Failure in new customer approach in tan cang shipping’s reffer service.pdf

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------
Thi Huong Giang Nguyen
(FAILURE IN NEW CUSTOMER APPROACH IN TAN CANG SHIPPING’S
REFFER SERVICE)
MASTER OF BUSINESS ADMINISTRATION
Ho Chi Minh City – Year 2018

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UNIVERSITY OF ECONOMICS HO CHI MINH CITY
International School of Business
------------------------------
Thi Huong Giang Nguyen
(FAILURE IN NEW CUSTOMER APPROACH IN TAN CANG SHIPPING’S
REFFER SERVICE)
MASTER OF BUSINESS ADMINISTRATION
SUPERVISOR: Trần Hà Minh Quân
Ho Chi Minh City – Year 2018

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Table of Content
1. Executive summary ........................................................................................................ 5
2. Background information.................................................................................................. 6
3. Methodology....................................................................................................................8
4. Problem Identification.....................................................................................................9
4.1 Situation analysis...................................................................................................... 9
4.2 Symptoms................................................................................................................ 11
4.3 Potential problems……………………………………………………………….. 13
4.4 Central problem......................................................................................................16
Figure 1: Initial cause – effected map ...................................................................16
4.5 Potential root causes...............................................................................................17
4.6 Central root cause...................................................................................................20
Figure 2: Cause – effected map .............................................................................21
5. Problem Solving............................................................................................................ 22
6. Action Plan ....................................................................................................................23
References .........................................................................................................................27
Appendix 01: Interviewees Information............................................................................29
Appendix 02: Interview guides .........................................................................................30
Interview Guide: Customers using referred container service ............................30
Interview Guide: Vice Director ...............................................................................30
Appendix 03: Questionnaire ……………………………………………………...............32
Appendix 04: Transcript …………………………………………………….....................33
Appendix 05: Estimated output/month for 40RH of TCS’s dry container customers…….38

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Professional terminology and abbreviation:
No.
Professional terminology
and abbreviation
Meaning
1 20GP 20 feet general dry container
2 40HQ 40 feet high cube dry container
3 45RH 45 feet high cube reefer container
4 Teus
The production of liner shipping and slot on
vessel. 20GP = 1 TUES, 40HQ=40RH=2 Tues
5 Depot The yard contains empty container
6 Shipside
The truck go to nearby the vessel to receive
container directly does not drop container on
terminal yard.
7 Closing Time
The time which vessel will stop loading
container to prepare for departing.
8 Freight Price for transporting container by vessel
9 Plugging Fee
Fee charge for plugging electronic of reefer
container on terminal, on vessel
10 OPS Operation Service in Terminal
12 TCS Tan Cang Shipping Joint Stock Company

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1. Executive Summary
In the beginning of 2017, Tan Cang Shipping expanded its service to reefer
service. After 7 months of operation, the company realized that the operation of
TCS’s reefer container service was not effective because the revenue could not be
as expected. One of the potential problems leaded to that system – failure in new
customer approach was selected to analysis deeply basing on in-depth interview
outcomes, market information and business report.
The purpose of this thesis is to use literature review, in-depth interview and
survey in order to determine factors that influence sale organization effectiveness,
which helps to identify why there is failure in new customer’s approach. The
cause – effected map is the drawn to find out the root cause.
The thesis intents to use 4 groups of factors affected to sale organization
effectiveness to TCS’s reefer service. The result shows that most factors have
faced trouble in some indicators. In particular, Evaluating sale service and
Rewarding are the two most noticeable indicators because of their significant
influence to sale performance. Setting sale performance measurement then is
chosen to as problem solving for the company’s current situation.

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2. Background information
Tan Cang Shipping Joint Stock Company (or Tan Cang Shipping – TCS) was
established on 28.11.2013 by Saigon Newport Corporation, to develop maritime
transport service. The beginning mission of Tan Cang Shipping is developing the
transport services of Sai Gon New Port Corporation while their vision is "Leading in
quality of service, customer oriented; Advanced management, professional and high
quality in human resources; Military discipline, corporate culture, community
responsibility " After almost 4 years of operation, strategic direction is to develop
sustainable production and business based on three pillars: Port Operation, Logistic
Services and Sea Transport. Despite its short time of operation, the company worked
quite well, completed all the missions and developed Tan Cang Shipping becomes a
prestige brand, having a strong position in the shipping industry in Vietnam
nowadays.
With the motto "Coming to Saigon New Port, coming to one of the top quality
services", Tan Cang Shipping always tries to provide their customers best quality
shipping service. To the Sea Transport Service, Tan Cang Shipping provides
customers with domestic transport services by sea line including main routes: Ho Chi
Minh - Da Nang - Hai Phong and opposite or Ho Chi Minh - Hai Phong and
opposite. To Logistics, they provides a full range of professional logistics services
such as freight forwarding, customs clearance services, warehousing services,...And
to Shipping Agent, we now are acting as an agent for vessels to import and export in
domestic ports as well as international port in Vietnam. In addition, we are ready to
provide ancillary services such as customs clearance, fresh water supply, fuel,
crewmembers supplying and other support services when the customer needs.
Besides developing shipping service, Tan Cang Shipping also focus on hiring and
training their employees. With the core value: "Satisfaction, Trust and Long-term
commitment of our customers", all the employees of Tan Cang Shipping are always
enthusiastic, hardworking, having responsibility with work and more experience to

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solve customer’s requirements quickly in all situations happened during
transportation. Moreover, Tan Cang Shipping usually has the policies of supporting
and consultation so that they can make their customers feel satisfaction when they
choosing their service and want to build a long-term stable cooperation.
The organizational structure of Tan Cang Shipping consists of 4 departments:

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3. Methodology
This thesis was developed and supported by both primary and secondary data
with particular following methods and resources:
Business reports: TCS's business performance report for dry service and reefer
service in 2017 checked in order to analyze how TCS achieve the target
revenue as well as how each trip follows the golden structure. The report on
reefer container’s revenue in 2017 be classified by customer’s name and trip.
In-depth interview: From the results of data analysis in business report,
classify the customer using TCS services into 3 focus-group, build an interview
guide and in- depth interview for each group and TCS’s Vice Director.
Survey: 10 questions was designed for sale team with 5-point scale and based
on standards of procedures of control system.
Secondary Research: Online research in Viet Nam shipping line market as
well as interview TCS’s customers to understand refer container market size.
Literature review: Classical theory of shipping line operation and
management. Also, contents relevant to sale management effectiveness are
applied to estimate how TCS performs and how to improve the current
situation.

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4. Problem Identification
4.1 Situation analysis
Under Sea Transport field, TCS provides customers with domestic transport services
by sea line including main routes with one-way or round trip from Ho Chi Minh - Da
Nang - Hai Phong and Ho Chi Minh - Hai Phong. There are two main categories of
container, which are dry and reefer containers.
In the liner industry, the twenty- foot equivalent unit (often TEU) is the unit of
measurement of cargo, often used to describe the capacity of container shops and
container terminals. The standard intermodal container is designed as 20 feet long and
8 feet wide. Additionally, there is a standard container with the same width but a
doubled length of 40 feet called 40-foot container, which equals two TEU. For more
example, 1 container 40 feet = 2 containers 20 feet = 2 TEUS
TCS’s dry containers service has been exploited quite well since the day company has
opened with two types: 20GP (20 feet) and 40HQ (40feet). It is considered as core
service of the company, which operated 4 vessels per week with 4 routines from South
to North and reverse trip (Table 1). Besides TCS, there are other popular liners in
Vietnam Domestic Shipping industry such as Hai An, GLS, Germadept, Vinafco, Bien
Dong, Vosco, Viet Sun, … In general, TCS and Hai An currently keep significant
output in comparing to others.
After 4 years of operation, TCS has gained great performance and customers’ trust,
Broad of Director decided to expand its service and reefer container service is a
potential field to develop in the near future. Therefore, in early 2017, TCS launched
reefer container service, which mainly transported 45RH (45 feet) with two following
objectives:
• Diversifying TCS’s service: Currently, most freight forwarders – TCS’s
customers are looking for both dry and reefer container service. Thus, TCS

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want to offer variety of service choices to customers, which is not only dry
container service but also reefer container field.
• Achieving opportunity costs: as domestic shipping lines do not own empty
reefer containers, customers who are owners of reefer containers have to pay
for all the fee occurred. Reefer service is more cost effective in comparing to
dry service. In details, dry service incurs many costs for the company such as
repairing, stock in yard, cleaning. While empty reefer containers are owned by
the customer (domestic liner does not own empty reefer containers), so that
customers will pay all of these fees. Regarding the freight, 1 reefer container
cost 10 million VND while the dry one is 7 million VND. To calculate the
opportunity profit of transport a reefer container, TCS will gain 3 million
VND from difference freight while 40HQ and 40RH is cover similar slot (2
TUES), TCS will not pay the clean (200.000 VND) and storage fee (100.000
VND/ day) because 40RH are customer’s owner.
Currently, there are nearly 20 customers, who used TCS’s dry container service, also
has demand on reefer container service (see Appendix 05. Source: Marketing
Department Report, December, 2016). TCS expects to attract 20-30% of this total
number.
TCS has 4 vessels with different loading capacity, Tan Cang Foundation (TCFD), Tan
Cang Victory (TCVR), Tan Cang Pioneer (TCPNand Tan Cang Glory (TCGR) (see
Table 1). With limited capacity and different freight of 20GP (3 million VND), 40HQ
(7 million VND), 40RH (10 million VND).
Table 1: Tan Cang Shipping Vessels information

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In order to proceed reefer service, the operators and sales departments were based on
the actual situation, TCS’s infrastructure conditions and freight rate to calculate a
“golden structure” as the benchmark for comparison. This is an effective structure to
ensure the feasibility, maritime safety and maximizing profit.
Table 2: Golder Structure of TCS’s vessels
As a new service, comparing revenue each month to identify how effective the new service is not
accurate. The output and service performance do not stable. Thus, it can only be evaluated objectively
based on expectations of the company. The golden is the optimum structure of the company with low
cost and high profitability, which in fact are based on current company’s situation, structure of ships
and estimated output attract to TCS’s current customers. (see Appendix 05)
Comparing months and months is not accurate due to the new service, the output is not stable, so it can
only be evaluated based on expectations of the company.
4.2 Situation analysis
After putting into operation for the first 7 months in 2017, the company realized that
vessels could not achieved “gold structure” and the total revenue is not as expectation.
Under expected revenue for reefer service
40RH 20GP 40HQ
TCFD 15 120 110
TCVR 20 125 80
TCPN 20 125 115
TCGR 20 135 125
Freight
(VND)
10.000.000 3.000.000 7.000.000

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Based on the current freight rate, in comparing the optimal revenue for each trip with the
actual data from January to July 2017, it is figured out that 95% of the transfer below the
expected level, only 5% achieved as equal or more than expected.
For more detail, 5% achieved the expected is on March, after Lunar New Year, when the
market in in the peak. But only 5/ 16 routes on March achieved, while the market is in
the peak on March.
Chart 1: Revenue and target revenues by vessel in the beginning of 2017
For detailed analysis, for 20GP and 40HQ dry container, it is easy to see that dry sales
nearly achieve the expected level, especially some trips are more remarkable.
Chart 2: Revenue and target revenues by Dry container in the beginning of 2017
For revenue of reefer container, the output was completely below expected and unstable
on each ship. Therefore, symptom was identified as the operation of TCS’s reefer
container is not effective.
Chart 3: Revenue and target revenues by Reefer container in the beginning of 2017

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Additionally, from market information, the monthly output of reefer container is around
400-500 containers, mainly for fruits, seafood, tapioca, coconut milk, ice cream ...
However, the output of TCS is lower. The least is 12 containers / month, the highest is
146 containers / month (see Table 3) in comparing to Hai An Liner, who also has 4
vessel similar with TCS, but each vessel they have 200-300 containers 40RH.
Table 3. The sale volume of 40RH TCS from Jan 2017 to July 2017.
3.1 Potential problems
Currently, the reefer container market has 18 companies transported route North-
South. According to marketing report, there was 15 companies have used TCS’s
reefer service. Standing on business metrics analysis, TCS’s customers can be
group into three main groups (see Table 4. Source: TCS’s Business Report, June
2017):
- Key account group: only 2 customers sign the contract with fixed slot on each
trip and given more slots on TCS than other liners. So that they have gained
more promotion from TCS’s policies of contracted-customers such as lower
freight, free electronic fee, receive their container in the peak season,…
- Regular customer group: 5 customers who have more than 1% of total quantity
in 7 months, and they book in more than 3 consecutive trips, but they did not
sign the contract with fixed slot so that they have not gain more promotion from

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TCS’s policies. We called them are Regular customers, who are potential to
become key accounts.
- New customer group: this group is divided in two sub-group such as irregular
customers and unreached customers. In detail, there are 8 out of 18 popular
companies in reefer market who only used TCS’s service for 1-2 times. They
just choose TCS when they have emergency reefer container need to be
transported immediately while TCS’s shipping schedule is suitable. On the
other hand, unreached group which contains 3 out of 18 popular companies
have heard about TCS’s reefer service but have never used.
Table 4: List of 18 biggest companies in reefer container market
Type of customer Customer’s name How to they knew TCS
Number of
40RH in 7
months (79
routes)
Quantity in 7
month/ total
quality
KEY ACCOUNT
HNC TCS’s dry service shift 233 46,88%
VINACONNECT Director introduced 143 28,77%
REGULAR
CUSTOMERS
HAI DANG PHAT TCS’s dry service shift 22 4,43%
TCRF TCS’s dry service shift 22 4,43%
COLLYER Market information 21 4,23%
VINALINES HP Market information 21 4,23%
VIET SAC TCS’s dry service shift 18 3,62%
NEW CUSTOMERS
- irregular customers
SCL TCS’s dry service shift 4 0,80%
HAMITRANS TCS’s dry service shift 3 0,60%
TNN TCS’s dry service shift 3 0,60%
GL TCS’s dry service shift 2 0,40%
GREEN LOG Market information 2 0,40%
DE LTA Market information 1 0,20%
GMD TCS’s dry service shift 1 0,20%
KIM THANH SINH TCS’s dry service shift 1 0,20%
NEW CUSTOMERS
- unreached customers
TTO
NHAT PHUONG
TIEP VAN XANH

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Source: TCS’s business report
A qualitative research method, which emphasizes the socially constructed nature of reality, was
conducted as in-depth interview to record, analyze and attempt uncover the deeper insights
about customer’s experience and their point of view toward TCS’s reefer service. This group
consists of 3 customers represented to 3 main categorizes, who use this TCS’s new service
permanently, regularly and irregularly. The findings then could be divided in two points as
follows:
Low customer satisfaction of regular customers group
Currently, there are just only 2 customers standing as TCS’s key account group.
Moreover, the key accounts of TCS are satisfied with TCS’s service and they are
giving more slots in TCS than in the other liners. The regular customers, who are
not satisfy with TCS’s service, policies, freight and support. They use TCS’s
service to keep the relationship for peak season. They have no plan to shift more
volume from other liners to TCS. Therefore, it seems like this customer group
does not intent to increase the volume.
According to the interview result, while being ask “do you intend to increase slot
in the future”, both regular group and new customer group thought that their
current regular shipping line is quite well, thus no plan to switch to TCS (see
Appendix 04). There is only key account agreed to increase their volume if they
have more contract and shift more in the future.
Failure in new customer approach
There are 4 over 18 customers, who have known about TCS’s reefer service by
market information (see Table 4). To understand customer’s insight about TCS’s
service, the elements affect to their decision to find out which TCS missed, we
conducted an in-depth interview on focus group. As reported by interviewee’s
feedback, both key account and new customer were agreed that they know about
TCS through transport market information. Especially, Ms. Le Thi Ngoc Anh –

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GL Viet Nam (new customer) said that she did not see anyone come to introduce
about this TCS’s new service (see Appendix 04). GL Viet Nam decided to use
TCS’s service because in the high season other regular shipping lines were almost
full. There is just only the regular customer knew TCS by the company’s staff.
The new customers group has been known TCS by market’s information instead
of marketing activities of TCS or sales team.
3.2 Central problem
In the high season, the new customers group tends to voluntarily use the service when
they have emergency good to transport as well as TCS’ shipping schedule is suitable
instead of waiting for the offer. However, they did not have plan to use TCS’s reefer
service permanently or shift a substantial proportion output in order to sign a fixed
contract with TCS. Additionally, there are still some well-known customers in the
market that have not used TCS’s reefer service (see Table 4). Related to TCS’s reefer
service field, 3 unreached customers included TTO, Nhat Phuong, Tiep Van Xanh seem
to have large influence and significant volume in the market.
TTO has the lowest output 100 containers/month and the highest output 300 containers/
month. One of current challenges of 70% customers choosing Hai An is difficult to book
this line with high output at the same time therefore customers have to divide their
output to other lines in the peak season. TTO’s main products are seafood, frozen food,
coconut water. This company is well- known as having the most reefer cargo shipping
by sea because TTO itself, which is not only the transport company but also the trading
company, invests in the fields of food and seafood. According to TTO side, this
company has not used TCS’s service because they did not know who to work with. Also,
a big company like TTO is accustomed to being invited by others, they would not
actively look for other transport partner unless there are any incentives or great benefit to
them.
Nhat Phuong has smaller scale than TTO and HNC with production around 50-100
containers/month, which mainly went through Hai An, the rest was splited into other

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lines. They also have not book through TCS because of unknown any direct contact.
Nhat Phuong’s structure is similar HDP’s, a forwarder merely collect goods.
In general, the common characteristic of these two unreachable customers is that they
have signed seafood and foodstuff contracts of big companies such as Vissan, Camimex,
Seaprodex and Kisimex so that their volume is constant throughout the year.
Ultimately, there are two main potential problems leaded to TCS performs under
expected revenue: low customer satisfaction of regular customers group and failure in
new customer approach in reefer service (see Figure 1).
It is undeniable that acquiring a new customer would cost from 5-7 times more
expensive than remain existing one. Also, consider research done by Harvard School of
Business that shows increasing customer retention rates by 5% would increase profit by
25-95%. However, the hardest thing to start not only a new business but also new
service is to look for the first customers. As there is no customer, the service would not
exist. It clearly shows that TCS could not reach potential customers even acquiring new
customers is extremely important. New customers increase the amounts of sales and
companies get more endorsement which will help to accelerate the cycle of money for
the companies. Thus, failure in new customer approach is focused as central problem to
analyze deeply in this thesis.
Figure 1: Initial cause – effective map for reefer service in Tan Cang Shipping (TCS)
3.4 Potential root causes
As a central problem, failure in new customer approach was found out by two potential root
cause: new customers knew TCS by market information instead of sale team and new customers

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tends to only use the service in high season when other regular shipping lines were almost full.
The lack of updating customer’s reefer service information leads to questioning the
effectiveness of sale team.
Nigel F. Piercy, David W.Cravens & Neild A.Morgan(10)
have said sale volume is the
most frequently used criteria to measure sale organization effectiveness. Hence, to
identify why there is failure in new customer approach, sale organization effectiveness is
considered to deepen. Effectiveness is a brief evaluation of sale organization’s outcome
and can be defined for either entire organization or smaller units such as regions or
district. It is related by sale management control system, sale territory design and
salesforce performance. However, on finding research literature, sale territory and
salesforce performance have contributed to the sale effectiveness, but do not completely
specify (Nigel F. Piercy, David W.Cravens & Neild A.Morgan 10)
. This thesis
concentrates on sale organization management under sale management control system
direction to discover thoroughly as its influence on sale volume is strongly believed.
Sales management is the process of developing a sales force, coordinating sales operations, and
implementing sales techniques that allow a business to consistently hit, and even surpass, its
sales targets. Therefore, to manage sale effectiveness, the organization should have the
reasonable policy in sale incentives and discover sales best practices, which motivate and lead
an effective sales team (Eric Longino4
). If your business brings in any revenue, the sales
management strategy is absolutely necessary. When it comes to boost sales performance for
every scale of operation, regardless of industry, the secret to success is always the precise sales
management process.
Understand effectiveness sale management from both perspective of sale manager and
salesperson is extremely crucial while running business. In order to measure the effectiveness
level, the businesses need to have system of sale management control. It was divided into two
separate dimensions: outcome- based system evaluated whole process outcome via sales and
profit results and behavior- based system assessed individual stages in whole process. In detail,
Anderson & Oliver (1)
believed that sale managers would less involve directly with sales team if
the sale control system are more outcome-based as the main sale manager’s control device is
the compensation system. On the other hands, in reality sale managers should actively involve

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with salespeople, work with them and try as much as them can to improve sales team’s
performance.
Anderson & Oliver(1)
described that sale management control system as a set of procedures,
which contain supervision, guide, evaluation and compensation, accepted in 1987 by Journal of
Marketing.
• Monitoring: supervising activities in progress to make sure they are on-track toward
reaching its objectives and to guide management decisions. Monitoring usually focuses
on processes such as time spend with salespeople, day-to-day activities, observing
performance of sales team.
• Directing: guidance or supervision of action in order to ensure people working under the
direction. Training people actively, discussing about the performance evaluations or
assisting employees improve their abilities represents for this stage.
• Evaluating: the assessment of an activity or project, focused on an expected and achieved
accomplishments, examining the results to determine the relevance, effective, efficiency
and the contributions of the interventions to the results achieved. In this case study, it
relates to profit contributed by each salesperson, number of sale calls, sale results.
• Rewarding: providing satisfaction or bringing benefits for employees which is considered
as motivation to change employee’s behaviors. To identify whether the business applies
this step in its management control system, there are some questions we should clarify
such as incentive compensation, non- incentive compensation and performance
feedback.
Basing on this concept and adding on an in-depth interview with Vice Director, who
currently has main responsibility and authority in TCS’s sale activities, the survey
was then designed for sale team to clarify how sale management applied in TCS and
whether sale management control system is effective or not. The extent to which sale
management control was measured by series of questions (5 point scale from never to
always). The questions is set in the survey based on criteria to be assessed under four
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above procedures of control system (see Appendix 03). All sale team including 4
people, are selected to conduct the survey.
3.5 Central root cause
According to the survey feedback, TCS’s sale management control system has trouble
in many indicators: policy of sale achievement, evaluating sale performance, time
spend with sale team, consistency of training sale team, frequency of performance
feedback. In particular, there were 3 sellers agreed that the manager rarely spend time
with sale team, also 1 other left said the manager just spent time with sale team one in
a while. It was showed that sale management control system somehow lacked of
monitoring process. On the other hand, all members of sale team agreed that sale
manager never participate actively in training sale people, which means that directing
in sale management control system is also one of TCS’s weakness.
However, the highlight is Evaluating sale service and Rewarding, the indicators
strongly affected to sale performance. In detail, most of salespeople in TCS said that
sale manager seems to rarely evaluate sale team’s performance. Additionally, 3 out of
4 people graded at point 2 while asking does sale manager provide performance
feedback to each salesperson. It is illustrated TCS has ineffective evaluating process,
even Vice Trade Director as well as sale manager have spent time with sale team to
look back sale performance, no lesson to be learned to improve as well as no criticism
to draw experience.
On the other hand, all salespeople voted for “never” while they are asked in the
survey “does the company has policy to encouraging sale people to increase their sale
result by rewarding them for their achievement”. It is illustrated that TCS’s sale team
is not motivated to find new customers and there would be no reward for that effort.
After all, Low sale management control system is the potential root cause that this
study was focused to analysis, in particular Evaluating and Rewarding. As TCS did
not have plan to criticize and appreciate in sale outcome, which would bring potential
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