Task 1:

Strategic planning is a process where the company creates a series of activities to set
priorities, concentrate energy and resources, enhance operations, make sure that everyone
are working towards common goals. According to Business Strategy Course Book, there
are six steps in strategic planning process as following figure:

A typical strategic planning process (BusinessStrategy)

Firstly, it is necessary to create mission, vision, objective and goals to have a clear
direction so that the company will be able to achieve the result as their expectation. In
Cộng Cà Phê’s case, its vision is to bring to customers the best quality coffee and to
preserve life style of old Hanoi in subsidy period. Cộng’s mission is to provide a unique
place with high quality products and dedicated services for customers and to bring
Vietnamese coffee and culture to other countries. Mission and vision are quite important
since they have an effect on making decision and actions process of the managers of the
company. After that, Cộng Cà Phê will set common goals and then set objectives towards
that goals based on those mission and vision. The objectives should be set based on
SMART model (Specific, Measurable, Achievable, Realistic and Time-bound) so that the
company will have clear and specific direction. As I explained in previous assignment,
Cộng set two main goals which are “Providing more value for customers by serving high
quality traditional products” and “Bring Vietnamese coffee and culture to foreign friends
by expending the brand to other countries” (congcaphe.com, 2016). Next up,
Environment analysis plays an important role in the process which includes Internal
factors and External factors. In External factors, the company can use PESTLE, Five
Forces to analyze the elements that can affect the company. In detailed, by using
PESTLE, the company can analyze the elements from politic, economic, Social,
Technology, Legal and Environment to see how they affect the company. With Five
Forces, the company will be able to evaluate whether the industry the company is doing
business in is potential or not by analyzing threat of new entrants, bargaining power of
suppliers, bargaining power of customers, the threat from substitute products and
competitive rivalry. From this point, the company will be able to know what external
elements can influence on the organization and to predict competition at the moment and
in the future. In Internal environment, the company can use some tools such as Value
chain, BCG Matrix, Product life cycle, etc. to analyze the company’s resources, the
standing of company in the market place, current successful level and capabilities of the
company. In Corporate analysis, the company will combine their information after
analyzing internal and external factors to build up a SWOT analysis to see their strengths,
weaknesses, opportunities and threats. Form this point, the company will know what they
need to improve, what they need to reduce to achieve their goals and objectives.
Strategic options is where the company lists out the options for strategic development
base on feasibility, acceptability, suitability, after that, these options will be compare to
each other and finally, the company will chose the most suitable options. After choosing
suitable strategic development, the company will implement the option that they have
chosen. In this step, the company will determine the best strategies for design,
production, marketing, etc. by setting KPIs and CSFs to make sure that the process can
run smoothly. Finally, after implementing the plan, the company will reflect and review
their actual performance and compare it to the plans.

Task 2:

2.1. SPACE Matrix:

a) Financial Strength (FS)

Revenue: The number of customers per day on a store of Cộng depends on its area and
location. For example, the area of Cộng’s store in Trieu Viet Vuong Street is about 28
m2, the staffs here reveals that they have about 60-70 customers/day. On the other hand,
larger stores have more customers. Cộng store’s area in Dien Bien Phu Street is about 66
m2 and they have about 300 customers/day, five time higher than Cộng’s store in Trieu
Viet Vuong Street. Cộng’s store in Trung Hoa Street has about 300-400 customers/day
with area of about 100 m2. Besides selling drinks, Cộng Cà Phê also sells souvenir such
as padded waistcoat, soldier style paints and T-shirts, rubber sandals, leather stuff,
pottery, etc. Price for a drink or souvenir of Cộng is from 30,000 VND to 150,000 VND.
According to the staffs of Cộng, their best-seller dinks are coffee with coconut milk,
coconut milk with young sticky rice, white coffee, frozen lemonade, etc. The prices of
these drinks are from 35,000 VND to 45,000 VND. Therefore, the average revenue of a
Cộng’ store per day may be 7,700,000 VND, therefore, the total average revenue for
about 50 stores of Cộng may be 385,000,000 VND per day. Compare to other
competitors’ revenue such as The Coffee House or Highland Coffee with revenue per day
is about 390,000,000 VND. Even though Cộng was established later than those
competitors but its revenue now is approximate the same as theirs. (vietnamnbiz.vn,
2018)

Therefore, I evaluate Cộng’s performance in Financial Strength is (5)

b) Environment Stability (ES)

- Inflation rate: The inflation rate averaged 6.4% from 1996 to 2018
(GeneralStatisticOffice, 2018) raised 2% compared to the same period last year. It is a
bad signal for Cộng since it will rise the cost of Cộng’s products, salary for staffs,
expenses, etc. However, inflation rate is still stable from 1996 till now. Hence, I will
mark this element (-3).

- Competitive Rivalry: Cộng has to deal with a large number of competitors including
inland ones and foreign ones. In terms of quality, Starbuck and Highlands are two
competitors that Cộng cannot compete. In terms of price, Cộng’s price of products still
expensive than Nescafe and Vinacafe. Overall, competition within the industry is very
high. However, Cộng outstands because of the value that it brings to customers. Hence,
this element should be (-5)

- Threat of substitute products: Nowadays, the trend of drinking bubble tea is ruling the
market. We can see the appearance of a series of bubble tea stores such as Dingtea, Royal
tea, Hekka, Chago, etc. It can be a threat for Cộng since the customers can switch to
drink bubble tea instead of drinking coffee if they want. Besides, one of coffee functions
is to boost energy. Nowadays, there are many bottled beverage and boost energy drinks
selling in super market, convenience stores like Monster, Mountain Dew, Number 1, etc.
These boosting drinks may take place of coffee since they have more flavors, cheaper and
easier to buy. However, drinking coffee is a traditional hobby of Hanoian, therefore,
despite of the fact that there are many substitute products, the value that coffee brings to
customers will never be replaced. Hence, I mark this element (-3)
 (−𝟑) + (−𝟓) + (−𝟑)
=> Average score: = -3.67
𝟑

c) Industry Strengths (IS):

- Threat of new entrants:

The required capital for opening coffee shop depends on these following factors. Firstly,
what type of business model the company wants to follow. There are several types for the
company to choose such as coffee shop combined with garden, normal coffee shop with
air-conditioner, coffee shop with books, take-away coffee shop, etc. Normally, coffee
shops that combined with other models like garden, books, pets, garden, etc. will cost
more than normal types. Secondly, the business size also plays a part in capital
requirements. The bigger the size is, the higher the initial capital required to establish the
business. Thirdly, another factor which also affects the capital requirements is the style
that the company want to apply. The cost of designing coffee shop will vary between 2
million to 4 million VND. Besides, the company also needs to keep an eye on cost of
renting cost. This cost depends on the area that the company wants to locate the coffee
shop, it varies between 200,000 VND to 500,000 VND per m2 to rent in suburbs; and
about 800,000 VND to 1 million VND per m2 to rent within the city. Moreover, the cost
for equipments also need to be considered. Normally, the company can lease machines
instead of buying a new one if they do not have enough money. They also need to prepare
equipments such as refrigerator, blender, cashier, etc. The cost for this factor may vary
from 10 million to 35 million VND. Last but not least, cost for raw material is also
important. Normally, raw materials accounts for 40% total initial capitals. Coffee price
and other raw materials’ price such as milk, chocolate syrup, fruit, etc, are not expensive.
In addition, with high demand and few regulations (business license and food safety
certification), hence, the barrier to enter the market is not high (posapp.vn, 2017).
Therefore, this element should be marked (+5)

- Growth potential: The demand of drinking coffee is raising. Drinking coffee becomes a
habit of Vietnamese especially Hanoian. With many Vietnamese, a morning must be
started with a cup of coffee; they “đi cà phê” when dating, when working, when meeting
friends or partners, etc. Although they may drink other drinks besides coffee, they still
call it “đi cà phê”. “Coffee” unintentionally becomes a common word which represents
for non-alcohol drinks. With such a high demand, many coffee shops have appeared in
the market to satisfy customers’ needs. Therefore, it can be said that it is a potential
market and I will mark this element (+5)
 𝟓+𝟓
=> Average score: =5
𝟐
d) Competitive Advantages (CA):

- Product quality: At the moment, Cộng Cà Phê is famous for White Coffee and Coffee
with coconut milk. These two drinks make Cộng become special brand in customers’
mind. Moreover, Cộng imports coffee beans from Buon Ma Thuot so the smell and taste
will be different and special than other brands. However, besides two signature drinks
that I have mentioned above, quality of the remaining is still at medium level. Hence, I
mark this element (-3)

- Customer loyalty: After asking for information from staffs, they told that Cộng had two
main types of loyal customers. The first one is students who came to Cộng after school to
meet their friends, the second one is mature who came to Cộng to relax and enjoy
peaceful and special space. Those customers usually come to Cộng and keep close
contact to build relationship between them and Cộng’s staff, so that they can receive the
best services. After 10 years appeared in the market, Cộng know how to maintain the
relationship with customers and turn them into loyal customers with their products and
service. However, Cộng still need to keep an eye on other competitors such as The
Coffee House, Highlands, Trung Nguyen and so on. Overall, I will mark this element (-3)

(−𝟑)+ (−𝟑)
=> Average score: = -3
𝟐
Elements Scores Conclusion
Financial Strength (FS) 5 Total score of axis X = CA + IS = 5 + (-3) = 2
Environment Stability (ES) -3.67
Total score of axis Y = FS + ES = 5 + (-3.67) = 1.3
Industry Strength (IS) 5
Competitive Advantages (CA) -3
 FS

Conservative Aggreesive
4

CA 0 IS
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6
-1

-2
Defensive Competitive
-3

-4

-5

-6
ES

It can be seen that Cộng should focus on Aggressive strategy to be successful in the
market. It has a quite strong Competitive Advantage in the market. However, Cộng
should use internal strengths to develop a market penetration, market development
strategy, forward integration, backward integration and horizontal integration (Business
Strategy Course Book, n.d).

From SPACE Matrix, we can see that the strengths of Cộng are Competitive Advantage
and Financial strength; Industry Strength and Environment Stability affect Cộng slightly.
Hence, in my opinion, I suggest Cộng three options which are market development,
market penetration and product development.

2.2. McKinsey Matrix:

Beside SPACE Matrix, Cộng Cà Phê also needs to apply McKinsey Matrix to dispose its
limited resources in a rational way. McKinsey is a model that assess business portfolio, it
provides strategic implications and help the company to make decision on what business
unit need to be invested (David, F.R., 2009).

Mc Kinsey Matrix (strategicmanagementinsight.com, 2014)

In this assignment, I will choose four SBUs to apply McKinsey Matrix which are Coffee,
Coconut ice blended drinks, Tea and Fresh Juice. These four SBUs are four main types of
drinks that Cộng is providing.
 a) Coffee:

- Industry Attractiveness:

Elements Weight Rating Weighted score

Market size 0.2 4 0.8
Market growth rate 0.2 4 0.8
Competitive rivalry 0.1 2 0.2
Technological 0.1 2 0.2
factors
Market 0.15 2 0.3
segmentation
Capital requirements 0.05 2 0.1
Profit potential 0.2 4 0.8
Total score 1.00 3.2
It can be seen that Cộng has a good respond to external environment

-Competitive strength of product:

Elements Weight Rating Weighted score

Market share 0.15 3 0.45
Product quality 0.2 4 0.8
Price 0.1 3 0.3
Brand value 0.1 4 0.4
Distribution 0.15 3 0.45
channels
Service quality 0.2 4 0.8
Financial ability 0.1 1 0.1
Total score 1.00 3.3
It can be seen that coffee products of Cộng has a quite strong competitive strength.

b) Coconut ice blended drinks:

- Industry attractiveness:

Elements Weight Rating Weighted score

Market size 0.2 4 0.8
Market growth rate 0.2 3 0.6
Competitive rivalry 0.1 3 0.3
Technological 0.1 4 0.4
factors
Market 0.15 1 0.15
segmentation
Capital requirements 0.05 2 0.1
Profit potential 0.2 4 0.8
Total score 1.00 3.15
With this product, Cộng has a good respond to external environment.

-Competitive strength of product:

Elements Weight Rating Weighted score

Market share 0.15 3 0.45
Product quality 0.2 4 0.8
Price 0.1 3 0.3
Brand value 0.1 4 0.4
Distribution 0.15 3 0.45
channels
Service quality 0.2 4 0.8
Financial ability 0.1 3 0.3
Total score 1.00 3.5
It can be seen that coconut ice blended drinks of Cộng has a quite strong competitive
strength.

c) Tea:

- Industry attractiveness:

Elements Weight Rating Weighted score

Market size 0.2 3 0.6
Market growth rate 0.2 2 0.4
Competitive rivalry 0.1 2 0.2
Technological 0.1 2 0.2
factors
Market 0.15 1 0.15
segmentation
Capital requirements 0.05 2 0.1
Profit potential 0.2 3 0.6
Total score 1.00 2.25
With this product, Cộng has a medium respond to external environment.

- Competitive strength of product:

Elements Weight Rating Weighted score

Market share 0.15 2 0.3
Product quality 0.2 2 0.4
Price 0.1 2 0.2
 Brand value 0.1 2 0.2
Distribution 0.15 3 0.45
channels
Service quality 0.2 3 0.6
Financial ability 0.1 1 0.1
Total score 1.00 2.25
It can be seen that tea products of Cộng has a medium competitive strength

d) Fresh juice:

- Industry attractiveness:

Elements Weight Rating Weighted score

Market size 0.2 2 0.4
Market growth rate 0.2 2 0.4
Competitive rivalry 0.1 2 0.2
Technological 0.1 3 0.3
factors
Market 0.15 1 0.15
segmentation
Capital requirements 0.05 2 0.1
Profit potential 0.2 2 0.4
Total score 1.00 1.95
With this product, Cộng has a poor respond to external environment.

- Competitive strength of product:

Elements Weight Rating Weighted score

Market share 0.15 2 0.3
Product quality 0.2 2 0.4
Price 0.1 2 0.2
Brand value 0.1 2 0.4
Distribution 0.15 3 0.45
channels
Service quality 0.2 2 0.4
Financial ability 0.1 1 0.1
Total score 1.00 2.25
It can be seen that fresh juice products of Cộng has a medium competitive strength
Name of products Symbol Industry attractiveness Competitive strength
score score
Coffee  3.2 3.3
Coconut ice blended
drinks
 3.15 3.5

Tea  2.25 2.25

Fresh juice  1.95 2.25

McKinsey Matrix for Cộng’s four lines of products: Coffee, Coconut ice blended
drinks, Tea and Fresh juice

Based on McKinsey Matrix that I have made for Cộng’s four types of products above, I
can see that “Coffee” and “Coconut ice blended drinks” are standing in “Investment and
Growth” area, meanwhile, “Tea” and “Fresh juice” are in “Selective
investment/Prudent”.
With coffee and coconut ice blended drinks, Cộng should keep investing these lines of
products, it will bring more return for the company in the future. The company may have
to spend a lot of money on developing these products because they will be operating in a
growth industry and they have to maintain or increase the market share. It is important to
concentrate resources for these products, Cộng should invest on advertising, research and
development, increasing productivity to satisfy the demand of the market in the future.

With tea and fresh juice, Cộng should think carefully before decide to invest in. If Cộng
have the money left from investing in coffee and coconut ice blended drinks, they may
consider spending this amount of money on developing tea and fresh juice in case they
thought that these products might bring profit in the future.

2.3. Compare the results:

SPACE Matrix McKinsey Matrix

Elements used to analyze - Financial Strength - Industry Attractiveness
- Industry Strength - Competitive strength of
- Environment Stability the company’s products
- Competitive Advantage
Result Aggressive Safe investment/growth for
=> Market development, “Coffee” and “ Coconut ice
market penetration and blended drinks”
product development. Selective
investment/Prudent for
“Tea” and “Fresh juice”
SPACE matrix is used to decide the future direction for the company, meanwhile,
McKinsey is used to analyze and position business portfolio of a company based on its
SBUs to decide investment strategy for particular products or SBUs. These matrixes use
many similar elements to analyze such as market growth, competitive rivalry, capital
requirements, etc. The results are quite similar when both two matrixes suggest Cộng to
keep investing and developing. However, the purposes of two matrixes are different so it
is quite difficult to compare.

Task 3:
3.1. Evaluate strategies:

a) Market penetration:

- Suitability: There are two main reasons that make market penetration suitable for Cộng.
The first one is the demand for a place to relax, meeting friends but still have drinks is
raising (Buzzmetrics.com, 2015). The second reason is that when using market
penetration, marketing activities are also used. From this point, Cộng can raise
customers’ awareness about the brand as well as franchisee’s prestige.

- Feasibility: As I have analyzed above, revenue of Cộng per day is approximately 385
million VND and cost accounted for about 25% of the price. Therefore, their net income
is about 288,75 million VND. It means that Cộng has a quite high financial statement.
However, it is not enough to broadcast the brand through traditional media transport like
television. The average price for a second is about 750,000-2 million VND depending on
time, channel and program.

Price for advertising on VTV channels (gardenmedia.vn, 2018)

However, Cộng can advertise through social network such as Facebook, Instagram,
Foody, Lozi, etc. These platforms will be more suitable for Cộng’s limited financial
resources. Normally, the enterprises will have a variety of choices to advertise on
Facebook: Page post, page to web, video, etc. Through Facebook, Cộng can do some
sales promotions to attract more customers such as buy 1 get 1, share post to get a
voucher, play mini game to receive gifts, etc.

Price for advertising on Facebook (bizcare.vn, 2016)

- Acceptability: Cộng’s objectives are expending the brand to other countries and
improving products’ quality to bring more value for customers. Market penetration can
support these goals.

b) Product development:
- Suitability: It is important to conduct product development since it will improve
customers’ satisfaction level, rise the number of customers and reduce the threat of other
competitors. By using product development, Cộng can use know-how techniques to
innovate or develop unique products to help them different among competitors.

- Feasibility: In fact, Cộng has skillful bartenders with at least 2 years experience in the
field in every store and all of them have certification. Normally, Cộng ask feedback from
customers through waiters once per month. When customers come to the store, they will
receive a feedback paper from staff and after finish the feedback, customers will give it
for the cashier when they pay their bills. Besides, customers also can give feedback
through Facebook or Foody. Foody is one of the largest platforms about food in Asia.
Customers can give feedback and rate quality of Cộng through Foody. By collecting
feedback from customers, Cộng will be able to know what customers like and do not like,
which trend is in the market, what Cộng can improve and reduce, etc. From this point,
Cộng will be able to create new drinks that meet the demand of customers or improve the
quality of existing drinks.

- Acceptability: Innovating new product will require a lot of money and time. However,
with 10 years appearance in the market, it is important to make a little change product
portfolio. With a quite high financial statement, Cộng definitely have ability to create
new products. However, Cộng need to keep an eye on the quality of new products since
new products does not mean they will receive good feedback from customers, quality is
still priority. Therefore, Cộng need to be careful if they want to create new products, if
the quality is not good enough, the owner or shareholders will object them.

c) Market development:

- Suitability: In a competitive market with many competitors like coffee market, it is

crucial to have a good image in customers’ mind. Cộng can expand the brand by using
market development. They can expand their size by establish more stores in Vietnam and
even other countries. In fact, Cộng has opened a coffee shop in Korea in July 2018 with
targeted customers are Vietnamese living in Korea and young generation of Korea
(congcaphe.com, Cộng cà phê chính thức đặt chân đến Hàn Quốc, 2018)
- Feasibility: As I mentioned above, the cost to open a coffee shop depends on several
factors. In Cộng’s case, they just need to consider the cost for renting, decorating and
salary for staffs. Renting cost will variety between 200,000 VND to 500,000 VND per m2
to rent in suburbs; and about 800,000 VND to 1 million VND per m2 to rent within the
city. Normally, decorating cost is from 5 million to 8 million VND; salary for an
employee averages 2 million VND. Overall, average cost for renting a 30m2 stores is
about 18 million VND, cost for decorating is about 6 million VND and salary for
employees averages 17 million VND. Hence, it costs 41 million VND to open a new
store. With medium-high financial statement, Cộng completely has enough ability to
open more stores in the future. In facts, they are keeping opening more stores.

- Acceptability: As I have mentioned above, one of Cộng’s objectives is to expend the

brand not only within the country but also in foreign countries. Hence, market
development is a suitable strategy to achieve that goal. Moreover, open more stores in
provinces and cities will help Cộng to have more customers and they will be successful
with this strategy. An example for this strategy is Vinmart+, established in 2014,
Vinmart+ now has more than 1000 stores all over the countries and become one of the
most successful convenience stores in Vietnam. Therefore, this strategy will be accepted
by shareholders.

d) Diversification:

- Suitability: Putting new types of product on operation at this time is a good idea for
Cộng. Cộng will be suitable for related diversification. For example, Cộng can sell some
types of cake such as pound cake, coffee cake, tart, flan, pancake, etc. in the stores. It will
raise the number of customers and satisfy their demand. When customers come to Cộng,
they can eat a piece of cake, sip a cup of coffee, read book or chatting with friends, it will
satisfy the demand of nosh.

Some types of cake Cộng should sell besides drinks.

- Feasibility: It is feasible because Cộng’s financial statement completely can satisfy

capital requirements for cakes. However, if Cộng wants to make the cakes by themselves,
they need to consider buying or hiring an oven, training the employee to make the cake,
buying counters to display cakes, etc. If they do not want to do that, they can buy from
some cakes retailers.

- Acceptability: In fact, there are many company apply this strategy. For instance, The
Coffee House and Highlands also sell cakes besides drinks and it really help them to
satisfy the demand of customers and make them successful. Therefore, it will be accepted
by shareholders.
 Some types of cake of The Coffee House and Highlands

3.2. Ranking and Scoring:

Objectives Profit Sell 200 cups Reach 80 Score Rank

raised of drinks per stores at the
10% for day in each end of 2018.
the next 4 store
months
Strategic options

Objective weight 5 3 4

Market    9 1st
development
Open more stores
within the country
Product    8 2nd
development
Create coffee with
fruit flavor drinks
Market penetration    8 3rd
Advertising through
social network

Diversification    5 3rd
Sell some types of
cakes such as pound
cake and flan.

3.3. Decision:

In my opinion, Cộng should give priority to Market development strategy because it help
Cộng to achieve their goal. By applying market development strategy, Cộng can expand
the brand and increase the market share. Besides, Product development and Market
penetration are the second choice for Cộng. Cộng should develop their quality of
products to bring more value to customers and attract the potential ones. Moreover, they
should focus on advertising so that they can raise awareness of customers about the brand
and improve the number of customers. Last but not least, diversification is in the bottom
of list, maybe this strategy is not that important at this time. Maybe Cộng can focus on
this strategy when they become more stable and want to bring something new to
customers.