UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ TRUONG NHAT TIEN INTERNAL FACTORS INFLUENCING SALES GROWTH AND SOLUTIONS – The Case of CAO Fine Jewellery Co., Ltd MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2020 1 TIEU LUAN MOI download : skknchat@gmail.com UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business ------------------------------ TRUONG NHAT TIEN INTERNAL FACTORS INFLUENCING SALES GROWTH AND SOLUTIONS – The Case of CAO Fine Jewellery Co., Ltd MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr. Tran Vi Ho Chi Minh City – Year 2020 2 TIEU LUAN MOI download : skknchat@gmail.com CONTENTS LIST OF TABLES. iv LIST OF FIGURES. v LIST OF ABBREVIATIONS.
vi EXICUTIVE SUMMARY. vii 1 PROBLEM IDENTIFICATION .1 Do not meet reachable target .2 Decreasing on revenue .1 Unable to retain old customers.2 Decreasing on ticket size of old customers.3 Low inventory turnover .5 Main problem validation .1 Unable to retain old customers.2 Decreasing of average ticket size of old customers.3 Low inventory turnover. 16 i TIEU LUAN MOI download : skknchat@gmail.1 The effectiveness of marketing campaigns .2 Store managers and staffs are lacking knowledge and skills .3 High turnover rate .4 Do not delivery on time .5 Insufficiency net working capital .6 Inventory structure does not match to the plan.7 Missing analysis of target customers’ portrait.3 Final cause- effect map .1 Building customers’ portrait and training with new material.2 Building customers’ portrait and reorganizing inventory structure.3 Action Plan in Organization .1 Research method summary .1 Interview with Accounting Manager. 39 ii TIEU LUAN MOI download : skknchat@gmail.2 Interview with Head of Supply Chain .3 Interview with Brand Manager .4 Interview with Chairwoman .5 Interview with Deputy Director .6 Interview with Sales Manager .7 Interview with PNJ Human Resources Manager.
49 Appendix 1: Confirmation e-mail about data. 49 iii TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES Table 1. Marketing’s 2019 internal report. Sales staff test results.
Store manager test results. CAO Human resources report of sales staffs. Supply chain report. Sales and inventory report base on products price structure.
Estimating expense of building customers’ portrait and training with new material. Estimating expense of building customers’ portrait. 37 iv TIEU LUAN MOI download : skknchat@gmail.com LIST OF FIGURES Figure 1. PNJ Net Revenue.
CAO Net Revenue. CAO’s share of revenue contributed by customer classification. Average of ticket size (VND). Initial cause-effect map.
Products structure 2019 plan. CAO Fine Jewelry brand key. Cause – effect tree. 30 v TIEU LUAN MOI download : skknchat@gmail.com LIST OF ABBREVIATIONS CAO: CAO Fine Jewellery Co., Ltd SJC: Sai Gon Jewelry Co., Ltd DOJI: DOJI Gold & Gems Group PNJ: Phu Nhuan Jewelry JSC BODs: Board of directors SM: Sales manager BM: Brand manager AM: Accounting manager CW: Chairwoman HR: Human resources SKU: stock-keeping unit vi TIEU LUAN MOI download : skknchat@gmail.com EXICUTIVE SUMMARY Jewelry industry is very competitive, this is right for not only the big jewelry organization as PNJ, DOJI, SJC.
but also local business. The quality of products and services are the weapons that they use to face with competitors. CAO Fine Jewellery has been found with the purpose to serve high-end customers who have desire for unique design and very high demand for quality of the products as well as service. In the past, CAO has been very successful but the market has changed and the firm could not adapt it in the last two years.
The significant decrease in revenue is a warning bell for the firm and CAO need to find the problems in order to improve the current business situation. Therefore, the purpose of this thesis is finding the key problems and provide solution which is identified base on the analysis of theories and empirical interview stakeholders. From those analysis, the thesis suppose that the orientation of the company has been abandoned by the market and the lack of specific analysis method in identifying target customers is identified as the main cause leading to CAO does not attract new customers. vii TIEU LUAN MOI download : skknchat@gmail.com INTERNAL FACTORS INFLUENCING SALES GROWTH AND SOLUTIONS - The Case of CAO Fine Jewellery Co., Ltd 1 PROBLEM IDENTIFICATION 1.1 Problem context CAO Fine Jewellery (CAO) is one of the subsidiaries of PNJ group.
It has been found in 2005 with the purpose to serve high-class customers. The products are limited with unique design and premium service. CAO converges what the company most elite of PNJ group. CAO are more favorable conditions than PNJ about product production, supply chain, sales systems and processes.
However, from the 2016 to 2019, the business of CAO was decreasing ominously as the revenue growth rate was fluctuation. In contrast, PNJ is a jewelry company making products for massive market have been growing dramatically. This problem is presented more detail in the symptoms part. So that, the purpose of this thesis to answer the question “why a subsidiary company having the same processes and supply chain but higher quality and service sales systems leading to an unexpected result? In addition, which is the main problems affecting to the business of CAO Fine Jewellery company?” 1 TIEU LUAN MOI download : skknchat@gmail.2 Company structure Figure 1.
Company Structure Sources: Internal 2019 reports 2 TIEU LUAN MOI download : skknchat@gmail.1 Do not meet reachable target Figure 2. PNJ Net Revenue Figure 3. CAO Net Revenue Sources: Internal 2019 reports 3 TIEU LUAN MOI download : skknchat@gmail.com According to the graph, we can see the number of the net revenue from 2016 to 2019 in PNJ group and CAO Fine Jewellery which is one of subsidiaries of PNJ group. Both graphs choose the year of 2016 as a base to make the comparison.
The figure of percentage represents for the growth and falling of the following year. In the last few years, CAO’s net revenue was fluctuated. After falling 33 percent in 2016 compare with 2015, the net revenue was increasing 28 percent gradually in the next two years. In addition, CAO net revenue was decrease 8% in 2019 comparing with 2018.
In the period of 2016 to 2019, the revenue was increasing very fast, after 4 years the revenue was doubled from 8,615 billion VND in 2016 to 17,000 billion VND in 2019. The average growth rate is minus 3% which was very not good. Meanwhile, the average growth rate of PNJ group is 22%. For that reason, the requirement of growth rate on net revenue is 20% and this is a reasonable target that the staff could achieve.
An achievable sales target is a motivation for the staffs perform effectively (1). However, in the last year, CAO did not only achieve the target but also drop 17%.2 Decreasing on revenue As mention above, the revenue decreased 17% in the last year leading to a result that the firm only get 67% of the sales target. Additionally, it accounts for 50% of the firm’s KPIs. For that reason, almost of the CAO’s staffs have not get the year-end bonus which affects to the working motivation of all employees.
Furthermore, this is also an evidence showed that the business of CAO having problems which need to be analyzed to determine next actions for the firm. To sum up, in the beginning, the company has been founded with the purpose to serve high-class customers to get higher profits. However, both of symptoms are presented that the business of CAO company has performed not well, in the last 4 years. When the activities of the firm were 4 TIEU LUAN MOI download : skknchat@gmail.com decreasing, the company need to adjust the resources in order to maintain the profitability and adapt to the future challenge as well as take advantages of the next opportunities (2).
For that reason, the board of directors need to consider whether closing the company or reorienting the company's strategy to maximize the investment.4 Possible problems Following these figures above, they showed that CAO has inside problems definitely. However, these are individual ideas, I need more other departments’ perspective. So that, I interview CAO’s head of main departments. I use this question to ask them: “I saw that the revenue and the EBIT of CAO decreased in 2019 sharply and just only achieve 63% of company target (growth 20 percent per year based on actual net revenue).
From the point of view of ahead of your department. what do you think are the problems happening in CAO company?” 1.1 Unable to retain old customers. Firstly, I interview Mrs. Nguyen Thuy Hau who is chief accountant.
In her opinion, she said: “The reason for decreasing on revenue that is the stores do not sell enough. You know that, we do not achieve the target on opening a new store and attracting the new customers and retain them”. She supposes that CAO depend on the loyalty customers to much and attracting few new customers as well as retaining them stay with CAO. They are potential loyalty customer if the firm satisfy them with premium products as well as services.
Because of lacking new customers, the company could not generate more revenue to cover the costs. Sales and marketing teams are 5 TIEU LUAN MOI download : skknchat@gmail.com responsible for convincing customers significantly and directly which are main motivation affecting to revenue-earning of the company (3). However, in the income statement 2019 showed that the marketing expense is just 42% comparing with the 2019 plan, so that I ask Mrs. Hau the second question: “In the financial report of CAO, the marketing expense is 42% comparing with the 2019 target.
Do you think tightening marketing expense affecting to the business performance?” She said that: “I think it does not affect. Because the revenue earned during the campaign period was not meet the target. As I mentioned before the marketing campaign targeted wrong customer group and failed in opening new stores, so that we could not attracted them to our stores to buy products leading to decreasing revenue”. Base on perspective of Mrs.
Hau, she supposes that low marketing cost usage does not affect to the results of marketing campaigns, because the campaigns perform depend on the early marketing 2019 plan. So that, the marketing performance could be the problems leading to attract loyalty and new customers.2 Decreasing on ticket size of old customers After taking with Mrs. Hau, I interview Mr. Pham Minh Tu being head of supply chain the same question with her.
6 TIEU LUAN MOI download : skknchat@gmail.com He said: “I think that the main customers group who contribute the more than 85%. However, their tickets size are decreasing gradually. So that we have to attract new customers to replace the left customers. In the last year, marketing campains do not meet the target as we expected.
Therefore, I think the main reason for reducing on revenue is that marketing targeting wrong customers segment” SHARE OF REVENUE CONTRIBUTION One-time 2% New 12% Loyalty 86% Figure 4. CAO’s share of revenue contributed by customer classification Sources: Internal 2019 reports He supposes that the problem is the effective of marketing campaigns. Because they are focus on the wrong customer segment, they could not recruit the number of customers as expectation. In contrast, Ms.
An is brand manager, she supposes that the price policy is to high, the products designs update slowly and employee high turnover in marketing department (the opinions of Ms. An are presented in the next part). And the supply chain department is in charge of product price policy as well as product designs. Therefore, I ask Mr.
Tu with the second question: 7 TIEU LUAN MOI download : skknchat@gmail.com “Do you think that because of pricing policy and quality of product affecting to the buying decision of customers?” He said: “In my opinion, the pricing policy is suitable for the high-class jewelries.