5 Five Forces Thegioididong [PDF]

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Group Assignment Cover Sheet

Subject Name

Managerial Economics

Lecturer’s Name

Dr. Pham Dinh Long

Title of Assignment

Group Presentation

Class

ME-DH42ISB-3

Group Number

4 Ta Le Thuy Duong Nguyen Bao Ngoc

Student Number and Name

Banh My My Dang Minh Nghia Do Ha My

Contact Number or Email

[email protected]

Length

6928 words (37 pages)

Due Date

11/12/2017

Date Submitted

11/12/2017

Declaration:  I hold a copy of this assignment if the original is lost or damaged.  I hereby certify that no part of this assignment or product has been copied from any other student’s work or from any other source except where due acknowledgement is made in the assignment.  No part of the assignment/product has been written/produced for me by any other person except where collaboration has been authorized by the subject lecturer/tutor concerned.  I am aware that this work may be reproduced and submitted to plagiarism detection software programs for the purpose of detecting possible plagiarism (which may retain a copy on its database for future plagiarism checking)

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Group 4 Ta Le Thuy Duong Nguyen Bao Ngoc Banh My My Dang Minh Nghia Do Ha My

ME-DH42ISB-3 Lecturer: Pham Dinh Long December 11th , 2017

Table of Contents Abstract.......................................................................................................................................................5 Introduction.................................................................................................................................................5 Literature Review........................................................................................................................................5 Porter Five Forces Model........................................................................................................................5 Horizontal Integration..............................................................................................................................7 Concentration Industry............................................................................................................................7 Economics of Scale.................................................................................................................................7

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Economics of Scope................................................................................................................................7 Methodology...............................................................................................................................................7 Company Analysis......................................................................................................................................7 Internal Analysis......................................................................................................................................7 Company Background.........................................................................................................................7 Value and Vision...............................................................................................................................11 Development History.........................................................................................................................11 Growth Strategy.................................................................................................................................13 Summary of Business Plan in 2017...................................................................................................13 Corporate Social Responsibility........................................................................................................14 Human Resource...............................................................................................................................15 Marketing..........................................................................................................................................15 External Analysis...................................................................................................................................16 Competitors.......................................................................................................................................16 Customers..........................................................................................................................................19 Suppliers............................................................................................................................................21 Thegioididong.com Model 5 Forces......................................................................................................22 Dien May Xanh Model five forces........................................................................................................24 SWOT Analysis.....................................................................................................................................25 Strength.............................................................................................................................................25 Weakness...........................................................................................................................................29 Opportunities.....................................................................................................................................29 Threat................................................................................................................................................32 Solution for current problems................................................................................................................33 Inventories.........................................................................................................................................33 Loss of goods.....................................................................................................................................35 Competition from big rivals...............................................................................................................36 Macro Risks.......................................................................................................................................37 References.................................................................................................................................................37

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Abstract This report will discuss about MWG (thegioididong.com, dienmayxanh, etc) company by applying theory of managerial economics into report analysis. Specifically, we analyze Internal, External Factors of company, applying SWOT and Porter Five Forces Model to condense strategy and solution for problem and opportunity. Introduction The report concentrates on MWG company analysis, there are five main parts including Internal Analysis, External Analysis, Five Forces Model, SWOT Analysis and Solution. Retrieving many evidences, financial or operation indicators, achievements and more to support for report’s analysis. Literature Review Porter Five Forces Model Porters Five Forces Model identifies 5 competitive forces that managers consider when analyzing the external environment and formulating strategy. Collectively these forces provide industry structure – industry structure can work to constrain or enhance firm profitability. Typically one or two forces will be dominant. As a rule of thumb, the stronger the industry forces, the lower the industry profit potential, making industries less attractive and vice versa. Supplier Power Inputs into production processes include raw materials and components, indirect materials, labor, and services. There are some indicators for supplier power includes Market Size, Concentration Ratio, forward integration, Available Substitutes etc. Buyer Power

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Buyers (consumers) can suppress the profitability of the industries from which they purchase by demanding price concessions or increases in quality. When buyers obtain price discounts, it reduces the firm’s top line and directly reduces profitability. Important factors affect Buyers power includes Volume Demand, Switching Costs, Backward Integration, Available Substitutes, Product Standardization, Price. Threat of Substitute Threat of substitute products relates to how easily an industry’s customers can switch to an alternate product, one typically provided by a different industry. Buyers can suppress the profitability of the industries from which they purchase by demanding price concessions or increases in quality. Important indicators for threat of substitutes includes Number of Substitutes, Switching Costs and Performance of Substitutes. Threat of New Entrances If the firms in an industry are highly profitable, the industry becomes a magnet to new entrants. Unless something is done to stop this, the competition in the industry will increase, and average industry profitability will decline. Know-how can level the playing field and bring barriers to entry down. There are vital impact of threat of new entrances which is Capital Requirements, Intellectual Property, Government Regulation, Product Differentiation (and Branding), Access to Distribution Channels, Economies of Scale. Horizontal Integration Horizontal integration refers to the merging of the production of similar products into a single firm. For example of MWG retail, there are Thegioididong as mobile phone appliance, Dienmayxanh as electronic appliances, Bachhoaxanh as FMCG.

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Concentration Industry Concentration ratios measure how much of the total output in an industry is produce by the largest firms in that industry. The certain indicator of concentration is market share ratio. Economics of Scale Economies of scale exist whenever long-run average costs decline as output increases Economics of Scope Economies of scope exist when the total cost of producing two products within the same firm is lower than when the products are produced by separate firms, that is, when it is cheaper to produce outputs Q1 and Q2 jointly Methodology This report utilized secondary data with transparent information from official reports of Vietnam listed firm on stock market, MWG. Some information are retrieved from government website, and trusted data sources. Through critical and logical thinking process to select, categorize and condense all information about retail industry and MWG to support evidence thorough the report. Company Analysis Internal Analysis Company Background Mobile World Investment Joint Stock Company is a retailer group in Vietnam, mainly operate in the mobile phone retailing field. According to MBS report in September 2016, Mobile World owned 30% of the market share, thus is the leading brand in mobile phone retailing market.

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Product line Mobile World Investment Joint Stock Company operates three retail chains thegioididong.com

Dien may xanh (dienmayxanh.com)

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Bach hoa xanh (bachhoaxanh.com)

and an online department store vuivui.com

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Over the past years, the company has continued to explode and despite the situation, economic advantages or disadvantages. Thegioididong.com was established in 2004 and specializes in selling retail of mobile digital products including mobile phones, tablets, laptops and accessories with over 1,000 supermarkets in 63 provinces and cities across Vietnam: 1. Mobile Products: The company currently offers most of its line of phones Vietnamese schools from the high-end to the popular. In particular, the product line is under 5 million billion high in sales, over 80% of sales. Only Apple product line is required to enter products from distributors (FPT and Viettel), all other models are imported directly from the supplier 2. Accessories: Sales from this segment accounted for 20-30% of total sales of the business segment thegioididong.com. According to the company's share, the MWG is still not satisfied about the market share of this business segment and realize the potential growth is very large, so in the future will continue to push strong increase in sales from this high margin product line. 3. Networking Products (SIM): currently supplying sims of the 3 largest network in Vietnam: Mobiphone, Viettel, Vinaphone. This product line will be used by the business to implement the chapter customer care in the following years. Revenue structure according to manufacturers

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By the end of 2016, thegioididong.com continue to confirm its leading position with 950 supermarkets across the country. Dienmay.com chain was launched in late 2010 specializing in retailing consumer electronics products such as televisions, karaoke machines, refrigerators, washing machines, rice cookers, vitamins, irons, electromagnetic stoves, microwave vacuum cleaners, and digital products such as cell phones, tablets, laptops and accessories. On 04/5/2015, the dienmay.com supermarket system was renamed Green Supermarket with 40 supermarkets in 63 provinces (website dienmay.com will be replaced. by new website dienmayxanh.com) to help customers easier to recognize and communicate. 2016 marked the development of overtaking from 70 supermarkets at the end of 2015 increased up to 250 supermarkets by the end of 2016. The company has built a distinctive customer service with customer-centered culture in every thought and action. The company has made efforts to build a dedicated team of customers and build a customer-centered website thegioididong.com and dienmayxanh.com. The gioi di dong's efforts and achievements have been recognized by the community as the number of customers visiting shopping centers has exploded over the years. Mobile World is also recognized by many prestigious domestic and international organizations as Global Business Forum, World Top Five Fast Growing Companies, - Pacific Asia 2010 (Euromonitor International), Top 500 Retailers in Asia Pacific for 6 consecutive years 2010 - 2015 (Retail Asia Magazine) and many other domestic awards such as House The most trusted retailer, the best mobile retailer, a mobile retailer with the best customer support ... The development of the Mobile World is also a good example to be studied, rescued and introduced at leading universities such as Harvard, UC Berkeley, Tuck Business School (USA). The department now has breakeven point with a gross margin of 14%, up from 10% at the end of last year. Profit margins were boosted in part by widening the scale of operations and also by the fact that most of the goods were purchased directly from producers or farms. The company also plans to expand into pharmaceutical retailing next year with a modest target of having around 50 or 60 stores in its first year.

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Value and Vision MWG 2020 is the most versatile multinational retailer, reigning the No. 1 position in ecommerce, successfully expanding its business in Laos, Cambodia and Myanmar. MWG is constantly improving to provide customers with the most enjoyable and satisfying experience based on the customer-centered and Integrity-based culture. Development History Mobile World Co., Ltd. was established in March 2004, the main field of activity of the company includes: trading and repairing equipment related to mobile phones, digital devices and other fields related to e-commerce. After three months of establishment, the company launched the website www.thegioimobi.com and three small shops at Hoang Van Thu, Le Lai and Cach Mang Thang 8 (Ho Chi Minh City). In October 2004, the Company decided to replace its retail stores with the opening of a larger and more complete supermarket at 89A Nguyen Dinh Chieu, Ho Chi Minh City, the original name of the supermarket is www.thegioimobi.com (later changed to thegioididong.com). With a size of over 200 m2, this well-built supermarket has been a huge success since it was completely different with more than 10,000 small mobile phone shops at that time in Ho Chi Minh City. Customer service and website have been caring and attention since the first day. In 2007, Mobile World Co., Ltd received the investment capital of Mekong Capital, converted into a joint stock company to expand its development opportunities. By the end of 2009, the company has a total of 40 supermarkets across the country. From 2010 to 2011 marked the rapid development with the success of the supermarkets thegioididong.com across the country. By the end of 2010, the company doubled the number of

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supermarkets compared to 2009; By the end of 2011, the number of supermarkets increased more than 5 times compared to 2009. By March 2012, with the opening of the supermarket in Bac Giang, thegioididong.com has completed map coverage throughout the territory of Vietnam. This is the first and only mobile retail system available in all 63 cities and provinces across the country. From then on, Thegioididong.com continues to maintain its position as the number one mobile retailer in Vietnam, completely different from other retailers.

Growth Strategy In 2016, thanks to its strong efforts, MWG has achieved sales milestone of over 2 billion dollars, making MWG the largest retailer in Vietnam. On this growth, MWG continues to maintain a dominant market position and widen the gap compared to other retail chains. In 2017, MWG's revenue is expected to grow strongly from all retail channels: thegioididong.com chain, Điện máy Xanh chain, the online channel from the web site of these two chains and the Bách Hóa xanh are available and ready to expand. Focus on quality – not quantity – for the thegioididong.com chain. Increase and maintain the quality and quantity of the Điện máy Xanh chain. Supermarket chain department Bách hóa xanh completed the testing phase by the end of 2016 and will continue to improve, "winning formula", while expanding to meet the criteria Buy FAST - Buy CHEAP of housewives. Online selling is still a strength of the MWG in the coming years. With a technology platform was invested basically, MWG build a solid foundation for business website online

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vuivui.com, ready to take off in the next 2-3 years, is expected to be contributed to the revenue and profit for MWG. All of the elements on MWG aim to achieve $3 billion in revenue in 2017. Summary of Business Plan in 2017 MWG Strictly control and improve the quality of customer service. Besides, raise the market share of thegioididong.com phone sales to over 45% through the growth of sales of old supermarkets and open about 100 new supermarkets in 2017. Maintaining service quality and promote the expansion of the chain Điện máy Xanh , especially the mini supermarket model with approximately 200 new stores, aims to occupy 25% market share of electronics in Vietnam in 2017. Moreover, MWG completes the "winning formula" for the Bách hóa Xanh store chain and enter the expansion phase in 2017 and promotes e-commerce, online sales reached gave a 100% growth compared to 2016. And finally MWG is looking for opportunities to conduct M & A with other retailers.

Corporate Social Responsibility MWG always striven completing business tasks, contributing to the country's economic construction. In 2016, MWG has fulfilled its tax obligations, specifically contributing to the state budget nearly 500 billion. At the same time, MWG regularly promotes activities and campaigns to raise energy awareness in the office and supermarket system nationwide. All supermarkets are equipped with energy-efficient and environmentally-friendly devices such as recyclable materials, LEDs, and auto-off timer. Since 2013, MWG supermarkets are equipped with an automatic light sensor that lights up the sign, at 6 pm or when it is dark

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enough and turn itself off at 10 pm every day. The company itself designed the system automatically lights, air conditioning at 7 hours and off at 23 hours a day at the supermarket. In addition, MWG constantly attract and recruit human resources, creating a favorable working environment for new employees to integrate and adapt to the fastest work. In 2016, along with the expansion plan, MWG strengthens the employment of new employees and improves the promotion of fairness and transparency for former employees to ensure efficient operation of the supermarket systems. In 2015 and 2016, MWG is honored to receive the "Best Company to Work" award.

Human Resource

Number of officials and employees of the end of 2016 more than 26,000 employees, including specific amount each block as follows: STT

Department

2015

2016

1

Supermarket

13411

23164

2

IT

198

295

3

Accouting financial

193

315

4

Business Development

336

1183

5

Logistics supply

597

577

6

Administration - Human Resources

113

152

7

Online Sales

335

521

15183

26207

TOTAL

In addition to contract wages, the MWG implements a wide range of salary and bonus policies to recognize and motivate employees to stay engaged and work more productively. 15

All employees who work for 6 months at the MWG can either stand for their own positions or transfer to other departments, as well as other locations in the system. MWG also organizes promotions for supermarket management from 3 to 6 times a year.

Marketing The Điện máy xanh is the backyard of thegioididong. Being aware of such a business situation, MWG has decided to spend hundreds of billions of dong on brand building in the last months of 2016 and throughout 2017. Remarkably, the brand's promotional video mainly focuses on traditional television channels and devotes less effort to promoting social media channels, and became a phenomenon. Launched in early November, with fun images, catchy melodies, this ad has been wellknown but the explosion and becoming a trend on social media is really an unexpected success. . Considering the discussion on social media, the advertising of the Điện máy xanh has attracted more than 400 thousand articles and discussions, more than 3.4 million times interact with more than 300 thousand participants to share and discuss. It can be said that the best thing is that green electricity is not as big as it feels, it's just a part of it, the rest is largely due to reprocessing it. As a result, it is spreading like a virus across social networking sites. Although receiving negative feedback, but in view of the original goal is to spread the message: Everybody wants to buy electrical appliances, the word "Điện máy xanh" will be the first name that comes to mind.

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External Analysis Competitors It is easy to realized that The gioi di dong now has making up the largest part of market share in retail market, which means that, The gioi di dong has been being handled Saigon Coop, Bic C to become the largest and the most powerful retailer in the entire market, according to Top 500 Asia retail company by Retail Asisa Publishing, 2017.

Top 500 Asia Retail Company – by Retail Asia Publishing, 2017.

This is the statistic that implies to the retail company fully embracing all the fields in retail market. When we say that The gioi di dong has been the biggest retailer in the market, it is easy to consider The gioi di dong now might not be competed by any competitors. However, in contrast with the considerably growing revenue from 2014 to 2016, there are some researches stating that economic growth of The gioi di dong has decreased about 30 percent in 2016, and the downtrend of economic growth is worsen time by time. 17

Because of both slower economic growth and entry of new companies, The gioi di dong thinks that this is not only the right time to expand more, but is the time to improve the quality of products and quality of service.

In particular, according to The gioi di dong's CEO financial report in October, 2017, The gioi di dong has opened 599 supermarkets nationwide. This number consists of 116 markets named Thegioididong.com, 310 markets named Dien may xanh and 173 markets of Bach hoa xanh. Until 10/2017, there are total 1854 markets is operating to serve customer. This is the result from entry of new companies in retail market. As we know, the branching which earns most profit for The gioi di dong in the past and in the present is always mobile retail market. However, in comparison to 2012 when The gioi di dong is the monopoly, in 2017, this market has 4 big companies to share the market. These 4 biggest companies is The gioi di dong (making up the largest part), Viettel in second, FPT Shop in third and Vien Thong A is the last one.

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The below statistic states that The gioi di dong accounts for the largest part in mobile retail store. However, Viettel and FPT Shop, Vien Thong A is expanding their store network, whereas the profit of The gioi di dong is continually decreasing, it has no choice but improve their quality and serivice, insteand of competing with the others by expanding their network. One of the striking strategies of The gioi di dong to maintain their position in mobile retail market is that they choose to approach the rural areas, where others’ choice is focusing on urban areas. The result from this strategy shows that The gioi di dong is now in a great chance to be the most powerful retailer in rural areas, which will increase again their revenue and then the profit. Customers

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As we know, The gioi di dong has target customer in all ages, all class in the social. However, because of the focusing on electronics devices retail (cell phone retail in particular), the major customer of The gioi di dong is from 18 to 35 years old. This range is the point customer of The gioi di dong with a view to their strong purchasing power. To compete with the other competitors, The gioi di dong chooses to approach customer in rural areas, which means that they have two major groups of customer: customer rural areas and customer in urban areas. However, owing to the strong purchasing power and strong will to catch up new trend, customer in urban areas is still the one who bring to biggest profit to The gioi di dong. In addition, The gioi di dong has been expanding their network in rural areas with the express purpose of being the monopolist in this rural retail market. As a result, despite the slower economic growth, profit of The gioi di dong still considerable increase in both 2016 and 2017. They reach more than 63 billion Vietnamdong, which is a dreaming profit of any Vietnamese domestic company.

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Thanks to shifting trend to smartphone use and the on-growing of middle income population, trend of customer behavior now give a big advantage for The gioi di dong over the other competitors. Along with brand loyalty which has been growth from the past to now owing to good quality and customer services, brand awareness is also on expansionary phase give the assistance to The gioi di dong that makes customer choose them as a prior choice. Likewise, sale from returning customer plays an important role in increasing The gioi di dong’s total profit as well. Suppliers In the past, not only The gioi di dong but also the other companies in mobile retail market is essential to import products like mobile, laptop, electric devices from intermediate distributors. However, this is just a story happened in the past. Nowadays, it is not necessary for any mobile retail company for importing from intermediate distributors. They have the chance to import directly products from the vendors that will decrease their cost for distributors and then maximize the total profit. This is the result when such big companies as The gioi di dong, Viettel or FPT Shop has the power to negotiate the market. These powerful companies are able to sell all their products,

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gain the large market share and then, they might cooperate with the vendors to increase profit, in an active manner. However, this is not a win-win game. Althought The gioi di dong, which is the lead company to be in this way, can increase their profit by import products directly, they are still at their own risk of high number of stock-in-trade. For example, time for importing directly from vendors is always longer than importing from intermediate distributors, which will be possible to lead to the high risk of price volatility or changing in customer behavior. Also, high competition and stock-in-trade maintained in long time will also be the risk that The gioi di dong must face with. Thegioididong.com Model 5 Forces

In general Thegioididong is in the perfect competition industry which has many small smart phone competitive retailers and stores across Vietnam with commodity products (Samsung, Apple, Oppo etc) and firms are price takers. However, Thegioididong takes the lower industry forces which leads to the firm’s potential is higher than others. The most important factor that makes Thegioididong currently is the leading smartphone retailer in Vietnam is Economy of Scale and Enterprise Resource Planning System from 2004 reducing Cost of Expenditure and increasing the bottom line of the firm drastically. 22

Low Power of Supplier Firstly, Thegiogididong cooperate with leading suppliers such as Samsung, Oppo Smartphone to import directly the products and not going through any intermediaries. Secondly, the highest penetration, a lot of available stores and popular brand across Vietnam that lead Thegioididong take the most vital role in increasing revenue for their suppliers (40% smartphone market share). Win-win cooperating relationship is that, however, Thegioididong has more power compared to suppliers Medium Power of Buyers Smartphone Vietnam Market has many retailers, small stores and entrepreneurs. Consumer have many choices of Stores, Price Preferences and Promotion with the same Product standard. Moreover, the expansion of middle-income population increasing consumer demand of high technology smartphone and best service (such as omni-channel, promotion, guarantee policy). Besides, the lack of high-service mobile phone stores in countryside and provinces in Vietnam lead to low buyer power. With this combination of situations, Thegioididong is the only retailer can apply consumer needs because of their economic of scale across country (420 stores through 67 provinces), accommodate price and best service. Low Threat of new entrants Vietnam mobile phone market growth is approaching saturation threshold which is just one digit 8% to 9% growth per year. Moreover, Thegioididong is standing toughly in the market with solid working capacity and ERP system thoroughly many years following with lots of substitutes outside, it is too hard for new entrants to jump into smartphone Vietnam market to be the next leading firm. 23

Low Rivalry among competitors The leading mobile phone omni-retailer in Vietnam taking up 40% market share and 80% of revenue for company parallel with strong capital investment, outstanding ERP to give out the best service, Wide distribution channels and ultimately economic of scale. The rivalry among competitors is lower through these current years. Dien May Xanh Model five forces

Dien May Xanh has lower competitive strength compared to Thegioididong. There are some significant factors includes electronic appliance demand is not as high as smartphone, older current competitors as Nguyen Kim electronic, Cho Lon electronic. However, currently, Dien May Xanh is growing and hitting up Nguyen Kim electronic toughly with the same revenue at the end of 2016. Medium Power of Suppliers High Available substitute such as the leading Nguyen Kim, Dienmaycholon or Vinpro. Dienmayxanh mark the milestone of highest available stores across Vietnam (250 stores) more than the leading Nguyen Kim. Such that economy of scale attract suppliers by increasing product penetration in Vietnam.

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Medium Power of Buyers Diemayxanh faces more challenges than their mobile phone business because of the consumer electronics lifecycle replacement rates were over 5 years, even over 10 years while this rate for mobile phone was only 2 years. However, higher penetration in the future with fiercely investment, dienmayxanh target to be the leading name not only in cellphone but also in electronic appliances. Medium Threat of New entrances. The number of electronics retailers is not as much as mobile phone because of heavier investment. Higher-income of consumer is also increasing with higher facility of life. Besides, product penetration is currently low in Vietnam provinces. These are opportunities for new entrants jump into Vietnam electronic appliances market. Low Rivalry among Competitors Dien May Xanh is now taking up 16% of market share which is also medium concentration ratio, creating revenue as the leading Nguyen Kim and increase economy of scale in the near future which is about available electronic stores in Vietnam.

SWOT Analysis Strength Currently leading the Vietnamese phone market share with retailing system running across the country: MWG now owning more than 30% market share in market phone retailing. At the same time, the Company has a total of 1771 thegioididong.com branches and 625

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supermarkets (updated in 2017). Which, roughly 30% thegioididong.com shop opened in the city Ho Chi Minh City and Hanoi and over 40% of shops in other major cities in the country. Distribution Chart of thegioididong.com and dienmayxanh.com shop

Have a good business relationship with most major distributors and operators are active in the market: MWG imports all products directly from phone vendors (except for Apple products) and is currently affiliated with the 3 main network providers in Vietnam: Vinaphone, Mobiphone and Viettel. Enterprise Resource Management System (ERP) efficiency: MWG build ERP system from the first day of establishment in 2004. The system helps businesses effectively manage capital fluency in business operations. Shareholder structure "concentrated" with the participation of many foreign financial investment organizations: More than 80% of MWG's shares are owned by internal shareholders and major shareholders. Hence the proportion of stocks retained MWG is relatively low (after the elimination of shareholder ownership over 5%). In addition, the foreign ownership rate at MWG hit 49%. According to the share of business, every foreign investors in the MWG participate in the form of financial investment. In there, there are two investment funds Mekong 26

Enterprise Fund II (holding 11.4% of MWG shares), CDH Electric Bee Limited (9.4%) invest in MWG before IPO. According to our estimates, market price (after adjusting dividends and more) of the MWG has increased more than 100% compared to the time of listing. Therefore, the shareholders realization of profits will be a risk to take into account the short-term price movements of the MWG. Stable online realization level: Through Google keyword research, almost all keywords related to the purchase of phones, tablets, accessories, electronics … are occupied by thegioididong.com and dienmayxanh.com. At the same time, according to Alexa, the website ranking service provider, thegioididong.com also ranked the highest traffic relative to websites of major competitors in the industry. This shows that thegioididong.com is keeping the advantage of reaching new potential customers. Because, when buying electronics products, customers tend to seek information on Google before approaching the actual product at the store. Google keyword result for electronic device chart 2015

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Website ranking chart 2015 by Alexa

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Weakness High chances that the company will have to face reduce marginal revenues in the near future: With the competition of power producers, the price of products is in the decreasing trend. As a result, the profit margin for retailers might be reduced. At the same time, rivalship in the field is increasing so the company may have to reduce marginal profit to increase incentives, services for customers. Risk from over-reliance on the product: Nearly 90% of MWG's sales are coming from retailing phone and electronic products so the company’s profit might be plummeted or slow down due to the smartphone market is almost saturated. Fields other than phones has yet to develop a solid position in their respective market: Currently, thegioididong.com is their best brand name. Dienmayxanh.com has gain relatively high recognition lately but there are still too many fierce competitors. At the same time, bachhoaxanh.com and vuivui.com is still in their testing phase. Opportunities The phone market is still growing well short term: In 2017, Vietnamese electronics market, according to GFK data, Vietnam electronics market grew 9.6% in Q3 / 2017 compared to the same period last year. This includes the strong growth of electronics, telecommunications, home appliances, refrigeration and digital appliances. In it, the smartphone market in Vietnam 29

will rank 9 worldwide in sales value growth. Besides, according to market research firm TNS, the ratio penetration smartphone Vietnam will raised to 50% from the current 36%.

In the retail market of electronic products, there are still plenty of potentials for the new store chain: Currently, large stores chain such as Nguyen Kim, Chợ Lớn Electronics has not yet too penetrated into the provincial market. For example: Nguyen Kim just opened Ho Chi Minh City, Hanoi and 9 southern provinces (mainly East and South West); dienmaycholon.com are currently available in Ho Chi Minh City and 10 southwestern provinces and two central provinces. The Cambodian market will replace the deceleration of revenue growth Thegioididong.com chain in the domestic market: Although less developed than Vietnam, Cambodian phone market recorded impressive growth in recent years, according to which the proportion of phone usage is expected to reach 94.5% in 2015, according to the Asia Foundation. However, the rate of use of smart phones is only 39.5%, suggesting demand of replacing phone when technology is improved makes multi-smartphones more usable and especially cheaper.

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The expansion of Dienmayxanh chain will maintain the revenue growth of Thegioididong in the next 1-2 years: Better profitability due to advantage from economies of scale will be greater than the cost of the brand in the short term. Even though coming later, Dienmayxanh is expanding rapidly both in terms of numbers of stores and sales. Net sales of electronic machine also increased 207% over the same period to 10,129 billion in 10T2016. Market share of the brand also increased significantly to 16% in October 2016 from 8% end of 2015.

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The initial success of the Bach Hoa Xanh chain test helps the chain becomes more potent: We expect more than 3,000 branches Bachhoaxanh in big cities in Vietnam. High probability of success thanks to experience and knowledge in the mobile retail world. Although Bach Hoa Xanh still facing losses, sales has reached 1 billion/shop/month, doubling the expected revenue of 500 million VND/shop/month and show more potential prospects.

Threat Competitors to increase market share: Brands with similar sale system of MWG are expanding businesses in the market such as FPTShop, Nguyen Kim… Phone market growth is progressing about the saturation threshol: In medium and long term, billion penetration rate of smartphones in Vietnam will advance to the average of developed countries previous smartphone movement. According to the Emarketer, in medium to long term, smartphones market grow only one digit, about 8-10%. Experts in field spectate that Thegioididong and Dienmayxanh will reach a peak in revenue and will be hard to grow thanks to extension. Therefore, the MWG will have to rely on sector growth to maintain improvement in earnings. Electronic business involves many risks than business phone products: Electrical products have an average life cycle of 5 years with some products having over 10 years while the replacement phone product rate is only approx 2 years. Dual retail growth in the period 20132018 of electrical products in the market Vietnamese schools only 3-9% (depending on the product Products). Profit margin of electronic products business is lower than machine phone product business 2-4%.

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Euromonitor's projection shows that the CARG (Compound annual growth rate) of the mobile devices field as well as the electronic appliances will decreased significantly. In addition, potential customers to the technology class is mostly between 15 and 30 years old, is forecasted to decrease in the proportion of the population, will bring many obstacles to the growth of the industry.

Raising marketing cost will affect short-term profit. Bách Hoá Xanh store chain is still in it's testing phase According to a recent report by KIS Vietnam Securities Company on MWG, by December 2016, although the Bách Hoá Xanh achieves a revenue of VND 1 billion per store per month, but the chain of stores still facing losses, this required the company to make changes in order to bring efficiency.

Solution for current problems Inventories In the era of technology, besides the positive impact on the demand for new technology and the possession of advanced products from consumers, the current situation puts a negative pressure on inventory management issues to protect the interests of enterprises. In particular, manufacturers of electronic devices are tending to launch new versions after a specific period of 33

time to stimulate consumption and maintain their position in the market. Then, to stimulate demand, the price of the products of the previous version will decrease significantly, posing a challenge for distributors to ask for the guarantee of rights from the manufacturer. Against the backdrop, if too concerned about risk, distributors may underestimate the potential of the market and decide to keep inventory low, resulting in reduced sales and distrust from investors and shareholders. However, deciding to purchase a large quantity of the product and can not sell it, the distributors, MWG in particular, will face a loss of sales, freezing cash flow, and not receiving sales priority from other suppliers.

On the other hand, besides the technology products, the FMCG sector of the company, namely the Bach Hoa Xanh system, faces the same risk. In fact, FMCG items have extremely short shelf life, such as fresh produce that can only be left for a few days. Thus, inventory management is considered a decisive factor in MWG' s business strategy.

To solve this problem, along with the planning of market-based procurement and human resource training, modern management software is the optimal choice. In particular, inventory stability requires careful monitoring and accurate calculation. Management software will take on the role of providing accurate and complete data, some advanced functions can also provide specific suggestions for each commodity status, saving time and eliminating subjective factors in decision making. In addition, management software is the solution to store large amounts of data in a uniform way. This will be beneficial in supporting sales in different areas with different needs. However, the suggestions from the software should only be considered as references, because the nature of the market is very sensitive and fast-changing.

In addition, for the fast moving consumer goods industry, the role of management software is less important than human decision making. Simply because food deterioration is more dependent on environmental factors, which management software will not handle. In addition, the market demand for these commodities is constantly changing and the ability to address the

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situation of employees in the retail system plays an important role. Therefore, staff training and reward policy should be paid attention and effective investment.

On the other hand, due to the constant development of technology, and the increasing risk associated with the ever-expanding market, updating the management software also plays an important and necessary role. The security of using the software is also a priority in the selection.

Loss of goods As one of the largest retail chains in Vietnam, the loss of goods is unavoidable and one of the major problems of the MWG. The cause of the leakage is not statistically significant, but two main causes are human behavior and damage to goods.

Currently, according to information published on the official website of the MWG, the company is applying the principle First In First Out to sell. In fact, this can be considered as an effective direction, as the longer the stocking period, the greater the risk of damage and devaluation of commodities. In particular, if the Last In First Out principle is applied, the company will facilitate the theft of goods because of the difficulty in controlling the situation of previously imported products.

In terms of human management, building consciousness can be seen as necessary and effective prevention. With a large and varied number of employees in terms of age, qualifications, culture, values, etc., the establishment of a fair, but reasonable punishment and rewarding system can be viewed as the most effective, having a direct impact on the goal of minimizing losses.

In business, there is a familiar notion that is "allowable loss rates". According to the theory, this definition is used to indicate the number of products allowed to be lost or damaged on the total number of products in the store of retail outlets. One way, though somewhat risky, promoting self-discipline, is to say no to "allowable loss rates". 35

In addition, every loss in stockpiling of goods requires a person to take responsibility. Specifically, the recipient of the responsibility can be a collective or an individual, based on the rules to address the loss situation. In addition, to encourage the protection of property, the company should also have a policy of rewarding individuals or organizations for good performance.

Competition from big rivals Because of the diversity in the business sectors, MWG also has many competitors both at home and abroad. Specifically, in the electronics distribution industry, rivals may be listed as FPT Shop, Hnam, and other retail brands. In the fast moving consumer goods industry, competitors include Vinmart (owned by VinGroup, a large corporation in terms of industry and investment scale), Co.op Mart, Satra Food, etc. The competition of large corporations led to the urgent need for business strategies to attract customers and dominate the market.

In particular, the most effective way to attract customers can be based on customer interest. In order to create business benefits, strategies need to convey the message of customer interests as a top priority and a key to business operations.

In fact, the revenue of a business depends on both factors, the turnover of each retail branch and the number of retail outlets of that business. According to the report by mid-2017, although the average revenue of retailers has increased rapidly, the number of stores tends to decrease, affecting the growth of sales of enterprises. Therefore, focusing on the development of retail points in both quantity and quality will contribute to maintaining revenue and developing the company effectively.

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Macro Risks In a business environment, macroeconomic risks are one of the threats that any business needs to take precautions and take timely action. In theory, macroeconomic risks include inflation, unemployment or changes in currency rates, etc. These are the factors that have a surprising but powerful impact and can change the market segment. In response to these threats, the MWG can focus on building and coaching risk management staff.

References Thegioididong Back Ground. Retrieved from https://vi.wikipedia.org/wiki/Thegioididong.com MWG Company (2017), CEO Report for first 10 months of 2017. Retrieved from the website: https://mwg.vn/eng/shareholders-news/ RongViet Securities Corporation, (2016). Mobile World Investment Corporation (MWG) Initial Report, (2016, May), p.2 Brands Vietnam, Thế giới di động: Thách thức bảo vệ ngôi vương (2015). Retrieved from the website: http://www.brandsvietnam.com/6465-The-Gioi-Di-Dong-Thach-thu-bao-ve-ngoi-vuong Cafe F, Thế Giới Di Động, FPT Shop "ngang nhiên" nhập hàng từ hãng, bỏ qua nhà phân phối (2016, December 12). Retrieved from the website: http://cafef.vn/the-gioi-di-dong-fpt-shopngang-nhien-nhap-hang-tu-hang-bo-qua-nha-phan-phoi-20161212090735863.chn Anh Hoa (Author), Cuộc chiến giành thị phần giữa FPT Shop, Thế Giới Di Động, Viễn Thông A (2017, June 27) MWG - InitialCoverage- 12052015. Retrieved from https://goo.gl/nXepzr MWG – 2017 Quarter 3 – Financial Statement Report. Retrieved from https://goo.gl/k73csp MWG – annual report 2016 – Vietnamese. Retrieved from https://goo.gl/raefuc

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