Solutions to enhance the effectiveness of G7mart operations

MINISTRY OF EDUCATION & TRAINING UNIVERSITÉ LIBRE DE BRUXELLES
HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BUSINESS SCHOOL

MBMM PROGRAM



LÊ KIM ĐẰNG


SOLUTIONS TO ENHANCE THE EFFECTIVENESS OF
G7MART OPERATIONS





FINAL PROJECT
MASTER IN BUSINESS & MARKETING MANAGEMENT



Tutor: Dr. Nguyễn Ngọc Hoà





Ho Chi Minh City
2007

This is my original work.
Any data and result in this writing is clearly identified.
LEÂ KIM ÑAÈNG

Acknowledgements

I would like to state that nothing ever happens if this work is only made
without any precious help and support from so many people. This writing is the
result of such help and support.
My special thanks are due to Dr. Trần Anh Tuấn and Professor Jean
Pierre Baeyens – the co-Directors of the MBMM program for the establishment
of this program.
I am particularly indebted to all the professors of Solvay Business School
and of Hochiminh city Open University who were so devoted to deliver their
knowledge, experience, ideas and suggestions during our courses (15 quizzes).
Also many thanks to the coordinators of the program: Ms. Bùi Phan Bảo
Trân and Mr. Serge Bywalski, who have stimulated and advised us during the
two years of the course.
I also owe a great deal to my tutor – Dr. Nguyễn Ngọc Hoà – the CEO of
Saigon Union of Trading Cooperatives, who has worked so hard to help me to
write and to finish this final project.
I am so grateful to the G7 Mart Company for permission to use their
company’s data to write my final project. Special thanks also to my mentor –
MBA Nguyễn Ngọc Châu – Regional Business Development manager of G7
Mart Company who has helped and supported me to complete my final duty.
Sincerely thanks to my family who gave me lots of material and moral
support. Without the love and support, I cannot complete this useful program.

INDEX

EXECUTIVE SUMMARY 1
INTRODUCTION 2
CHAPTER 1: THE OVERALL STRATEGY OF G7 MART PROJECT 3
CHAPTER 2: ANALYSIS OF VIETNAMESE RETAIL MARKET AND G7
MART OPERATION 8
2.1 Analysis of Vietnamese retail market 8
2.1.1 Consumer behavior trends 8
2.1.2 Governmental policy and foreign investment 10
2.1.3 The trends of international economic integration 10
2.2 G7 Mart business philosophy and methodology 11
2.2.1 Preliminary current status of the traditional stores 11
2.2.2 Marco Aspect 12
2.2.3 The benefits from micro point of view 14
2.3 The practicability of G7 Mart convenience store’s project 15
2.3.1 Suitable business concept that can get the stores’ support 15
2.3.2 The advantages of the stores that make the G7Mart project
feasible 16
2.3.3 The real capacity of the company for doing the G7Mart project 16
CHAPTER 3: CAUSES OF CHALLENGES THAT G7 MART FACES TO RUN
THEIR BUSINESS SUCCESSFULLY 17
3.1 Unfavorable governmental regulations cause many difficult for G7
Mart to develop its project: Tax policies, Land Laws and Competition Laws 17
3.2 The shortage of professional employees and the uninteresting human
resources policies of the company 18
3.3 Disadvantages from business partners 19
3.3.1. Disadvantages of the stores 19
3.3.2. Problems coped with Suppliers and producers 20
3.4. Some articles in the Pilot contracts and agreements that impossible to

achieve in real life at the moment 21
CHAPTER 4: SOLUTIONS TO BE DEVELOPED IN 2007 AND THE
COMING YEARS 22
4.1 Petition the Government for amending 22
4.2 Recruitment, training and re-structured organization plan 22
4.3 More co-operating with the Stores and strengthening the relationship
with the suppliers and producers 23
4.4. Revised the Pilot contracts and agreements 25
CONCLUSION 25
APPENDIX 26
Appendix 1: Pilot Assessment Sheet 27
Appendix 2: List of Pilots in Hochiminh city 30
Appendix 3: Pilot Agreement (in Vietnamese) 36
Appendix 4: Distribution Contract (in Vietnamese) and annex 1, 2, 3 38
Appendix 5: Pilot Contract (Franchising) 50
REFERENCE 59




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EXECUTIVE SUMMARY

The current retail system in Vietnam needs to re-organize to be stores in
chain in order to create the united strength as well as to share the irresistible risks.
Trung Nguyeân Coffee Group – now a famous and successful Coffee group in
Vietnamese market wants to build up G7Mart convenience stores
(
/>) to become the leading group of the Vietnam retail

industry. Based on the existing and available factors and opportunities, such as:
Vietnam retailing market starts being growth and is highly evaluated at the
international level; the supports of the government, of the suppliers, as well as of
the store-owners; the Group’s experience and the ability of market understanding
for years; the quite stable support of financial sources; and experienced, dynamic
and skilled Marketing and sales experts of the Group that create the belief for
G7Mart convenience stores to be born and develop to achieve their target.
The overview of G7Mart strategy together with the analysis of the
Vietnamese retail market and G7Mart operation can give us a landscape of an
increased demand of retail industry and practicability the G7 mart project.
However, the reality of developing this system at the beginning phase
somehow reveals some problems that are not as per G7Mart Company’s desire. The
system’s image in the market is badly influenced by these problems.
The following project investigates some basic causes that make G7Mart
developed unsuccessfully in order to recommend the solutions in the expectation
that it can contribute a little to refresh the G7Mart convenience stores’ system in
their operation at the first steps of their long-term project.


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INTRODUCTION
The retail in Vietnam has been slowly but surely changing over the past five
years, as the number of supermarkets and modern retail outlets have been gradually
increasing, eating into the market share of traditional open-air markets in cities.
Nowadays, Vietnamese people in general and especially Hochiminh city are
familiar with foreign invested key retail players: Metro Cash & Carry of
Deutschland, Big C of Bourbon Group – France, Parkson of Lion Group – Malaysia
as well as the domestic ones such as: Saigon Co-op marts, city marts…
Basing on the available factors, opportunities, G7Mart convenience stores

start to boom in Vietnam; determine to push to build the system to become one of
the biggest domestic retailers.
Up to now, the company has started the business for 10 months within its
three year plan is to develop and to standardize the system that is the top priority;
difficulties are rising that require the company to find quick solutions for them in
order to be able to develop in the right direction and continually grow.
The objective of this project is to analyze some basic causes that trouble the
G7Mart project and to recommend the solutions to be developed.
Structure of the Project:
- Introduction
- Chapter 1: The overall strategy of G7 Mart project
- Chapter 2: Analysis of Vietnamese retail market and G7Mart operation
- Chapter 3: Causes of challenges that G7Mart faces
- Chapter 4: Solutions to be developed in 2007 and the coming years
- Conclusion


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CHAPTER 1:
THE OVERALL STRATEGY OF G7 MART PROJECT

1.1 Vision and Missions:
Setting up the biggest modern distribution system in Vietnam by associating,
upgrading the traditional distribution network in order to create opportunities for the
domestic enterprises to offer their products, brands to customers more efficiently.
Substantially support the business’s growth and brand building to become the
local counterbalance to foreign retailer groups.
Cooperating with domestic producers to build up the Viet town to the world and
contribute to the development of the Vietnam economy.

1.2 Project’s investment capitals: at the first stage at 395 millions USD
1.3 Planning: three stages:
The first stage: Fast developing the distribution system by gathering and joining
the successful and existing stores and agents. The G7 Mart Company upgrades them
into the modern and professional distribution system at high level from the available
street shops to be G7 mart convenience stores; from agents, distributors to be
efficient distribution centers at large volume and then linking the domestic
producers together stably.
The first 500 G7 Mart convenience stores have been launched on August 5
th
,
2006 selling a variety of foodstuffs, beverages, cosmetics and consumer products
such as: newspapers, phone cards, etc. This was the initial step of the 2006 year
plan with 500 pilots, 9,500 member-shops, and 70 distribution centers. After 5 years,
G7 Mart Company will develop 10,000 stores, 7 department stores…


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• 2006 – 2007: 1,500 G7 Mart Pilots 7,000 member shops and 100
distribution centers should be officially run and developed.
• 2007 – 2010: 7,000 pilots, 200 distribution centers, 7 commercial
centers and 7 supermarkets at 65 provinces and cities in Vietnam.
The second stage: Joint & cooperation with the big, successful and existing
wholesalers/retailers/partners to build and develop the biggest modern distribution
centers, supermarkets, hypermarkets at 65 provinces and cities in Vietnam by 100%
investment, joint-venture, licensing or franchising.
The third stage: Building Viet town to the world – the strong cooperation
between the domestic producers and distributors supported by the Government,
Vietnamese and Vietnamese overseas customers.

1.4 The model of G7 Mart modern distribution system: includes G7 Mart
convenience stores (Pilot), G7 Mart member shops and distribution centers.
• Pilot G7 Mart: is the store that meets the G7 Mart’s selection criteria and is
officially run in the G7 Mart distribution system. The criteria should be:
+ Good location: accessibility to major roads, area of dense population
+ Space: at least 4x7m and good infrastructure: nice built and having the
ownership or long term leaseholder
+ Consumption goods and many customers; experienced retailing.
+ Capital: 50 – 100million VND; sales turnover at least 10 millions VND/day
Pilot G7 Mart’s benefits
1
:
a. G7 Mart’s supports:
+ G7 investment/no franchise fees by end of 2007; Designing the store and
good display according to G7 mart standards.


1
Appendix No.3: Pilot Aggreement and Appendix No.5: Pilot Contract (Article 3.2)


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+ Benefits from the advertising in the store
+ Training course on sales, customer service; Participating in G7 congresses
+Provided software of financial management, goods display, inventory
control…; Transferring the technology of modern and professional retail
+ Benefits from promotions that G7 mart deal with the suppliers
+ Link to the bank for loan if needed; Good and exact payment.
b. Opportunity to expand business through: Good products of all kinds;

professional service and modern and convenient service
G7 Mart does not create the well equipped expensive stores (air conditioner,
expensive interior decoration) that make the investment cost high, unsuitable to
lifestyle, consumer behavior and that can impact on the sales revenues. G7 mart
only upgrade the available and existing stores themselves, people (store owners and
their family), adjust some unsuitable operations. The all in package of investment
cost is at 100 – 150 million VND/store including: re-design the store, display
shelves, sign board, training courses, management and control system software …
• G7 Mart member shops: are the ones in the stage to become standardized
Pilots. Their benefits are:
+ Candidate to be G7 Mart convenience store; Good consumption
+ Good products of all kinds; Buying (Cash & Carry) from G7 Mart
distribution center at reasonable price/benefits; Consulting about modern retails.
The developing of G7 Mart convenience stores is based on 5 competitive criteria:
The stores will be equipped to be well identified in order to attract the customers’
attention to visit and buy at the stores; Being polite to create customers satisfaction;
Diversified merchandises, competitive price in comparison with the other system;
Convenient and professional service; Well merchandise display, easy to select.


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• G7 Mart Distribution Centers are the ones to supply products for the whole
system including the Pilots and the member shops of G7 Mart. Similar to the
way of building pilots, the system of distribution centers are upgrading from
the existing whole sale agents to be the G7 Mart standardized distribution
centers. Besides that, G7 Mart also invests to build up the warehouses at
about 500 – 1,000 m2. G7 Mart distribution centers’ benefits
2
:

+ Return on investment (R.O.I) is efficient.
+ Full of five categories business; One stop purchase
+ Good customer service; Good business training
+ High sales and benefits; Attract huge customers of all kind.
• G7 Mart company benefits: its long term investment, at this moment, the
business of G7 Mart essentially, is the business of solution and then to create
and to strengthen the brand for the company. After that it can develop
multiform business models.
• Co-operation benefits of suppliers:
- Increase market share and market size: faster-smarter- and more efficient.
- Save time and cost of distribution and stable and efficient brand building.
- Huge sales volume; on time payment; Real time information for better R & D
- Professional supports and co-operation.
The evaluation, study and learn experience of retail lessons from the former
companies such as: Massan, Day & Night on the investment, co-operation, and
effective capital management helped the company to avoid risks that may happen.
In the past, convenience stores have failed to catch on in Hochiminh city. Massan
Marts have been forced to close down all of them because they could not compete


2
Appendix No.4: Distribution Contract


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7
against with the thousands of household-run stores in the city, where the concept of
convenience is taken to the ultimate level. This is due to many different causes:
* Incorrect opening time

* Ferocious pricing competition with the traditional groceries.
* Insufficient products.
* Investment cost for a store was so high.
Learning the experience from the former retailing system, G7 Mart offers the
co-operation model. The stores will benefit the increasing sales turnover, and the
company will gain more the awareness for its brand. Below are the G7 Mart long-
term targets:
No. Business Quarter
2/06
Quarter
3&4/06
2007 2008 2009 2010
1 Pilot G7 mart
convenience
stores
500 (*)
3.000

2 Pilot G7 mart
(Franchising)


4.000 5.000 7.000 10.000
3 G7 Member
shop
5,000 (*)
7.000 6.000 5.000 3.000
4 Distribution
center
100 (*)

150 200
5 Department
stores
14 20 24 30
6 Supermarkets 10 16 18 20
7 Viet Town 7 10 12 20
(*) negotiated and confirmed


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CHAPTER 2:
ANALYSIS OF VIETNAMESE RETAIL MARKET AND G7 MART
OPERATION

2.1 Analysis of Vietnamese retail market
2.1.1 Consumer behavior trends
2.1.1.1. How will Vietnam population look like in 10 years?
2006
Population:
84 million
2016
Population: nearly
100 million
Population are under 30 years
old:
57%
Population are under 30 years
old:
50%

Consumer base (from 15 to 69
years old):
60 million
Consumer base (from 15 to 69
years old):
70 million
Urban:
27%
–Rural:
73%
Urban:
33%
–Rural:
67%
Average household size:
4.8
Average household size:
4.0
3-generation families:
50%
3-generation families:
30%

(Source: TNS world panel)
2.1.1.2. Social and Economic trends in 10 years:
GDP per capita (USD)
274
400
585
620

1,450
0
300
600
900
1200
1500
1800
1995 2000 2005 2006 2016 -
estimated
GDP Growth rate of Vietnam (%)
9.5
6.7
8.4
8.0 8.0
0
2
4
6
8
10
1995 2000 2005 2006 2016 - estimated

(Source: General Statistic Office)
The infrastructure is upgraded, more modern apartments and modern
shopping places are built. Computers, mobile phones, internet, luxury products …


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will emerge. Vietnam continues to keep the high GDP growth rate and double the
GDP per capita in 10 years ‘time. Vietnamese people are getting richer.
23%
18%
59%
<190 USD
190-285 USD
>285 USD monthly
Low Income
Middle Income
High Income
>600 USD monthly
29%
21%
50%
10%
2006
2016

2.1.1.3. Consumerism in 10 years
Changes in population, social and economic standings will have strong
impact on Vietnamese consumerism: Convenience, Health and Indulgence.
Convenience:
people are busier. They have not time to go to the markets
regularly. Shopping behaviors move from daily shopping to bulky buy and stock-up.
Vietnamese people are in the habit of bargain, of eating fresh foods and of carefully
spending. That’s why they prefer to traditional open-air market than modern retail
outlets. But this changes together with their increasing incomes and no much free
time. They are even willing to pay a little more for their convenience at the
convenience stores, by ATMs or online shopping for home delivery.

Health:
Healthy lifestyle’s choices will drive consumers’ behaviors. 70%
housewives in Vietnam are worried about health more NOW than before – (source:
TNS Lifestyles). In urban: 80% like to buy food with active ingredients, 37% to have
a choice of lower calories food. 36% regularly diet to lose weight. Food hygiene and
safety standards become more and more important for consumers. People feel more
comfortable when buying food with clear well known origin source.
Indulgence:
Metro-sexual revolution: Vietnamese men are starting to pay
attention to their appearance from skin and hair to fashion and fitness. Women look
for prevention, advise, self reward, trust, indulgence and seduction. “Me Me Me”
driven by both men and women.


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Consumer’s convenience, health and indulgence will be the key product
features. Modern shopping basket will become more sophisticated and contain more
line extensions. There’re 60 million of consumers today and will be 70 million in
2016. They will drive luxury consumption in the future. Modern trade will dominate
shopping behaviors – shopping less frequently but bulkier.
2.1.2 Governmental policy and foreign investment: Under Dispatch
1701/TTg-QHQT
(Oct 23
rd
2006), the Government establishes new policies to
conditionally open by end of 2008 the domestic retail market to foreign firms; allow
them access to the local market. This is the time for retail industry to grow. Many of
the world’s largest retail manufacturers and distributors have already established a
presence in Vietnam, including Germany’s Metro Cash & Carry, France’s Bourbon,

Malaysia’s Parkson have opened, while England’s Tesco, Singapore’s Giant Asia
Investment studied the market. Major global corporations, the US-based Wal-Mart
and French retailer Carrefour, have included Vietnam in their plans for expansion.
With the financial power, experience, these foreign companies will push the retail
in Vietnam into an international competition. When entering Vietnamese market,
these huge Groups will have their own producers and raise more difficult buying
conditions for domestic producers if they want to join in their distribution channels.
Generally, the distribution system in Vietnam is still rather not good in many
aspect: The infrastructure (investment, management, human resources…) is so weak,
and unprofessional; the macro support from the Government on economic policy is
not enough; the enterprises only focus on production rather than on brand building
and operate separately, lack support and co-operation with each other. The risk of
lagging behind economically and being defeated can be completely happened.
2.1.3 The trends of international economic integration: It is evident truth
and forced to push the country economy to develop.
- The more the life standard is improved, the more the needs to ask for a
modern, civilized, convenient life and fast contact to information and service.


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- In order to quick integrate into the world, the Government itself needs to
amend its macro strategies; administrative reform to comply with international
regulations in order to support the enterprises and attract the investment.
- The enterprises have upgraded their service, technology, installed new
equipments and machineries, and created links to become stronger.
- All media have changed by publishing information faster and accurately.
Every thing has been changed, upgraded in order to be harmony with the trends of
global economic development, especially as soon as Vietnam officially becomes the
WTO member. G7 Mart itself has realized these influences and it is in the progress

to self perfect to meet the demands that are getting higher– offering the model of
convenience stores to link the stores into the one large system, to link the
producers/suppliers with the stores and to benefit the support from the Government.
2.2 G7 Mart business philosophy and methodology:
2.2.1 Preliminary current status of the traditional stores: The products are
distributed to the customers mainly through the traditional markets (40%), family
owned stores (44%), supermarkets, convenience stores (10%) and the producers
(6%)
(Source: General Statistic Office). So, as the foreign retail groups enter in Vietnam,
the competition will occur in the segment of 10% first. Gradually, due to their
professionalism they bring customers convenience, satisfaction the market share
10% will increase rapidly. The more it increases the more 44% market share of
family owned stores decrease, causes difficult for these stores especially where
supermarkets and convenience stores will be built. At the moment, stores freely
develop so they run their business very flexibly. They have good location for
effective investment cost that mostly is not high. They are present on all streets,
lanes, drives; have created the customer relationship because of effective customer
services. Furthermore, the business environment is favorable, diversified,
especially the retail market grows. But most of the stores are invested by the
owners spontaneously, subjectively; they lack experience, development orientation,
plan for the stores; co-operation and association that make the store controlled poor,


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un-standardized and uncontrolled quality input products, high price, and
unmethodical merchandise display. Their business will face high risks because of
little market intelligence, competition information, merchandise, capital investment
management knowledge. This is the weak point of the Vietnamese small retailers
that is very easy for the foreign competitors to attack. Society develops, customer

needs and expectations are raised; they are still asking for more, so the stores must
be changed in quality. Moreover, in the ferocious competitive trend today, the
traditional distribution is certainly amended to the development of retail industry
such as some of them change to become convenience stores in a system. In the
other countries as before, when the foreign retail Groups enter the market; they will
influence all the distribution system by rapidly expanding convenience stores as
well as opening supermarkets/hypermarkets. The street stores need to closely
associate with each other in a system. This association can create strong financial
sources, share product/service sources and disperse the risks. The store will be
stronger when in a system that the G7Mart convenience store chain is one of them
because of the strong numerous systems that they can be against versus competitors.
2.2.2 Macro aspect: The modern trade is raising and dominated by foreign
invested Group such as: Wal-Mart, Carrefour, Big C, Metro, 7- Eleven… while the
traditional trade distribution and retail is under threat of collapse. Thousands of
household-run stores are almost on small scale, developed spontaneously and
managed unprofessionally. Meanwhile, the retail market in Vietnam is classified as
the third in the world on the attractive level, American enterprises and many other
foreign enterprises want to share this attractive market, because they know well that
the Vietnam retail system has four main weak points:
2.2.2.1.Finance:
Vietnam now has about 200 supermarkets, 32 commercial
centers, 1,000 stores operating nationwide with the turnover of goods and service
retail estimated at USD 20 billions/year – it’s a very moderate number. Meanwhile,
only Shanghai or Beijing in China, it’s ten times more than ours. The turnover of a


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biggest supermarket in Vietnam now only reaches at about VND 200 billions /year.
(Source: General Statistic Office)

The foreign groups that are very strong in finance, well experienced in
management start to enter the Vietnam market. Their registered capital is tens of
millions USD, but in some project, their registered capital reaches at hundreds of
millions USD. For instance the case of Metro and Bourbon – both of them has the
registered capital at 120 millions USD (Source: M.P.I.). Meanwhile, almost the local
retailers lack of experiences, capital sources, professionalism and brand. According
to the report of the Ministry of Planning and Investment (MPI), many international
groups plan to enter the Vietnam market including the three world retail leaders:
Wal-Mart (US), Carrefour (France) and Tesco (UK) and other Asian groups such as:
Dairy Farm (Hong Kong) and South Investment (Singapore)…
2.2.2.2. Logistics:
the modern distribution requires professional logistics
system. However, Vietnamese supermarkets still have problems with the
distribution centers or suppliers because they do not supply and deliver the needed
quantity in time, especially on the occasion of special events: New Year holidays,
Xmas seasons and so on. About 40% goods in the domestic supermarket in Vietnam
now are mostly waiting for the suppliers bring to the shelves to sell so it’s difficult
to compete against with foreign supermarkets. Besides that, the dispatch of the
delivery vans at right time, right place, and right type is also the problem
influencing on the business running, and increasing the labor, management costs.
2.2.2.3. Professionalism:
The number of successful supermarkets and
commercial centers in Vietnam market such as: Metro Group Coop mart, Fivimart,
Intimex… are still little. The majority of the supermarkets still struggle to find their
way. This proves the professionalism of Vietnam distribution is still weak.
The products now sold through modern distributors are at about 10% in
Vietnam, but in China: 30-40% and Thailand: 60%. Besides, the domestic
distributors have not yet built up the direct distribution channel, but still have to go
through many intermediaries so that the prices are not very competitive. Our

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supermarkets have not taken care much of size/scale, environment and have not
also been interested in building the brand and products for the stores.
2.2.2.4. Human factor:
Besides the Government’s strategic policy, the links
between the distributors to create the strength of the union is very important and
necessary. But the most serious challenge of the domestic retail in the coming years
is that people prefer to co-operate with foreigners than Vietnamese each other.
Founded on the base and support of Trung Nguyen Coffee Group which is
successful and has good reputation in the Vietnam coffee market, G7 Mart with its
available experience on market, large relation, and its strategic target is to establish
system based on the humanity; calling for supports, co-operation to bring the
common benefits for the community and the country. The objective of G7 Mart is to
call people to build the distribution of Vietnam, to protect the value of Vietnam
brands and to link the retailers and domestic producers to create a stable and long-
term market to be protected from the ferocious entry, and competitions of products
made in other countries. To do so, the Government, stores, producers should clearly
recognize and make all efforts to alter based on the mutual support, co-operation.
2.2.3 The benefits from micro point of view that it can bring to the stores:
- Large strong competition: it offers to the G7 Mart convenience stores the
ability to compete against with the stores that are outside of the G7 Mart system;
against with large/big supermarkets especially against with foreign distribution
groups.
- Influences on the suppliers on the benefits such as: Discount, Promotion.
The stores can get the benefits from the rental ads contracts of suppliers at their
stores through the negotiation of G7 Mart and suppliers.
- Developing more the profits and better customer service: water/ gas/
electricity/ telephone bill payment for customers.

- Often being trained on store management skills, inventory skills, product
display… to cut down the unnecessary costs.


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- Getting benefits under many sources as soon as the company develops:
become share/stock holders, priority on the benefits and support…
2.3 The practicability of G7 Mart convenience store’s project:
2.3.1: Suitable business concept that can get the stores’ support:
The stores that registered to join the system are over 300,000 stores in
Vietnam; G7 Mart selected 10,000 stores to develop in the coming years. The
company concentrated to open the first 500 stores, including 110 stores in
Hochiminh city that meet the company selection criteria
3
. However, there’re stores
that meet the G7 mart selection criteria but they are reluctant to join.
- Stores want to join because they:
• Consider their retail business as their career and want to invest for long time.
• Desire to change the way of selling products that is new and more modern.
• Are afraid of competition and backward.
• Realize the benefits and advantages when being in a professional system.
• Turnover will be increased as soon as the various goods and service are
available in the stores.
- Stores do not join because:
• Not meet the G7 Mart selection criteria (as: space, capital, experienced…)
• Not want to change into the new business environment.
• Not yet believe in the practicability of the project.
• Not want to invest more because they are afraid of risk.
- Comparison table between the G7 Mart stores and the stores outside the system:

FACTORS NORMAL STORES G7 MART C.STORES
Investment of signboards and shelves No Yes
Consulting, supporting to develop No Yes
Benefits from rental ads at the stores No Yes
Public Relations for the store system No Yes
Benefits from the store system No Yes
Profits from retailing Yes Yes
Promotion programs Yes Yes

3
an appendix No.1


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As the table shown, when joining the G7 Mart Convenience stores, they can
get more benefits and advantages than the other ones who do not join the system.
The result of developing the G7 mart in Vietnam by end of January 2006:
Pilot Distribution center Member shop
Vietnam (Total) 595 46 4930
Hanoi 45 4 400
Northern provinces * 82 6 750
Central provinces 84 8 720
Southern central provinces 50 4 600
South east provinces 101 7 900
Hochiminh city * 141 4 800
Mekong delta 92 13 760
(*): exclusive Hanoi. In Hochiminh city by end of April 2007, there are 177 pilots (G7 Mart convenience
stores) covering all the twenty two districts of the city.
2.3.2 The advantages of the stores that make the G7Mart project

feasible: They have favorable locations, retailing experience, and existing
customers. They want to develop best service of their stores to increase profit and
create new competitive advantage when being in the large system. They accept to
apply the new modern retailing methods to help to push the business development,
generate the advantages and create the links to communicate between stores and
the store and its customers and to be a member in a chain of strong and top retailers.
2.3.3 The real capacity of the company for doing the G7Mart project:
What G7Mart is doing now is to bring the benefits for all community and the country
in general, and for the company itself in particular so it has received the high
support of the Government, other economic departments and services, enterprises
and the majority of the stores nationwide. The ability of investment capital at the
first stage supported by the 4 banks together with experienced staffs that help the
company feels self confident to develop. The company believes in the developing
opportunity, integration of the country into the global economy that helps to offer
many potential immediate chances. Besides that, consumption liking and needs of
the customers increases more and more, the availability of infrastructure of the
present stores makes the building up new image, new retail system is achievable.



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CHAPTER 3:
CAUSES OF CHALLENGES THAT G7 MART FACES TO RUN THEIR
BUSINESS SUCCESSFULLY

The G7 Mart has been run nearly for 10 months in the first three year plan to
develop and standardize the stores; however, it reveals the problems that make the
system unsuccessful as desires. This project focuses on analyzing the three causes:

3.1 Unfavorable governmental regulations cause many difficult for G7
Mart to develop its project: Tax policies, Land Laws and Competition Laws.
The inappropriate tax and levies duty are the first disadvantage for the
G7Mart to deal with the stores because the store owner should pay the tax of
business rate, business and individual income tax, sales turnover tax. However, the
local agency of Tax decides the business rate, business income tax, and sales
turnover tax based on their judgement affected by the target that they should collect
annually. The normal street shops usually bear the lower tax than the equipped
stores do. So, as the stores join G7 Mart system with the new image, tax should be
increased. Like the case of mini-hotel and guest-house. They are same function,
scale, income, sales turnover, but different name and decoration, the tax is varied.
Land laws are so complicated questions. There are still many overlapped and
inadequate regulations related to Land and properties, many of them are not
suitable to apply in the current circumstances, but are still in effect causing
problems for the enterprises. For example:G7Mart’s long term target of 2007 : build
200 Distribution Centers and Base Depots that requires much capital and many
pieces of lands, the company can ask for financial supports from many sources:
bank loan, raising capital… but because of the present policies and laws on lands and
properties such as the period of leasing lands, land using purpose, land using right,


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land project; the process to authorize the land using right is so long that the company
should wait for years, so the business opportunities will be gone out soon.
Besides the pressure of the market economy, the companies in the retail
industry have to face the unfair competitions such as the co-operation with the
powerful enterprises in the industry; dominant position… According to the report of
Bureau of Competition Management under the Ministry of Trade, Vietnam has to
face three main issues: the implementation of Competition Laws; the interference

of the authorized State organizations; and the comprehensive measures to create the
legal environment to protect the fair competition in distribution and retail industry.
Although the Competition Laws have been approved by the National Assembly,
they still need the Governmental decrees, circulars of the Ministry of Trade,
interministerial circulars, and instructions of the Provincial People’s committee.
3.2 The shortage of professional employees and the uninteresting human
resources policies of the company: - the important factors to run down the project.
3.2.1 The shortage of professional employees: To run the project
efficiently, the company needs the well experienced staffs in the retail industry.
However, almost the key staffs are inexperienced in this domain even they are good
at marketing. This is weak point, because of inexperience; they settle the problems
as per their thinking in the way to learn experience from the real problems in the
field. It causes the system unprofessional. Furthermore, because of lacking good
people, the G7 Mart staffs have to hold more than one of their functional positions
and duties. Taking example of sales forces: they have to follow up the achieved
pilots to take care their customers, but they also have to develop the new generation
stores as their sales targets. So the selection and development of new stores have
not been well made as well as perform well the agreement on the supports from the
company between G7 Mart and pilots such as consulting, helping them in store
management and market information provided, market survey…


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3.2.2 Human Resources policies are not interesting and clear enough
to attract talent people to join and to retain high performers. The recruitments
sometime are heavily focused on quantity rather than quality due the the pressure of
time. Furthermore, the interviewers are not skilled to select the right ones that lead
to the unprofessionalisme of the system and poor retention. Many left the company
causes the big trouble for it. Because there will be empty position in a period to

fulfill; no talent people to help and to motivate the new comers and this causes also
the negative perception in the company. Most Training and development program
are not well designed and standardized for every staff’s level. They are only short
courses. The salary and benefits are competititve enough, but only based on sales.
3.3 Disadvantages from business partners:
3.3.1. Disadvantages of the stores:
3.3.1.1. Capital limits are the problem of most of the traditional
retail stores. They are founded on the original background of small scale store,
limited capital the store owners do not or can not invest more in their stores.
3.3.1.2. Stores in the G7Mart store system: (Pilots)
Human being is the key factor, but almost the store owners are not well
educated and are very conservative. To upgrade the store, the company must
standardize service through the training sales skill, informatics technology system
application in management and software to control the sales and inventory,
payment… However, the new technology can help them to improve their business,
but it’s difficult for them to learn it at their ages and education level. This can
destroy the unity in the total system of G7 Mart pilots.
The store owners’ selling habits who were the former traditional
grocery store owners is the big problem. When joining the G7 Mart convenience
stores, they have to change all their habits: service at the stores, well and correct
dressing (uniform), polite and civilized behavior (via customers of course, and even


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via their employees). The goods display can bring many benefits: such as
coordinated products should be put close to each other to stimulate combined
purchases. But because of their habits, they put the goods not according to any
standards: at hand level, categories, hot and impulse zones to attract customers…
This influences the image of the store, and makes it unprofessional and no

differentiation between the upgraded store and the old style one, sales revenue and
margins can not increase, and dangerously the objective of G7 Mart convenience
store can be damaged.
3.3.1.3. Stores out of the system:
The way of their feeling and thinking about the market is still too
subjective; not worried about the competition. Their retail business only combines
two factors: place and goods; but goods are kind of “we sell what we have”, not
“we sell what you need”, especially the stores temporarily with good sales volume
at high profit and still have not the real competitors in their area. Therefore they are
over self confident on their competition ability and do not think that they need to
upgrade and improve in order to be better in competition in the future. Most of them
do not recognize the model of the modern convenient retail. They misunderstand
that the company want to develop this model is only to go to their store to make an
advertising board. They do not want to invest, but prefer to receive money to
upgrade the stores.
3.3.2. Problems coped with Suppliers and producers:
The other difficulty of the company is to supply goods for its
convenience stores. At present, G7 Mart has 70 distribution centers to supply goods,
inventory… The benefits that G7 Mart would like to bring to the consumers are the
right and competitive price because G7 Mart buys directly from the producers, the
suppliers and bring to their convenience stores. Now, it has about 200 suppliers as
business partners of G7 Mart, but they believe soon or late all the domestic
producers and suppliers will gather into one channel. The final goal of G7 Mart is to