UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Nguyen Son Tung DEALING WITH REVENUE REDUCTION AT INTERTEK COMPANY MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: ASSOC. TRAN HA MINH QUAN Ho Chi Minh City – Year 2018 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table of Contents EXECUTIVE SUMMARY. Introduction about The Company. 6 CHAPTER 2: PROBLEM IDENTIFICATION .1 Symtoms of the company .3 Poor support among company employees .4 Not enough support from Intertek.
17 CHAPTER 3: DESIGN SOLUTION AND SUGGESTION. Improves recruitment process. 24 CHAPTER 4: ACTION PLAN. 26 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.
41 Vietnamese Free Trade Agreements. 43 Intertek – Market Growth Driver. 44 Vietnamese Competitive Footprint across Market. 45 Priority Areas for Growth.
46 Major Competitor Updates. 49 Important Regulation during 2014-2016. 52 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EXECUTIVE SUMMARY The increase of human’s living standard leads to the requirement on using the quality products. Based on Choon7, over 78% of supermarket or shops or malls tend to require their supplier to provide the certificate of quality from trusted Quality Assurance Company.
This directly supports the article’s claim that some assurance company has many development opportunities because of reaching the demand of customers. One of the leading quality assurance companies in the world and even in Vietnam is Intertek that found in 1880 by Thomas Edison and had developed in Vietnam in 1998. According to Intertek Group Plc - Annual Report11, the company runs their business into using their techniques to test, inspect and measure the product’s quality and evaluate the factory’s environment. However, Intertek is faced with complicated issues in attracting consumers because of the limited in marketing planning and high competition in the quality assurance providers.
This specific organization was chosen because the researcher would to apply their knowledge and skills that are learned in Economic University in Ho Chi Minh City. This paper will firstly provide the background of quality assurance companies in Vietnam before analyzing the Intertek’s problem that company is suffering. Some recommendation on the company’s issue will definitely be mentioned. 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 1: INTRODUCTION 1.
Introduction about The Company Intertek is a total assurance quality company that conducts business in checking product quality, reorganizing the factory’s risk and evaluating the employee’s working condition. According to Nguyen-Viet, Tran, Unger, Dang-Xuan & Grace31, the business had established by Thomas Edison from combination between most modern assurance quality labs in London, Hong Kong and US in 1880. During 140 developing years, Intertek has identified as an international enterprise where 45,000 employees work over 140 countries. Owing to the hard-working of all employees and good management skills of high-level staff, Intertek is known as one of the most trusted leaders in Total Assurance Quality Industry.
In Vietnam, Intertek was built in 1998 from Intertek France’s investment and currently has 9 official offices throughout 6 Vietnamese cities and provinces: Ho Chi Minh City, Da Nang, Ha Noi City, Nha Trang, Can Tho and Hai Phong. According to Intertek Group Plc - Annual Report11, the main business portfolios of Intertek Vietnam are Cargo, Softlines, Certification Service, Hardlines, Business Assurance, 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Governmental Trade Service, Electric and Agriculture. According to Pham32, Vietnam is the leader of rice and garment exports, Intertek Vietnam focuses on building the innovative labs to conduct test that relates to agricultures and softlines services. It is worth pointing out that these departments currently become the profitable ones that contribute 46% monthly revenue of Intertek Vietnam.
Research objectives In order to solve the business problems, the research needs to understand clearly into business’s current situation and the suggestion will be identified. Research Methods In order to be successful in this paper, primary and secondary research will be used as a main material of making consumptions of Intertek Vietnam’s situation. When it comes to primary elements, interviews had been conducted with Finance Country Manager of Intertek Vietnam –Ms. Lena Tran, Food Services General Manager – Mr Khoi Nguyen that supports the researcher to identify the business’s troubles while the result of surveys can draw a general picture of organization’s performance.
For secondary research, the researcher conducted some online research at reliable resources in order to collect the market demand of Assurance Quality 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com industry in Vietnam and business opportunity of Intertek Vietnam in Vietnamese market. From material collected, the business’ problem will be obviously recognized and supported to project’s recommendation. Questionnaire design The question in interview is created to attempt collecting information of account department that supports the research to solve the business’s problem. These questions will relate to the working task and department’s duties and difficulties in working process.
The answer of these survey questions will be analyzed in following step as a main resource of recommendation. Limitation The project requires the significant number of relevant resources that need to be researched and analyzed in several months. It follows that the project will not be able to cover all the theories from courses as well as all the business’s situation due to limitation of time and written words. 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER 2: PROBLEM IDENTIFICATION 1.1 Domestic market The living standard in Vietnam still is low due to low monthly earnings, so most of Vietnamese citizens are willing to purchase low quality goods with cheap prices.
According to Tran & Jeppesen40, around 81% of food in Vietnamese market was at low quality while the people have to eat dirty food daily. The author also mentioned that many customers do not have basic knowledge that presents the unsafe good directly brings bad influences to people’s health. In particular, dirty food is purchased in Vietnamese market and it includes poisonous chemicals insight goods. According to Asia News Monitor1, 63% of the Vietnamese customer answered that public quality assurance companies do not support much in finding out unsafe goods and low quality products because these companies are not invested much into labs, machines and employees.
From this element mentioned, customers do not know how to evaluate what the quality product is and keep buying the goods in market while Ministries of Health noticed that 92% clothes or toys in Vietnamese market has ingredient that directly causes serious illnesses, as cancers to the customers.2 Export Market Key Trading Partners in 2016 (US$bn) 50 38 32 34 24 22 17 15 15 11 11 9 ASEAN China Japan Korea EU US Exports (US$bn) Imports (US$bn) 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com According to Pham32, people in developed countries has high living standard while the government of these nations also register strict rule on the quality of exported products that plans to export into their markets. According to Tran & Jeppesen40, the main possible exported markets of Vietnam are Japan, EU and United State (find chart 1) that requires the quality product certification when products are delivered into their market. To demonstrate, some main products are textile & garments, accessories of electrical and computer equipment, agricultural products and foods are checked strictly in US market while China has begun adapting more stringent rules on reviewing the quality of rice that makes from Vietnam. As a result, it requires the growth of trusted Quality Assurance Company in Vietnamese market that can give trusted certification to these partners accept Vietnamese products enter into their market (Pham 2010).
It follows that partner of Vietnamese exported company requires their vendor to conduct good’s quality test in international assurance company that already has brand name in international market and satisfy their market’s requirements on quality of products. 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 Competitors According to Fairclough13, existing players adapt the intense prices and increase their investment in Vietnamese Branch labs while many entrants have start setting up their offices in Vietnamese market. To demonstrate, the competitors of BV and SGS has lower price compared to Intertek Vietnam at 40% while these competitors has expanded their organization in North of Vietnam quickly. In additional, these two key competitors have some potential customers at exported market as US and EU.
It follows that Intertek’s market share might be decrease at Vietnamese market. Estimated Addressable Market Share (2016) 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.1 Symtoms of the company According to Ms. Lena – Country Finance Manager of Intertek Vietnam, the revenue of the company has been declining continously in the past 5 years which is a very disappointed performance as the demand in both domestic and export market has grown well during that time due to the increasing awareness of food safety and quality control. Revenue decreases means that Intertek not only have difficulty in finding new customers but also struggle to retain the current customers.
Year 2013 2014 2015 2016 2017 Revenue 85 million 83 million 45 million 32 million 25 million USD USD USD USD USD One reason of that is certainly the highly competive industry. According to Intertek Group Plc - Annual Report11, the key risk from Intertek’s competitors includes entry of new players, expansion of existing players, price wars, clients and staff poaching. In particular, some tests, which require from vendor, cannot be done by Intertek but provided by their competitors as Flame retardants TB117 and Formaldehyde ASTM D6007 under US regulation (SGS), Testing for Polymer material (SGS), Services for FSC, ASC, ISO 15378 (BV), BAP & ASC certification and testing (BV & SGS) and Full range of Food Contact Testing and Certification (SGS and TUV-R). Moreover, these competitors have lower price on test compared to Intertek.
For instance, the price in testing HP in footwear in Intertek is 30 USD compared to 15 USD at SGS and 25 USD at BV. In addition, some new entrants invest heavily in technology, so their result in testing fee, which will be released more quickly, meet the timeline of exporters. Therefore, the rate of new customer revenue in total revenue in 2013 was about 13% and decreased steadily until 2017 only about 4%. Beside the harsh competition of big players in the industry, there must be a number of reasons that cause the company’s declining revenue internally.
It is because of the nature of the industry, customers are not likely to switch to other companies if they are satisfied with the current provider as long-term corporation will decrease costs3. It 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com means customers are not satisfied with Intertek and it can be explained by: firstly, the cost is not effective; secondly, they are not satisfied with the services and solutions of Intertek; and finally, they are not happy with Intertek’s experts. According to Goetsch & Davis16, The company has been working in the quality assurance for a long time, it has resources, knowledge and experience to offer most of services and solutions customers need with a reasonable cost. Khoi also pointed out that Intertek's prices and services are not the cause of this problem because when compared with other companies, the price and service of Intertek is very competitive.
Therefore, the problem can come from the company’s experts who work directly with the customers. The primary requirement of an expert who work in the quality assurance industry is his/her skills and knowledge. Fully skilled experts can offer exactly what solutions customers need and it will save time and cost. Customers also require the experts to have a certain level of knowledge about the products that need to control the quality.
However, Intertek’s service cannot rely only on the experts because they are just one part of the working system. The experts need to be supported by the company, from other departments and from other experts in order to provide a good service.