VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS Nguyen Khac Trung

BUILDING COMPETITIVE STRATEGY
IN THE RICE FARMING INDUSTRY
THE CASE OF AN DINH COMPANY Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr. Ta Ngoc Cau

Hanoi – 2010

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TABLE OF CONTENTS

ACKNOWLEDGEMENT……………………………………………………… i
ABSTRACT…………………………………………………………………… ii
TÓM TẮT………………………………………………………………………. iv
TABLE OF CONTENTS……………………………………………………… vi
LIST OF TABLES AND FIGURES …. ix

CHAPTER 3 : BUILDING COMPETITIVE STRATEGY……………………… 39
3.1 Company profile……………………………………………………………… 39
3.2 Strategy formulation …………………………………………………………. 41
3.2.1 External environment analysis……………………………………………… 41
3.2.2 Industry environment analysis……………………………………………… 51
3.2.3 Internal environment analysis……………………………………………… 56
3.2.4 SWOT analysis …………………………………………………………… 63
3.2.5 Strategy formulation and selection ………………………………………… 64
3.2.5.1 Production expanding ……………………………………………………. 65
3.2.5.2 Japanese rice farming and Vietnamese high quality rice processing ……. 65
3.2.5.3 Rice seed producing ……………………………………………………… 65
3.2.5.4 Marketing enhancing …………………………………………………… 65
3.3 Implementing the competitive strategy ………………………………………. 66
3.3.1 Objectives ………………………………………………………………… 66
3.3.2 Solutions …………………………………………………………………… 67
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3.3.3 Action plan ………………………………………………………………. 68
3.3.4 Recommendations to AnDinh Company ………………………………… 70
3.3.5 Recommendation to the government …………………………………… 71

CONCLUSION ………………………………………………………………… 72

REFERENCES ………………………………………………………………… 73

APENDDICES ………………………………………………………………… 75
Figure 1.4 The value chain
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Figure 1.5 Strategic analysis processes
Figure 1.6 SWOT Matrixes
Figure 2.1 Vietnam rice farming areas
Figure 2.2 Vietnam rice productions
Figure 2.3 Rice volumes for consume and export (thousand tons)
Figure 2.4 Vietnam export value by rice and commodity group (2009)
Figure 2.5 Vietnam agro-forestry and rice export value (US $billion)
Figure 3.1: Corruption Perceptions Index 2009
Figure 3.2 Vietnam GDP per capita growth
Figure 3.3 VND/USD exchange rate (2008-2010)
Figure 3.4 Vietnam population pyramid (2009)
Figure 3.5 Impacts of sea level rise (1m scenario)
Figure 3.6 Value chain model in rice farming industry
Figure 3.7 AD Company Revenue and Net profit
Figure 3.8 AD Company’s organizational structure
Figure 3.9 AD Company’s SWOT matrix
Figure 3.10 AD Company’s strategies implementation process - xi -
LIST OF ABRREVEATIONS

R&D: Research and Development
PEST: Politics, Economics, Social, Technology
SWOT: Strengths, Weaknesses, Opportunities, Threats

known as one of world’s richest agricultural regions and is the second-largest
(after Thailand) exporter worldwide and the world's seventh-largest consumer of
rice.Vietnam government has made effort in order to develop high quality and
value-added rice production and export. An Dinh - a rice farming and trading
company- has been case-studied and researched that its rice production is limited
in capability resulted in an irrelative market share. A higher position in the market
requires a competitive strategy implementation by intensively investing in
expansion and enhancing marketing activities.
This thesis, in above actual fact, is to build an appropriate competitive strategy for
An Dinh Company’s development. It has also added the value to the strategy
formulation by giving recommendations and proposing an action plan, which can
be applied in implementing strategies.
3. Objectives
The objectives of this thesis are to (a) review the theory of building competitive
strategies, (b) provide an overview of rice farming industry in Vietnam, (c) present
An Dinh Company and analyze its business environment, and (d) build an
appropriate competitive strategy for company’s further development. The study
also gives a number of insights into company’s current strength and weakness, and
identifying an action plan for production expansion.

- 2 - 4. Methodology
This thesis applies the case study to build competitive strategy for An Dinh
Company. The research has been prepared mainly through on desk study reviews
of available literature and data through three basic steps:
The first step is to review theories of competitive strategy and strategic
management. The study focuses on the literature view of existing approaches to
competitive strategy formulation, and identifies a common process to build

Beginning with the introduction part, the thesis concludes three chapters and the
conclusion part.
Chapter 1 provides a fundamental review of competitive strategy and strategic
management theory focusing on the competitive strategy formulation process.
Chapter 2 discusses rice farming status in Vietnam, highlighting its latest
achievement and key factors.
Chapter 3 presents An Dinh Company and analyzes its environment to identify
external opportunities and threats as well as internal strength and weakness that
influence on building company’s competitive strategy. Action shall be
recommended for strategic management implementation.
10. Suggestion for future research
A rapid change of factors like technological advances, climate, and customer’s
lifestyle creates both opportunities and challenges to the rice farming industry and
An Dinh Company. Therefore, a deeper research undertaken could create more
benefit to larger size companies.
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CHAPTER 1
LITERATURE REVIEW
The importance of competitive strategy and strategic management for
organizational success is now recognized in both the literature and practice.
Strategy and strategic management are necessary for an organization to achieve its
objectives, enhance competitive advantages and improve its value.
Today highly competitive business world pressures on managers and employees
across functional areas at all organizational levels to be taken on strategic
responsibilities. It is essential that they understand both strategic management
concept and process.
This chapter provides the basic understanding of competitive strategy and strategic
management. It focuses on strategy formulation as a part of the strategic
management.

Business strategy is a plan for how a firm will compete, what its goals should be
and what policies will be need to achieve goals.
4

The business strategy is a combination of the investment decision and the
development of a sustainable competitive advantage. The investment decision of a
business strategy covers the product and market, its investment intensity and the
resource allocation. The development of a sustainable competitive advantages
based on advantages of a business such as assets, technology, human resource,
management.
1.1.2 Competitive strategy
Since publication, Michael E. Porter’s “Competitive Strategy” has introduced the
theory and practice of business strategy throughout the world.
He defines competitive strategy as:
 Competitive strategy is the search for a favorable competitive position in an
industry, the fundamental arena in which competition occurs. Competitive
strategy aims to establish a profitable and sustainable position against the
forces that determine industry competition.
53
Fred Nickols (2000), “Strategy: Definitions and Meaning”, www.nickols.us
4
Oxford English Dictionary
5
Michael Porter (1985), “Competitive Advantage: Creating and Sustaining Superior Performance”
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 Competitive strategy is a combination of the ends (goals) for which the firm is

production and TPS. Both Lean and TPS can be seen as a loosely connected set of
potentially competing principles whose goal is cost reduction by the elimination of
waste. These principles include of: Pull processing, perfect first-time quality,
waste minimization, continuous improvement, flexibility, building and maintaining
a long-term relationship with suppliers, smart automation, load leveling and
production flow and visual control. This production system create a high technical
production capacity and effectiveness that supply to customer a good product with
low price compare to another product and make the Toyota achieve the position of
largest motor production in the world now. Moreover, the strength financial
support from Japanese government and the large distribution network over the
world also contribute to the achievement of Toyota today.
1.1.2.2 Differentiation:
Differentiation strategy: Same products or services are produced at a higher
quality than competitors’ are.
Companies using the differentiation strategy often have some characters:
- Good team in research and development (R&D)
- Good sales team: Ability to communicate information of product to
customer
- Reputation and ability to innovative
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Amway is an example of implementing differentiation strategy.
Amway is a corporation based in United State established in 1959, now company
operates in more than 80 countries and territories over the world, getting $8.2
billion turnover in 2008. Amway focuses on producing high quality product and
differentiation strategy. Amway has strong research and development system with
65 research and development laboratories worldwide staffed by more than 500
scientists, engineers and technical professionals. Amway research and
development have been awarded more than 500 patents and have had more than
400 papers published in top industry journals. Amway is a leader in the U.S.

As Michael Porter opinion, enterprises can be successful in using combination of
these strategies when they establish separated company following one strategy.
Rayonier’s is one example of company implementing focus strategy
Rayonier's medium-density fiberboard plant is largest panel plant in New
Zealand. Its capacity can produce 170,000 cubic meters of annually.
This company is using focus strategy for its product. This strategy is focusing
particular buyers who bought MDF for house construction and large furniture
making. It has only produced MDF panels with thickness from 2cm to 5cm.
Rayonier segmented its product line even they can produce other kinds of
thickness. The reason is that they found the demand of house construction and
large furniture making in this country and by focusing those kind of products they
can get more profits.
The strategy is focusing on a particular buyer group, segment of the product line,
or geographic market. As differentiation, focus may take many forms. Although the
low cost and differentiation strategies are aimed at achieving their objectives
industry wide, the entire focus strategy is built around serving a particular target
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very well, and each functional policy is developed with this in mind. The strategy
rests on the foundation that the firm is thus able to serve its narrow strategic
target more effectively or efficiently than competitors who are competing more
broadly. As a result, the firm achieves either differentiation from better meeting
the need of the particular target, or lower costs in serving this target, or both.
Even though the focus strategy does not achieve low cost or differentiation from
the perspective of the market as a whole, it does achieve one or both of these
positions with its narrow market target.

1.2. Strategic management
Strategic management is the process by which top-management determines the
long-term direction and performance of the organization by ensuring that careful


Vision
Mission

External
environment
analysis
• PEST
analysis
• Five – forces
analysis

Internal
environment
analysis
• Value
chain SWOT
Analysis

Strategy
implementation

Strategy
formulation &
selection
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Table 1.1 Example of possible factors in a PEST analysis
Political Analysis Economic Analysis
Political stability
Environmental regulation and protection
Consumer protection
Legal framework
Intellectual property protection
Trade regulations and tariffs
Anti-trust laws
Taxation
Wage legislation
Working hours
Mandatory employee benefits
Industrial safety regulations
Government intervention in the market
Economic growth
Comparative advantages of the country
Infrastructure quality
Skill level of workforce
Labor costs
Business cycle stage
Income
Unemployment rate
Inflation rate
Monetary policy
Government spending
Social Analysis Technological Analysis
Demographics

Economists measure rivalry by indicators of industry concentration. A high
concentration ratio indicates that the largest firms hold a high concentration of
market share; the industry is concentrated or less competitive. A low concentration
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ratio indicates that many rivals, none of which has a significant market share,
characterize the industry. The market is competitive.
The intensity of rivalry is commonly based on the firms’ aggressiveness in order
to gain an advantage. It is influenced by the industry characteristics such as:
 The number of competitors
A large numbers of competitors increase rivalry because more firms must compete
for the same customers and resources. The rivalry is more intense if there are
many small or equally sized competitors; rivalry is less when an industry has a
market leader.
 Market growth
In a slow growth market, firms have to compete for market share. On the contrary,
firms are easy to improve revenues in an expanding market.
 High fixed costs
If total costs are mostly fixed costs, the firm must produce near capacity to attain
the lowest unit costs. The firm must sell a large quantity of product, that lead to a
fight for market share and an increase in rivalry.
 Level of product differentiation
Low level of product differentiation is associated with higher level of rivalry.
Industries where products are commodities have greater rivalry, industries where
competitors can differentiate their products have less rivalry.
 Switching costs
Rivalry is reduced if there is a significant cost associated with the decision to buy
a product from an alternative supplier.
 Threat of New Entrants
It is not only existing rivals that make a threat to companies in an industry, the


profitable. A common exit barrier is asset specificity. If the plant and equipment
required for manufacturing a product is highly specialized, they cannot easily be
sold to other buyers in another industry.
Table 1.2 Industry’s entry and exit barriers
Easy to Enter if
Common technology
Little brand franchise
Access to distribution channels
Low scale threshold
Difficult to Enter if
Patented or proprietary know-how
Difficulty in brand switching
Restricted distribution channels
High scale threshold
Easy to Exit if
Salable assets
Low exit costs
Independent businesses
Difficult to Exit if
Specialized assets
High exit costs
Interrelated businesses
 Bargaining Power of Buyers
Buyers are the people or organizations who create demand in an industry. The
power of buyers is the impact that customers have on a producing industry.
If buyer power is strong, the relationship to the producing industry is near to a
monopoly, a market in which there are many suppliers and one buyer. Under such
market conditions, the buyer sets the price.
 Bargaining Power of Suppliers

Many buyers and few dominant
suppliers
No substitutes for the particular input
High switching costs from one supplier
to another
The industry is not a key customer
Suppliers threaten forward integration
Suppliers are weak if
Many competitive suppliers
Low switching costs: products are
standardized
Purchase commodity product
The industry is a key customer
Buyers threaten backward integration