UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Le Thoai Vy MANAGING RETAIL CUSTOMERS AT DUONG MINH PHUC COMPANY LIMITED MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2017 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ Le Thoai Vy MANAGING RETAIL CUSTOMERS AT DUONG MINH PHUC COMPANY LIMITED MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Prof. Tran Ha Minh Quan Ho Chi Minh City – Year 2017 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SUPERVISOR’S REPORT ON THE THESIS PROPOSAL SUBMITTED FOR DEGREE OF MASTER of BUSINESS ADMINISTRATION The thesis proposal title: MANAGING RETAILS CUSTOMERS AT DUONG MINH PHUC COMPANY Student name: Le Thoai Vy Supervisor: Dr. Tran Ha Minh Quan 1. General comments: • Remarks on the student’s attitude:.
• Remarks on the assignment’s academic quality:. Overall assessment: Meet requirement for submitting Not meet requirement for submitting 3. Other remarks: - Did the student follow the report schedule? 󠇒 Yes 󠇒 No 󠇒 Other: ………………… - The turning plagiarism percentage: Supervisor’s signature LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Table of Contents EXECUTIVE SUMMARY 1. SUPPORTING DATA APPENDIX REFERENCES LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com EXECUTIVE SUMMARY Recently, the financial statement of Duong Minh Phuc Co., Ltd has experienced a significant drop in the sales and has not shown any signal of recover yet.
Although there was a stability in the sales around 50 units over the years, the company still saw a dramatic fall in sales in 2017. This circumstance is mostly due to the reduction of existing customers and the possibility of new buyer attraction. In order to discover the issues that DMP is facing, the survey about customers’ satisfaction and thoughts has been taken. DMP had organized some meetings with Sales department, Marketing department and company CEO to research and analyze the survey’s result.
DMP has used the theory of Michael Porter referred to "Porter's Five Competitive Pressure" to determine the competitive pressure that the company is facing in recent days. After interviewing some potential consumers, DMP has found out some reasonable factors that made the sales in product reduced. The main reason is due to customers’ dissatisfaction and the penetration of new substitutes. Interviewers have complaint about the attitude of company staff as well as the promotion for old buyers.
DMP has not focused much on marketing strategy when it comes to household consumer segment; as a result, the existing customers tend to choose other distributors for the gas cylinder. However, the problem and cause itself may not correct and appropriate due to the limited interviewer and the fluctuation of market. Because of the limited resources and time, DMP only interviewed some potential consumers, which may result in the subjective and there is no guarantee that answers to determine the whole problem of company is valid and reliable. Therefore, managers of all department will analyze the problem and cause carefully and specifically to find solutions for each issues.
The solutions will mainly focus on how to improve and develop the customers’ service and marketing the product, especially in training the staffs, promotion programs and has a straight plan for the future. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. INTRODUCTION Company background Duong Minh Phuc Co., Ltd (hereafter referred to as “DMP”) was established in 2015 specializing in providing high-quality liquefied petroleum gasoline for residential and industrial uses. Newly penetrating to Ho Chi Minh City market, DMP is still at an experimental stage of tweaking its products and services to meet the consumers’ need, response to their expectation and well-adapt the market.
With a small scale of fewer than 10 employees, DMP is categorized as small and medium enterprises (SMEs). Consequently, DMP’s organization structure is extremely simple which is suitable for its operation since the company needs flexible and efficient managements. The chart of organization is as follows: Director Sales Accounting Logistics Engineer Mission: • To commit to deliver the high-quality products to customers. • Enhance consumers’ perception of safety in using gas to avoid the risks.
• To become one of Ho Chi Minh City’s leading distributors in the field. The category of customers: • Geography: urban or rural • Type of using purpose: individuals, family, hospitality • Income: low or high 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Products and services: • Gas • Maintenance: cleaning stoves… • Products: valves, stoves. • Services: LPG system installation for restaurant, factory, F&B consultant • Integrated products and services 2. Risks and challenges in LPG Retail industry First of all, the nature of retail sector for LPG is fierce competition.
More specifically, diverse retailers provide customers with similar products or services as well as compete intensely on the basis of price, quality, and after-buy services. Thus, DMP has to learn and forecast the competitors’ strategy on the way of making its own plan to gain more market share as it is a new enterprise in Ho Chi Minh market. Therefore, forecasting method is consider to be the key factor for the company’s comparative advantage. Secondly, the next challenge could be continuous changes in consumer trends or preferences.
Customer is the new point-of-sale, as a result their satisfaction and trends can effect considerably on the market share. There are major variety of shopping ‘experience’ thanks to connected consumer networks. Moreover, customer’s commitment to the businesses can be very weak when they cannot be beneficial from the products or services. Because the number of suppliers in the market is huge, the costumers are tended to change a new products with more benefits if the company cannot meet their satisfaction.
Furthermore, attracting and retaining talented employees is an obvious challenge. Key personnel who impact the business’ ability to deliver customer service should not be replaced regularly in order to avoid interruption in keeping contacts with customers. Senior manager should concentrate not only on consumers, but also on their employees by 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com some incentive policies to maintain the employees’ loyalty. This step can create a mutual benefit for both party.
LPG is a special and typical business strictly supervised by Government in terms of price, business practices, and other related regulations. However, in the context of rapid growth of the economy, more and more LPG related companies have been established, which reaches saturation in the urban areas. Under the situation of the fierce business environment, LGP companies in general and DMP in particular is facing difficulties and challenges that can be realized as follows: • Loss of gas cylinders • Unfair competition • Inability to keep track the movement of the gas cylinders • Illegal filling • Lack of regular inspection and tight controls from authorities • High costs of LPG refilling • Unskilled staffs • Safety threat to customers • Heavy taxation by the Government 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Problems in service management at DMP Number of customers 60 50 50,050,050,0 47,047,047,047,0 42 42 42 43,043,043,043,043,0 40 38 38 38 32 32 30 25 25 20 15 15 15 10 0 Jul Jul Apr Jun Aug Nov Apr Jun Aug Nov Jun Sep Feb Mar May Sep Feb May Mar Oct Oct Dec Jan Dec Jan 2015 2016 2017 Figure 2.1 The number of customers from June 2015 to June 2017 As can be seen clearly from the line chart, even though having a leveling off in the beginning when the number of consumers remained unchanged at 15 costumers for 3 months since its establishment, DMP still had a strong growth in overall.
Especially, in 2015 the company witnesses a considerable rise in the quantity within 6 months only, from 15 to 32 clients. DMP experienced a peak of this number from the last quarter of 2016 to the first month of next year. However, the figures began to decrease from 50 to 43 since the beginning of 2017. This still counted to be a good performance for the company since the number of customers of DMP in June 2017 was by nearly triple of that in June 2015.
Although there is more growth than when the company first entered the market in Ho Chi Minh City, the number of customers in 2017 compared to 2016 has dropped significantly (from 50 to 43). This shows that company DMP has ineffective business strategies that lead to customer dissatisfaction, thereby losing a significant number of customers. Pricing strategies, marketing or after-buy service are also one of the key points for many companies today to retain their customers. However, perhaps with some wrong steps in 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com the above strategies, the company has lost a lot of market share in Ho Chi Minh City.
In addition, the technical aspects of the product such as packaging, product quality, safety and reliability are also one of the key factors that help the company gain the trust of others. With the fiercely competitive gas market in Ho Chi Minh City, DMP needs to improve its design and product quality to match the tastes of its customers as well as catch up with its competitors. Average turnover of gas cylinders (12kg) 002 001 001 001 Unit 001 001 000 000 000 Jul Jun Aug Nov Apr Jul Jun Aug Nov Apr Jun Sep Feb Mar May Sep Feb Mar May Oct Oct Dec Jan Dec Jan 2015 2016 2017 The line graph presents the average turnover of gas cylinders from June 2015 to June 2017. Overall, there was a moderate drop in this number over the past two years.
It has been significantly lengthened from 0.5 – 3 months for a consumer to assume one cylinder of gas since June 2016 to current. It means that the gas cylinders to be consumed in a month has gone down from 1 unit per month to only 0.3 unit per month. Part of the reason for this situation is because the business policy of the company has not really suited to the consumer market in Ho Chi Minh City. The market saturation at 1.0 unit in the first year when the company just entered the market is understandable, because they offered a new product, so the market needs time to adapt and trust.
However, the 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com sharp decline from the highest point to the lowest in the two years from 2016 to 2017 is very worrying. The root of the problem is various choices in replacement of gas such as electronic stoves or food delivery as its more convenience. Technology products are increasingly developed and widespread, making gas appliances become obsolete in major cities. Trends in cooking utensils as well as consumers 'eating patterns have greatly influenced consumers' perceptions about the use of gas.
In addition, the competition in the industry is quite a factor that makes the market share decline significantly. As the economy grows, the gas market is also expanding, many enterprises enter the industry, giving customers more choices. As a result, DMP's strategies are no longer relevant to the sector's competition and lose much of its market share. This puts financial burden on the business operation due to the increase on weighted average cost of capital (i.
spending more to order more cylinders). DMP should have more stringent cost control policies in the coming years. Because the decline in market share has partly increased fixed costs, the financial burden of the company has increased respectively. 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.