Final Researc- Introduction

Chapter 1
Introduction
1.1. General ideas
One of the highlighted trends that characterize today's business environment is fiercer
and fiercer competition. This brings business organizations a wide array of opportunities and
threats that require the design and implementation of strategy or strategic planning in doing
business [34]. Thus, strategic management as a concept has evolved over the last three
decades and will continue to evolve. Strategic management is carried on in most organizations
today - and most organizations that practice it benefit significantly [37].
The ultimate goal of the strategy of a company is the creation and improvement of
sustainable competitive advantages to secure the long term future of the company. The process
of strategic management will help the managers of the company to get a better understanding of
their company with its strengths and weaknesses as well as opportunities and threats, to know
where their company is, where it should be, can be, and must be within the competitive
environment. Therefore, the question of how a company's superior performance against its
competitors can be achieved and sustained must be addressed. Finding out the answers is
subject matter of developing a competitive strategy.
In the course of economic transformation from a centrally planned to a market-oriented
system, Vietnam is emerging as a potential market for both consumer products and industrial
products. A lot of foreign and domestic investors are entering into this unsaturated market. As a
consequence, all business sectors have to cope with really strong competition raising in business
environment - that is the nature of a free-market economy. However, many domestic
manufacturers, especially the state-owned ones, have got little experience of how to do business
in an atmosphere of competition. Filling this gap is the author's original idea for doing research on
competitive strategy in the Vietnamese context. So far, the beer industry has been chosen as an
objective of the research because of the typical cutthroat competition which is happening there
and will be depicted clearer through the description of the problems faced by Danang Brewery
Company at present.
Danang Brewery is one of the largest breweries which has dominated solely the beer
market in the central region of Vietnam for the last five years. Nowadays, the competition is
sharper and sharper, requesting the company to develop differential advantages. Then the

priority belongs to developing its own competitive strategy.
1.2. Statement of the problem
Keeping pace with Vietnam is fast economic growth rate, the citizen's standard of living is
soaring. Accompanying this good fortune is the demand for beer. While beer consumption in
Vietnam is then only four to five liters a head each year (statistical figure in 1994), compared to a
global average of 15 liters a head or up to 150 liters in Britain, France or Germany, many
domestic and foreign investors saw that there was money to be made from it.
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Not only private domestic but also joint-venture breweries have come into being with
substantial investment from home and abroad [32]. In addition, the "free-flow" of import beer, both
legal and illegal has led to fiercer competition between a myriad of brands. With a tour of the beer
distribution and agent network, we can see how the high volume of domestic and import beer are
sold. Some more than 60 different brands of bottled and canned beer are sold everyday. They
are Tiger from Singapore, Heineken, Amstel and Dab from Holland, San Miguel from the
Philippines, Guiness from Ireland, Foster from Australia, Stella Artois from Belgium, BGI and
Castel of a Franco-Vietnam joint-venture, Saigon bottled beer and 333 canned beer
manufactured by Saigon Brewery, and so on.
The flow of investment into new breweries has shown an upward tendency. The recent
introduction of bottled and canned beer bearing such brand names as BGI and Castel or Vinagen
has created tough competition for a number of domestic breweries and beer joint-ventures. With
the starting of Heineken in Ho Chi Minh city at the end of 1994, together with the San Miguel
Brewery in Khanh Hoa, Ha Noi and other beer joint-ventures in other provinces which also will
start operating, the battle of the breweries is bound to become quite a spectacle of cutthroat
competition.
As competition among the brewers is getting fiercer and as it is only a question of time
until the larger foreign brewers which have been concentrating their efforts on the two main cities
Hanoi and Ho Chi Minh will try to enter regional market as well, the Danang Brewery is facing the
thorny question of how to develop in this competitive environment. Hence, the problem of
designing an effective competitive strategy is becoming more and more essential and crucial.
This will form a benchmark for the company's performance in order to meet best the satisfaction

of consumers and the company's objective with respect to the constraints of the company and
the business environment.
1.3. Objectives of the study
This research is designed to understand the situation of the local companies in new
business environment of a market-oriented economy that is characterized by fierce competition.
Generally, from the result of understanding the process, the objective is to develop a competitive
strategy in order to grow strongly taking into account many chances and constraints for a local
brewery.
This study particularly focuses on the development of a competitive strategy including the
following steps:
• To assess the current strategic situation of the company in order to develop its
competitive profile.
• To assess the existing and potential competitors in Vietnamese beer market in general
and especially in that of central region of Vietnam.
• To help the concerned firm in first developing strategic alternatives, assessing them and
then suggesting possible courses of actions in order to achieve desired performance
level.
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• To serve in providing information about competitors for the investors who pay their
attention to enter beer market in central Vietnam.
1.4. Scope and limitations
This research study will be undertaken purely from a viewpoint of strategy with the aim to
design a competitive strategy for a particular company since it is regarded as an essential issue
in the increasingly competitive environment in Vietnam now. As stated above, the author chooses
the beer industry for the study since it is regarded as particularly dynamic showing development
which will sooner or later also affect other industries in Vietnam.
The company chosen in this study is Danang Brewery - a medium-size local manufacturer
of beer product which is located in the central of Vietnam - and its local market there. However,
the business environment of Danang Brewery should not be limited to those which are identified
in this research - since the study will be conducted only for major activities and product-market

strategies.
Other limitations of this research are:
1. First, in the domain of strategy, the study is narrowed to competitor analysis to define the
strategic position and more carefully analyze marketing function in defining strategy
capability.
2. Second, primary data is collected just from the major geographic area - Danang city -
which are concerned to real business strategy of the company. Meanwhile many
geographic areas which could be the promising potential markets for the company can
not be treated in this study because of the time constraints.
3. Third, this study relies heavily on the available secondary data, the primary data used are
relatively limited because of time limitation and the author's ability to conduct a large
survey.
4. Last, the study will focus mainly on strategy process in which propose what strategies
should be opted to succeed in the market, while other functional aspects such as R&D or
management of technology will be mentioned but not thoroughly treated .
1.5. Organization of the study
The study is organized as follows:
Chapter 1 provides an introduction including the rationale of the research, the
identification of the problem, the objectives as well as scope and limitations of the study.
Chapter 2 shows the literature review of the topic being considered by the research
proponent. This will encompass the fundamental ideas on corporate strategy, the role of
competitor analysis in forming a company's competitive strategy and an overview of beer product
industry in the world and Vietnam.
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Chapter 3 deals with the methodology of the study including: Design of the framework of
the study, identification of the sources of information, of the instruments to collect data and of the
stages of data collection.
Chapter 4 provides an analysis of external factors that help to identify the firm's strategic
position. The main contents of the chapter, therefore, will convey environmental scan that
emphasizes on central region of Vietnam, then structural analysis of the industry. Simultaneously,

this part mainly focuses on the analysis of the major domestic and foreign brewery manufacturers
who are competing in the Danang market and the whole country.
Chapter 5 is devoted to the analysis of the current situation of the Danang Brewery
Company in terms of production, organization management, marketing, finance, and human
resource management. Its ultimate goal is to determine the critical success factors which define
firm's strategic capability.
Chapter 6 will provide the expected outcome of the study in trying to develop strategic
alternatives based on the analyses from previous parts, which can help Danang Brewery gain
superior performance in the next coming years.
Chapter 7 encompasses the practical recommendations on the implementation of a
competitive strategy for the chosen company and conclusions.
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Chapter 2
The approaches to competitive strategy and beer industry:
an overall view
2.1. The nature of corporate strategy
2.1.1. Integrated definition of strategy
Strategy, starting from its military roots, is defined by Webster's New World Dictionary as
"the science of planning and directing military operations". Thereby, the concept of strategy is
not quite a new one in the last centuries. However, applying and developing the concept of
corporate strategy into the arena of doing business is a breakthrough idea since the later half of
this century. Then the decades of the sixties and seventies saw a tremendous growth in the
development and application of the tools and techniques of strategic planning. At that time, most
management definitions of strategy by many authors were emphasized on the planning theme as
an important component. This traditional approach is elaborated by Charles W.L. Hill and Gareth
R. Jones as the following:
"Harvard's Alfred Chandler defined strategy as "the determination of the basic long-term
goals and objectives of a enterprise, and the adoption of course of action and the allocation of
resources necessary for carrying out these goals". Implicit in Chandler's definition is the idea that
strategy involves a rational planning process. The organization is depicted as choosing its goals,

identifying those courses of action (or strategy) that best enable it to fulfill its goals, and allocating
resources accordingly. Similarly, Jame B. Quinn of Dartmouth College has defined strategy as
"the pattern or plan that integrates an organization's major goals, policies and action sequences
into a cohesive whole. And finally, along the same line, William F. Glueck defined strategy as "a
unified, comprehensive, and integrated plan designed to ensure that the basic objectives of the
enterprise are achieved" [7].
However, planning based definitions of strategy had evoked criticism. Then Hill and Jones
showed a new approach based on Henry Mintzberg's definition of strategy as "a pattern in a
stream of decisions or actions", the pattern being a product of whatever intended (planned)
strategies are actually realized and of any emergent (unplanned) strategies. Both of them argued
that Mintzberg's revision of the concept of strategy suggests that strategy involves more than just
planning a course of action. It also involves the recognition that successful strategies can emerge
from deep within an organization .
In the sequence decades of 1980s and 1990s, "strategy" becomes essence in business
domain than ever before, the term "corporate strategy" and "strategic management" are a
responsibility of all managers - a responsibility that is becoming more and more crucial. So far,
the concept of strategy has received a great deal of attention by various authors until now. Many
of them realized that it should not be emphasized a different perspective, providing merely a
single dimension of this fairly complex concept. Further more, they have attempted to develop a
widely accepted concept of strategy.
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By 1991, Arnoldo C. Hax and Nicolas S. Majluf pointed out that strategy can be seen as a
multidimensional concept that embraces all of the critical activities of the firm, providing it with a
sense of unity, direction, and purpose, as well as facilitating the necessary change induced by its
environment.
Reviewing some of the most important work in the field of strategy, Hax and Majluf have
identified the following critical dimensions that contribute to a unified definition of the concept of
strategy:
• Strategy as a coherent, unifying, and integrative pattern of decision
• Strategy as a mean of establishing the organizational purpose in terms of its long-term

objective, action program, and resource allocation priorities
• Strategy as a definition of the competitive domain of the firm
• Strategy as a response to external opportunities and threats and internal strengths and
weaknesses in order to achieve competitive advantage
• Strategy as a channel to differentiate managerial tasks at the corporate, business and
functional levels.
• Strategy as a definition of the economics and non economic contribution the firm intends
to make to its stakeholders [4].
Gerry Johnson and Keval Schole (1993), in the similar way, have stated the nature of
corporate strategy by the characteristics usually associated with the word "strategy" or "strategic
decision". In sum, according to the mentioned authors, strategy is the direction and scope of an
organization over the long-term; ideally, which matches its resources to its changing
environment, and in particular its markets, customers or clients so as to meet stakeholder
expectations [12].
From this unifying approach, strategy becomes a fundamental framework through which
an organization can assert its vital continuity, while, at the same time, it forcefully facilitates its
adaptation to a changing environment. The essence of strategy thus becomes the purposeful
management of change toward the achievement of competitive advantage in every business.
Applying corporate strategy concept to Vietnamese business conditions now is extremely
important in order to enhance the building up of a strategic vision for the managers who are
operating all the domestic companies there, especially for managers of state-owned companies.
Business environment in Vietnam today is likely different from that of the previous planned-
economy where all of the resources and the output were subsidized by central government and
where the existence of a predetermined long-term plan was merely a formal procedure by
subjective figures without any environmental consideration. Actually, the managers today are
challenged by the uncertainty and the faster change of the new business environment as well as
by the competitive forces surrounding their firms. The task of keeping up the firm's growth
requires setting up a well-defined strategy at all levels of management within their firm.
2.1.2. Hierarchical levels of strategy
Within the company, strategic managers are found not just at the apex of the

organization, but also at different levels within its hierarchy. There are three basic conceptual
hierarchical levels which have always been identified as essential layers of the formulation and
execution of the firm's strategy: the corporate level, the business level, and the functional level.
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Corporate level
At the corporate level, the main strategic issue seems to be concerned with the overall
scope of the organization. Typically, this involves defining its mission and goals, determining
what business it should be in , allocating resources between the different business areas, and
formulating and implementing strategies that span individual businesses. The corporate level of
management consists of the Chief Executive Officer (CEO), other senior executives, the board of
directors, and corporate staff. These individuals occupy the apex of decision making within the
organization. The CEO is the main strategic manager at this level. His or her strategic role is to
oversee the development of strategies for the total organization. Of course, it should be noticed
that the decision maker at the corporate level is not necessarily the isolated CEO. Depending,
among other things, on the management style of the CEO, corporate strategy might be shaped
and implemented by the core team of top executives.
Business level
The second level can be thought of in terms of competitive or business strategy with the
main efforts aimed at securing the long-term competitive advantage in all the current businesses
of the firm. In the single-industry company, the business and corporate level are the same. In
order to decide how to compete in a market, the concerns are therefore about which products or
services should be developed and offered to which markets; and the extent to which these meet
customer needs in such a way as to achieve the objectives of the organization. So, business
strategy is more likely to be related to a unit within a whole. The main strategic managers at this
level are the heads of the divisions. Their strategic role is to translate general statements of
direction and intends at the corporate level into concrete strategies for individual businesses,
constrained by the overall resources assigned to the particular business unit. Thus business-level
strategic managers are concerned with strategies that are specific to a particular business.
Functional level
Functional (or operational) strategies are concerned with how the different functions of the

enterprise - marketing, finance, production, personnel and so on - contribute to the other levels of
strategy. Such contributions will certainly be important in terms of providing the ultimate
competitive weapons to develop the unique competencies of the firm. By definition, there are no
strategic manager bear responsibility for specific business functional. They are not in a position
to look at the big picture. Nevertheless, they have important strategic role, for it is their
responsibility to develop functional strategies that help fulfill the strategic objectives set by
business.
2.2. Strategic management process
Strategic management is not simply the management of the process of strategic decision
making. According to Balaji S. Chakrvarthy (1986), strategic management is the process through
which managers ensure the long-term adaptation of their firm to its environment. It should be also
emphasized that strategic management process is continuous - it never really stops within the
organization. Samuel C. Certo and J. Paul Peter (1990) defined strategic management as "a
continuous, integrative process aimed at keeping an organization as a whole appropriately
matched to its environment".
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Johnson G. and Scholes K. point out that the nature of strategic management is different
from other aspects of management. Some of these differences are summarized in the table 2.1
below:
Table 2.1: Differences between strategic and operational management
Strategic Vs Operational
management management
• Ambiguity
• Complexity
• Non-routine
• Organization-wide
• Fundamental
• Significant change
• Environment or
expectation driven

• Routinised
• Operationally specific
• Small- scale change
• Resource driven
(Source: Johnson G. and Scholes K., Exploring Corporate Strategy, Prentice Hall, 1993)
Organizational effectiveness depends on the ability of the organization to adapt to its
environment, which is in turn influenced primarily by the strategic management of the
organization. Strategic management includes making such major choices as which environments
in which to compete (corporate level strategies) and how to compete within those environments
(business-level strategy). These choices may either diminish or enhance the probability of
specific types of management actions and plans, thereby influencing business performance
outcomes (Child, 1972; Hambrick and Mason, 1984; Pfeffer and Salancik, 1978 ).
Different components of the strategic management process are visualized in figure 2.1.
The components include the selection of the corporate mission and major corporate
goals, analysis of the organization's external competitive environment and internal operating
environment, the selection of appropriate business and/or corporate level strategies, and the
designing of organizational structures and control systems to implement the organization's
chosen strategy. The task of analyzing the organization's external and internal environment and
then selecting an appropriate strategy is normally referred to as strategy formulation. The task of
designing appropriate organizational structures and control systems, given the organization's
choice of strategy, is called strategy implementation.
Business performance, however is not only a function of how well strategy is formulated.
Business performance also depends on whether the strategy which was chosen is actually
implemented, and how well the implementation is done. In other words, performance is likely to
depend on the extent to which "intended" strategy and "realized" strategy are the same
(Mintzberg, 1978). Insight into the nature and content of business-level strategic choices, the
patterns of managerial actions by which their implementation is accomplished, and reasons for
their relative effectiveness [7].
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2.3. Competitor analysis and competitive strategy for a company

As mentioned in the previous part, the second level of strategy is concerned with the
competitive strategy which is considered as the core of managerial actions. In order to answer
the question of how to compete in a market, strategic managers must examine the choice of a
business competitive strategy which targets to develop a superior position for the business unit. It
is also the ultimate objective of the business strategy.
There are two key sets of factors in deciding how to position the business within its
competitive environment: (1) factors that determine the attractiveness of the industry pertaining
to the business, as measured primarily by its long-term profitability prospects; and (2) factors that
determine the relative advantage of the business with respect to competitors in the industry [4].
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External Analysis
Strategic choice
Internal Analysis
Business level
Strategy
--------------------------
Corporate level
strategy
--------------------------
Portfolio analysis and
Entry and Exit
strategy
Choosing
Organization
structure
Conflict, Politics and
Change
Choosing
organization control
Matching strategy,

Structure and control
Corporate Mission
and goals
Feedback
Figure 2.1: Components of strategic management process
(Source: Hill C. W., Strategic management)
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The first set of factors is normally external to and uncontrollable by the firm. Its analysis
leads us to recognize the industry attractiveness and competitors' behavior. The second set of
factors , which corresponds to the actions controllable by the firm, allows us to comprehend how
the business can develop unique and sustainable competitive advantages. Its analysis is
basically supported by a thorough understanding of the activities represented in the business
units' value chain.
2.3.1. Structural analysis of the competitive environment
In order to select the desired competitive position of a business, it is necessary to begin
with the assessment of the industry to which it belongs. The dominant aspects of an
organization's environment assumed to exist in and around the industry, or industries, in which a
firm competes. Thus, for strategic decision making there is no such thing as "the" environment - if
the work "environment" is taken to mean a single holistic entity. Instead, organizations may
confront multiple environments, each with its own characteristics and pivotal competitive issues
[28].
An industry environment consists of a particular set of competitive forces that establish
both opportunities and threats that confront the company. Michael E. Porter (1980) postulates
that there are five forces which typically shape the industry structure: intensity of rivalry among
competitors, threat of new entrants, threat of substitutes, bargaining power of buyers, and
bargaining power of suppliers.
The pattern of forces changes due to the action of competitors. Strategic moves by any of
these competitors can alter prevailing relationships and thereby change the pattern of forces in a
firm's environment. Figure 2.2 summarizes the "five forces" approach to structural analysis and
their interrelationship.

2.3.1.1. The threat of entry
The threat of new entrants is due to potential competitors which are companies that
currently are not competing in the industry but have the capability to do so if they choose.
Established companies try to discourage potential competitors from entering, since the more
companies enter an industry, the more difficult it becomes for established companies to hold their
share of the market and to generate profits [12].
Therefore, the threat of new entry depends on the extent to which there are barriers to
entry. Most typically these are as follows:
• Economies of scale
• The capital requirement of entry
• Access to distribution channel
• Brand loyalty
• Absolute cost advantages
• Expected retaliation
• Legislation or government action
• Differentiation
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Indeed, empirical evidence also suggests that the height of barriers to entry is the most
important determinant of profit rate in an industry.
2.3.1.2. Rivalry among the industry competitors
The rivalry among competitors is at the center of the forces contributing to industry
attractiveness. The extent of rivalry among established companies within an industry is largely a
function of three factors:
Industry competitive structure: which refers to the number and size distribution of
companies in an industry. Structures vary from fragmented industry to consolidated industry.
Different competitive structures have different implication for rivalry.
Demand condition: Growing demand tends to moderate competition by providing greater
room for expansion. Conversely, declining demand results in more competition as companies
fight to maintain revenues and market share.
Exit barriers: Exit barriers are economic, strategic, and emotional factors that keep

companies competing in an industry even when returns are low. If exit barriers are high,
companies can become locked into an unfavorable industry.
A reflection on the combined impact of exit and entry barriers on the profitability of an
industry is presented in figure 2.3.
2.3.1.3. Threat of substitutes
Substitutes could affect the attractiveness of an industry in different ways. Their mere
presence establishes a ceiling for industry profitability whenever there is a price threshold after
which a massive transfer of demand takes place. Also the impact that the threat of substitution
has on an industry profitability depends on a number of factors such as availability of close
substitutes, user's switching cost, aggressiveness of substitutes' producers, and price-value
trade-off between the original products and its substitutes.
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COMPETITIVE
RIVALRY
POTENTIAL
ENTRANTS
SUPPLIERS
BUYERS
SUBSTITUTES
THREAT
OF ENTRANTS
THREAT OF
SUBSTITUTES
BARGAINING
POWER
BARGAINING
POWER
Figure 2. 2 : A model for structural analysis
(Source: Adapted from M.E. Porter, Competitive Strategy, Free Press, 1980, p.4)

EXIT BARRIERS
Low High
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High
ENTRY
BARRIERS
High and stable profit

High but possibly
Unstable profit
Low
Low and stable profit Low and
unstable profit
Figure 2.3: The impact of entry and exit barriers over industry profitability
(Source: Hax A. C., Majluf N. S., The Strategy Concept and Process, Prentice Hall, 1991)
2.3.1.4. Bargaining power of suppliers and buyers
Power of suppliers Power of buyers
• Number of important suppliers
• Availability of substitutes for suppliers'
products
• Differentiation or switching costs of
suppliers products
• Suppliers' threat of forward integration
• Industry threat of backward integration
• Suppliers' contribution to quality or
services of the industry products
• Total industry cost contributed by
suppliers
• Importance of the industry to suppliers'

profit
• Number of important buyers
• Availability of substitutes for the
industry products
• Buyers' switching cost
• Buyers threat of backward integration
• Industry threat of forward integration
• Contribution to quality or service of
buyers' products
• Total buyers' costs contributed by the
industry
• Buyers' profitability
The industry structure model contains only passing references to the environment beyond
the industry level. What might be termed as general environment is simply discussed as a source
of "external forces". There is no explanation of how these forces are configured or linked to
competitors and patterns of competitive forces within industry environments. The strategic
implications of events originating in the general environment can only be determined after
assessing their impact on industry conditions and the relative strategic positions and capabilities
of competing organizations (Porter, 1977, 1980; Lenz, 1980)
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Having identified key competitive forces through structural analysis, the sequences
important step is to analyze the business's competitive position (or strategic position): that is how
it stands in relation to those other companies competing for the same resources, or customers,
as itself. One of the most relevant ways is undertaking competitor analysis in order to examine it
against competitors or rivals it faces. Gerry Johnson and Kevan Scholes suggest that in order to
understand how a given competitor is attempting to cope with the environment it faces, the
following question could usefully be asked:
• What are the objectives of the company: is it seeking growth, for example; and if so, is it
mainly concerned with profit growth , revenue growth or market share
• What resource strengths do competitors have, and what are their weaknesses

• What is the record of performance of each competitor
• What is the current strategy of competitors
• What are the assumptions underlying the competitors' approach to their strategy
development
Uncovering these strategic aspects of companies can help understand how competitors
have in the past dealt with the forces identified as important in the competitive and wider
environment, and how their are likely to deal with them in the future [12].
2.3.2. Internal analysis
To design effective competitive strategy, any company is not only supposed to emphasize
the importance of matching the firm's strategies to the environment within which the organization
is operating, but also must pursue strategies which is capable of sustaining. Therefore, internal
resource analysis is an important way contributing to understand a firm's strategic capability.
Internal analysis focuses on drawing out a firm's strengths and weaknesses as well as
building a distinctive competence (or core competencies) for its strategic businesses. The term
distinctive competence here represents the unique strengths of a company. Building a
sustainable competitive advantage involves the strategic exploitation of distinctive competencies;
they form the bedrock of a company's competitive strategy.
Figure 2.4 provides a systematic way to move from a simple audit of resources to a
deeper understanding of strategic capability.
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Resource
audit
Value chain analysis
Resource utilization
Resource control
Drawing comparison
Historical analysis
Industry norms
Best pratice
Assessing balance

Product portfolio analysis
Skills/ personality analysis
Flexibility analysis
Identification of key issues
Strengths and Weaknesses analysis
Core competencies
Understanding strategic
capability
Figure 2.4: Analyzing strategic capability
(Source: Johnson, G. and Scholes K., Exploring corporate Strategy, Prentice Hall, 1993)
Internal analysis is mainly undertaken based on the value-chain concept which has
recently been popularized by M.E. Porter (1986). According to Porter, the value chain is divided
between primary activities and support activities. Primary activities have to do with the physical
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creation of the product, its marketing and delivery to buyers, and its support and after-sales
service. Support activities provide the inputs that allow the primary activities of manufacturing
and marketing to take place.
Since the value chain is composed of the set of activities performed by the business unit,
it provides a very effective way to diagnose the position of the business against its major
competitors, and to define the foundation for actions aimed at sustaining a competitive
advantage. The activities of the value chain constitute the foundation of the controllable factors to
achieve competitive superiority. Their analysis leads us to identify the critical success factors that
are central to compete, and to understand how to develop the unique competencies which
provide the basis for sound business leadership.
As soon as completing the tasks of identification of the most relevant competitors, of
selection of the critical success factors and of developing a competitive profile, the competitive
strategies will be designed according to the choice from three basic competitive approaches: cost
leadership, differentiation, and focus. Each of these generic strategies results from a company's
making consistent choices on product, market and distinctive competencies. Table 2.2
summarizes the choices appropriate for each generic strategy.

Table 2.2 : Product / Market / Distinctive competence choice and generic
competitive strategy
Cost Leadership Differentiation Focus
Product
differentiation
Low
(principally by
price)
High
(principally by
uniqueness)
Low to High
(price or
uniqueness
Market
segmentation
Low
(mass market)
High
(many marketing
segments)
Low
(one or a few
segment)
Distinctive
competence
Manufacturing
and materials
management
Research and

Development
sale and
marketing
Any kind of
distinctive
competence
(Source: [7])
2.4. Beer industry in the world
2.4.1. Beer - a familiar product
Beer is defined as a drink with light alcohol level caused by fermentation of barley malt
and the addition of hops taste. The exact origin of beer is unclear. The oldest clay document
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extant, dating back to the Babylonian era of 6000 BC., pictures the brewing of beer [48].
Nowadays, beer is brewed everywhere in the world.
Beer is brewed from the major ingredient which might be barley, corn or rice. The brewing
method also involves five main stages: malting - brewing - fermenting - aging and finishing - and
packaging. The malting process will convert the starch in the barley into a soluble form. The
barley is then put into malt kilns, which dry and roast the substances into malt. Depending on
whether the heating degree at this stage is low ( 5°C - 10°C) or high (12°C - 20°C), they would
get two types of beer, namely yellow beer and black beer.
In the brewing process, after grinding the product given by previous stage and mixing it
with brewers rice, hops are added in order to bring beer flavor and a little bit of bitter taste. Next,
with the addition of yeast, the fermenting process can begin. Yeast is extremely crucial for beer
quality. So the kind of yeast is secret and unrevealable know-how of each brewery and it
determines the uniqueness of each beer brand.
Once complete, the beer is aged for 16 to 45 days under pressure so that it can build up
its own natural carbonation. After it is aged, the finishing process is begun by cooling the beer to
near freezing where it then achieves the proper alcohol level. Another factor that also plays a
very important role for determining the quality of beer is water. Water for brewing must be
chemically and biologically pure and contain low levels of calcium.

According to statistical figures for 1986, there were 101,500 millions liters of beer
consumed in the world [54]. The top of the consumption level belongs to U.S.A. with 23,050
millions liters. The US has also the two biggest brewing companies in the world that are
Anheuser-Bush Company and Miller Brewing Company. Other giants are Heineken (Holland) and
Kronenbourg (France).
Currently, the brewing industry in both US and Europe are facing two significant
challenges: saturation and changing consumer attitudes.
2.4.2. US beer market
The type of beer consumed in America today originated in the 1840s with the introduction
of lager beer, a light beer with a mellow taste. It did not take long for lager beer to gain popularity
and for the American beer industry to grow as consumers' taste shifted away from the heavy
German beers [48]. As the ability of beer manufacturers to produce beer in larger quantities
increased, a structure change took place in the beer industry that eventually led to the
establishment of national as opposed to regional firms. Between 1860 and 1985, the number of
breweries in the US declined from 1269 to 85. As industry sales volume grew and the number of
firms in the industry declined, advertising became the primary tool used to differentiate between
beers and to expand and maintain market share.
Between 1975 and 1980, the US beer industry expanded at an annual rate of
approximately 4 percentages. As of 1980, only 88 domestic brewery plants produced
188,373,657 barrels of malt beverage. But in 1982, the growth rate was less than 1%. The year
1982 may have been the turning point for industry sales volume increases, and it was the first
year in 25 years that domestic beer producers as a group experienced a profit decline (Pierce
and Robinson, Strategic management, Irwin, 1985, p. 511). In 1984, beer industry sales declined
0.3% while other beverages were experiencing significant gains. For example, wine sales in 1984
- 76 -
were up 3.5% and soft drink sales increased by an amazing 7.5%. This trend has been
continuing up to now to indicate "an industry in flux". Sale volume in 1993 increased only 0.2%
after declining in previous years. This growth is caused by an increasing sales volume of
imported beer and beer of smaller breweries. In general, the big breweries have lost a part of
their domestic market. Therefore, the leading brewing companies now are trying to expand their

advertising campaigns as well as to sell their beer at a reduced price. Simultaneously, they also
focus on launching new beer brands, especially to light beer because of the increasing demand
for this type. For example, Miller Brewing began to produce ice beer with the brand "Icehouse"
last year. According to experts in beer industry, US beer consumption in 1992 - 1993 was
approximately 189 millions of barrels [51].
Another impact on US beer industry has come from changing consumer attitudes. In
1984, US Congress moved to establish a national minimum drinking age. The industry responded
to the threat of even more restrictive legislation by developing "low-alcohol" beer. Moreover, the
"fitness fad" has leveled off and the introduction of light beers satisfied the demands of
consumers concerned about fitness [29].
2.4.3. European Beer Industry
Experts on brewing industry of Europe stated that during last 15 years, beer volume sold
seemed to increase at a very low rate (even zero) while competition is becoming fiercer and
fiercer [53].
A vigorous series of mergers in the 1950s and 1960s which led to larger and larger firms,
a characteristic that was further encouraged by the increasing financial and capital cost of
production and distribution of keg beer which smaller breweries found difficult to meet. The
industry is now characterized by marked differences in size between the largest brewers and
small breweries. Size is also associated with geographical coverage. Besides the European
giants such as Heineken, Kronenbourg, Carlsberg, which are not only national but also
international operators accounting for more than a 80% share of beer sales (1987 figure), there
are still more regionally based brewers covering parts of the nation, and there remains a large
though decreasing number of small local brewers serving a town or city.
Similar to the US situation, the beer industry here has also entered the maturing stage in
which demand saturation caused declining beer sales. Thus, declining demand constitutes a
major threat, for it increases the extent of rivalry between established breweries within domestic
markets. The two biggest European breweries - Heineken and Kronenbourg - are really confused
by the attack of other new beer brands which are gradually taking market share away from theirs
in each segment category. Thus, the industry is experiencing a proliferation of new products
supported by enormous marketing budgets. Emerging breweries attempt to grow by offering

"special" beer, "de luxe" beer or beer for summer, etc. to satisfy new waves of customers'
demand with lower price. Let's take French beer industry as an example. Thanks to the "de luxe"
beer, in 1994, Saint-Omer gained 16 percent increase in sales, Groupe Fischer 9%, Brasseries
Duyck 7% while giant Kronenbourg gained only 2 percent [53].
Stagnant industry sales have led many brewers to extend their diversification by entering
new markets such as food products or entertainment. Additionally, large brewers are becoming
more vertically and horizontally integrated.
- 77 -
Actually, consumers are understanding more clearly that there is an equivalence of
brewing technology which has been establishing universally. In fact, a famous beer brand can
sustain its reputation whenever it depends on future products rather than on old products.
Therefore, everyone can observe a reduced price tendency of famous beer brands since last two
years. Both Heineken and Kronenbourg have been forced to cut down price of their beers.
The cutthroat fighting on the beer market is not only taking place inside but also across
national boundaries. Challenges of the domestic market have powerfully motivated brewing
giants to look for new markets abroad. Since Asian beer market has shown an strong upward
tendency propelled by high economic growth in recent years, it really is an attractive place for big
breweries of the US and Europe to continue "the war" between beer brands.
2.4.4. Asian Beer Market
According to the assessment of the Hongkong economic experts, economies of Asian
countries have gained high growth rates in the recent years. Living standards of the people have
been improved vigorously. Hence, the Asian beer market has shown a tremendous growth
catching up from a lower average consumption level than that of developed countries. Realizing
that huge potential, brewing companies of Europe, U.S. and Japan are rushing into this market.
Statistical figures in table 2.3 below illustrate the reason why the Asian beer market
becomes so considerable to foreign brewers who wish to invest there.
The Thai beer market was previously dominated by Japanese breweries until 1993,
Denmark Breweries (Carlsberg) invested to build brewing plants here. Within only one year,
Carlsberg has gained 10% market share and made Thai breweries worry. The success of
Denmark beer has evoked other European and US breweries to plan to launch their products in

1995. In fact, they (European and US breweries) are not only concerned with the Thai market of
60 millions people, but they also want to put their feet to other ASEAN markets with 330 million
people. Besides this, the 1200-million-people beer market of China and 900-million-people beer
market of India are places that seem to catch their attention [49].
The Vietnamese beer market currently has breweries from Germany, Singapore,
Denmark, France, Philippines seeking to establish new Joint-ventures. Similarly, in China,
Anheuser-Bush (US) has bought 5 percent equity shares of Tsing tao Brewery Co., the biggest
Chinese brewer. Asian Pacific Breweries (Singapore) where Heineken holds 50 percent share,
has planed to set up from 3 to 4 joint-ventures with local partners during the time from 1993 to
1996 [50]. San Miguel Company also entered this country by a joint-venture in a Southern
province [52]. In India, did not want to be late, "Coors" (US) started operating since August, 1994
with its intention to own 10% market share in 1996.
By now, most of the famous brands from US to Europe are present in the Asian market.
Together with national breweries, they heat up the competition in this market making it more and
more a spectacle than ever before.
Table 2.3: Beer consumption and its growth in some country
Country Beer
Consumption 1993
(million liters)
Average per head
(liters)
Average increase
(%)
- 78 -
France 200 140 1%
Germany 144.2
England 150
Belgium 100
Australia 80
India 0.6

China 12000 10 20%
Thailand 400 7 20 - 25 %
Vietnam 230 4 30 %
Table 2.4: Worldwide beer production volume
(Unit: hectoliter)
1989 1988
Europe 450,650 442 940
America 409 861 399 157
Africa 56 160 55 670
Asian 160 006 149 168
Australia 27 659 28 038
1 104 336 1 075 573
Table 2.5 : Beer industry in the world: Summary
US EUROPE ASIA
Trend • Sales decline
• Stagnant growth
rate
• Industry
concentration by
mergers
• Diversification of
big breweries
• Vertical
• Very low growth
rate
• Increasing of
diversification
• Vertical
integration of core
brewing activities

• Technology level
equal b/t brewers
• High growth rate
• Boom in the
number of
breweries
• Joint-venture b/t
local partners
and foreign
- 79 -
integration brewers
Demand
patterns
• Changing
consumers' taste
and preference
• Demand saturation
• Demand is
restricted by legal
drinking age
• Higher quality
differentiation
• Growing foreign
beer segments to
change drinking
habit.
• Demand
saturation
• Seasonal pattern
• Special type of

beer (non-
bacteria) gain
important
• Unsaturated
market
• Increasing
demand for beer
• Regional and
local taste and
preference
• High brand
loyalty
Key success
factors
• Development of
new beer brands
• Segmentation
strategy
• Advertising is
primary tool to
differentiate
• Looking for
international
market
• Marketing and
advertising
expenditure
• Investment for
brewing plant
abroad

• Looking for
alliances abroad
• Early Mover to
affect consumers'
taste
• High level of
capital
investment
• Price
• Brand awareness
• Adaptation to
local customers'
taste
- 80 -
Chapter 3
Research Methodology
3.1. Conceptual framework
The cases add a sense of realism and relevance to the study of strategic management
[1]. This research therefore is presented in the form of a case study exposing the complexities of
a real business situation in Vietnamese market. Finally, the problem solving here is to formulate
an effective competitive strategy for Danang Brewery Company following a thorough situation
analysis.
The study of strategy is often likened to using a system's approach. This technique
enables one to readily understand how goals and objectives interact with the external
environment, the resources needed to carry out a strategy, and organizational structures and
functions as they are related to strategic management. The linkages and interactions between
these variables thus conform a conceptual framework for each strategic study. The analytical
process of this research relies on the framework adapted from Strategic Management Process by
Charles W.L. Hill and Gareth R. Jones [7] with a minor complement that is referenced from Gerry
Johnson and Kevan Schole [12]. It is illustrated by figure 3.1.

Since the company mission sets out the reason why the company exists and what it
should be doing, this will be a guideline for the process of diagnosing both external and internal
factors affected the business performance of the chosen company.
The objective of external analysis is to identify strategic opportunities and threats in the
company's environment. Two interrelated environments should be examined at this stage: the
wider macro environment of Vietnam today, and the operating environment referred to the
industry in which the company operates - the Vietnamese beer industry. Analyzing the beer
industry environment involves an assessment of the industry growth, consumption pattern,
impacts of new entrants and substitutes, and especially the competition between the existing
breweries in the whole country and the company's local market particularly. Analyzing the
broader environment focuses on examining the national and local economic development and the
political and legal factors which strongly affect the beer industry evolution.
The internal analysis is devoted to pinpoint the strengths and weaknesses of the
company. Therefore, all the quantity and quality of the company's resources in brewing, raw
material management, marketing, brewing technology, personnel, and finance are assessed.
In the next stage, a series of strategic alternatives are developed. To choose among the
alternatives, the company has to evaluate them against each other with respect to their ability to
achieve the major goals. Then the strategy will be implemented. Once a strategy is implemented,
its outcomes are revealed by the company performance which should be monitored. So, the
feedback loops are necessary in order to help adjust a part or the whole strategic management
process. However, the scope of this study only reaches to the formulation of the strategic
alternatives, after that a possible course of actions will be recommended to the targeted brewery.
3.2. Data sources
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Qualitative and quantitative data used for this study are obtained from the following main
sources:
1. The descriptive data requirements were extracted from the publication of the Government
offices like Vietnam General Statistical Office, the Ministry of Light Industry. Data relating
to international context was obtained from academic journals and industry publications in
AIT and in Vietnam.

2. Data was also provided by local government offices including the Department of Science,
Technology and Environment, the Department of Industry, the Center of Science and
Technology Information of Quangnam Danang province and the Statistics Department of
Danang city.
3. Data and information from the targeted company were obtained from DBC annual reports
and from the direct interviews conducted with DBC director, middle and lower level
managers.
4. Relating data and information were also derived from personal interview with directors of
two other local brewery companies.
3.3. Data collection method
Data and information needed for conducting the research were obtained basically by the
qualitative research method which forms the core of any valuable case study. The qualitative
research used here combined of two instruments: group interview - discussion and individual in-
depth interview.
Both of these were used in combination to make the data collection process more flexible
within the limited time frame left to the author for this research. However, personal interviews
were major means. The first crucial place to collect data is the Danang Brewery Company, the
target company. The in-depth interviews were conducted with the Director and the 6 key
managers of the company, then a guiding questionnaires (attached in Appendix 4) was used as a
check-list for each interview. Following this guiding, small-group discussions with the lower-level
managers were also held thanks to the support of the Board of Directors.
In addition, the interviews with the top managers of two other local breweries were also
carried out. The information given was used in order to help the required analysis more realistic
and effective.
3.4. Data analysis
The data analysis basically consisted of the following components:
The first component related to the economic, political, legal, and technological factors in
Vietnam as well as in central region particularly. These are indeed necessary for the proper
understanding of the root of growth and development of Vietnam beer industry.
- 82 -

The second component covers the analysis of the various structural determinants of the
relevant elements of the beer industry structure. Basically, the data is aggregated in congruence
with Porter's model, that is the five force model for industry structure analysis. The discussion
centers on the analysis of intensity of rivalry, the threat of entry that are considered as the most
important elements shape up competitive strategy for the company.
The third component reveals the internal factors that create company's strategic
capability. These are crucial to match between strategic position and strategic capability in order
to have the right strategic direction.
Gathering of all three component is foundation for competitive strategy formulation
applied to targeted company.