Situation Analysis Report Phu Nhuan Jewelry Joint Stock Company PDF

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Situation Analysis Report Phu Nhuan Jewelry Joint Stock Company Phan Quoc Thinh Han Trung Kien Nguyen Hong Nhung Nguyen Thu Thao Le Quang Thai Nguyen Dang Quang

22 November 2015

2015

Situation Analysis Report Phu Nhuan Jewelry Joint Stock Company (PNJ)

• Phan Quoc Thinh – Leader S 3582943 • Han Trung Kien S 3515531 • Nguyen Hong Nhung S 3577671 • Nguyen Thu Thao S 3577785 • Le Quang Thai S 3505985 • Nguyen Dang Quang S 3577806

Lecturer: Phung Thanh Phuong

Situation Analysis Report MKTG1205 Group 2 – Team 5 Saturday, November 21, 2015

Table of Contents Company profile ............................................................................................................ 2 Micro-environment ........................................................................................................ 4 1. The company.......................................................................................................... 4 2. Suppliers................................................................................................................. 4 3. Marketing intermediaries..................................................................................... 4 4. Customers .............................................................................................................. 5 5. Competitors ........................................................................................................... 5 6. Publics .................................................................................................................... 5 Macro-environment forces ............................................................................................ 6 1. Demographic forces .............................................................................................. 6 2. Economic forces ..................................................................................................... 6 3. Technological forces .............................................................................................. 7 4. Political forces........................................................................................................ 7 5. Cultural forces ....................................................................................................... 8 SWOT analysis .............................................................................................................. 8 Strengths ....................................................................................................................... 8 Weaknesses ................................................................................................................... 9 Opportunities ............................................................................................................... 9 Threats .......................................................................................................................... 9 Market segmentation ................................................................................................... 10 Market targeting .......................................................................................................... 11 Positioning ................................................................................................................... 11 Differentiation ............................................................................................................. 11 Product differentiation.............................................................................................. 11 Service differentiation ............................................................................................... 12 Channel differentiation ............................................................................................. 12 Image differentiation................................................................................................. 12 Conclusion ................................................................................................................... 13 Bibliography ................................................................ Error! Bookmark not defined.

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Company profile

Name Abbreviation Address Sector and Industry Core business Business lines Raw materials Charter capital (2014) Telephone Email Website Legal representative Vision Mission

Core values

Main competitors

PHU NHUAN JEWELRY JOINT STOCK COMPANY PNJ 170E Phan Dang Luu Street, Ward 3, Phu Nhuan District, Ho Chi Minh City, Vietnam. Consumer Cyclical and Luxury goods Fine gold (bar), gold and silver jewelry  Trading watches and gold bar  Testing diamond, gemstone and precious metals  Real Estate house leasing  Business Law Raw gold and silver materials, gems, gemstones, diamonds VND 755,970,355,000 +84 839 951 703 [email protected] www.pnj.com.vn Ms. Cao Thi Ngoc Dung - chairwomen Becoming the leading jewelry processor and retailer in Asia market and securing number one position in the segment of medium and high-end jewelry in Vietnam. PNJ brings customer pride with elegant, outstanding quality jewelry products.  Honesty  Responsibility  Quality  Creativity  Innovation  Doji Jewelry Corporation (Doji)  Sai Gon Jewelry Company Limited (SJC)  Bao Tin Minh Chau Jewelry and Gemstone Co.Ltd.  Sacombank Jewelry (SBJ)

Sources: (FPT Securities, 2014) (PNJ Annual Report, 2014)

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Introduction hu Nhuan Jewelry Joint Stock Company, better known with abbreviation name as PNJ, is one of the most renowned and respected jewelry retailers in Vietnam. Not only is PNJ domestically successful, but the company is also honored in Asia by Retail Asia magazine (Singapore) as one among top 500 retailers in Asia Pacific between 2004 and 2009. Officially established on 28 April 1988 by twenty progressive like-minded people in Phu Nhuan district, PNJ has been since showing strong and consistent development and performance, and has consolidated its position as the biggest player in the Vietnamese jewelry sector. With more than 173 stores spanning across the nation, employing nearly 2,500 employees, and even becoming the only Vietnamese company that has the capability to export gold and jewelry to the international market, PNJ has not only established its dominant presence nationwide but also advance to do business internationally. In order to have today success, it is the diligence, persistence and smart moves sanctioned by the board of management over the last 30 years, with special regard to Ms. Cao Thi Ngoc Dung, who simultaneously served as the chief executive director and the chairwoman ever since. (Bloomberg, 2015)

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The tale of this enterprise began in 1988 and the formative stage lasted 4 years. During that time, Vietnam jewelry market was of tender ages, which posed many challenges and innumerable difficulties regarding human resources, financial supports and lackluster governmental subsidies. The next developing period was between 1993 and 2000, when PNJ expanded its business to reach Hanoi by opened a ramification in the capital in 1994, together with many different strategic locations. That were also memorable years as the company had its products exported for the very first time, but more importantly, it started gaining customers’ trust and reputation. Moving on, January 2004 marked the next milestone in the company’s history because of the participation to the stock market, which effectively raised capital and promoted equalization. Since then, the company has always been improving and diversifying its products, aiming to fulfill high customer's satisfaction by delivering superior quality items and services, as accorded to the company mission statement. PNJ also furthers its business by providing sponsorship to many beauty competitions, such as the Miss Universe 2008 and Miss Earth 2010, Nevertheless, in 2012, the claimed Asian biggest jewelry manufacturing factory was built to accelerate the firm’s productivity to the next level (Young Tiffany, 2012). With the vision of becoming the leader in jewelry fashion industry in Vietnam, incorporate with the proposed philosophy “Customer benefits is our commitment”, PNJ has received many praiseworthy achievements and is well on the way to approach its prospects. According to Bloomberg: “For the period [the first half of 2015], the company reported revenue of VND 3.846 billion, up 6%, gross profit of VND 546 billion, up 43% and net profit before tax was VND 228 billion, up 46% over the same period last year, completed 60% annual target”. This report is written with care and dedication giving readers an insight about the business operation at PNJ, and to give detailed explanations to many factors that affect the company, as well as the brand’s value proposition. Diagrams, charts, and further information are written under Appendices section.

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Micro-environment 1. The company The board of Directors at PNJ has been working closely to implement action plans for both production and business operations. To begin with, the department of human resources has been ordered to improve the labor productivity by running additional training and helpful workshops, reorganizing organizational structure and increase the ratio of junior to senior staffs with the ambition to rejuvenate the workforce. Next is R&D, which is PNJ backbone department that has been received huge subsidies and financial support from the top management in order to accomplish a sole mission of meeting customers’ increasingly stringent requirements of jewelry products. The department has done well by regularly hitting the market with new exclusive jewelry collections, employing and well-treating proficient artisans, and running competitions to recruit innovative design ideas as well as adapting production line with advanced technology. Last but certainly not least, the sales department is strengthened by regularly opening short staff-training courses, running incentive programs to give attractive bonuses and create “PNJ Common Home” for team-building and relaxation. A strong culture identity is PNJ biggest asset, said by the company CEO, as it can be extremely beneficial for the development of the organization by providing the much-needed motivation to increase productivity and improve employee morale as well as personal wellbeing. In addition, the well-developed culture creates a participative and cooperative workplace, where people enjoy working, willing to work hard and they, therefore, can increase responsibility to deliver better customer services. (PNJ Annual Report, Annual Report 2014, 2014). 2. Suppliers The inputs used in manufacturing jewelry are precious metal, i.e. gold and silver, and gemstone with prices are often highly responsive to changes in the global market, often unpredictable and even unprecedented. Therefore, PNJ applies strict control to minimize the negative effect this may have on the company business. • Raw gold input: Due to the government strict policy upon gold importation, PNJ speculates its warehouse by collecting raw gold from local suppliers whose gold are taken from various sources. A large proportion of this kind of gold is not trademarked, also known as not SJC, is abundantly available and sold at a cheaper price. • Raw silver input: With no restrictions of the government, the firm imports silver directly from MatalLor (Belgium). • Raw gemstones are imported mainly from Creative Gems BKK (Thailand) and RMC (Hong Kong) while diamond inputs are bought from multiple international accredited sources, such as Yakubov, Forte and Fischler (Belgium). (Phong, 2013) 3. Marketing intermediaries • Resellers: Strictly, the products manufactured by PNJ are only sold in PNJ-owned outlets across the country. There are 173 stores in every major city and suburban area across 44 provinces in Vietnam (PNJ, 2014). Most of the outlets are situated in main streets, as well as in shopping malls, supermarkets and airports, such as Aeon Malls, Parkson C&T, BigC and Tan San Nhat international airport. • Physical distribution firms: PNJ accepts home delivery option and thus the customers’ ordered products are protected by the representative of the authority during the transport. PNJ has four warehouses operating at highest security and when there is a need for airline transport, the cargo is airlifted under the protection police force. (FPT Securities, 2014) • Marketing services agencies: In 2011, PNJ signed a contract with Value Partners Management Consulting, a consulting firm from Italia, to help PNJ deal with market research, decision-making at management level, business operations and expectation for future jewelry market. On the other hand, since PNJ is a powerful jeweler in the domestic market, the firm receives much attention from the media and the government. Most of the 4|Page

business-related newspapers are conveying updates about PNJ operations while magazines publish new collections worn by the brand ambassadors, who are usually public celebrities. Furthermore, the firm also delivers its brand image through the sponsorship of many beauty competitions and actively maintains a Facebook page with promotions updates as well as products exhibition. (Doanhnhansaigon, 2014) (Tan Viet Securities, 2015) (VNexpress, 2015) 4. Customers • Consumer markets: On average, 91% of PNJ total revenue and 87% gross profit in the period between 2007 and 2013 came from retailing services. There are four differentiated jewelry brands, namely PNJ Gold, PNJ Silver, JEMMA and CAO Fine Jewelry, are made to satisfy different needs of individuals whose age are from 15 to 45+. • Business markets: PNJ supplies gold and silver jewelry to many smaller enterprises, which do not have the capability of large-scale jewelry production and the technology required. This wholesale gold and silver have lower quality, less delicacy and usually do not interfere with PNJ products sold in-store. Some names in this partnership include Vietinbank Gold and Jewelry, Phu Quy Gemstone and Jewelry and Phuong Nam Jewelry Commercial Corporation. (FPT Securities, 2014) • International markets: Only contributing a tiny fraction to PNJ net profit. PNJ is the only jeweler in Vietnam who has the ability to export products. However, experts expect that this segment will not grow by much since PNJ is using resources to focus in the domestic playground. (FPT Securities, 2014) (PNJ Annual Report, Annual Report 2014, 2014) (PNJ Annual Report, 2013) 5. Competitors • Three main competitors are “Sai Gon Jewelry Company Limited (SJC), Doji Jewelry Corporation (Doji) and Bao Tin Minh Chau Jewelry and Gemstone Co. Ltd (BTMC)”. (FPT Securities, 2014) • All of these big four jewelry companies, including PNJ, however, accounts for a merely 20% of market share according to Mr. Huynh Trung Chanh - vice president of Viet Nam Gold Traders Association (FPT Securities, 2014). Small traditional family-owned business, minor manufacturers and small retailers scattering across the country own the rest 80% of market share. 6. Publics A. Financial publics • By participating to the stock market, PNJ has effectively raised its market capitalization to 3,144.8 billion VND and 49% foreign ownership (MorningStar, 2015). This has brought huge amount investment for PNJ to spend on its business operations, brand expansion and facility development. • Internal shareholders still hold the highest share capital percentage, of 40%. • Vietnam Azalea Fund Limited (Mekong Capital) owned 565,500 shares (Vietcombank Securities, 2011) • Vietnam Enterprise Investments Limited (Dragon Capital) owns 6.57% shares. • Route One Investment Company owns 5.04% shares. • Deutsche Bank AG & Deutsche Asset Management (Asia) Ltd owns 4.83% shares. (FPT Securities, 2014) B. Government publics •

The jeweler has received much governmental recognition for its achievements in terms of business running, customers’ satisfaction and society contributions. Some of most prominent 5|Page

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awards included the Vietnam Value Award by the Vietnamese government in 2010, First Labor Medal by the President in 2003, Vietnam Excellent Brand 2006 -2009 by the Ministry of Commerce and the Top 50 Best Performing Companies in Vietnam in 2012. (PNJ, PNJ achievements, 2015) However, the influence of government policy on PNJ operations and marketing strategy is substantial, often unpredictable and can be either favorable or disadvantageous. Further detail is discussed in Macro-environment and Appendices section.

C. The general publics • According to a market research published by (VNExpress, 2014), PNJ brand image in the eyes of customers is quality-oriented and trustworthy and company products are served by courteous and professional staffs. Founded in 1988, PNJ has been building a strong accountable entity with personnel who have high responsibility and eager for building profitable relationship with customers. • PNJ outreaches to help community through the operation of PNJ Charity Fund. In 2014, PNJ spent 4.5 billion VND on charity budget alone, gave out hundreds scholarships to poor but studious students, and brought thousands gifts to highlanders and habitants in sparsely areas (VietnamNet, 2015) (PNJ, Mái ấm của những tấm lòng, 2015). All of these meaningful activities to society have contributed positively on the public image and customers’ perception of PNJ.

Macro-environment forces 1. Demographic forces • In July 2014, Vietnam had an estimated population of 93,421,835 and the number of people whose age between 15 and 54 accounts for the greatest proportion of 62.6% (CIA World Factbook, 2015). This is a big market and, as the result, PNJ can take this young, large and rapidly growing population to its advantage. • The middle-class is to burgeon in Vietnam. (Foreign and Commonwealth Office, 2015) states that Vietnam has the fastest regional growth rate regarding middle-class among other Southeast Asian countries, i.e. a consistent 12.9% year-to-year in the period 2012-20. With regard to the particular traits of the jewelry industry, the emerging middle-class brings prosperity and opportunities to PNJ. • (Foreign and Commonwealth Office, 2015) also points out there is a geographical shift in distribution map of jewelry-consuming. The demand for premium quality jewelry has now expanded beyond the Vietnamese two most populous cities, i.e. Hanoi and Ho Chi Minh, to smaller cities and many “new provincial pockets of affluence” across the nation. (Le Chi, 2014) consolidated this claim with a report published by ANZ. Anticipate this ongoing trend, PNJ has planned to open 35 new stores at the end of 2015, effectively increase the firm’s presence to 44 provinces nationwide (PNJ, 2015). 2. Economic forces • Despite many challenges, the economy of Vietnam has recovered substantially and even become the bright spot in Asian’s gray picture. According to (World Bank, 2015), GDP in the first two-quarters of Vietnam witnessed the greatest increase in the last 5 years, reached 6.28%. The inflation rate has been maintained low, at 4.1% and the unemployment rate has decreased substantially by 10.91%. (International Monetary Fund, 2015). • The Prime Minister sanctioned the increase in Vietnam’s monthly salary, which took effect from January 2015 that allowed wage floor to reach up to VND 3.1 million, depending on region (Wageindicator, 2014). Furthermore, the government has recently approved a further

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raise of 12.4% on minimum wage, which take effect on January 1 2016 (IndustriALL , 2015). PNJ believes this robust domestic economy will increase the proportion of middle to upper middles-class and that will effectively increase the market share of the firm. Since jewelry has high income elasticity of demand, as incomes rise, customers ‘’will likely use their increased income to purchase more luxury goods and services” (Investopedia, 2015). Vietnam joined World Trade Organization (WTO) more than 8 years ago, on 11 January 2007 (WTO, 2007). According to the article “10 benefits of the WTO trading system” written by...