Business Strategy of PNJ [PDF]

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Table of Contents Introduction.................................................................................................................3 Findings....................................................................................................................... 4 I. About PNJ............................................................................................................4 1. Mission, Vision, Strategic goals and objectives................................................4 2. The relationships between them........................................................................5 II. The impact of macro environment on PNJ......................................................5 1. PESTEL............................................................................................................5 2. Strategy of PNJ from PESTEL analysis..........................................................10 III. Industry structural analysis...........................................................................11 1. The industry structure......................................................................................11 3. Implication of the industry structural analysis.................................................15 4. Suggested strategy...........................................................................................16 IV. Oppotunities and threats from macro and micro environment analysis....17 V. Internal environment and capabilities............................................................17 1. VRIO framework............................................................................................17 2. Value chain analysis........................................................................................21 3. The organizational structure analysis..............................................................23 4. PNJ stakeholder analysis................................................................................24 5. Benchmarking.................................................................................................26 VI. Strategic direction...........................................................................................28 1. Strategic planning............................................................................................28 2. Operating plan.................................................................................................31 Conclusion.................................................................................................................34 References.................................................................................................................. 35 Appendix.................................................................................................................... 36

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Introduction This report will provide the basic information of PNJ company and thoroughly analyze the internal and external environment. From there, come up with a reasonable competitive strategy in the future and make a tactical plan for each functional department to implement for 2022.

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Findings I. About PNJ Phu Nhuan Jewelry Joint Stock Company (PNJ) is the leading brand in Vietnam in the manufacturing and retailing jewelry field with gold, silver, and precious stones. PNJ's market share increased sharply in 2020, up to 35.8% in the third quarter of 2020 (Do Huyen, 2020). PNJ mainly provides jewelry products made from gold, silver, precious stones and diamond such as rings, watches; additionally, they also have gold bar trading and inspection services. Currently, PNJ is only doing business in the domestic market and is gradually entering the international market through export to achieve its vision of leading Asia in the jewelry retail industry. Domestically, PNJ is still leading this industry with a high revenue of 17,510 billion dong, profit of 1345 billion dong and will continue to exploit the domestic market due to many opportunities (PNJ annual report, 2020). Some activities indicate participation in international markets such as exporting products to 10 countries or cooperating with Disney. 1. Mission, Vision, Strategic goals and objectives PNJ's vision is to become Asia's leading company in jewelry making and retailing beauty products, reaching out to the world. With that vision, they bring the mission of constantly innovating to bring exquisite products with real value to honor the beauty of people and life. PNJ has 5 golden goals that are economic growth, community building, social development, human resource development and environmental protection (PNJ annual report, 2020). To achieve those goals, their objectives also need to be given based on their mission and vision. In 2021, PNJ has set these objectives: - PNJ targets net revenue of more than 21,000 billion dong and profit of 1230 billion dong compared to 2020, - PNJ plans to issue a maximum of 15 million shares to increase the charter capital to VND2426 billion and 3.41 million ESOP shares for employees and subsidiary company,

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- PNJ continues to open 40 to 45 more stores designed to suit the characteristics of each region (PNJ annual report, 2021). 2. The relationships between them Mission mentioned the continuous improvement and creativity that created the foundation for PNJ's world reach. Although it has not shown the target audience in it, it has shown the goal of building and developing community and society when bringing value to life. Moreover, the stated objectives also meet their goals. Although 2020 is a difficult year because of Covid-19, they still set a very high growth target. This shows that efforts for sustainable economic growth and optimization have maximized the shareholders and investors’ interest. With the goal of development and human resource orientation, the issuance of ESOP shares is considered a very valuable reward of PNJ for its employees. Additionally, the planned increase of 40-45 stores further demonstrates the efforts to achieve goals and the vision to become the leading company in Asia. However, these objectives have not yet helped the company achieve the goals of social development, community and environmental protection, but only focused on the economy and people of PNJ. II. The impact of macro environment on PNJ 1. PESTEL This is a model to analyze 6 external environmental factors that affect the business. This section will analyze how those 6 factors affect PNJ. a, Political In the 21st century, political stability helps Vietnam having peace and prosperity (Long Van, 2014). No conflict is a great advantage of Vietnam, so disputes over precious resources such as gold and silver do not occur. The one-party mechanism demonstrates its superiority in disease prevention and maintenance of nonnegative economic growth. Some state policies such as monetary policy of the State Bank contribute to supporting the domestic economy, helping GDP growth and controlling inflation; and several resolutions to help support businesses (TTXVN,2021). Additionally, the government's anti-goldenization policy has helped change the speculative needs of the people to the demand for jewelry and gifts. This is a very beneficial demand for PNJ 5

because the gold bar business is not their lifeline. Even long-term speculative demand makes it difficult for businesses doing business in this industry due to the low frequency of buying. Regarding import-export policy, the state still monopolizes the import and export of raw gold, along with strict management conditions for this activity with enterprises. Therefore, there are quite a few private enterprises licensed to import and export gold. Among them, PNJ has been licensed to import raw gold since 2013 (A.H,2013). The Ministry of Finance recently proposed to increase the export tax on gold (> 95%) to 2%. Since Covid-19 has prevented exports a lot, the tax increase will hinder PNJ's gold and silver export activities, making it difficult for businesses to stabilize production and business. However, although the import of raw gold is still difficult due to the pandemic, the tax rate in Vietnam is 0%, which is very convenient for PNJ; in addition, the import tax on jewelry is still quite high (25-30%). Political factors mostly have a positive impact on PNJ, especially import and export activities help PNJ solve the problem of raw material shortage. The government always offers reasonable policies to promote business development. As for the negative impact, in 2020, PNJ has opened more factories to reduce imported products to meet the needs of domestic and foreign markets (PNJ, 2020). This helps PNJ minimize the amount of import tax. b, Legal Circular 22/2013 on the quality of gold jewelry is an indirect opportunity for PNJ to develop market share based on the company's reliability and reputation because the circular helps consumers to raise their awareness of the quality of gold jewelry product. Currently, the Vietnamese government's regulations on jewelry business do not force businesses on the amount of capital and years of experience, but gold bar regulations require high capital (100 billion VND) and more than two years of experience. Therefore, PNJ does not benefit from this regulation because even in gold bar business, it is difficult for PNJ to confront state-owned enterprises like SJC. Some laws also create an impact for businesses today, such as the labor law, which is increasingly tightening and more employee-oriented. For manufacturing 6

companies that have an impact on the environment like PNJ, they need to strictly follow environmental laws to avoid affecting business activities and brand image. The law has both positive and negative impacts on PNJ. With a negative impact, PNJ is forced to comply with state regulations that can reduce business revenue such as tax regulations. For example, recently, PNJ was fined more than 1 billion VND due to incorrect financial declaration leading to lack of VAT and the company income tax (Kim Son, 2021). In order to take advantage of opportunities from positive impacts and minimize damage from negative impacts, PNJ always has supervisory activities by the Board of Directors with the Board of Management. c, Economic The IMF (2021) predicts that Vietnam will grow GDP at 3.78% in 2021, having growth during the pandemic is a good sign for businesses because people have more income and spending, especially retail and consumer businesses. Specifically, PNJ's jewelry retail industry has the opportunity to promote growth because highincome people will increase the demand to buy jewelry. Moreover, the inflation rate increased by 1.88% compared to December 2020 (GSO, 2021), which is low and still under the control of the state. Low inflation helps PNJ's production costs not fluctuate sharply, avoiding an increase in output prices because an increase in selling prices will easily lead to a decrease in shopping demand and consumption. Another positive effect for PNJ is that the loan interest rate is reduced by 1.55%/year compared to before the epidemic (Viet, 2021). This creates favorable conditions for businesses in general and PNJ in particular to access capital and support businesses to recover production and business after the pandemic. The jewelry industry has input materials such as gold, diamonds, and precious stones, which are materials with constantly fluctuating prices (for example, in 2020, the price of gold will increase sharply by 25%). Meanwhile, these materials account for 86% of PNJ's production and business expenses (PNJ annual report,2021); if the continuous increase in gold price will reduce the company's profit, the increase in product price will also lead to a decrease in PNJ's competitiveness compared to its competitors.

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Economic factor is one of the important factors that strongly and positively affect PNJ. To take advantage of this positivity, in 2021, PNJ has prioritized the use of short-term loans to expand its scale, actively regulate the speed of store opening, exploit the good location and anticipate the trend when the market recovers (PNJ, 2021). Additionally, PNJ recently intends to borrow nearly VND 1260 billion after reporting losses for 2 consecutive months to supplement the capital for business activities (Minh Hang, 2021). d, Social Vietnam is a country with a long tradition of using gold and silver to hoard assets or payment methods in the past. Although there has been a change in the purpose of use as mentioned in Political, the purpose of hoarding has existed for a long time, so this behavior is difficult to change. This behavior will greatly hinder the jewelry retail industry - PNJ's strength. The current population of Vietnam is more than 98 million people and the population is expected to increase positively with more than 800,000 people, the average age is 32.9 years old. These are factors that are quite suitable for increasing the consumption of jewelry. This is an abundant and potential source of labor. Currently, a favorable consumption trend for PNJ is the demand for gold. According to WCG (2021), this demand increased by 85% compared to the same period in 2020 in Vietnam. Covid-19 has had a significant impact on consumer confidence, in particular, this demand has increased sharply with markets that have handled the pandemic well. These impacts help PNJ have the opportunity to develop business again after the pandemic passes, especially in the southern market - a longstanding market of PNJ but also heavily affected by the pandemic. Social is a factor that has a great positive impact on PNJ's strategy because it directly affects jewelry retail sales through demand. Due to the large demand for gold, in 2020, PNJ opened 29 new Gold stores, closed 36 stores, mostly PNJ Silver to restructure the location and have better rental costs; thanks to that, PNJ has completed the goal of optimizing revenue at each store (PNJ, 2021). e, Technology

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In recent years, Vietnam's R&D activities have made great progress, although the budget for R&D in 2019 is only 0.53% of the country's GDP, much lower than neighboring countries, but Vietnamese businesses contribute. up to 64% in national R&D (Hoang Giang, 2021). Moreover, the digital transformation is also developing strongly in Vietnam, with 80% of business leaders saying that digital transformation is urgent and 65% planning to increase investment in this activity (moit.gov.vn,2021). These developments make it possible for PNJ to optimize its resources to reach customers, expand the company's scale and not disrupt business when the lockdown occurs. However, one factor that is not beneficial for enterprises in terms of technology is that human resources in the technology industry in Vietnam are still scarce and of low quality (Toan, 2021). The demand increased rapidly, but the supply was short in both quantity and quality. For PNJ, this will hinder the application of technology in the company; even lose the technological advantage with competitors in the industry. This factor has a negative and positive impact, PNJ has applied and built a number of systems such as ERP system, Xman software to increase communication convenience and optimize risk management; digital marketing channels to reach customers; the payment system and retail application to optimize sales channels. To overcome the negative impacts, PNJ constantly opens training and human resource development programs at the company, is in the top 100 best places to work in Vietnam and have good benefits to attract talent. f, Environmental Due to the specificity of heavy metal jewelry making, input materials are nonrenewable can contaminate water and air. Organic materials such as rubber, when decomposed, will cause environmental damage and create pathogens in the surrounding area. Heavy metal pollution also harms the working environment, reducing employee productivity. The input materials of the jewelry industry originate from gold and silver minerals and it is always limited, so PNJ always has to ensure the economical use of this material, avoiding the increase in raw material costs and resource depletion.

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Environmental factors for PNJ's careful consideration, not only for production but also to meet great interest from stakeholders. Environmental factors have negatively impacted PNJ. To handle it, PNJ has built wastewater and waste treatment systems followed standard QCVN 40:2011/BTNMT, and fuel-saving policies to ensure the government's environmental protection regulations (PNJ annual report, 2020) and many other technologies. 2. Strategy of PNJ from PESTEL analysis In the future, there will be two factors that create threats to PNJ, namely Economic and Environmental factors, which are detailed below: The influence from the Economic factor will change the Social factor, namely the people's demand for speculation or jewelry. They will vary based on the economic situation of the country. Hoang (2004) recognizes gold as a kind of savings, a concept of security, a measure against the currency devaluation and for investment. Therefore, during the Covid-19 pandemic, the unstable economy caused prices to rise, investment channels such as stocks fluctuate strongly, making gold popular. From there, the gold bar market will dominate the jewelry retail market of PNJ. On the contrary, if the economy is stable, people's income increases, the demand for jewelry will increase again. Therefore, PNJ always has a strategy to adapt to the change between these two needs of customers. The second influence from the Environment factor. PNJ's gold and silver industry has a great impact on the environment when handling input materials. The development of the industry will increasingly degrade the environment and legal regulations will be tighter for businesses. Therefore, PNJ always focuses on developing technology to treat waste and wastewater; make optimal use of mineral resources, processing technologies also need to meet standards to optimize the amount of raw materials and avoid wasting resources force. Currently, PNJ is following the product differentiation strategy because PNJ's product portfolio is always diversified in design and reach a lot of different segments. For example, they constantly have collaboration with famous brands such as Disney; open many unique and own brands for young people to bring a variety of designs. However, if customers change their needs to highly speculative, the only 10

strategy of product differentiation is difficult because customers do not pay much attention to design. Additionally, gold price rises sharply because of great demand; the technology must be advanced to handle environment problems, making the cost more and more expensive, so they cannot implement the cost-leadership strategy. Therefore, they should implement the differentiation focus strategy. PNJ can research the market that brings the most profit for PNJ, reposition products to be suitable and focus resources to diversify products for that market. For example, PNJ can segment the high-end jewelry market and still create product design and portfolio differences to create a brand and dominate this high-end market. In general, the strategy will be as follows and it will specifically described in part VI. Strategic goal

Strategic objectives

Strategic direction

Sustained development

- Releasing 5 jewelry

Product development:

collection annually in

Diversify more products

2022

belonging to the target

- Reduce input costs for

customer segment in the

each product brought to

South Vietnamese market

market

Market development: Bringing existing products in the South to the North market to expand the scale.

III. Industry structural analysis 1. The industry structure Porter (1980) defined industry as a group of firms that produce products and services interchangeably, providing customers with essentially the same needs. From this definition, the industry of PNJ belongs to the jewelry industry. The gold bar business is also considered in this industry, however, because there are very few companies allowed to participate and the government currently has a near monopoly in this industry, it will not be considered in the jewelry industry in Vietnam. a, Threats of new entrants (Low) 11

First of all, we will consider the factor of capital and resources. In terms of government regulation, this is an industry where the government does not require capital. Based on Article 8 of Decree 24/2021/ND-CP, the government also does not have strict regulations for businesses when trading in jewelry, just a certificate and facilities. Regulations to open a brand are not too strict, helping this threat to be high. Conversely, there are many factors that make this threat low. Jewelry design and production requires a large amount of human resources with expertise and advanced production technology. Customer loyalty is very high due to the uniqueness of product design; it is difficult for customers to switch to a new brand because the price of gold is very expensive. Another factor is economies of scale, big brands always have labor specialization integrated with technology that helps boost production output. Large companies like PNJ, Doji always require high output, so supply orders will be high and the discount will help reduce input costs. Those are the reasons that economies of scale help reduce costs for big brands, creating cost and price advantages for new entrants. In the future, this pressure may increase to medium because as analyzed in Social, the demand for jewelry of customers will increase in the future, so new entrants can take advantage of this and earn a name in the future in the jewelry industry. Moreover, the more convenient access to resources for businesses, will create opportunities for new entrants to enter and the rapid development of new brands. b, Threats of subtitutes (Low) Imitation or artificial jewelry made from other materials such as titanium cannot replace the importance and benefits of gold and silver such as health protection or investment, and only help in beauty for a short period of time. Moreover, the quality of life of Vietnamese people is increasing, so there is no possibility of replacement in the future. Thus, this force in the present and in the future is weak. For the purpose of speculation, products such as stocks, real assets, etc. can replace gold and silver jewelry depending on the economic situation that investors change their investment plans. Therefore, this product does not have much impact on the jewelry industry. 12

c, Bargaining power of suppliers (High) Gold, silver, diamonds, precious stones are materials that are irreplaceable in their benefits and value, they are obtained from ores or imported from other countries. For example, PNJ sources gold and silver materials through purchases from passersby and imports from other countries, diamonds and gems are imported from India, Hong Kong, and Thailand (Khanh Linh, 2019). The State Bank also has strict rules in importing this material. Another factor is that gold and silver are used not only in the jewelry industry but also in electronic components and the chemical industry. Therefore, the number of industries that need this source of raw materials is very large. The number of suppliers is not much, especially diamond and gemstone suppliers, diamonds for instances, PNJ imports from Yakubov, Forte. In terms of human resources, they usually have to go through 2-4 years of training from vocational training schools, which costs a lot of training. Because of this training cost, many companies will train themselves or get human resources from only one place to meet the company's training in technology and techniques. Therefore, the bargaining power of suppliers is very high. In the future, if the State Bank removes restrictions on importing gold and silver materials, creating favorable conditions for import tax, companies will be able to increase the supply of input materials and reduce their dependence on suppliers. in the country and the power of suppliers may drop to medium. d, Bagaining power of buyers (Low) Jewelry is not an essential product for people but is bought by many people for the sake of keeping wealth and beauty. They have a unique design, so the volume of customers' purchases is not much, each person only buys one product for one design. Along with that, the number and size of companies with unique jewelry is not as large as the size of customers. We can see that although the shops and companies sell a lot of jewelry, the products they sell are often the same. In terms of big companies like PNJ, Doji, SJC, etc., they always bring different products and invest a lot in R&D for products, the number of such companies is not much in Vietnam. Products between brands are always differentiated, even if they have the same design, the high price of gold and silver also makes customers not want to switch to 13

other brands' products. That shows that the customer's cost of switching suppliers is high. From those factors, customers have low negotiating power and it remains the same in the future. e, Competitive rivalry (low) The size of companies in the jewelry industry is almost the same. Specifically, in the third quarter of 2020, PNJ's market share increased sharply to 35.8% (Do Huyen, 2020) and recently, Doji was ranked at the top of the jewelry industry according to Vietnam Report (Anh Duong, 2021). Additionally, there are many largescale Vietnamese brands such as SJC or Bao Tin Minh Chau and some foreign brands. Even up to 73% of the jewelry retail market share belongs to traditional stores (Hoang Kieu, 2020). Thus, the number of competitors in the industry is very high so companies are forced to compete fiercely to keep and expand market share. In terms of jewelry market saturation, although there is no specific data on industry growth, for example, after the first 7 months of 2021, PNJ reported revenue growth of 32.4% compared to the same period in 2020 (PNJ, 2021). On the other hand, Doji had the growth of 24.3% in 2020 compared to 2019 (Dong Tien, 2021). This growth shows that the market is still not saturated, companies can still focus on increasing sales without competing to attract customers. Therefore, competitive pressure is low. In terms of prices, the price difference in each company is due to the cost of resources. Moreover, jewelry brands all have different designs suitable for each customer, and the product portfolio of each brand is diverse according to their brand positioning. For example, Skymond positions a high-end brand, so products are made from platinum and diamonds, PNJ positions customers with average incomes and above, so the product also has more gold and silver. Quality also depends on the technology and workmanship of each brand. Products with many differences make the competition to attract customers low. Additionally, another factor that makes competition low is the low barrier to exit. The technology of the jewelry industry is usually 3D printing technology, which can be applied to the accessories and components industries. Gold and silver are raw

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materials used in many different industries such as electronic components. They easily switch to another industry without spending a lot of money on other resources. This pressure in the future is likely to increase to a very high level as foreign brands gradually enter Vietnam to capture more market share and the more specialized technology and resources become for the jewelry industry, the higher the barriers to exit. 3. Implication of the industry structural analysis *Radar plot of Vietnam jewelry industry Threat of new entrants 5

Supplier power

Threat of sutitutes Current Future

0

Buyer power

Competitive rivalry

1: High; 3: Medium; 5: Low From the radar plot above, although PNJ is currently not facing much pressure because only the pressure from suppliers is high. They need to promote the settlement of negotiations with suppliers to avoid resource shortages, disrupting the production chain. The negotiating power from the supplier will probably last long until the government creates an opportunity by breaking the monopoly control in this industry. In the future, competition with competitors in the same industry will need to be considered and handled by PNJ first; then there is competition with new entrants. However, with its available and big resources, PNJ may not need to pay too much attention to new entrants. Moreover, the barriers to entry also come from suppliers so if the supplier power decreases, PNJ will also have an advantage with new entrants. 15

Indeed, competitors in the same industry as Doji are also competing fiercely with the scale and development not inferior to PNJ and some domestic brands are also expanding such as Huy Thanh jewelry. 4. Suggested strategy Based on the factors analyzed, according to Porter's three general strategies, PNJ is currently implementing a proper product differentiation strategy. PNJ always diversify its product portfolio to create diverse options for customers. The company cooperates with big brands to bring more unique designs, open many different brands to target different customers like StylebyPNJ, keep the release frequency of jewelry collections high. However, differentiation only creates the uniqueness with customers and can easily lose customer loyalty if the strategy is not maintained. Especially when competitors increase and become stronger, the products will be more diversified, the product portfolio and brand positioning are similar to PNJ, the greater the competition to attract customers. Therefore, PNJ should combine with a focus strategy to specifically focus on a customer segment market, along with a differentiation strategy to quickly capture a large market share in that segment. As a result, in the future, PNJ will not be too worried about competitors because they already have a large loyal market. This differentiation focus strategy will help PNJ eliminate the risk of having to focus a lot on R&D because it can control the change in customer behavior in the company's market and avoid losing customer loyalty. Specifically, to implement this strategy, PNJ needs to identify the market segments they pursue, reposition products and brands; create products with unique, innovative materials and designs to suit that market. IV. Oppotunities and threats from macro and micro environment analysis Opportunities

Threats

- Support policies from the government

- The threat from new entrants and

with PNJ

competition with competitors increases

- The economy is stable, recovering

in the future

quickly, people's income is increasing

- Gold price fluctuates continuously,

- Increased demand for gold and silver 16

for various purposes

affecting PNJ's revenue.

- Opportunities from technological

- Losing skilled jewelers to opponents.

developments in many fields

- The increasingly degraded environment forces PNJ to have environmental protection activities

V. Internal environment and capabilities 1. VRIO framework a, Tangible resources *Product range and distribution network Value: PNJ's product portfolio is very diverse in terms of materials, uses and product lines such as watches, 10K, 18K gold jewelry, diamonds, etc. If compared with other brands In Vietnam, PNJ has the largest product portfolio. Additionally, PNJ has 336 stores nationwide up to now and also supplies products to 12,000 local jewelry stores across the country (Tri Tuc, 2021). This shows that PNJ is providing a variety of different products to meet the needs of all customers and increase opportunities to reach new segments. Rarity: PNJ is currently one of the few private enterprises in Vietnam that exports gold and silver jewelry thanks to its large-scale production capabilities and products that meet the technical standards of its partners (Everest, 2021). However, the export is only a few large enterprises such as Doji, SJC and some banks, so this is a rare resource. Imitability: With a fairly large product portfolio of PNJ, it is very difficult to imitate because they need a large production scale and a highly skilled team. It is also difficult to imitate distribution networks because they need large scale, strong enough supply capacity to the market, especially, export activities need to ensure strict standards of other countries. Organizational capability: PNJ is an enterprise founded together with SJC, has been operating for nearly 35 years and holds a large market share in this industry, so they have high bargaining power with suppliers on specific raw material standards; has a highly skilled team to develop a more diversified product portfolio. 17

*Financial resouces Value: PNJ has great financial resources, total capital of nearly 8,500 billion VND with equity of more than 5 trillion VND and cash amount of more than 113 billion VND (PNJ annual report, 2021). These figures show that this is a very valuable resource of PNJ. Rarity: Only some of PNJ's main competitors have the same potential and large scale as Doji Group with total assets of more than 12,000 billion dong; even state-owned enterprise SJC only has total assets of nearly 1,650 billion dong. Enterprises with financial resources greater than or equal to PNJ are few, so this is a rare resource. Imitability: Financial resources are difficult to duplicate because these are tangible resources unique to each company, used and allocated depending on the economic situation and secret activities of the company. Moreover, in Vietnam, two companies, PNJ and Doji, have a very large scale, and PNJ is also circulating more than 227 million shares, so it will take a lot of time for competitors to catch up with PNJ. Organizational capability: Currently, to cope with the epidemic, PNJ reduces labor force, issues more shares to increase capital for the company. PNJ's financial-related activities are scrutinized, reported and approved by the company's shareholders to ensure transparency. Thanks to that, after a year of closing many stores, PNJ lost more than 159 billion dong in the third quarter of 2021 but still saw a slight growth of 8% in the retail channel (Van Linh, 2021). b, Human resouces Value: PNJ owns more than 6,000 employees with outstanding professional background, especially a design team of 50 members and more than 1000 jewelers and artisans who are highly skilled and creative (PNJ, 2020). Moreover, in 2020, PNJ developed a set of jewelry standards to evaluate the skills of jewelers. This shows that PNJ's human resources are very valuable. Rarity: PNJ always invests on human resource training activities. Training programs integrate digital technologies for greater convenience. Moreover, they have developed training news sites to promote a culture of learning in PNJ and have many other skills improvement programs for employees (PNJ annual report, 2021). This is a rather prominent feature of PNJ for its personnel. 18

Imitability: It is very difficult to have qualified and skilled human resources because specialized training in the jewelry industry is very expensive. PNJ used to own 70 jewelers in Vietnam in 2014 (Nguyen, 2018). Organizational capability: PNJ pays great attention to create equality, empower employees to show trust and increase cohesion between employees and management. The working space is also decorated in a modern way, ensuring efficiency for employees. Labor laws are also guaranteed. As a result, PNJ has been in the top 100 enterprises with the best working environment for 6 consecutive times. c, Intangible resources *Brand image Value: With nearly 35 years of operation in the industry, the brand image has been built very firmly, so this is a very valuable resource for PNJ. In 2020, PNJ won the award of the best enterprise in the Asian jewelry industry of the JNA Awards; Additionally, PNJ is also a national brand for 12 consecutive years. It can be seen that the PNJ brand has created a great resonance in Vietnam. Rarity: Once included in the top 50 leading brands by Forbes Vietnam in 2019, now, PNJ has reached a brand value of 94.1 million USD (PNJ annual report, 2021) and has always been the leading jewelry retail brand. first in Vietnam. In Vietnam, there are very few brands in the same industry that achieve as much as PNJ, so this is a rare resource. Imitability: It takes a lot of effort and time to copy PNJ's brand image, because this is an element associated with PNJ's long history. Organizational capability: PNJ is exploiting the brand by adding value, introducing new products, linking with famous brands to make the product more attractive. *Intellectual property Value: PNJ's products are all unique and creative from their design team, so they are very valuable. Rarity: PNJ has deals with many big brands to use its image and is an agent to provide watch products of other brands. However, Vietnamese businesses are also doing this activity, especially foreign enterprises are entering the Vietnamese market, so this is not a rare resource. 19

Organizational capability: cooperation with big brands has helped PNJ become more prestigious and is an opportunity to expand into foreign markets. d, Capabilities *Production and design innovation capacity Value: Currently, PNJ owns 2 factories with a design team of 50 people and 1000 highly skilled jewelers. Each year, the company launches more than 3 million products to the market, best meeting shopping needs across the country. Rarity: The jewelers are all qualified, the factory in Ho Chi Minh City has been upgraded to produce high-tech products to replace imported products. At the same time, the selection of suppliers is also applied by PNJ strict principles of standards and quality; ensure the criteria of environmental protection and political stability like diamonds from India. Imitability: The production and design lines in the jewelry industry are not special, most of them are man-made. Moreover, Vietnam has many old craft villages with large jewelry factories, so this is an ability that can be copied from competitors. Organizational capability: Design products are carefully selected by PNJ with a frequency of 20/100 products being mass-produced and brought to the market (PNJ, 2019). Besides, PNJ always improves the productivity of the two factories to ensure the supply to the market and reduce the number of imported products.

Based on the above analysis, we have the following VRIO analysis table: Resouces and 20

V

R

I

O

Competitive

capabilities

implication

Product range and

Yes

Yes

Yes

Yes

distribution network

Sustained competitve advantage

Financial resouces

Yes

Yes

Yes

Yes

Sustained competitve advantage

Brand image

Yes

Yes

Yes

Yes

Sustained competitve advantage

Intellectual property

Yes

No

-

Yes

Competitive parity

Production and design

Yes

Yes

No

Yes

Temporary

innovation capacity

competitive advantage

Human resouces

Yes

Yes

Yes

Yes

Sustained competitve advantage

2. Value chain analysis Inbound

Operations

logistics HRM

Outbound

Marketing and

logistics

sales Bonus policies to

Service

Staff have

- Training

- Product

Staff

expertise in

personnel,

quality control promote business

inspecting the

setting standards staff.

such as sales

inspection

quality and

to improve team

- The

emulation

work for

standards of

skills.

distribution

program for sales

customers;

gold, silver,

- Team of

system at the

staff nationwide.

customer

and diamond

designers,

stores is

service staff

raw materials.

jewelers with

handled by

solve problems

high

trained staff.

for customers

performing

professional

such as

qualifications.

warranty.

Technology

- Design

- Apply multi-

Product

development

software,

channel selling

maintenance

modern

technology: app

equipment,

21

technology from

retail, e-

analytical

Europe such as

commerce.

equipment for

3D printing

- Omni-channel

testing

technology,

marketing

diamonds and

laser cutting

integrates digital

gems.

- Environmental

channels to

waste treatment

increase customer

technology

experience.

meets state standards Procurement

- Materials are

- PNJ always

Procurement of

purchased

invests in

valuable gold

from domestic

production

bars, diamonds

and

technology and

and jewelry

international

equipment to

from

traders.

ensure even if it

customers.

Diamonds are

is affected by

imported from

the epidemic.

Indian

- PNJ sends

suppliers.

human resources

- Some jewelry to developed

Firm

products are

countries such

imported from

as Germany and

big brands and

Italy to learn

high

jewelry

productivity

manufacturing

factories.

technology.

- Information system: is the system that supports PNJ to organize communication

infrastructure activities between company and stakeholder like employees, shareholders,etc.; process, store and synchronize information about sales activities on different sales platforms. - Legal: Intellectual property rights on design, product images and related laws are 22

protected by Vietnamese law. PNJ also has its own internal regulations and charters for the company. - Quality control: PNJ has strict supplier selection processes to ensure it fits the company's culture and standards. Employees are trained continuously to keep up with current trends. Jewelers are evaluated against a set standard to ensure the perfect product when it reaches the consumer. - Finance: Very large financial resources, the financial allocation is balanced between revenues and expenditures. Finance-related activities are always summarized and thoroughly checked by the audit committee to help the Board of Directors make decisions. The financial statements are also made public to shareholders and investors.  The core activity of PNJ drawn from the above table is operations. To support this primary activity, HRM provides highly skilled manpower with expertise in jewelry design and manufacturing; technology development activities bring software to support the design, 3D printing technologies to reduce the work for workers, application of technology to protect the environment; Procurement activities help the company import new production technologies and trained human resources from abroad. In addition, infrastructure provides information systems in factories, the quality control of machines or stages in the production process. 3. The organizational structure analysis

23

From the organizational chart above, it can be seen that PNJ is using a functional structure for the company because activities and work are divided among different departments. Functional structure helps increase the specialization for PNJ. For example, it can eliminate duplication in work, increase coordination between departments. Specialization also manifests in the fact that highly qualified employees or specialists can be responsible for the performance of specific functions. Moreover, the organizational structure of PNJ also follows a top-down hierarchy to show the level of authority of each department. One weakness of this structure is management. Weaknesses are in the complexity of monitoring individual work processes, too many departments leading to lengthy decision-making procedures. Additionally, because experts only perform one function, lack of understanding between departments is likely to occur. 4. PNJ stakeholder analysis Internal stakeholder is Labor (Employee, Manager): This is an audience with low power. They are high interested in income policies, benefits and training and development opportunities in PNJ. These forces PNJ to ensure safe working conditions, a fair and civilized environment and take care of occupational health. 24

Conflicts may arise between employees and Shareholders when Shareholders want high profits, reduce costs, possibly labor costs; This makes employees unhappy because wages or benefits may be reduced. External stakeholders of PNJ include Government, customers, Shareholders, community and suppliers, partners. Government: only cares about taxes, so the level of concern is very low. However, the power is high because the government has regulations and policies of the State that can change the production and business activities of PNJ. Customers: are the people who can help PNJ survive, so they also have high power, indirectly changing business strategies through demand, product and service quality requirements. Those same requirements, when buying products of PNJ, Customers also pay much attention to the quality of products, services or core values of PNJ, so the level of concern is also high. Shareholder: mainly interested in capital, finance, profit and business situation of the company, even the capacity of shareholders to manage the enterprise. They have the highest power in the company, can decide the activities of PNJ. PNJ always has to be transparent about information, ensure the interests of shareholders and maintain a sustainable growth rate in order to create trust for shareholders to provide capital. They may have a conflict of interest with each other when making decisions in PNJ. Community: this is an audience with no power and not much interest. They only care about activities that support local economic and social conditions and ensure environmental safety. Suppliers and partners: these stakeholders have a moderate interest. They are interested in development cooperation and stable income source with PNJ; implement the terms signed in the cooperation. Additionally, suppliers who can decide on the quality and price of the supply should have average power.

25

5. Benchmarking Based on the Strategic group (Appendix), it can be determined that Doji is the main competitor to PNJ in the jewelry industry. Resouces and capabilities

Strategic Importance (PNJ)

Relative strength (Doji)

Product range and

Large product catalog and

The product portfolio is also large,

distribution network

distribution stores, agents are

but there are no silver products yet,

present all over the country (10)

the distribution network is large, present throughout the country (9)

Financial resouces

Brand image

26

Huge financial resources, the

Operating in many different fields,

company is ranked in the top 50

not only jewelry, large capital, in

best listed companies in Vietnam 6

2020 each achieved a revenue of

times in a row, always has a good

about 100,000 billion VND (Doji,

reputation with shareholders. (8)

2020) (9)

Having been in the industry for

Only operating in the industry for

nearly 35 years, is a mid- and high-

27 years, exploiting the high-end

end segment brand with quality

segment, is a familiar brand in the

products. (8)

Vietnamese market, standing

above PNJ in the top 10 prestigious retail companies in 2021. (9) Intellectual property

There are many cooperations on big

There are few major brand image

brand image, cooperation in

collaborations, mainly watch

distribution of jewelry brands,

brands distribution cooperation (7)

unique products in design. (8) Production and design

Having 2 jewelry factories with a

There is a jewelry factory with the

innovation capacity

capacity of 3 million pieces per

largest scale in the country and a

year, a highly specialized design

gem mining company in Yen Bai,

team, complex selection and

production processes in modern

manufacturing processes (9)

lines from Korea, Thailand. (9)

The staff scale is more than 6000

The staff size is nearly 2000

people with a design team of 50

people, the number of people with

people and a jeweler of more than

seniority over 10 years accounts

1000 people. (8)

for 25% (Doji, 2019). (7)

Human resouces

Based on the above table, it can be seen that PNJ has strengths in human resources, production and design innovation capacity, intellectual property and a superfluous strength of product range and distribution network; these are the resources that are being fully utilized at PNJ. Meanwhile, brand image and financial resources are PNJ's weak points.

strength

Relative

High

Superfluous strengths

Key strengths

Product range and distribution

- Human resouces

network

- Production and design innovation capacity - Intellectual property

27

Zone of irrelevance

Key weaknesses Brand image Financial resouces

Low

Strategic importance

High

Based on the above analysis, we have the strengths and weaknesses of PNJ as follows: Strengths

Weaknesses

- Huge product catalog

- Brand image is lagging behind Doji

- Wide distribution network

- Strong financial resources but still not

- Abundant human resources, large

on par with Doji.

scale, high professional capacity - Large production capacity, complex and thorough product creation process - Products with high creativity and originality VI. Strategic direction 1. Strategic planning a, Strategic objectives According to the analysis in part I, the initial objectives of PNJ have not helped the company achieve the set goals. Their objectives is only to focus on business activities and ensure the benefits for shareholders. Therefore, the following table outlines the objectives and priorities for PNJ. Priorit

Strategic objectives

Analysis

Sustainable growth in

Meet the goal of economic growth, which is the

profits, revenue and

top goal for PNJ to operate.

y order 1

maximizing the benefits of shareholders and 28

investors 2

3

Enriching human

Help PNJ improve its strengths, maintain a

resources, creating a

sustainable competitive advantage and improve

healthy environment

the image of a good working environment with

for employees

employees.

Improve brand image

Help PNJ brand image spread, create positive emotions from customers through community projects. Two parallel activities will help achieve the goal of building community and improving brand image.

4

Efficient use of natural Meeting PNJ's environmental protection goal. resources and treatment of waste from the production process

b, Strategic direction The Ansoff matrix is the model applied to orient the strategy for PNJ.

In the past, PNJ followed the product development strategy when investing heavily in the southern market. PNJ focuses on creating many products and diversifying product portfolio to serve all needs of customers. The proof is that PNJ used to hold 70% of jewelers in Vietnam in 2014 (Nguyen, 2018). 29

PNJ is currently following the strategy of product development in the North market and market development for the South market. Product development: PNJ continues to diversify its product models, expanding more and more stores. The company always aims to expand market segments and exploit new segments, even taking market share from retail stores. This direction helps PNJ can bring these product to the South and create a foundation for more investment in the Northern market development strategy. Market development: Although PNJ started to have the first stores in Hanoi since 1994, it wasn't until 2019 that they focused on the northern market, starting with PNJ Next. PNJ believes that young people in the North no longer tend to use gold as a hoarding asset, so they have started to bring available unique design products to the North market, especially the urban areas concentrating people with moderate income and above. It is this direction and extensive experience in the Northern market that have helped PNJ continuously expand the market, making it difficult for other competitors to compete. In the near future, PNJ should maintain its strategic direction to cover all provinces in Vietnam. Recently, PNJ has also focused more on the Northern market through the expansion of retail stores. In the further future, with the vision of a leading Asian company, PNJ should implement a related diversification strategy when moving to expand its scale in the Asian market. Because these are new markets and jewelry styles are also different as India has more types of jewelry worn on the head of the bride and has wider hinges. c, Competitive strategy Currently, PNJ is implementing a very thorough product differentiation strategy. Specifically, Vietnam used to have a long tradition of gold and silver, so it is difficult for PNJ to compete with small shops or traditional craft villages both now and in the future. Because these are small competitors, they can optimize costs and sell at a very cheap price. Therefore, PNJ has expanded its product categories to target the most customer segments, create a lot of choices for customers and focus on the psychology of customers who prefer to use branded products. Thanks to the uniqueness and diversity of designs, materials, and designs, PNJ has been very 30

successful in the Vietnamese market, always leading in the jewelry industry; Typically, the silver jewelry product lines of PNJ Silver have higher prices but are still favored by customers. However, not only small stores but also many foreign brands have entered the jewelry market. Diversifying product categories is easy for foreign new entrants with better financial resources than PNJ. Therefore, in the future, PNJ should change to differentiation focus strategy. PNJ needs to focus on the high-end customer segment instead of spreading it out like now to create a certain loyal customer file. The difference is in cost and product attributes. Specifically, product attributes such as materials and designs will be more diverse for customers to choose from, designed by famous artisans with a higher cost to create a brand with this customer segment. Moreover, PNJ also needs to innovate its services to increase customer experience in both online and offline sales channels. 2. Operating plan To accomplish the stated objectives, the functions of PNJ in 2022 will be shown as follows: Corporate

Functional objectives

goals Sustainable

Operation:

growth and

- Reduce cost per product by 10%

benefits for

- Improve production capacity of factories to 4 million

shareholders

products/year

and investors

- Optimizing input costs, incurred costs such as equipment repair Finance: - Reaching a profit of 23,000 billion in 2022, an increase of 10% compared to the target of 2021, profit after tax of 1365 in 2022, an increase of 5% compared to 2021 - Issue 10 million shares to raise more capital - Adjust 2 short-term and long-term debts reasonably R&D: - Released 4 new jewelry collections

31

- Improve production operations Developing

HRM:

human

- Ensure policies on occupational safety and health

resources and

- Building a diverse and gender-equal environment

ensuring a

- Implement training programs for all subjects in the enterprise

working

- Improve skills of jewelers and design team

environment for employees Improving

Marketing:

brand image

- Improve customer awareness of the brand - Promote brands in the PNJ ecosystem in the Northern market - Create positive emotions of customers with PNJ through investment in community projects such as scholarship, sponsor, etc.

Environmental

Operation:

Protection

- Invest in manufacturing waste treatment technologies - Ensure compliance with procedures and regulations on standards for using gold and silver resources

With PNJ's focus differentiation strategy and market development strategy orientation, functional departments need to carry out the following tactical actions for 2022: Function

Activities - Raising capital for PNJ

Budget 5 billion dong

- Budgeting, financial reporting and making financial forecasts for the

Finance

business - Control PNJ's finances and cash flow for operations

Operation - Ensure the source of raw materials, input equipment and output products to ensure quality and cost-effective - Optimizing costs for jewelry production activities

32

50 billion dong

- Manage distribution network and network expansion activities - Provide KPIs to evaluate the effectiveness of employees, standards to 10 billion dong evaluate the skill level of jewelers.

HRM

- Building a flexible working environment, promoting creativity and innovation for employees - Research target market segment

Marketing

20 billion dong

- Come up with a suitable marketing strategy when “new normal” happens - Launch and invest in community benefit programs - Make sure to add a new product every month

R&D

- Improve jewelry production and operation processes

33

25 billion dong

Conclusion Although a business that has always been at the forefront of the jewelry industry, PNJ needs to improve more and take advantage of opportunities to surpass its main competitor Doji; prepare resources to compete with potential competitors in the Vietnamese market. With a vision to be at the top of Asia, it is possible that the strategies proposed in this article will help PNJ achieve this vision.

34

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9. Hoàng Giang, 2021. Đầu tư vào R&D tại Việt Nam: Cần sự vào cuộc hơn nữa của các DN lớn. [online] baodientu.chinhphu.vn. Available at: [Accessed 13 December 2021]. 10. Hoàng Kiều, 2020. 4 ông lớn ngành vàng PNJ, Doji, SJC và Bảo Tín Minh Châu đang kinh doanh ra sao?. [online] vietnambiz. Available at: [Accessed 29 October 2021]. 11. Hoang, V., 2004. Analyses on Gold and US Dollar in Vietnam'sTransitional Economy. [ebook] Université Libre de Bruxelles. Available at: [Accessed 26 October 2021]. 12. Hồng Nhuận, 2021. IMF hạ dự báo tăng trưởng GDP Việt Nam 2021 xuống còn 3,78%. [online] Cafef.vn. Available at: [Accessed 21 October 2021]. 13. Long Vân, 2014. “Nền chính trị ổn định tạo cho Việt Nam có được một nền hòa bình và thịnh vượng”. [online] https://www.qdnd.vn. Available at:

[Accessed 1 December 2021]. 14. Minh Hằng, 2021. PNJ muốn vay thêm ngân hàng tối đa 1.260 tỷ đồng. [online] vietnambiz. Available at: [Accessed 12 December 2021]. 15. moit.gov.vn. 2021. Chuyển đổi số giúp doanh nghiệp có sức chống chịu tốt hơn. [online] Available at: [Accessed 15 December 2021]. 36

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24. Toàn, T., 2021. Phát triển nguồn nhân lực ngành Công nghệ thông tin trong giai đoạn 2021 - 2025: thực trạng và giải pháp. [online] Tạp chí Công Thương. Available at: [Accessed 15 December 2021]. 25. Tri Túc, 2021. Đóng đến 80% cửa hàng do Covid-19, chuỗi vàng bạc trang sức PNJ thua lỗ 158 tỷ đồng trong quý 3/2021. [online] Cafef.vn. Available at:

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Appendix Strategic group

As can be seen on the mapping, brands have different strategies than competitors. Skymond and Tierra are two brands that focus on the high-end customer segment with diamond and platinum products, which are very expensive; The material limitation also limits the product range to a small extent. With the same level of product diversity, Huy Thanh Jewelry only deals in gold jewelry with low brand positioning. Besides, Doji and PNJ both have the same brand positioning because the products are both aimed at young people and different ages with a good average income, but PNJ has a wider range of products because they have more types of products. silver jewelry. It can be concluded that Doji is a biggest competitor to PNJ in the present and future, although the product portfolio is smaller, with their strategy, they are always at the top of the jewelry industry, competing for the position with PNJ. Meanwhile, the remaining competitors with different positioning and product diversity, to take the position of PNJ, they will have to face mobility barriers. For example, Skymond cannot change its position down to PNJ because diamond and platinum are very expensive materials. Or for companies to expand their product 39

portfolio, they need large resources for R&D in terms of knowledge, human resources and technology.

40