FINAL SCRIPT FOR BUSINESS CASE
Phan Thanh Hai & Nguyen Xuan Hai Vu – MBA14
A: BHX's CEO (Hai)
B: MWG's CEO or Chef of Finance & Investment Officer, MWG (Vu)
A: (Chat with professors)
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Good morning professors! My name is Hai and I’m working on the case of Mobile World
Group. How are you today? (set up the computer)
That’s nice to see you here. Shall we start now?
Perfect. We are going to have a meeting to discuss on business strategy for Green Grocery –
a new chain of Mobile World Group. While waiting for Mr Vu – a member in Mobile World
Group’s Board of Managers to join our meeting, let me share with you an overview of the
case.
As you know, Mobile World Group has operated the business for 11 years. We have more
than 15,000 staffs across the country and a mobile retail chain with nearly 570 stores in all
63 cities and provinces. At this moment, we are the number 1 in mobile retail sector with
30% of market share. 5 years ago, we opened Green Electronics, a consumer electronics
chain with more than 50 super markets.
That’s make us be the biggest electronics retailer in term of store number and market
share with profit of nearly 900 bil dong by end of last year.
In the last August, we announced a new plan to MWG investors about the opening of a new
business in grocery sector called Green Grocery and operated this chain under mini-mart
model, following the success of Alfamart in Indonesia.
And now, it’s time for us to discuss on how to develop this young business.
Oh, here you come, sir. Good morning!
B: Good morning. As per discussed last time, did you finish the business case for Green
Grocery?
A: Yes, of course. That is the reason why I've come today.
B (brief overview/vision): Good! As you know, our group started only in the mobile industry,
however our vision was always to become the leading corporation in retail. Thus, in 2010
we expanded into electronics business. After 5 years, this venture proved to be quite a
success. Last year, the board decided that it is time for us to operate yet in another industry:
food retail.
A: Yes I understand. At first when the idea was proposed people were quite confused as to why
a mobile group decided to invest in a brand new industry with little to no experience. Then,
many investors consider our Green Grocery Chain as a huge gamble. Thinking on the bright
side, we successfully created buzz in public.
B (story/reason to invest in BHX): Rightly so. However there are 2 main reasons why we
think that food industry was the best option available to us. Firstly, although mobile and
electronics are in different industries, there is still quite strong correlation between the two.
It might put us at risk should the market experience adverse effects. Investing in food retail
- a completely unrelated industry – will diversify our investment, thus hedge our risk
greatly.
Secondly, the food retail industry itself is very promising. (industry overview). Many
researches point out that with the increase in living standard, customers are slowly moving
away from wet markets to convenience stores/mini marts with superior products and
convenient location, at the costs of higher prices. Currently in Vietnam there are only
several big brands such as Vinmart, Shop&Go or Coop Mart with several hundreds of stores
throughout the country, nowhere enough to satisfy the growing demands of our customers.
So, this is the right time to start our green grocery business.
A (current status of GG): Yes, the results from our “experimental” stores also support our
decision in opening Green Grocery.
In the last 3 months, we’ve opened 11 stores in the outskirt of Ho Chi Minh city and they
all received positive feedbacks from the customers. On average, each store attracts 350
customers per day, most of them are housewives, bringing us more than 29 billion VND
in sale across the chain.
B (objective): Good. It’s a promising start. I think with the right strategy we could reach the
objective set by the board: To make Green Grocery into a successful convenience chain
that contributes 10% of MWG’s total sales by the end of 2018, which is around 5,400
billion VND. The board will allocate 20% of the group’s profits in the next 3 years to fund
this project. The total investment is about 1,000 billion VND.
A (opt statement): Sure. After the meeting last quarter, I've worked with my team in order to
come up with best solutions to meet the objective given. Based on our research, we think the
best solution is that we focus on selling clean fresh food to improve sales and reputation
among the public to meet the target in 2018.
B: Any alternatives?
A *give B the paper* (alternatives): Here. We have 4 alternatives, which are
1. Aggressively opening as many stores as possible with all the funds given.
2. Status quo option: Keep opening stores with the same speed as now.
3. Franchising & Acquiring
4. Focus more on online sales and delivery services rather than traditional selling.
I've also listed down all pros and cons of each alternative to help you in your decision making.
B: Hmm...They seem very promising. However I think 2 of them are not suitable right now.
A: Which one? And why did you decide to do that?
B: The first one is the online sales. After all these years, even with excellent growth, online
channel only generate 5% of our total sales. It will be even harder to sell food online, as
Vietnamese people are still used to traditional shopping method. We can corporate online
sale in our expanding strategy, but it's not our focus right now.
A: Yes. I understand. And the second one is...
B: Franchising. It is very tempting to share parts of the risk with another party, of course,
but it's not feasible right now. We have close to no branding power, putting us at a
disadvantage in leveraging. Moreover, it is our tradition to use our own profits to fund our
new businesses, like we did with Green Electronics. Sharing control will make it even more
difficult to strategize for the brand.
Therefore, today we will focus on the other 3 options. Please elaborate them more.
A (Opt statement review): Sure. Firstly, let discuss on my proposed option - focusing in selling
clean fresh food.
In our calculation, with this option, we can open up to ~250 stores after 3 years and over
achieve 109% of the sales target.
This strategy is quite suitable with the market trend since the population of middle class is
rising rapidly in Vietnam and their biggest daily concern is food quality and health care.
Building our brand this way will be the best option.
Also it provides the highest margin compared to all other options. Stores are expected to
generate profit starting from the 4th year.
B: Yes, but I'm concerned about our suppliers. It's quite difficult to secure a constant flow of
qualified food, and it may put us at a disadvantage when leveraging. I hope you also account
for this when proposing.
A: Yes, limited supply resource is the reason why we can only open 80 new stores per year.
With this number of stores I've already prepare a plan to secure our supplies should we choose
to proceed with this option.
B: Good. How about option number 2?
A: The option 2 is quite ambitious, that is aggressively opening stores with all the funds given,
due to the fact that the market is still in the early stage and in no way saturated.
With this option, we can open up to 1000 stores and end up 2018 with almost 4 times of the
expected sales revenue, putting our presence in the market as one of the biggest players.
B: Hmm... this will give us the most profit in the long run, however, the losses are quite
significant. Opening too many stores can have reverse effect in the form of internal
competition, as it did to Mobile World. We also face the risk of over-saturating the market, if
other competitors also choose to adopt this strategy. Vinmart already plans to expand into
1,000 stores in the next few years. Other competitors also expect to double or triple their
numbers in the near future.
A: Yes sir... Great pros and a lot of cons. But let me present the last alternative – also the status
quo option before you make decision, ok?
B: Ok, go ahead please!
A: If we keep expanding Green Grocery chain with current speed as of 2015, in the next 3 years,
we'll have about 130 stores. The losses are much less than 2 other options but sales revenue is
just a half of sales target. With this option, it will be easy to manage with low number of stores.
I also call it a Safe strategy since we can prolong the time to test the effectiveness of this
project. But the risks are foreseen, we can easily lose out of the market since the competition
heat is forecasted to be extremely high in the next 3 years.
B: The plan is not bad in itself, however the board does not have any intention to change the
objective, hence we must eliminate this option. It also does not give us any edge in
competing with other big players. About the option 2, 800 billion VND in losses will take us
too long to recover, especially with the low margin, not to mention the huge costs in
opening over 1,000 stores. Hence we should also cross this one.
All in all, I think it's best that we go with your original proposal: Focusing on selling fresh
and high quality food. Firstly, the losses are quite tolerable and we already generate some
profits since the 4th year. Secondly, it will give us an advantage over other competitors on
the market right now. Lastly, but most importantly, it doesn’t use up all our budget, and we
can use them to further promote this brand or invest in yet another project.
Please show me the implementation plan that you've prepared.
A: Of course, I will not go over every detail, as it will be sent to you later, however I will stress
several main points.
With plan to focus on develop a grocery chain where sells clean fresh food, each year we can
open 80 new stores. After 3 years, in total, we will have about 250 stores.
As we’ve discussed on the disadvantages and risks of this plan. I would like to share with you a
general strategy in order to cover all the gaps.
As we know your most concern is about the supply, we team did spend much time researching
and finding a list of good fresh food suppliers and producers following VIETGAP standard. The
focus will be dealing with them for long time contracts. We can also make exclusive
distribution agreements for special goods to create more competitive advantages for Green
Grocery.
The second focus is about sales and marketing which cost us 3.5% of total sales. Our best
strategy is to utilize existing effective marketing channels and customer database from the
Group. I’ve also prepared a battle plan for Marketing for you to review then.
Lastly, our focus will be on location of stores. In retail, location is everything, and we will
spend time and effort to secure best locations as possible. All the stores will be located nearby
resident or working areas where we can easily attract big number of our target customers as
housewives and female officers. To save the cost, we also plan to utilize current mobile world
stores by replacing new Green Grocery stores for inefficient ones.
B: Ok. Don’t forget about people. Even though we have experience in retail industry, it’s
only limited to electronics goods. Dealing with food will be a completely different story. I
think we should invest into recruiting good people or transferring senior sales staff from
the group, training them well by top specialist in food retail industry, tough quality
management and building a fair environment for them to grow and bring more value.
A: Ok, we will add this in the detail plan and send it to you by the end of next week.
B: Ok. You and your team did an amazing job and I think that your proposal is very
promising. I will go over the details and inform you of our final decision for this project
later.
A: Yes thank you.
B: (toward teachers): Okay, thank you two for listening. Do you have any comment on this
case? We are eager to know,…