Introduction

Big C supercenter operates business in the form of “Hypermarket” or “Supercenter”, a modern retail business which is managed under the umbrella of Casino group. It is one of the major retailers in the world, with over 200,000 employees working in more than 11,000 stores, in Vietnam, Thailand, Argentina, Uruguay, Brazil, Colombia, France, Madagascar and Mauritius. Today, Big C has a total of 17 stores all around Vietnam. With more than 8,000 staffs, Big C offers a clean, comfortable shopping environment with a wide assortment of goods available at reasonable prices and provides an outstanding customer service in order to ensure the winning business strategy. Big C provides a one-stop shopping experience to our customers with a wide range of useful services at all stores. In addition, Big C represents two of the most important criteria in business and strategic direction to their success. “Big” means "Great", which shows the massive scale of Big C supermarket and a various selection of goods that they offer. Currently, each Big C supermarket has about 40,000 items of goods to meet customer’s needs. “C” is the abbreviation of the word "Customer", they are the key to the business strategy of the Big C.In the previous report, we have explained the strategy contents including missions, visions, goals, core competencies as well as the significance of stakeholder analysis based on the information of the business. We also analyzed the internal and external factors for the company then using SWOT analysis in guiding strategy formulation for the company. This is the continuation of the previous report, carrying out the next stages of strategy making: Crafting strategies, and Evaluating possible alternative strategies.

Part 1Revision of Existing strategies

1. Cost Leadership

We can see evidences in BigC’s behavior proving that this company is following a cost-leadership strategy. It focus on serving the mass market, targeting all people. We can see this even in the vision statement of BigC (Nourishing a world of diversity). And it is clear that BigC is using cheap prices as one of their most important selling points. According to Michael Porter’s competitive strategies model, with a broad target and a price-based competitive advantage, we can conclude that BigC is following a Cost Leadership strategy.

There have been criticisms about how BigC follow this strategy. The most popular criticism by customers is that there are many products in BigC which are more expensive than in other places. Here are some examples showing price comparison of the EXACT SAME ITEMS in BigC and in wet markets:Product BigC’s price Popular price (wet markets)Kitchen knife 35,000 VND 15,000 VNDNylon gloves (1 box) 26,000 VND 10,000 VNDOmachi noodles (pack) 6,000 VND 5,500 VNDKids’ shoes 124,000 VND 24,000 VND

Many among BigC’s customers claim that BigC only sell some certain goods at a cheaper price (especially FMCGs such as washing power, toothpaste, etc.); in order to create a belief that they are selling cheap. The rest of BigC’s products are much more expensive than the usual prices elsewhere.

This fact shows that BigC is not completely following the Cost Leadership strategy. They are only using cheap prices (accepting even zero profit in some goods) to draw customers toward them, then make profit by selling other products at prices higher than market levels.Although BigC is still successful currently, it may suffer very significant damage when more and more customers realize this fact and turn away from BigC. Hence, a more sustainable strategy should be considered. Choosing a distinct direction – either fully cost leadership or fully differentiation – may be advisable for this business.

2. Market penetration

Based on the Ansoff Matrix, we find that BigC is following a Market Penetration strategy. They rarely expand their business to new products or new markets, instead BigC try to maintain or increase their market share in existing products and secure their dominance; by applying competitive pricing and aggressive sales promotion, as well as strengthening advertising.

Market penetration is a strong but costly strategy to follow. There are several activities to do in order to grow using this strategy:

Increase present customers’ rate of use: o Increasing the size of purchaseo Maximizing the rate of product obsolescenceo Finding new uses for productso Advertising other useso Offering incentives for increased use

Attracting competitors’ customers: Lure customers away from competitors by establishing differentiation between BigC and them, increasing advertising efforts, or cutting prices.

Attract non-users to buy:This process can be done by offering trial uses of our products, adjusting the price up or down, and promoting other uses to attract these customers.

Big C has been doing well in pursuing the Market Penetration strategy. Massive sales promotion and bonuses makes customers want to buy more, buy in larger amount when shopping at BigC. BigC drew many of competitors’ customers toward them: many shoppers who used to go to Metro now prefer BigC, and many others who come to smaller supermarkets now come to BigC for shopping. Many prefer buying massive amount of FMCG goods in BigC and stockpile them instead of buying in usual distributors in wet markets (e.g. washing powder, toilet paper, etc.). A large number of non-users became buyers: people usually complains that they usually find themselves buying more than they intend to, and some of which are the things they do not actually need.

We can see applying Market Penetration strategy has become a great success of BigC.

Part 2Several alternative strategies

We hereby apply several different methods to craft strategies for the company.

1. SPACE Matrix – Strategic positioning

The Strategic Position & Action Evaluation matrix (SPACE matrix) is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization.The SPACE matrix can give us the direction for building our strategies.The SPACE Matrix analysis functions upon two internal and two external strategic dimensions in order to determine the organization's strategic posture in the industry. The SPACE matrix is based on four areas of analysis.

- Internal strategic dimensions: Financial strength (FS) Competitive advantage (CA)

- External strategic dimensions: Environmental stability (ES) Industry strength (IA)

By analyzing these areas using several most influential factors, addressing their characteristics and importance, we can direct our strategies accordingly.

There are two tools similar to the SPACE matrix: the Boston Consultant Group matrix (BCG matrix) and the McKinsey matrix (a.k.a. GE matrix). These tools are built based on the same foundation with SPACE matrix (market/industry attractiveness and the firm’s competitive position). However, BCG matrix and McKinsey matrix tend to provide much simpler and vague direction, which may be unpractical for strategy development in our particular case of BigC. Therefore, we decided to use the SPACE matrix as the sole representative for the “Market attractiveness – Competitive position” models.

a. Financial Strength (FS)Big C is a strong company in terms of finance. From establishment until now, BigC has been keeping a steady grow in revenue, except for in 2007 when Vietnam experience hyperinflation. The company even managed to increase its revenue in 2008, when the global crisis happened. The table below shows BigC’s revenue from 2005 to 2008:

Year 2005 2006 2007 2008

Revenue (billion VND) 800 860 820 960

Besides, BigC also have a significant and stable revenue source from exports: in 2009 it exported nearly 1000 containers of goods, with a net worth of around 17 million USD.Moreover, BigC is a division of Groupe Casino (France), a successful multi-national corporation. Hence, BigC is financially backed by this giant, taking advantage over many of its competitors which are not supported (e.g. Co-opMart).Because the financial data of BigC is not available to the public, we can only estimate their financial strengths based on these factors. Accordingly, we give the Financial Strengths of BigC the following scoring:Financial Strength (FS) ScoreSteadily growing revenue 3Stable income from exporting 4Backed by Groupe Casino 5Average 4

b. Competitive Advantage (CA)

59%26%

7%8%

Market Share of Supermarkets in Hochiminh City (2008)

Co-opMartMetroBigCOthers

-Source: 2008 Hochiminh City consensus, as cited in Nguyen, 2009-

According to Nguyen (2009), BigC have certain competitive advantages and disadvantages in comparison with strong competitors like Co-opMart. We hereby summarize the most significant points and score them accordingly:

Competitive Advantage (CA) Score

BigC has significant market share, but far after Co-opMart and Metro in South Vietnam.

-4

BigC has hypermarkets all standardized, complying to 2005 national standards. Older competitors (established before 2005, including Co-opMart)

-3

have many supermarkets which do not meet the standards.A few products are cheaper in BigC than in other places, however Co-opMart has better promotion schemes for most of these products.

-3

BigC has much less coverage than Co-opMart in South Vietnam, due to the weak distribution system. In North Vietnam, BigC still reigns as the most popular supermarket.

-4

Less variety of products than Co-opMart and Metro. -6

Rich in imported goods, but weaker than Co-opMart in terms of local goods. -3

Better advertising and promotion activities (than all competitors). -2

BigC has a wider variety of products produced by themselves. -3

Average -3.5

c. Industry attractiveness (IA)Usually, FMCG goods is a SLOW growing market. However, the most profitable items that BigC sells are not FMCG goods; plus the fact that Vietnamese population is growing fast, this is not a limitation for the growth of BigC’s market size. In fact, since BigC’s revenue is growing very well (around 10% per year) when market share stays stable, we can safely say that this industry is growing steadily.Besides the industry’s growth rate, we should also consider the Porter’s Five Forces to analyze the industry attractiveness. (To see more details about Five Forces analysis for BigC, please refer to the previous report of us). The total compilation of all these factors is shown below.

Industry Attractiveness (IA) ScoreAveragely growing industry 4Relatively high threat of new entrants 2Very high threat of substitutes 1Low bargaining power of suppliers 5Considerably high bargaining power of buyers 2There are strong competitors, especially in South Vietnam 2Average 2.67

d. Environmental Stability (ES)We address BigC’s Environmental Stability mainly by looking back at our previous PESTEL analysis.Environmental Stability (ES) ScoreVery politically stable, but business legislations are frequently adjusted -3Chaotic bank policies and interest rates -6Society is developing toward modernization -2Technologically developing: online shopping becomes more popular, more comfortable shopping, electronic payment, etc.

-2

Economic cycle stage: in crisis, which is unfavorable for now; but will have -2

great potential to grow later.Average -3

Using all the estimations shown above, we can plot the dimensions into a SPACE matrix and draw a suggestive conclusion about BigC’s future strategy direction.

As we can see in this figure, the SPACE model gave us a suggestion that BigC should follow the Conservative Strategy. This strategy is similar to the Dog position in BCG matrix, and the Controlled Harvest position in McKinsey matrix.

The strategic movements that these two tools suggest are much similar to the points brought by SPACE matrix below.

Conservative strategy is often suggested by SPACE matrix if the industry looks bad and the business has significant competitive advantages. It is when any remaining profitability is under major threat and the business can become a cash drain which will reduce financial strength to diversify elsewhere.

The business should look to trim costs and any loss making customers and products wherever it can to buy more time to find attractive diversification opportunities. It should also cut back on capacity so that it shrinks to fit the future market expectations. We should consider the various SBUs of BigC and even the particular activities or products in each SBU. Food processing is an important and significant SBU for BigC: though not too popular in Vietnam, it is the source for BigC’s stable income from exporting. So we should consider the specific products in BigC’s retailing system: which products are inefficient for the business, which are important to the business. We need to clarify the strategic role of each product in order to have precise decisions.

Otherwise the business may be able to improve its position through a determined strategy to improve its competitive advantages. They can make major gains through focused action and find overlooked assets and opportunities. However, BigC should be careful so that it doesn’t over-invest because the market isn’t considered to be attractive. The business may identify niches where it does have advantages or can quickly develop advantages that are not appreciated in the wider market.

The conservative strategy in the SPACE matrix also suggests that the business is not under major threats from the environment; and because of its financial strengths, it has time to consider its options.

2. Ansoff Matrix As we mentioned in Part 1 of this report, BigC has been following the Market Penetration

strategy in the Ansoff matrix, and it brought significant success to the company. We hereby address more alternative strategies that the company may want to follow, by looking at other directions in the Ansoff matrix.

a. Market developmentMarket development is the name given to a growth strategy where the business seeks to sell its existing products into new markets.There are many possible ways of approaching this strategy, including:

New geographical markets; for example exporting the product to a new country New product dimensions or packaging. New distribution channels Different pricing policies to attract different customers or create new market segments

In the case of BigC, there are two most appealing options for market development: Exporting its products (processed food) to new countries, using the existing export SBU

located in Dong Nai. Opening new hypermarkets/supermarkets in new locations

b. Product developmentProduct development is the name given to a growth strategy where a business aims to

introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.

For BigC, the production SBU may consider developing new products or product lines to add to their production system of food processing. This activity will need some time and efforts of the R&D department and also the market research division of the company. The retailing SBU may find new products to sell in their hypermarkets, this requires intensive work of the market

research division of BigC. Since selling in hypermarkets such as BigC’s needs very good market adaptability and precise timing for the release of each and every product, finding most appropriate products to sell at the most appropriate time is a difficult job.

c. DiversificationDiversification is the name given to the growth strategy where a business markets new products in new markets.This is an inherently more risk strategy because the business is moving into markets in which it has little or no experience.For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks.For BigC, the company may want to spend money to establish a whole new business. In fact, the word “establish” is used loosely here: for better pace and efficiency, companies wanting to diversify usually do so by merging with or taking over other companies.Diversification can be either related or unrelated to BigC’s existing business. There are several options:

Vertical integration: The forward vertical integration is not available, since BigC’s vertical end is retailing, and the deliveries are already done by themselves. In backward vertical integration, BigC can start doing business in farming, thus supplying inputs for its food processing SBU. Another way is to produce other goods to supply its retailing hypermarkets. Food items and FMCGs are the most viable options, since other types of products are less likely to make profit when producing and selling in small amounts. (Note that producing food items here means opening/taking over businesses which produces food, not expanding the existing food processing SBU to produce new varieties).

Horizontal integration: BigC can buy (take over) other companies. This option is highly potent, since widening the distribution channel is a favorable move for BigC. Gaining more market share and eliminating competitors are also good for the business. However, cost is the main concern in this option.Merging with strong competitors may be a solution, but this has never been the case with Groupe Casino. This option is likely to be denied by the parent company.

Unrelated integration: this is a very risky option, since the company will need to strive in a market it has no experience in. Unrelated integration has no limitation, the company can spend money to establish a new business or take over any business that it sees great potential for profit. BigC should know really well what it is doing, and should have extremely careful research about its choices before deciding to execute this option.

Summary of alternative strategies given:

1. Looking to trim costs by selecting which products are important to us, which products negatively affect our profitability. Cut costs by not working in unworthy products and focus on most profitable ones.

2. Find niches to focus at, developing a differentiation plan to gain market share in particular segments, assuring better profitability.

3. Exporting to more countries.4. Establishing new hypermarkets to cover more geographical area.5. Develop new products in the food processing SBU.6. Finding new products to retail.7. Backward-integrate with farming, supplying inputs for the food processing SBU.8. Backward-integrate with producing new food items or FMCG goods.9. Purchase smaller supermarkets to make them BigC’s.10. Establish or take over businesses unrelated to existing enterprise, selecting only the best

potent businesses.

Part 3Strategy evaluation

In this part, we assess the alternative strategies found in Part 2 of this report, by using three main criteria: suitability, feasibility and acceptability. We included Ranking and Scoring to evaluate the advantages/disadvantages of each strategy. Since we do not have access to the company’s particular objectives in detailed figures, all evaluations here are qualitative.Note that during the formation of the strategies above, we already filtered some obviously inappropriate options using these criteria. For example, the option of merging with strong competitors was removed because of Acceptability: it is likely to be denied by Groupe Casino (France), the parent company of BigC.

1. Suitability: “Should it be done?” The first criterion we use to assess a strategy is whether the strategy has significant positive effects to the business or not. A suitable strategy needs to comply to the following criteria:

Does the strategy fit well with the company’s situation? That is, does it concern the strength, weakness, opportunity and threats of the company (see our SWOT analysis in the previous report for details)

Does the strategy fit with the organization’s vision, mission, goals and objectives?The table below lists all 10 alternative strategies we mentioned in Part 2, and grade their feasibility accordingly in the manner similar to Ranking and Scoring method.Strategy Use

Stren-gths

Avoid & fix Weak-nesses

Take Oppor-tunities

Deal with Threats

Comply to existing purposes

Total Score

Relative Weight 3 2 3 2 2 121. Cut costs by not working in

unworthy products and focus on most profitable ones.

6

2. Find niches to focus at, developing a differentiation plan to gain market share in particular segments, assuring better profitability.

8

3. Exporting to more countries. 8

4. Establishing new hypermarkets to cover more geographical area. 9

5. Develop new products in the food processing SBU. 8

6. Finding new products to retail. 8

7. Backward-integrate with farming, supplying inputs for the food processing SBU.

3

8. Backward-integrate with producing new food items or FMCG goods. 5

9. Purchase smaller supermarkets to make them BigC’s. 10

10. Establish or take over businesses unrelated to existing enterprise. 6

2. Feasibility: “Could it be done?”The second criterion is whether the company have sufficient resources to follow the strategies (financial resource, human resource, management capability, time, and many other activity-limiting factors).The feasibility of each strategy is highly dependent on the nature of the strategy itself. Different strategy needs different resources and in different amount. For example, exporting to more countries needs attention about production capacity, and if it is insufficient, many resources must be poured in. Developing new products in the food production SBU needs time and an amount of retained profit to invest in research and development. Related integration (horizontally and vertically) needs less time, but much larger amount of money. However, integration projects are likely able to receive financial support from the parent company, Groupe Casino.The table below addresses the feasibility of each strategy. Strategies with lower feasibility means it needs more resources, which the company may not have enough to supply.

Strategy Resource needed Feasibility11. Cut costs by not working in

unworthy products and focus on most profitable ones.

None Perfect

12. Find niches to focus at, developing a differentiation plan to gain market share in particular segments, assuring better profitability.

Money, time (for market research, then product development). Money should be from retained profit

Good

13. Exporting to more countries. All resources to improve production capacity

Good

14. Establishing new hypermarkets to cover more geographical area.

Money, management capability, human resource

Low

15. Develop new products in the food processing SBU.

Time, money for R&D Good

16. Finding new products to retail. Money for market research Good17. Backward-integrate with

farming, supplying inputs for Money Average

the food processing SBU.18. Backward-integrate with

producing new food items or FMCG goods.

Money Average

19. Purchase smaller supermarkets to make them BigC’s.

Money Low

20. Establish or take over businesses unrelated to existing enterprise.

Money Low

3. AcceptabilitySince BigC is not a public limited company, the main stakeholders influential to the acceptability of strategies are the parent company and the managers. Managers pay attention mostly to the development of the company, hence they are more concerned about the suitability and feasibility of the strategies. They are generally more short-term minded than shareholders. However, the parent company (including its internal shareholders) pays more attention to the profitability of the business, and they usually think more long-term. They concern about how their money are being spent.The suggested strategies should not have problem with acceptability, with the exception of the four diversification strategies. Since integration strategies (vertical and horizontal) needs a large amount of money to be invested in, while being a risky move, stakeholders may question about whether to do it or not. The last strategy (unrelated diversification) is the least acceptable option, due to the enormously high risk involved.

4. SummaryAfter all the evaluations above, we hereby suggest the most suitable, feasible and acceptable strategies that can help BigC develop well in the near future:

- Use retained profit to improve production capacity (food processing SBU), export to more countries in order to increase the stable source of income.

- Press on market research in order to adapt well with market trends; always sell the most desired products in the market.

- Take over weaker competitors to increase geographical coverage and market share. The company should ask for support from Groupe Casino to have sufficient financial resource to do this.

Conclusion

In this report, we have revealed the issues involved in strategic planning for Big C. We analyzed the existing strategies that BigC has been applying, assessing their effectiveness. We also used several tools for strategy formation, mainly SPACE matrix and Ansoff Matrix, in order to form several alternative strategies for BigC. After assessing these alternative strategies using the three criteria (suitability, feasibility, acceptability), we suggested that the company should:- Use retained profit to improve production capacity (food processing SBU), export to more countries in order to increase the stable source of income.- Press on market research in order to adapt well with market trends; always sell the most desired products in the market.- Ask the parent company for capital to take over weaker competitors to increase geographical coverage and market share.

We hope these recommendations prove helpful for the company. We are looking forward to making further contributions for the company.

References

BigC corporation (n.d.). “Big C’s achievement”. [Online] Available at: <http://www.bigc.vn/Gioithieu/Thanhtich/tabid/90/y/2012/h/award/language/en-US/Default.aspx> Last accessed May 2012

BigC corporation (n.d.). “Big C’s vision, mission and values”. [Online] Available at: <http://www.bigc.vn/Gioithieu/Giatridoanhnghiep/tabid/99/language/vi-VN/Default.aspx> Last accessed May 2012

Business Essentials – Business Strategy – Supporting HND/HNC and foundation degrees course book, BPP Learning media, UK.

Nguyen, T.N.M. (2009). “Business strategy formation for Co-opmart Supermarket Chain until 2015”. Hochiminh City University of Economics.

Simister, P. (2011). “SPACE Analysis – Strategic Position and Action Evaluation Matrix”. [Online] Available at: < http://www.differentiateyourbusiness.co.uk/space-analysis-strategic-position-and-action-evaluation-matrix> Last accessed May 2012

Simister, P. (2011). “Conservative Strategy In The SPACE Matrix”. [Online] Available at: < http://www.differentiateyourbusiness.co.uk/conservative-strategy-in-the-space-matrix> Last accessed May 2012