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with the expeditious development of scientific and technical areas such electronic, communication, biotechnology advance in the world, the plastics have also had outstanding technological progress
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 Fredric William Swierczek (Chairman) Dr Truong Quang Dr Clemens Bechter Nationality: Previous Degree: Vietnamese Bachelor of Economics HCMC University of Economics, Vietnam Bachelor of English HCMC University of Education, Vietnam Scholarship Donor: The Government of Switzerland Asian Institute of Technology School of Management Bangkok, Thailand April 1999 i ACKNOWLEDGEMENT I would like to express my deepest gratitude to my research advisor, Dr Fredric William Swierczek for his intensive support, valuable suggestions, guidance and encouragement during the course of my study My sincere thanks are also due to Dr Truong Quang and Dr Clemens Bechter for their valuable time as the members of the examination committee Their constructive suggestions were of great help in my completing this study I would like to express my sincere gratitude to all of my teachers at SOM-AIT for their teaching and guidance during my course I sincerely thank Mr Uong Tien Thinh and Mr Le Dinh Tuc for providing me the opportunity to carry out the study and such valuable information I appreciate the assistance of managers and staff of Rang Dong Plastic Company who were helpful in the collection of data I would like to specially express my thanks to all of my friends for their support and encouragement Finally, I heartily dedicate this study to my beloved parents and my husband, Nguyen Thanh Long who have always sacrificed to encourage and support me during my study at AIT ii ABSTRACT Rang Dong Plastic company is one of the most successful companies in terms of high market share It has produced plastic products of various kinds in which PVC films is the core product of the company The PVC films product accounts for 70% of the market share However, in the competitive environment, Rang Dong Plastic company has faced various difficulties especially the lack of the vision in the long term The objective of the study will therefore design a development strategy for the company in the long term Based on the examination and analysis of the external and internal environment, the study will determine strengths, weaknesses, opportunities and threats (SWOT) Derived from the SWOT and based on the general process of strategy formulation, the study will develop the most appropriate development strategy for the company Finally some recommendations are suggested for the company to be able to implement the proposed strategy iii Table of Contents Chapter Title Page Title Page i ACKNOWLEDGEMENT ii ABSTRACT iii List of Tables vii INTRODUCTION 1.1 Background 1.2 Problem statement 1.3 Objectives 1.4 Scope and limitations of the study 1.5 Methodology and framework of the study 1.6 Organization of the study LITERATURE REVIEW 2.1 Strategic management perspective 2.2 Definition of strategy 2.3 The process of strategic management 2.4 Structural analysis of the competitive environment: 2.5 Selecting development strategies 12 EXTERNAL ENVIRONMENT ANALYSIS 16 3.1 Macro-environment analysis 16 3.2 Current situation and trend of investment of Plastic Industries in Asian nations 19 3.3 Current situation of Vietnam plastic industry 22 3.4 Development of Vietnam plastics industry of 2005 25 iv 3.5 Investment potentials 28 3.6 Industry environment analysis 31 3.7 Summary of opportunities and threats for Rang Dong Plastic company 32 INTERNAL ENVIRONMENT ANALYSIS 34 4.1 History of Rang Dong plastic company 34 4.2 Company missions 35 4.3 Organizational structure 35 4.4 Production at Rang Dong Plastic company 38 4.5 Sales and net income 45 4.6 Marketing 47 4.7 Finance 49 4.8 Conclusions on strengths and weaknesses of Rang Dong Plastic Company 50 DEVELOPMENT STRATEGY DESIGN 51 5.1 Foundations of Rang Dong plastic company’s strategy 51 5.2 Strategic options for Rang Dong plastic company 52 CONCLUSION AND RECOMMENDATIONS 55 6.1 Conclusion 55 6.2 Recommendations 56 REFERENCES 58 v List of Figures Figure 1.1 - Framework of the Study Figure 2.1 - The Determinants of Company Performance Figure 2.2 - Strategy Formulation Process Figure 2.3 - Requirements for Competitive Success Figure 2.4 - The Five Forces Model Figure 2.5 - The Porter Model Applied for the Vietnam Plastic Industry 12 Figure 2.6 - Development Strategies 13 Figure 3.1 - GDP during the Period of 1990-1998 18 Figure 3.2 - GDP Growth Rate in the Period of 1990-1998 18 Figure 3.4 - Asean Thermoplastics Consumption by Type 21 Figure 3.5 - The Competitors in the Field of Producing PVC Films 32 Figure 4.1 - Rang Dong Plastic Company’s Organizational Chart 36 Figure 4.2 - Process of Producing PVC Films 39 Figure 4.3 - Process of Producing PVC Leathers 40 Figure 4.4 - Process of Producing Sheets for Roofing and PVC, PE Boards 41 Figure 4.5 - Process of Producing Pet Bottles 41 Figure 4.6 - Current Product Structure of Rang Dong Plastic Company 44 Figure 4.7 - Sales Revenue 45 Figure 4.8 - Net Income (1994-1997) 46 Figure 4.9 - Structure of PVC Films Market Share 46 Figure 4.10 - Distribution System of Rang Dong Plastic Company 48 Figure 5.1 - Development Strategy Designed for Rang Dong Plastic Company 54 vi List of Tables Table 2.1 – Generic Strategies 14 Table 2.2 – Product / Market / Distinctive Competence - Choice and Generic Competitive Strategy 14 Table 2.3 – Alternative Directions for Development 15 Table 3.1 – The Economic Growth Rates (%) 20 Table 3.2 – 1997 Asean Per Capita Thermoplastics Consumption 21 Table 3.3 – Plastic Product Structure Compared with Thailand and Malaysia 23 Table 4.1 – Labor Force of Rang Dong Plastic Company 38 Table 4.2 – Price List of PVC Films Products According to Methods of Payment 47 Table 4.3 – Rate between Sales Revenues and Advertising Costs 48 Table 4.4 – Fixed Assets Turnover 49 Table 4.5 – Total Assets Turnover 50 Table 5.1 – Direction for Rang Dong Plastic Company’s Strategy Development 54 vii CHAPTER 1 1.1 INTRODUCTION Background In the past 20 years and in the following years, together with the expeditious development of scientific and technical areas such electronic, communication, biotechnology advance in the world, the plastics have also had outstanding technological progress As plastic products in these days are serving not only for family life activities but in all economic sectors, through the experience of developing countries it is proven that if the growth ration of the national economy is 1%, the plastic industry will develop accordingly from 2% to 3% In the next 10 years, according to a forecast of economic experts, our country's economy can grow stable at a rate of 7%-8% or more Therefore, the annual growth rate of the plastic industry will also be in the range of 20%-25% consequently The center of the development of the plastic industry as well as the center of the plastic industry is now concentrated in Ho Chi Minh City with productivity of over 70% output of the country with plastic products of various kind This situation leads to the benefits for consumers and the profit reduction for producers In addition, the plastic products serve mainly for consuming household utensils at the rate of about 65% of the total output Plastic products for other economic areas are not much, remarkably are the packaging products covering 20% of the total output, plastic product or electric and electric industry and for other production industries are very little The plastic industry of Vietnam is on the threshold of a new and highly promising but also of the challenging era of development Vietnam Plastics industry has gained such a high development However, due to the low start, the per capita of 2.8 kg is still not comparable with that of 100-200 kg per annum in other developed countries Not only the per capita is too low but product structure accounts for the low level of Vietnam Plastic industry in comparison with other countries Moreover, most of the manufacturers are of small and medium size and the number of big-sized manufacturers are very few This situation results from the lack of the management at the macro level It is clear that the Vietnam Plastic Industry needs a development strategy in the long run This problem will be illustrated more clearly through the case of Rang Dong Plastic Company Rang Dong Plastic Company has faced with various difficulties especially the lack of the vision and the limitation of information about foreign market and competitors for strategic management in the long term 1.2 Problem statement Based on the examination and analysis the external and internal environment, the study will formulate the development strategy for the Rang Dong Plastic Company in the long term 1.3 Objectives The study is an attempt to establish the development strategy for the Rang Dong Plastic Company The following are the specific objectives of the study: To review literature dealing with the strategic management process, especially the process of strategy formulation To identify strengths and weaknesses as well as opportunities and threats that the Rang Dong Plastic Company has been faced with To assess the current situation of the company to develop its competitive profile To formulate the development strategy for the Rang Dong Plastic Company in the long term 1.4 Scope and limitations of the study The study is about the Rang Dong Plastic Company It aims at the formulation of the development strategy for the company in the long term The depth of the study depends partly on the availability of the data of Vietnam's economic situation and plastic industry in general, especially of Rang Dong Company It depends on the cooperation from the company and the Vietnam Plastic Association (VINAPLAST) as well 1.5 Methodology and framework of the study The study begins with the literature review which concerns the strategic management process, particularly the process of strategy formulation It refers to the concepts and principles of the Porter Model to analyze the competitive environment of the industry Data for the study are collected from main sources: Primary data: Interviews with by persons of VINAPLAST and the Rang Dong Plastic Company as well as other plastic companies Secondary data: Annual reports and other relevant data about the Rang Dong Plastic Company Relevant data about the plastic industry and the Vietnam economy will be collected from Ministry of Industry, VINAPLAST, the National Statistics Office, Ho Chi Minh City Statistics Office, Ho Chi Minh Department of Industry and Commerce, from newspapers, magazines and from Internet and media as well The framework of the study can be illustrated by Figure 1.1 PROBLEM LITERATURE REVIEW STRATEGY PROCESS SITUATION ANALYSIS Scanning external environment Analyzing competitive Scanning internal environment Evaluating current performance results • Opportunities • Strengths • Threats • Weaknesses GENERATION, EVALUATION, AND SELECTION OF THE BEST STRATEGY CONCLUSIONS AND RECOMMENDATIONS Figure 1.1 - Framework of the Study They are calendered and compressed by modern hydraulic machinery line As a result, the products have strong structure The products are available in various sophisticated patterns, nice colors, thin and light-weighted and easily installed They are applied for interior decoration as flooring, walling and ceiling PVC synthetic carpets They are manufactured by Japanese advanced calendering machine The carpets resist to moisture, insect devastation, fire and hard-wearing available in rich colors and patterns They are applied for covering floor in interior decoration works Rang Dong Plastic Company has always tried to improve its product quality through the strategy of technology investment and of skilled labor training investment However, due to the lack of capital, the company has stilled produced some kinds of products with old technology and equipment even equipment of the decade of 1960 Consequently, the quality of these products is not really excellent 4.5 Sales and net income Sales revenue in the period of 1992-1997 and net income (1994-1997) of Rang Dong Plastic Company are depicted in Figures 4.7 and 4.8 250 200 150 Sales 100 50 1992 1993 1994 1995 1996 1997 Figure 4.7 - Sales revenue (Unit: billion of VND) 45 Net ncome 1994 1995 1996 1997 Figure 4.8 - Net income (1994-1997) (Unit: billion of VND) From 1992 up to now, the company’s sales have increased Sales in 1997 were multiplied by nearly more than times compared with that of 1992 Similarly, net income has risen steadily year by year However, comparing to 1996, net income in 1997 increased slightly This was explained that in 1996 and 1997, price of plastic raw materials in the world market has increased rapidly - for example the average price of PVC powder in 1996 was 659USD/1 ton but even on March 1997 to 850USD/1 ton This made manufacturing costs increased to 4% Moreover due to hard competition and based on its pricing policy, the company can not increase the price of their products This shows a weakness of the Vietnamese plastic industry in general, of the company in particular - depending on the external sources of raw materials According to Mr Nguyen Cong Chuong, the company’s General Director, Rang Dong Plastic Company presently accounts for about 70% of PVC films market as depicted in Figure 4.9 Other companies 30% 70% Rang Dong Plastic Company Figure 4.9 - Structure of PVC films market share 46 4.6 4.6.1 Marketing Pricing policy The company has paid much attention to price policy and the quality of the products as well The high profit in the field of producing PVC films has attracted many producers Fierce competition therefore occurs in the form of quality and price although the market for PVC films is large Now price competition of Rang Dong Plastic Company has been based on production on a large scale, modern machinery and low inputs costs For the products consumed on the domestic market, price set is mainly based on manufacturing costs, profit and budget accumulation Price is set according to market trends when fluctuation occurs Table 4.2 presents the price list of PVC films products from Rang Dong Plastic Company according to methods of payment Table 4.2 - Price list of PVC films products according to methods of payment PRODUCT N1 OH 010 x 137 x 100 UNIT M Payment on delivery (Price of VND) Deferred payment (Price of VND) PLASTIC PRODUCTS PROMOTION AND DISTRIBUTION STORE 2310 2370 2400 N1 OH 012 x 137 x 100 2370 2390 2470 N1 OH 013 x 137 x 100 3360 3390 3450 N1 OH 014 x 137 x 100 3990 4100 4170 N1 OH 015 x 137 x 100 4095 4105 4195 N1 IH 015 x 137 x 100 4200 4250 4320 Sources: Trading Department – Rang Dong Price set is based on market price research The Company determines the different price list in different periods and it also depends on the price of raw materials each period The Company always informs the price each period to the distribution store on time However, the Company has not stimulated product consummation as having not used the policy of discount and commission for customers purchasing in bulk 4.6.2 Distribution network : The current distribution of Rang Dong Plastic Company is illustrated in Figure 4.10 Rang Dong Plastic Company has a distribution network spread from Hanoi to Southern 47 provinces The customers can buy Rang Dong Plastic Company’s products through its stores and branches These stores and branches represent the Company to introduce Rang Dong Plastic products to industrial customers like textiles and garments, footwear industries Rang Dong Plastic Company Promotion and Distribution Store Commerce Company Production Units Wholesaler Retailer CUSTOMERS Figure 4.10 - Distribution system of Rang Dong Plastic Company In summary, the Company has paid attention to the problems of setting price and establishing the distribution network However, the Company has not paid much attention to the advertising Table 4.3 illustrates the rate between sales revenues and advertising costs Table 4.3 - Rate between sales revenues and advertising costs YEAR SALES REVENUES ADVERTISING COSTS RATE (%) (Unit: (1) VND) (Unit (2) VND) 1995 139.256.536.425 145.525.000 0,01 1996 181.365.592.231 150.342.000 0,08 1997 221.235.957.982 362.654.000 0,16 (2) : (1) Sources: Finance and Accounting Department – Rang Dong From the table, it proves that the cost for advertising was low (0,16% in 1997) though the advertising cost increased steadily year by year This illustrates advertising activities and 48 promotion policy have not been paid much attention 4.7 Finance 4.7.1 Fixed assets turnover In 1997 most financial sources are self-support capital from the company The company has taken the advantage of financial sources from the bank or has imported raw materials by payment on installment and has made the collection of accounts receivable more quickly in order to guarantee capital for the trading and manufacturing activities and investment of the company The company has also applied the financial management measures to improve fixed assets turnover From Table 4.4, the company has increased the fixed assets turnover to 4.6 times in 1997 Table 4.4 - Fixed assets turnover Criteria 1995 1996 1997 Sales revenues 139.256.536.444 181.365.592.591 221.235.957.982 Fixed assets 47.319.242.709 48.551.608.041 47.610.552.426 Fixed assets turnover 2.9 3.7 4.6 Sources: Finance and Accounting Department – Rang Dong The company has improved the level of accounting knowledge by sending some units to take the training course However, the company has had some financial difficulties as follows: Due to operation expansions all over the country, the company has had the lack of capital The company must therefore have the loans from the bank In 1997 the Company has paid interest of billion VND to the bank This affected the profitability of the company Moreover the Company has had the difficulty in collecting accounts receivable 4.7.2 Total assets turnover Table 4.5 indicates that the company has performed better year by year, total assets are used more effectively in generating its sales In 1997 total assets turnover increased to 2.1 dues to using working capital effectively In summary, total assets turnover is good 49 Table 4.5 - Total assets turnover Target 1995 1996 1997 Sales revenues 139.256.536.444 181.365.592.591 221.235.957.982 Total assets 94.081.383.619 99.271.515.429 107.588.836.000 Total assets turnover 1.5 1.8 2.1 Sources: Finance and Accounting Department – Rang Dong 4.8 Conclusions on strengths and weaknesses of Rang Dong Plastic Company Through internal analysis and comparing with other competitors, the strengths and weakness of Rang Dong plastic company are listed as follows: STRENGTHS WEAKNESSES The local leader in plastic business scale, Marketing activities have not paid much production technology and scope of activities attention yet The company has produced PVC films products by Japanese advanced technology Substantial skilled labor force and good Depending on imported sources of raw management of top-managers materials This is a common problem of all domestic plastic producers The company currently accounts for 70% of Limitation of information about foreign PVC films on domestic market share market and competitors Market research has not been paid attention A thirty -year prestige and quality recognized by local and foreign customers PVC films products of Rang Dong plastic company has a high brand loyalty Close cooperation with associations of plastic manufacturers, textiles and garments, footwear industries, Rang Dong is maintaining regular business relations with large organizations and group in countries having already developed plastic industries Wide distribution network all over the country Total assets are used more effectively in generating its sales 50 CHAPTER 5 5.1 DEVELOPMENT STRATEGY DESIGN Foundations of Rang Dong plastic company’s strategy In order to recommend a right strategy for Rang Dong Plastic company, firstly it is necessary to answer three questions which are at the heart of the company’s strategy choice because they help to indicate the sources of the company’s competitive advantage over its rivals and determine how the company will compete in its business These three questions are: What is to be satisfied? (Customer needs and product differentiation) At present, Rang Dong Plastic company produces PVC films with the width of 1.37 meter, the thickness of 0.06mm up to 0.20mm and the length of 100 meter for one roll used for tableclothe, commodities packaging and making rainwear As mentioned, the competition in the field of producing PVC films now becomes more and more aggressive The company has tried to differentiate its products by producing PVC films in rich patterns and colors, plain, embossed finishing, customized designs with continuously quality improvement The products have been processed by Japanese advanced calendering technology As a result, the difference has given the Company a competitive advantage In summary the product differentiation at Rang Dong Plastic company is based on the product quality and the rich patterns and colors Who is to be satisfied? (Customer groups and market segmentation) The Company operates with 12 member-units including factories, regional branches and center, stores over the North, Central and South of Vietnam and one joint-venture enterprise located in Ho Chi Minh city Rang Dong PVC films serve mainly for the domestic market (78% in the South, 17% in the North and 5% in the Central) and also for foreign market PVC films have been sold to the companies, factories and production units for their making packaging, rainwear, etc The main customer is Ha Noi Plastic Materials General Trading Store and other customers as Hoan Kiem company of Commerce and Services-Ha Noi, 117 Ly Thuong Kiet Store… They have been the company’s loyal customers due to its largest scale of production Also a small quantity of consumers can buy the company’s products from its agents and its distribution store Due to high transportation costs, PVC films products have not been consumed much in the Central area of Vietnam Moreover, customers in the Central area are accustomed to products of local production units How customer needs are to be satisfied? (Distinctive competences) Rang Dong Plastic company has always concentrated on the technology and substantial experience labor with customized designs and rich patterns and colors to satisfy customer needs As analyzed before with the Japanese advanced calendering technology and the variety of patterns and colors, the Company has achieved the brand loyalty for PVC films In the competitive environment, the Company recognizes the advanced technology and the distinctive features of its products to be competitive advantage for the company to maintain its current first position 51 5.2 Strategic options for Rang Dong plastic company Options about the development strategy for Rang Dong Plastic company are derived from solutions for the three following issues: What generic strategy will the company base on to develop? Which direction will the company develop in? What method will the company use to develop? 5.2.1 Generic competitive strategies and a recommended strategy for Rang Dong Plastic company A selected generic strategy is the result from the Company’s making consistent choices on product, market and distinctive competences Based on Rang Dong Plastic company’s product differentiation, market segmentation and distinctive competence in part 5.1, now strategic alternatives are assessed to find out the most appropriate strategy for the Company Cost leadership strategy The low-cost strategy requires Rang Dong Plastic company to be good at materials management and to have cost minimization in Research and Development, advertising, etc At present the Company has to rely 100% on the import of raw materials As analyzed in the parts of 3.6 & 4.6.2, the bargaining power of suppliers now is not strong The suppliers could be Thai, Japanese, Korean and Taiwanese companies One more advantage is that Rang Dong company has the right to import directly from abroad Though the cost of advertising was low (0.16% in 1997), the company has got good image on customers Based on the analysis of Rang Dong Plastic company’s current situation-product differentiation, market segmentation and distinctive competence-the cost leadership strategy is suitable for the Company for the reasons as follows: In order to meet the domestic market all over the country, Rang Dong Plastic company must increase the production capacity by using advanced technology and its special skills Being the local leader in plastic business scale, production technology and scope of activities and a reliable supporter of consumers’ products manufacturers, the company has had the experience with new technology and market Moreover its cost advantage is gained through the regular suppliers of raw materials In the competitive environment, the rate between sales revenues and advertising costs was only 0.16% in 1997 As discussed above, the company has had a long development history PVC films relate to Rang Dong company: a brand name attached to products of first class quality In Vietnam only Rang Dong is in good position to manufacture and supply regularly PVC films and other plastic products with high quality, large volume and in wide range Differentiation strategy Following differentiation strategy, Rang Dong Plastic company has some disadvantages as follows: 52 In Vietnam, only Rang Dong is in good position to manufacture and supply regularly PVC films with high quality, large volume and in wide range The product differentiation is based on the product quality and the rich patterns and colors, plain and embossed designs to meet customer’s satisfaction As a result, under Rang Dong brand, PVC films spread their reputation in the company’s target market-the Northern and Southern regions Differentiating PVC films by investing in innovation, upgrading, and modernization of machinery and equipment to synchronize and increase production capacity However, the marketing activities have not been paid much attention The Company therefore finds it difficult to pursue the differentiation strategy at a broad competitive scope Focus strategy A focused company concentrates on serving a particular market niche which may be defined geographically, by type of customer, or by segment of the product line (Porter, Competitive Strategy, p.46) It is difficult for Rang Dong Plastic company to follow focus strategy for the reasons as follow: Now the company has a distribution network over the North, Central and South of Vietnam Moreover the company’s production scale was enlarged to meet customers demands in the whole country with the merger and production start-up of four plants in Hoc Mon, Ho Chi Minh City, Ha Noi, Nha Trang and three branches were newly established in Hanoi, Khanh Hoa, and Quang Nam As a result the focus strategy does not enable Rang Dong Plastic company to follow its chosen strategy From the analysis above, it can be concluded that Rang Dong Plastics company should follow the cost leadership strategy 5.2.2 Directions for Rang Dong Plastic company Options about direction for the Rang Dong Plastic company’s development strategy is relied on the combination choice between product and market Rang Dong Plastic company now is in the strong competitive position and market for PVC films grows highly, the Company aims to maintain its current market share (60%) by growing with the market In addition PVC films products have been exported to foreign markets The Company therefore needs to improve the products more and more in order to be more reliable to present market and to look for new markets With regards to PVC films, Rang Dong Plastic company should follow the direction of consolidation and market penetration At present, Rang Dong’s PVC films are much appreciated for their unique excellent features and first-class quality This is opportunities for the Company to grow in terms of product development The directions for strategy development can be summarized in Table 5.1 Table 5.6 - Direction for Rang Dong Plastic Company’s strategy development 53 PVC films PRODUCT Present Consolidation Product development New Market penetration MARKET 5.2.3 Methods for Rang Dong Plastic company’s strategy development As mentioned in the history of Rang Dong Plastic company, it was founded by Union Financial de L’ indochine before 1954 under the name of Rang Dong factory and taken over by a Chinese group after 1954 under the name of UFIPLASTIC In THE PLANNED ECONOMY, Rang Dong Plastic company has operated under the control and allocation of the Government Since 1989 in the market economy, the company has operated and developed by internal development, the key method for strategy development Also on November 1990, the Company established Li Phu Dong joint-venture enterprise which specializes in high quality PVC, PU coated fabrics and leathers for export DIRECTION Consolidation Product development Market penetration COST LEADERSHIP DEVELOPMENT STRATEGY METHODS Internal development Alliances Figure 5.1 Development strategy designed for Rang Dong Plastic company In summary, Rang Dong Plastic company will develop on the basis of the cost leadership strategy with the directions of consolidation and product development for present market and of market penetration for new market by the methods of internal development and alliances designed in Figure 5.1 54 CHAPTER 6 6.1 CONCLUSION AND RECOMMENDATIONS Conclusion For the Vietnam Plastic industry • In the past five years, the plastic industry have been able to keep up with its average growth rate of 27% per annum and there is a positive tendency to increase higher in 1999 In the next five years, according to the forecast of economic experts, Vietnam’s economy can grow stably at the rate of 7%-8% or more The annual growth rate of the plastic industry will also be in the range of 20%-25% However such an annual growth rate is quite modest compared to that of Southeast Asian countries Most of Vietnamese plastic manufacturers are of small and medium size, the big-size ones are very few Therefore the capacity to invest and develop in large scale to high technology plastic products is very limited The plastic products serve mainly for consuming household utensils at the rate of about 65% of the total output Plastic products for electric and electronic industries and for other production industries are very little • Despite rapid development, Vietnam plastic industry is sill weak in the field of moulds and designs Several companies are heavily dependent on the designs of other companies’ products, including foreign ones Apart from this, obsolete technology and dependent sources of raw materials are obstacles that Vietnam plastic industry must deal with on its way to develop • It is readily seen that Vietnamese production and trading businesses have made considerable contribution to the fast changes of the local plastic industry However one can see a basic shortcoming of this industry, namely the development without a master plan This situation has led to ample investment in the production of plastic home appliances Facing such a situation, many a company has produced lower quality products to cut down the production costs and to raise the competitiveness Therefore unfair competition in the plastic industry in general and in the field of producing PVC films in particular is also the key problem that Vietnam plastic industry’s managers should be concerned with and develop solutions to ensure the development in the future • Vietnam plastic industry has achieved remarkable performance recently and now developing at high growth rate It promises a bright prospect in the future For Rang Dong Plastic company The company presently accounts for about 70% of PVC films market This is the core product of the company with first class quality processed by advanced technology that helps the company to achieve the brand loyalty and high market share in local segment of the market In order to maintain and consolidate its current first position, Rang Dong Plastic company should continuously upgrade its technology and product quality 55 Due to high demand for the product, in the past years, Rang Dong Plastic company has not paid much attention to the marketing activities Moreover, in the strong competitive environment, the company has met unfair competition from small-scale plastic production units and private companies The company therefore should pay much more attention to the marketing activities as well as market research to be more successful in the future The market for PVC films is potential in the future This implies both opportunities and challenges for PVC films On the one hand, the company therefore should increase the production scale for the product and expand the operation and look for new foreign market On the other hand, new entrants can break into the market This situation will lead the competition heavier As analyzed above, the most appropriate strategy for the company to follow in the future is to develop on the basis of the cost leadership strategy with the directions of consolidation and product development for present market and of market penetration for new market by the methods of internal development and alliances 6.2 Recommendations For the Government • Investments in the plastic industry require significant capital The biggest problem for the plastic industry is capital shortage The government therefore should support the companies by capital tax exemption • For unfair competition, the Government should issue the regulations on the protection of industrial patents, standards of plastic products and control strictly the quality of plastic products • To increase the ratio of high quality and hi-tech plastic products to replace imported products, the Government should establish and maintain the sector of producing moulds and raw materials for plastic products • As analyzed inn the orientation in the development of Vietnam Plastic industry to the year of 2005, in order to sustain its development on the one hand the plastic industry must improve investment in manufacturing plastic products for construction packaging and other industries In order to encourage investment in the areas that need large investment capital but with little profit, the Government should provide tax exemption, give more information and give privilege as well On the other hand the Government as well as manufacturers of Vietnam need an untiring and endless effort with a readiness to exchange, cooperate and bring an opportunity for foreign investments and absorb specialized plastics scientific and technical information in order to upgrade the plastic industry For Rang Dong Plastic company • As discussed above, marketing activities and limitation of information about foreign market and competitors are the main weaknesses of Rang Dong Plastic company In order to 56 implement the proposed strategy, the company should establish a marketing department which is responsible for marketing activities as advertising, researching consumer and competitor behavior and new product development research as well In addition the company should have budget for market research especially researching market and competitors… From that the company will have strategic master development plan for the company in the long term • The company should follow the backward integration strategy to improve the close relationship with foreign suppliers of raw material to the company • The company should invest into the new product development through strategic alliances with foreign partners • The company should enlarge the company’s scale to meet the demand of the whole country especially in Hanoi, Hai Phong, Nam Dinh, and South China large markets • In order to integrate into the development trend of world and Vietnamese plastic industries, Rang Dong Plastic Company should have an investment on new equipment and technologies to improve the quality and application features of the products, meeting ASEAN, ISO standards • The Rang Dong Plastics company should improve human resource management by training, upgrading, and updating the skills of engineers, technicians, managers through short and long term course in Vietnam and abroad • Also the company should intensify and widen its relations with Asian, European, ASEAN and technology applications, cooperation, joint-venture on manufacturing and trading, marketing researches, information exchange, plastic international forums as well as labor training 57 REFERENCES Ansoff, H I., Corporate Strategy, 1987 Country report - India, the 6th Asia Plastics Forum, Vietnam, 1996 Country report - Indonesia, the 6th Asia Plastics Forum, Vietnam, 1996 Country report - Singapore, the 6th Asia Plastics Forum, Vietnam, 1996 Country report - Japan, the 6th Asia Plastics Forum, Vietnam, 1996 Country report - Philippines, the 6th Asia Plastics Forum, Vietnam, 1996 Country report - China, the 6th Asia Plastics Forum, Vietnam, 1996 Country report - Thailand, the 6th Asia Plastics Forum, Vietnam, 1996 Country report on the Singapore Plastic Industry, the 7th Asia Plastics Forum, India, 1997 Country report – Japan, the 7th Asia Plastics Forum, India, 1997 Country report – Malaysia, the 7th Asia Plastics Forum, India, 1997 Country report – India, the 7th Asia Plastics Forum, India, 1997 Hill, C / Jones G., Strategic Management, Houghton Mifflin Company, 1995 Huynh Phuc Anh, The update of Vietnam Plastics industry and directions towards the year 2005, Vietnam Plastics Fair’96, HCMC, Vietnam Industry Service, Restructuring project of Plastic industry for the year 2005, 1997 Johnson, G / Scholes K., Exploring Corporate Strategy, Prentice Hall, third edition, 1993 Le Quoc Khanh, Speech from Ministry of Industry, the 6th Asia Plastics Forum, Vietnam, 1996 Modern Plastics International, Asian Edition, Vol.27 No.8 August 1997 Modern Plastics International, Asian Edition, Vol.27 No.9 September 1997 Modern Plastics International, Asian Edition, Vol.28 No.4 April 1998 Nguyen Cong Chuong Semi – annual report of Rang Dong Plastic company, July 1998 Nguyen Thanh Long, thesis 5.02.05, UEH, Vietnam, 1997 Pham Gia Duoc, Report on production-trade of Vietnam Plastics Corporation (VINAPLAST), January, 1998 58 Pham Gia Duoc, Role of plastics industry in developing the national economy to the year 2005, March, 1995 Porter, M E., Competitive Advantage, Free Press, 1985 Tran Thai Hoang, Research study SM 96-72, 1996 Truong Xuan Vu, Orientation for plastics investment in Vietnam, March, 1995 Truong Xuan Vu, Potential investment for Vietnam Plastics industry in coming years, Vietnam Plastics Fair’96, HCMC, Vietnam 59 ... 35 4.4 Production at Rang Dong Plastic company 38 4.5 Sales and net income 45 4.6 Marketing 47 4.7 Finance 49 4.8 Conclusions on strengths and weaknesses of Rang Dong Plastic Company 50 DEVELOPMENT... 5.1 Foundations of Rang Dong plastic company? ??s strategy 51 5.2 Strategic options for Rang Dong plastic company 52 CONCLUSION AND RECOMMENDATIONS 55 6.1 Conclusion 55 6.2 Recommendations 56 REFERENCES... ENVIRONMENT ANALYSIS This chapter is to focus on the strengths and weaknesses of Rang Dong Plastic Company in order to locate the company? ??s competitive position 4.1 History of Rang Dong plastic company