Table of Contents

1. Introduce Michel's 5 competitive forces model of Michael Porter..............2

2. Introduce the current situation of Vietnam's sugar cane industry ............3
3. Applying the Michael Porter’s five forces of competition in The Sugar ....4
3.1. Threat of new entrants: .............................................................................................4
3.2. Competitive rivalry .....................................................................................................5
3.3. Threat of substitutes...................................................................................................5
3.4. Bargaining Power of Supplier (Manufacturers) .............................................5
3.5. Bargaining Power of Buyer .....................................................................................6
4. Conclude ...............................................................................................................................6
GROUP MEMBER EVALUATION .........................................................................................7

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Question: Applying the Michael Porter’s five forces of
competition in the industry, please analyze and evaluate the
competitive intensity in Vietnam's sugar cane industry.

1. Introduce Michel's 5 competitive forces model of Michael Porter

H1. Michel's 5 competitive forces model

Porters model is based on the insight that a corporate strategy should meet
the opportunities and threats in the organization's external environment.
Especially, competitive strategy should base on an understanding of
industry structures and the way they change. Porter has identified five
competitive forces that shape every industry and every market. These
forces determine the intensity of competition and hence the profitability
and attractiveness of an industry. The objective of corporate strategy
should be to modify these competitive forces in a way that improves the
position of the organization. Porter’s model supports analysis of the driving
forces in an industry. Based on the information derived from the Five
Forces Analysis, management can decide how to influence or to exploit
particular characteristics of their industry.
Porter's five forces include - three forces from 'horizontal' competition:
- The threat of new entrants
 Time and cost of entry
 Specialist knowledge
 Economics of scale
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  Cost advantage
 Technology protection
 Barriers to entry
- Competitive Rivalry within an Industry
 There are many competitors
 Exit barriers are high
 Industry growth is slow or negative
 Products are not differentiated and can be easily substituted
 Competitors are of equal size
 Low customer loyalty
- The threat of substitute products:
 Substitute performance
 Cost of change
And two forces from 'vertical' competition :
- Bargaining Power of Suppliers :
 Number of suppliers
 Size of suppliers
 Uniqueness of service
 Your ability to substitute
 Cost of changing
- Bargaining Power of Customers:
 Number of customers
 Size of each other
 Differences between competitors
 Price sensitivity
 Ability to substitute
 Cost of changing

2. Introduce the current situation of Vietnam's sugar cane industry

The sugar industry is considered the first step in the process of
industrialization and modernization of rural agriculture. After 22 years of
development and growth, has built a solid position and contributing 0.53%
of the country's GDP, with a value of US $ 975 million.
Among agricultural crops cultivated in Vietnam, sugarcane is a crop with a
close link between farmers and processing enterprises through investment
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contracts and product consumption. This is an essential consumer industry
in the country. It is not only an economic sector but also a sector with social
meaning, helping the rural economy to develop, stabilize society, and
increase employment.
3. Applying the Michael Porter’s five forces of competition in The
Sugar industry in Vietnam
Entering the 21st century, due to the trend of globalization and integration,
research on competitors is very important for businesses. Information
about each competitor on each market is a basis for businesses to
determine their duties and competitive objectives, which is a basis for
enterprises to plan appropriate and effective strategies in each period. In an
increasingly complex and constantly changing business context, businesses
must research and carefully analyze competitive regulatory forces in the
industry. Following, group 9 will apply the Porter Five Forces Analysis to
analyze Vietnam's sugar cane industry.

3.1. Threat of new entrants:

- Economics of scale: A sugar mill must have a design capacity of 6,000 tons
of sugarcane/day or more and a corresponding area of material area to
achieve economic efficiency of scale. In order to have a factory of 6000 tons
of sugarcane pressing capacity/day, it will have to invest about 60 million
USD.
- Specialist knowledge: Because of technical and technological
requirements, which are products originating from agricultural products,
the technological requirements in the field at production stage are not high,
but at the stage of raw materials, certain mechanization is required for sale
off.
- Government policy: according to the Decision 26/2007 / QD-TTF and
NN&PTNT in the period 2020-2030, the orientation of the sugar industry by
2020, no more new factories will be made, but intensive In-depth
investment for existing sugar factories. Do not increase the area of
sugarcane but focus on planning material areas, planning into large fields.
 Therefore, it can be concluded that the competition of new competitors is
quite low, competition takes place mainly competitive rivalry within an
industry.

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3.2. Competitive rivalry
- There are 41 sugar factories nationwide from North to South.
- Bien Hoa Sugar Company, Quang Ngai Sugar JSC, Thanh Thanh Cong JSC,
and Lam Son Sugar Company have the largest production scale, all reaching
100 thousand tons of sugar per year.
- In which, Quang Ngai Sugar Joint Stock Company accounted for 11% of
the total sugar output of the country. Thanh Thanh Cong JSC and Bien Hoa
Sugar Company are the two biggest sugar producers in the Southeast
region, the largest sugarcane growing region compared to other listed
companies.
- The other companies are quite small in size, the design capacity is from
3,500 tons a year or less.
- At present, domestic sugar production has not been able to meet demand,
moreover, factories are distributed by regions, so they mainly produce and
consume on the spot. (  No excess production capacity)
- Most are small-scale companies.
- Exit barriers are high (Because production line are modern and
specialized)
- The high growth rate of the industry
 Rivalry among competitor is high.

3.3. Threat of substitutes

- Sugar and sweetening products are often thought to cause many health
problems, from obesity to high blood pressure. Therefore, consumers tend
to look for products that replace traditional refined sugar.
- Some types can be substituted such as molasses, honey,…
- In terms of prices, these products often cost more than refined sugar many
times.
 Threat of substitutes products is significant. However, their price is often
higher than the price of refined sugar so the competitive pressure from
substitute products is not high.

3.4. Bargaining Power of Supplier (Manufacturers)

- As of 2017, there are 41 sugar factories nationwide from North to South.

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- Currently, sugar production has not met the demand, moreover, factories
are distributed by regions, so they only produce and consume in that area.
- In the 2015 - 2016 season, there are 62 provinces planting sugarcane with
a total area of 284,367 hectares spread across Bac Trung Bo, Tay Nguyen,
Duyen Hai Nam Trung Bo. (In which Gia Lai and Thanh Hoa are the two
regions with the largest sugarcane cultivation area in the country)
- The scale of sugarcane production is small, easy to change the area and
difficult to apply mechanization, the material areas haven’t been distributed
properly.
- Although the area of sugarcane growing is large, the number of farmers is
high so the concentration is not high, affecting the ability to supply raw
materials of the region.
- Suppliers are small and no threats to forward integrate.
 We can see that the concentration of suppliers is not high so the
bargaining power of suppliers is low. This means that the bargaining power
of the buyer is strong which will reduce the intensity of competition in the
sugar cane industry.

3.5. Bargaining Power of Buyer

- Most sugar factories are planned a separate material area and signed
investment contracts with sugarcane farmers. So it is difficult to change
suppliers.  Switching costs of buyers are high.
- Sugar is an essential product in daily consumption and is the raw material
of the food industry so it is less sensitive to price.
- The difference between the products of sugar manufacturing companies is
very low because factories have relatively similar production processes.
 The intensity of competition decreases. (Low)

4. Conclude
Through the analysis, we see that the competitiveness of Vietnam's sugar
industry is quite high. Intense competition with sugar products from
Thailand (While the scale of sugar companies in our country is very small).
Therefore, the sugar industry needs to be restructured comprehensively.
There are huge opportunities that have not been fully exploited but there
are also big challenges when competitors are increasingly required

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businesses to adapt, improve and make appropriate strategies for
Vietnam's sugar industry in general and sugar businesses, in particular, can
develop properly with its potential.

GROUP MEMBER EVALUATION

Number Full name Role in essay Attitude Total

1 Nguyen Thu Trang

2 Tran Thi Thu Trang

3 Phi Thi Yen

4 Nguyen Hoang Minh Tu

5 Nguyen Anh Tuan

6 Pham Thi Van

7 Nguyen Tuong Vi

8 Hoang Van Truong

10 Nguyen Minh Tu

11 Nguyen To Uyen

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