice has a good source of materials to produce high quality rice without pesticide residuals. It is a competitive advanatage for the company when comparing with other rivals in the market. In the business model of Sông Vàm Rice, the company is not the first-mover in rice brand industry, so CEO chose the strategy: “best-cost provider” to compete in the market. It means Sông Vàm Rice provides high quality and hygienic rice (some main characteristics: the purity, color, fragrance, stickiness and without pesticide residuals) with a reasonable price compares to other competitors in the rice industry. A strong distribution channel plays a vital role in the success of any companies. Instead of competing directly with big competitors such as Hat Ngoc Troi rice, Minh Tam rice in MT (modern trade) channel such as supermarket (Big C, Coopmart, MM supermarket) or big grocery stores (Vinmart, Bach Hoa Xanh, CoopFood), the strategy of Sông Vàm Rice is attacking the potential market in apartment areas or residential areas through cooperating 5 with dealers in these areas where the competition is not fierce to gain the market share quickly. Salesmen of Sông Vàm Rice will be repsonsible for finding potential dealers in these areas to cooperate with them. Dealers could be traditional rice stores, family-owned grocery store or people live in the residential and apartment building area. They have a place to store and sell rice for the customers or they have many relationship in their living area, especially, they would like to earn extra income for their family. Salesmen of Sông Vàm Rice will introduce sales policy of the company, consult dealers about the products knowledge about rice industry as well as rice production process in factory, process of growing rice. Moreover, salesmen cooperate closely with marketing employees to organize trade marketing activities to support dealers such as sampling, promotion program, point of sales materials, standee to boost the revenue and profit for sellers. This strategy could help Sông Vàm Rice gain market share quickly before big competitors start to attack this distribution channel. Besides that, Sông Vàm Rice diversified its distribution channel to protect the business through signing long-term contract with companies, restaurants and schools in Ho Chi Minh city who have demand for hygienic rice. It could help the company having sustainable profit. Therefore, the performance and cooperation of sales team and marketing employees had a huge positive impact on the success of Sông Vàm Rice. 6 1.2 Organizational structure of Sông Vàm Rice Sông Vàm Rice is a small company. Total employees of the company is 25. Accounting & finance department (4 people), company service department ( 2 people), technical & production department (5 people), warehouse and procument department (5 people), sales & marketing department (9 people). CEO Operational department (6 people) Business development department (19 people) Account & Finance department (4 people) Technical & Production department (5 people) Company service department (2 people) Warehouse and procument department (5 people) Sales & Marketing department (9 people) Figure 1: Organizational structure of Sông Vàm Rice. Source: Sông Vàm Rice profile. As mentioned above, the strategy of Sông Vàm Rice is not competing directly with big competitors with large resources as Hat Ngoc Troi rice, Minh Tam Rice in MT channel (supermarket, grocery store chain like Coopmart, CoopFood, Bach Hoa Xanh). Initially, the company developed its distribution channel by finding potential dealers in residential areas or apartment buildings in Ho Chi Minh city. Hence, the role of salesmen and marketing employees 7 is very crucial in the development of the company. They need to find potential dealers to cooperate, boosting sales revenues through marketing activities to achieve target of CEO. That is the reason why we need to understand deeply the organizational structure and the working process of this department to enhance the performance of the company. Sales manager (1 person) Salesmen (5 people) Marketing employees (3 people) Content (1 person) Trade marketing (2 people) Figure 2: The organizational structure of sales & marketing department in Ho Chi Minh city of Sông Vàm Rice. Source: Sông Vàm Rice internal report in 2019. Sales & marketing department consists of 9 people, they have responsibility to expand market share of Sông Vàm Rice in Ho Chi Minh city. Sales manager will handle all members in this department and offer a plan for CEO to increase sales revenue. Besides that, Sông Vàm Rice has 5 salesmen to develop its business by finding potential dealers and taking care of them. Marketing employees will cooperate with salesmen to execute marketing activities to not only support salesmen and dealers but also build the brand of Sông Vàm Rice. Salesmen will report the sales data and performance of dealers for sales manager. CEO, sales manager and marketing employees will have meeting regularly to discuss about suitable programs to support salesmen and dealers. Marketing employees put more efforts into advertising the brand of Sông Vàm Rice to customers. 8 1.3 Mission of Sông Vàm Rice Although Sông Vàm Rice is only a small and medium enterprise and has just established recently. But the company would like to bring high quality products of rice for customer’s family. The company emphasizes the mission mentioned as below as a guideline to lead the company to grow and move forward in the future: · Bringing the warm meal to customer’s family. · Providing high quality rice ( rice without pesticide residuals, quick delivery service) with a reasonable price for customers. · Building a sustainable relationship with farmers, bringing a sustainable profit and an efficient process to grow hygienic rice. 1.4 Vision of Sông Vàm Rice Sông Vàm Rice has its vision to achieve in the next 10 year. It helps the company creating plans, objectives and making important decisions towards the vision. Vision as a map to guide the company, define the picture of the company, how it works or what it needs to gain to make the vision come true. A vision helps keeping organization focused, connecting the valued resources to gain the huge achievement. · Branding Sông Vàm Rice becomes one of popular brand rice in a domestic market: By organizing a good distribution channel along the country, diversifying distribution channel both in general trade channel (GT) and modern trade channel (MT) to ensure the financial performance of the company. · Building the Vietnamese rice brand in international markets: Although Vietnam is the third biggest exporters of rice in the world, we don’t have any famous Vietnamese brand rice in foreign supermarkets. The foreign consumers don’t know about the reputation of Vietnamese rice. Starting working with the supermarket in domestic market to understand deeply the process of selling rice in MT channel, this would helps Sông Vàm Rice having experience to attack international supermarket in the future. · Diversifying value-added products from rice: The value chain of argricultural products of Vietnam is small, we don’t have many value-added products. In Thailand, they have many value-added products from rice such as rice cracker, bran rice oil, rice milk, cosmestics from bran rice… Sông Vàm Rice needs to invest money in research & development activities to create new types of products from rice. It has a purpose to 9 protect the business of Sông Vàm Rice in the fierce market and expand the product line of the company. 2. Problem context 2.1 Vietnamese rice industry The rice industry in Vietnam is very potential, but the competition is very fierce. Vietnam is now one of top leading exporters rice in the world. There are nearly 150 rice exporters in Vietnam. These exporters mainly concentrate on quantity and revenue, not pay enough attention to the brand and the quality of Vietnamese rice around the world. Meanwhile, Thailand, India and recently Cambodia successfully build their brand rice in international market. In domestic market, Vietnam market is very potential, our country has over 90 million people. Every year, Vietnamese farmers produced around 20 million tons of rice. 1/3 of them around 7 million tons of rice are used to export for foreign countries, the rest are consumed in domestic market. That is the reason why Vietnam rice market is very attractive. Because of the concern of the customers about fresh and hygienic food, many rice companies in domestic market are building their brand rice to provide for customers. In reality, the market share in domestic market is divided into many parts, most of them belong to traditional stores who often sell many varieties of rice without brand name, date of expiration, origin of rice. Some big players in the rice brand industry in Vietnam are Hat Ngoc Troi rice, Vinh Phat Wilmar rice and Minh Tam rice. They are first players of rice brand industry with large resources and experiences. They possess a strong distribution channel, especially in modern trade (MT) channel such as big chain supermarkets as Coopmart, Big C, Lotte and grocery stores as Bach Hoa Xanh, Coop Food. These companies are the biggest competitors of Sông Vàm Rice. However, they focus on taste of rice of customers. Meanwhile, Sông Vàm Rice not only concentrates on bringing suitable taste of rice (degree of stickiness and fragrance) for customers but also providing hygienic rice (without pesticide residuals) to ensure customer’s health. Some small players as Hoa Nang, Hoa Lua rice, they sell organic rice with USDA and EU certificate. However, the price is vey expensive, it ranges from 50,000 – 60,000 VND/kg. (according to price of these products listed in Coopmart).The demand for safety food in Vietnam is increasing, however the price is a barrier for consumers to buy safety food. 10 2.2 Analyzing the competitors of Sông Vàm Rice Figure 3: Strategic group mapping. Source: Competitor Analysis Report of Sông Vàm Rice in 2019. As the chart of strategic group mapping, Minh Tâm rice and Hạt Ngọc Trời are the same segment customers with Sông Vàm Rice. To compete in the market, Sông Vàm Rice is pursuing the best-cost provider strategy. It means that Sông Vàm Rice will provide high quality & hygienic rice (fragrance, stickiness and without pesticide residuals) for the customers with a reasonable price. (price ranged from 20,000 VND/kg to 28,000 VND/kg). Comparing with other competitors in same segment as Hat Ngoc Troi and Minh Tam rice, the price of product of Sông Vàm Rice is similar, however, Sông Vàm Rice put more efforts into providing hygienic rice to ensure health of customer’s family. Comparing with Hoa Nang and Hoa Lua rice, Sông Vàm rice provide the products with the quality nearly similar with the quality of Hoa Lua and Hoa Nang rice with a reasonable price. For instance, the highest price of Sông Vàm Rice is 28,000 VND/kg (according to company’s report), meanwhile the price of product of these companies is often range from 35,000 VND – 50,000 VND/kg. (according to price listed in Coopmart and Bach Hoa Xanh). Sông Vàm Rice is not the first-mover in rice brand industry, therefore the company chooses to build its distribution channel in general trade channel (GT channel) first to gain market share quickly by finding potential dealers to cooperate in residential areas or apartment buildings in Ho Chi Minh city. Because the discount percentage for retailers as supermarkets, grocery stores in MT channel is much higher than the discount percentage for dealers in GT channel, moreover, the account receivable days in MT channel is often longer than GT channel. ( 45 days comparing with 15 days). Besides that, Sông Vàm Rice also diversified distribution channel by providing rice for companies, restaurants and schools to gain sustainable profit for 11