UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ LE PHUONG NAM DECREASE OF REMUNERATION AND INADEQUATE STAFF TRAINING AT VINAMILK MASTER OF BUSINESS SUPERVISOR: DR. NGUYEN PHONG NGUYEN Ho Chi Minh City – Year 2019 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com DECREASE OF REMUNERATION AND INADEQUATE STAFF TRAINING AT VINAMILK TABLE OF CONTENTS EXECUTIVE SUMMARY .1 History of establishment and development .3 Vision and mission .1 Higher accident rate during transportation and loading process .2 High job turnover rate.3 Lower employee performance.1 The decrease of remuneration to employees .2 Slow adoption of new technologies in operations .3 Inefficiency of OHS practices.4 Lower training to employees .3 The importance of main problem. 23 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.1 Poor top management support.2 Poor middle management leadership .3 Low employees’ training awareness .1 Solution to poor top management support .2 Solution to poor middle management leadership.3 Solution to low employees’ training awareness .4 Change plan design. 38 APPENDIX I: INTERVIEW TRANSCRIPTS.
44 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATIONS Abbreviations Meanings USDA United States Department of Agriculture CSR Corporate social responsibility HCMC Ho Chi Minh City ODR Occupational disease rate LR Leave day rate AR Absence rate IR Injury rate OHS Occupancy Health Safety KPI Key Performance Index TAM Technology Acceptance Model TRA Theory of Reasoned Action TRI Technology Readiness Index TAR Technology Adoption Propensity ERP Enterprise Resource Planning LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 1: Business performance of Vinamilk. 5 Table 2: OHS Index of Vinamilk. 6 Table 3: OHS Index of Vinamilk. 7 Table 4: Employee turnover rate in Vinamilk.
7 Table 5:% Employees achieved KPI. 8 Table 6: Remuneration to Vinamilk’s employees. 16 Table 7: Green energy used by Vinamilk. 17 Table 8: Role of each level towards safety management.
29 Table 9: Cost for implementation of solutions to top management support. 32 Table 10: Cost for implementation of solutions to poor leadership of middle management support. 34 Table 11: Cost for implementation of solutions to low employees’ training awareness. 36 Table 12: Change plan.
36 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 1: Organization structure of Vinamilk. 4 Figure 2: Initial cause and effect map. 15 Figure 3: OHS management framework of Vinamilk. 20 Figure 4: Training to employees in Vinamilk.
21 Figure 5: Main problem and symptom. 22 Figure 6: Potential cause and effect map. 26 Figure 7: Final cause and effect map. 28 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EXECUTIVE SUMMARY Withstanding to the position of leading company in Vietnam, Vinamilk has continued renovating itself to further improve the quality of products in the way of improving living standards and health quality of the customers.
The company has more than 40 years of doing business since 1970s and current market share is about 50%. However, the accident rate been increased in previous years along with higher employee turnover rate and lower employee performance, raising the concern of the board of directors. The reasons are identified as from the low top management support, poor leadership skills from middle management, and lack of training awareness. The examination of these factors enable the change to renovate current business structure to further improve the business performance of Vinamilk in coming times.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1 COMPANY OVERVIEW 1.1 History of establishment and development Vinamilk was established in 1976 with three factories for dairy production. Throughout more than 40 years of development, Vinamilk has been become one of the largest corporations in Vietnam with primary business is to produce milk and dairy products. The company now has many dairy factories which are located in different provinces. In 2008, two dairy factories of Vinamilk gained the certification in environment protection awarded by the Ministry of Natural and Resources and Environment.
Despite of global economic and financial crisis happened in 2008, Vinamilk has been expanding its business throughput global business strategy. A factory was established in New Zealand with full capacity of 32,000 tons per year and some smaller factories in U. and other countries, increasing the revenues from export activities to 15% of total revenue. Vinamilk has made its effort in corporate social responsibilities by implementing Public Health Nutrition Consultant Centers and the application of new technologies to produce better products to the customers.
The application of new technology has been proven through the establishment of mega dairy factory in Binh Duong with all manufacturing activities have been automated. In 2014 and 2015, Vinamilk raised its stake in a New Zealand’s company and officially launched its brands in some ASEAN’s countries. In 2016, Vinamilk introduced a premium product, namely Vinamilk Organic Fresh Milk and this product passed the requirements from the United States Department of Agriculture (USDA). Currently, Vinamilk has more than 10 farms national-wide and breeding cows are originated from U., New Zealand, and Australia.
The branches and operating facilities of Vinamilk has been populated in different cities and provinces and its farms have achieved international standards in agricultural practices. For example, Vinamilk was established the first organization dairy farm in Da Lat and it qualified the standards provided by Control Union Organization. Total breeding cows in Vinamilk is about 120,000 and it supplies an average of 750 tons of raw milks which allows the company to LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com produce about 3 million milk-glass per day. The business objective of Vinamilk is to increase the number of breeding milk up to 200,000 by 2020 so that total raw milks production volume will be 1,500-1,800 tons per day.
It is asserted that all raw milks collected from dairy farms are transported to Vinamilk’s factories in Vietnam Moreover, part of raw materials are transported to another factory located in Cambodia. The action of placing factory outside Vietnam is to attain the competitive advantage of cheaper labor cost. Up to now, Vinamilk’s products have been presented in more than 40 countries and territories with export turnovers was creased from US$30 million in 1998 to US$260 million in 2016. The company has invested into corporate social responsibility (CSR) system, programs, and practices.
For example, Vinamilk has introduced a milk fund program under the name of “Growing Vietnam” since 2008 and this program’s objective is to bring financial supports to disadvantaged children. After more than 10 years of operation, this CSR program has helped more than 380,000 disadvantaged children in the country with total financial support up to VND130 billion. The company also joined into the program named “1 million trees for Vietnam” with the objective of growing green areas for the country. Vinamilk also participated into “World Milk Day” to provide useful health consultants to Vietnamese old people.
Vinamilk developed a program to build schools for children in mountain areas and this program actually brings educational services to more than half of million children in both kindergarten and primary schooling level.2 Market share Vinamilk is now doing business in producing and trading dairy products in Vietnam. It is perceived that dairy production which is part of Vietnamese food and beverage industry. Vietnamese food and beverage industry gains high growth rate which was 29.3% in 2018 as reported by the Statista (1). Regarding to dairy production market, there are more 230 companies and the market is being dominated by 5 players, including Vinamilk, Nestle Vietnam, Nutifood, Frieslandcampina Vietnam, and TH Milk.
According to the Stoxplus (2), current market share of Vinamilk is more than LUAN VAN CHAT LUONG download : add luanvanchat@agmail. The company is dominating the market along with four other companies, namely TH Milk, Frieslandcampina, Nutifood, and Nestle Vietnam. The company is also planning to consume 60% of local market share by 2023, according to Vietnam Investment Review (3).3 Vision and mission The vision of Vinamilk is to become a global brand in producing nutrient and healthy products. The mission of the company is product and to deliver nutrition to the community with high responsibility, love, and respects.
To support this vision and mission, Vinamilk delivers five core values, including compliance, ethics, fairness, integrity, and respect. The compliance is defined as a core value in which it demands that all activities of the company are to follow the regulations issued by the government and the company’s code of conducts. Ethics mean that Vinamilk establishes and maintains all ethical standards which are developed and implemented accordingly. Fairness refers to the importance of all stakeholders of the company are treated in fairly manner.
Integrity is determined as the demand of all activities which are conducted the company are transparent. Finally, respect is put into core values of Vinamilk and it addresses the importance of making good cooperation among all stakeholders.4 Business goals The business goals of Vinamilk are emphasized through its business philosophy. Currently, business philosophy of the company covers three main areas, including quality, demand, and innovation. It is translated to the statement of all activities and products of the company are to serve the customers in higher quality and innovative manners.
In addition, all customers’ demands are captured and analyzed so that the company is able to produce diversified and quality products. The company commits that the products are produced in strict compliance with government’s regulations and food safety standards and the products are sold at competitive prices. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.5 Organization structure Figure 1: Organization structure of Vinamilk Source: Vinamilk (4) Currently, Vinamilk is being managed by shareholders who are holding the company’s shares. The shareholders meeting takes the highest responsibility in the company’s organization structure and it directly manages board of directors.
The board of directors is further dictated by four committees, including strategy committee, nomination committee, remuneration committee, and audit committee. Chief Executive Officer is placed under board of directors and takes the responsibility of managing all business functions of Vinamilk, including finance, human resource management, administration, public relation, marketing, research and development, sales, supply chain management, strategic planning, and information technology. Beside of this organization structure, Vinamilk’s subordinate units are mainly divided into head office, branches, factories, logistics, subsidiaries, and a clinic laboratory. The company has 3 branches which are located in Hanoi, Da Nang, and Can Tho.
Total factories are 12 factories nation-wide and the products and materials are distributed through two logistics centers LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com in Hanoi and HCMC. To ensure the production capacity, Vinamilk has established 6 subsidiaries. 2 SYMPTOM Vinamilk achieves significant business result in the last 5 years. Table 1: Business performance of Vinamilk Indicator Unit 2014 2015 2016 2017 2018 US$ Revenues 1,659 1,831 2,099 2,251 2,284 million Net profit US$ 286 354 418 452 443 after taxes million Cost of US$ 1,117 1,084 1,093 1,180 1,213 goods sold million Cost of goods sold % 67% 59% 52% 52% 53% to revenues Source: Vinamilk (4) From 2014 to 2018, revenues of the company was increased from US$1,650 million to US$2,284 million.
Net profit after tax was stood at US$443 million in 2018 and it was 54% higher compared to 2014 when the number was US$286 million. The company succeeded in reducing the portion of cost of goods sold through the application of new technologies into its production process and it is proven through cost of goods sold ratio was decreased from 67% in 2014 to 53% in 2018.1 Higher accident rate during transportation and loading process During the exploration, the researcher explores that the company did not provide good safety management practices for its employees. It is confirmed through the higher occupational disease rate (ODR), leave day rate (LDR), absence rate (AR), and injury rate (IR) between 2016 and 2017. From 2016 to 2017, these indicators are calculated and published by Vinamilk as below: LUAN VAN CHAT LUONG download : add luanvanchat@agmail.