PRINCIPLE OF MANAGEMENT REPORT ANALYSIS CORPORATE LEVEL STRATEGY OF MASAN GROUP

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FOREIGN TRADE UNIVERSITY

FACULTY OF BUSINESS ADMINISTRATION

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PRINCIPLE OF MANAGEMENT REPORT

ANALYSIS CORPORATE LEVEL STRATEGY OF MASAN GROUP

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CHAPTER 1: OVERVIEW OF MASAN GROUP...2

I. Masan Consumer Company...2

II. Business mission...2

III. Business vision...2

CHAPTER 2: CORPORATE LEVEL STRATEGY THAT MASAN APPLY

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1. Strong Market Position...17

2. Diversification and Synergies...17

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3. Brand Recognition and Loyalty...17

3. Product Launch Setbacks...18

4. Financial Performance Volatility...18

5. Regulatory and Compliance Issues...18

6. Execution Challenges...19

REFERENCES...21

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Masan Group, a prominent company operating in Vietnam, has established itself as a leading corporation with diverse business interests across various sectors. The corporation aims to deliver outstanding products and services that cater to the daily needs of millions of Vietnamese people while ensuring affordability and quality.

This paper will focus on analyzing the corporate-level strategy of Masan Group at different stages of its development to hopefully provide valuable insights into the company's strategic evolution, adaptability, and growth trajectory. This also allows us to assess the associated risks, successes, and failures of their strategies.

During the early stages of Masan Group's development, the company focused on establishing a strong foundation and core competencies in its primary business sectors. The corporate-level strategy during this phase aimed at building a solid market presence, developing robust supply chains, and fostering operational excellence. Analyzing this stage provides insights into how Masan Group laid the groundwork for future expansion and positioned itself as a key player in its chosen industries.

As Masan Group entered a phase of growth and diversification, its corporate-level strategy shifted towards expanding its portfolio and entering new markets. This stage involved strategic acquisitions, partnerships, and investments to broaden the company's offerings and capture new growth opportunities.

By investigating Masan Group's corporate-level strategy at different stages of its development, we can gain valuable insights into the company's strategic decision-making, risk management practices and responses to both successes and failures.

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CHAPTER 1: OVERVIEW OF MASAN GROUP

I. Masan Consumer Company

Masan Consumer, also called Consumer Goods Joint Stock Company Masan, is the 7th position in the list of top 50 most valuable brands in Vietnam 2016 and ranks 2nd in the consumer goods industry.

Masan Consumer produces and distributes a variety of food and beverage products. Its products include soy sauce, fish sauce, chili sauce, instant noodles, instant coffee, instant cereals, and bottled beverages. The company exports its products in the United States, Canada, France, the Russian Federation, the Czech Republic, Poland, Germany, Japan, the Middle East, Asia, Laos, and Cambodia. It operates in the packaging technology, food processing, information and communication technology, construction, investment, and mining industries. Masan Consumer Corporation which was formerly known as Masan Food Corporation changed its name in August 2011. The company was founded in 2000 and is headquartered in Ho Chi Minh City, Vietnam. Masan Consumer Joint Stock Company operates as a subsidiary of Masan Consumer Holdings Company Limited (MCH)

II. Business mission

The Company’s mission is to provide better products and services to the 90 million people of Vietnam, so that they can pay less for their daily basic needs. Masan aims to achieve this by driving productivity with technological innovations, trusted brands, and focusing on fewer but bigger opportunities that impact the most lives.

Masan Group’s member companies and associates are industry leaders in branded food and beverages, branded meat, value-added chemical processing, and financial services, altogether representing segments of Vietnam’s economy that are experiencing the most transformational growth.

Masan’s vision is to be Vietnam’s leading consumer company by sales, profitability and brand recognition. They also want to meet the daily needs of

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Vietnam’s 90 million evolving consumers, as well as to be the symbol for quality and a source of pride among Vietnamese. Moreover, Masan want to be the destination for top talent and to be recognized as the best workplace in Vietnam.

EACH STAGE

I. Masan from 1996-2004

Masan Group was established in 1996 as a small trading company focused on food products. The company gradually expanded its operations, entering into distribution, retail, and manufacturing sectors. It established partnerships with international companies to enhance its capabilities and access to technology.

1. Growth Strategy

1.1 Concentration

In 1996, Masan’s first predecessor company, Viet Tien Industry -Technology - Trading JSC was established, specializing in food processing and food seasoning. In 2000, Minh Viet Industry Import - Export JSC was established, specializing in trading foods. During 2001, Minh Viet Packaging JSC was established, specializing in producing high-end plastic packaging and Viet Tien Food Technology JSC was established, specializing in sauce processing. Throughout the first 5 years, Masan focused on concentration strategy with an aim to expand the primary line of the business. Apart from food processing and seasoning, Masan produced packaged food and sauce to increase the number of its products in the market.

1.2 Vertical integration

In 2002, Masan Industrial JSC was established as a manufacturing facility to accommodate its sales growth in sauces and instant noodles. This backward vertical integration was applied to produce its own inputs to meet the increase in the demand for sauces and instant noodles without hiring other intermediaries.

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1.3 Diversification

In 2003, Viet Tien Industry-Technology-Trading JSC merged with Minh Viet Industry Import-Export JSC and changed its name to Masan Trading Corporation. During this time, Masan applied related diversification by merging two firms in related industries which trade products; these two firms’ operation and strategy are similar to a certain extent which facilitates the merging procedure.

II. Masan from 2005-2008

Masan Group strategically shifted its focus towards the food and beverage industry. In 2005, the company acquired controlling stakes in various leading Vietnamese food and beverage companies. This move enabled Masan Group to consolidate its position in the market and gain access to established brands.

1. Growth Strategy

1.1 Concentration

In January 2007, “Nam Ngu” and “Tam Thai Tu” were introduced. Masan originated from a company manufacturing food so the introduction of “Nam Ngu” and “Tam Thai Tu" is a way to raise the number of products it offers, thus increasing the scale of its production. This concentration strategy would increase opportunities for Masan to approach potential customers having different buying purposes.

1.2 Vertical integration

In 2007,Masan PQ JSC was established as a subsidiary, specializing in trading and producing raw fish sauce to improve the capacity to procure raw materials . During this period, Masan applied backward vertical integration by focusing on producing its own materials to gain control of inputs and become itself-supplier instead of buying raw materials from other companies.

In 2009, Masan Group conducted an initial public offering (IPO) on the Ho Chi Minh Stock Exchange, raising significant capital for future growth. The company began expanding its market presence and launched several popular

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consumer brands. Masan Group also formed strategic alliances with international partners to leverage their expertise and expand into new markets.

1. Growth Strategy

1.1 Vertical integration

In 2009, Masan HD JSC, a manufacturing facility in northern Vietnam, was established to increase its production capacity and optimize its distribution and logistics network. During this time, Masan Food Corporation tried to gain control of the increasing output by establishing new distribution channels to deliver their goods. This forward vertical integration was successfully integrated as Masan could expand its production capacity and its logistics services at the same time.

1.2 Horizontal integration

Masan Consumer acquired a 50.25% stake in Vinacafe in November 2011. During this time, Masan Consumer successfully applied a horizontal integration strategy by acquiring a stake of Vinacafe which used to be one of the main rivals that Masan Consumer dealt with in the beverage industry.

1.3 Diversification

In August 2009, the Company was renamed Masan Group Corporation, holding 19.9% and 54.8% stakes in Techcombank and Masan Consumer, respectively. In January 2011, Economic stake in Techcombank was increased to 30.6% following the purchase of Techcombank’s convertible bonds. This is the first time Masan Consumer acquired a stake in a bank instead of continuing to invest in manufacturers in the food industry. However, this unrelated diversification strategy could be seen as a thoughtful step which might bring them high financial returns because Techcombank is a reputable and highly trusted bank, it is known as a reliable provider of financial products and services, especially for individual customers and small and medium enterprises (SMEs).

2. Renewal strategy

In Mar 2011, Masan Food Corporation changed its name to Masan Consumer Corporation as part of a corporate restructuring aimed at entering

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other consumer product categories. Masan applied retrenchment strategy to restructure the company’s operations, thus increasing productivity and generating sales.

IV. Masan from 2012-2013:

Masan Group continued to diversify its operations beyond food and beverage. It acquired stakes in various industries, including financial services, mining, and telecommunications. The company aimed to capture synergies between its diverse business units and create a more resilient and integrated conglomerate.

1. Growth Strategy

1.1 Horizontal integration

In 2012, Masan Consumer increased its stake in Vinacafe to 53.2%. From February to April 2013, Masan Consumer acquired a 24.9% stake in Vinh Hao Mineral Water Corporation and increased its stake to 63.5%. These are the two main competitors of Masan Consumer in the beverage industry. In this case, Masan Consumer applied the Horizontal integration strategy to increase its competitive strengths as a company manufacturing drinks and lower competition among industry rivals, eventually increasing its sales and profit.

1.2 Diversification

In Oct 2012, Masan Consumer, acquired a 40% stake in Vietnamese-French Cattles feed JSC which is the second largest livestock & aqua feed manufacturer in Viet Nam. This is the first time Masan Consumer penetrated in the Cattle feed Market which is a completely different field compared to those that Masan Consumer invested in before. This unrelated diversification strategy was applied by acquiring a considerable stake of a Cattle feed manufacturer which is a potential firm that may bring higher financial returns.

V. Masan Group in 2014

The year 2014 was a difficult year for consumer companies, especially for new brands since consumers remain cautious with expenditures and were less likely to explore new brands. However, the Company’s increase in sales and

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success in new product launches suggest that its investment in brand building was sound and effective in 2014. In fact, Masan Consumer separated Vinacafe and Vinh Hao from Masan Food and put the two companies under control of a new subsidiary, Masan Beverage, in 2014.

1. Growth strategy

1.1 Vertical integration

In July 2013, Masan used forward vertical integration. Specifically, the company entered into a cooperation agreement with H.C.Stark of Germany to produce high-value-added tungsten chemicals. Via a joint venture between Nui Phao Mining (51 percent) and H.C.Starck (49 percent), 100 percent of Nui Phao’s tungsten concentrate output will be purchased and then processed to transform into higher value chemicals such as sodium tungstate (ST), ammonium paratungstate (APT) and blue tungsten oxide (BTO).

1.2 Horizontal integration

In December 2014, Masan Consumer acquired a 32.8% stake in Cholimex Food. In September 2014, Masan acquired Phu Yen Beer and Beverage JSC, producer of the “Su Tu Trang” beer brand.

1.3 Diversification

In May 2014, Masan Consumer established Masan Beverage as a wholly owned subsidiary, into which the company’s interest in Vinacafé Bien Hoa and Vinh Hao was subsequently transferred. This related diversification bring various benefits for Masan .It has provided a platform to target the attractive USD2.5 billion beverage market, which is growing at 20 percent. To enable this, Masan has used the platform to launch energy drinks and isotonic drinks such as Storm (energy drink) and Aktiva (isotonic drink). It is estimated that in three years, Masan Beverages may be as large as Masan Food.

2. Renewal strategy

Masan Group also divested non-core businesses such as food packaging by the disposal of Minh Viet Packaging One Member Company Limited and other units where the Company did not have a controlling interest. This retrenchment

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strategy is applied to eliminate underperforming business units and gather resources to develop new products.

Masan Brewery Company Limited (formerly another investment holding subsidiary) was restructured to hold Masan’s beer interest and has been transferred to MCH. Under Masan’s management, the beer facility reached full production capacity with a trial launch in the Mekong Delta region. Phu Yen Beer and Beverage JSC were then converted into a single member company in 2015 under the new name Masan Brewery PY One Member Company Limited.

VI. Masan in 2015

1. Growth strategy

1.1 Vertical integration

In January 2015, Masan Consumer applied backward vertical integration by acquiring a 99.99% stake in Saigon Nutri Food, a processed meat manufacturer, to go further into the animal-based protein sector. In April 2015, Masan acquired Sam Kim Limited Liability Company, the controlling shareholder of Proconco and ANCO. The acquired company was subsequently renamed Masan Nutri-Science. The acquisition of Masan NutriScience immediately made Masan Vietnam’s largest local animal feed player with a leadership position in the pig feed segment. Masan Nutri-Science is the Company’s first step to transform Vietnam’s animal protein industry and ultimately reach consumers with branded meat products.

1.2 Diversification

During 2015, Masan High-Tech Materials applied unrelated diversification. It has been increasingly recognized domestically and internationally as a well-established mining and high-tech materials company because of its superior advantages in sustainable practices in mineral mining and refining activities together with innovative recycling technologies to create advanced high-tech materials, servicing critical industries globally.

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VII. Masan Group in 2016

2016 marked the culmination of three years of investing and transformation of Masan’s businesses to lay the foundation for the next phase of growth. Masan Consumer transformed from a food company into a food and beverage company. A minority interest in Proconco developed into Masan NutriScience, Vietnam’s largest animal feed business by external sales.

1. Growth strategy

1.1 Vertical integration

The success of Masan Nutri-Science’s consumer-centric approach and innovations to enhance productivity: Masan started with a mere minority stake in Proconco in 2012. Masan transformed Masan Nutri-Science into an integrated branded meat player with its “3F model” (feed-farm-food). Masan applied backward vertical integration through started construction on its first pig farm and entered into a strategic partnership with Vietnam’s largest branded meat company, VISSAN. The 3F model is a must to make meat affordable (Vietnamese are paying nearly 2 times the price compared to US consumers), and to meet the growing demand for hygienic and safe meat products.

In November 2016, Masan Nutri-Farm (NA) broke ground on a high-tech pig farm in Nghe An, completing their 3F (Feed - Farm –Food) business model.

1.2 Horizontal integration

In January 2016, MCH increased its direct ownership in Masan Consumer to 96.7%, Masan Beverage increased its direct ownership in Vinh Hao to 84.2% and MNS increased its ownership in Proconco to 75.2%.

In February 2016, Masan Beverage increased its direct ownership in Vinacafé Bien Hoa to 60.16%, which further increased to 68.5% in December 2016.

In March 2016, ANCO acquired a 14% stake in VISSAN to become its strategic partner.

In June 2016, ANCO increased its stake in VISSAN to 24.94%. In June 2016, Masan Nutri-Farm (N.A) was established.

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1.3 Diversification

In July 2016, Masan Consumer Thailand was established.

In September 2016, Masan Consumer Thailand and its strategic partner Singha introduced its first seasoning brand in Thailand, Chin-su Yod Thong fish sauce which is related diversification. This is the first step in its In-land ASEAN journey to better serve the region’s 250 million consumers.

2. Renewal Strategy

The “cleanup” of Techcombank and its “Consumer Tech Bank” strategy -a turnover str-ategy: M-as-an m-ade -a very difficult -and unpopul-ar decision in 2012 to sacrifice growth. In order to emerge as a winner out of the financial crisis, we only had to do one thing: rebuild a healthy balance sheet.

Throughout the market consolidation and optimization period spanning from 2016 to 2019, Masan Group dedicated its efforts to the streamlining of operations with a primary objective of maximizing profitability.

1. Growth Strategy

1.1 Concentration strategy

In December 2018, Masan Nutri-Science successfully introduced the 'MEATDeli' meat brand to the market. In July 2019, Masan Nutri-Science shifted its focus to the meat industry and announced a name change to 'Masan MEATLife.' The ultimate goal of Masan MEATLife is to provide delicious, safe, and reasonably priced meat products to Vietnamese consumers.

1.2 Vertical integration

During 2019, Masan Group primarily focused its strategy on forward vertical integration by acquiring distributors to gain control of its distribution channel.

In December 2019, Masan HPC, a subsidiary within the personal and household care products sector, made a successful offer to acquire up to 60% of Net Detergent Joint Stock Company ("NETCO") at a price of 48,000 VND per share. This acquisition marked the company's initial steps into the HPC (Home

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PRINCIPLE OF MANAGEMENT REPORT ANALYSIS CORPORATE LEVEL STRATEGY OF MASAN GROUP

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