Harvard Case - Dai Viet and Chien Thang: Two Companies and a Family (A)
"Dai Viet and Chien Thang: Two Companies and a Family (A)" Harvard business case study is written by Roy Chua, Ramesh Ramachandra, Mahima Rao-Kachroo. It deals with the challenges in the field of Strategy. The case study is 10 page(s) long and it was first published on : Jan 17, 2024
This case study presents a complex situation for the Tran family, balancing the growth of two successful businesses, Dai Viet and Chien Thang, while navigating family dynamics and potential conflicts. We recommend a strategic approach that prioritizes sustainable growth, family harmony, and long-term value creation for both companies. This involves a combination of strategic planning, organizational restructuring, and clear communication to ensure a smooth transition and continued success for the family business empire.
2. Background
The case focuses on the Tran family, owners of two successful businesses in Vietnam: Dai Viet, a construction company, and Chien Thang, a rapidly growing food processing company. The family faces challenges in managing the growth of both companies, ensuring a smooth succession plan, and navigating potential conflicts between family members with different visions for the future. The core protagonists are the Tran family members, particularly the father, Mr. Tran Van Minh, and his two sons, Tran Van Dung and Tran Van Thang, who represent different leadership styles and aspirations.
3. Analysis of the Case Study
Strategic Analysis:
- SWOT Analysis:
- Dai Viet:
- Strengths: Strong brand reputation, experienced management team, established market position.
- Weaknesses: Limited growth potential in the domestic market, dependence on government contracts, potential for corruption.
- Opportunities: Expansion into new markets, diversification into related industries, adoption of new technologies.
- Threats: Increasing competition, economic downturn, government policy changes.
- Chien Thang:
- Strengths: Rapid growth, strong market demand, innovative product development, entrepreneurial leadership.
- Weaknesses: Limited financial resources, lack of experience in international markets, potential for operational inefficiencies.
- Opportunities: Expansion into international markets, diversification into new product lines, adoption of e-commerce and digital marketing.
- Threats: Competition from larger players, changing consumer preferences, regulatory challenges.
- Dai Viet:
- Porter's Five Forces:
- Competitive Rivalry: High in both industries, with increasing competition from both local and international players.
- Threat of New Entrants: Moderate in construction, high in food processing, with potential for new startups and foreign investment.
- Threat of Substitutes: Moderate in both industries, with alternative construction materials and food products available.
- Bargaining Power of Buyers: Moderate in construction, high in food processing, with consumers having a wide range of choices.
- Bargaining Power of Suppliers: Moderate in both industries, with suppliers having some leverage in terms of pricing and availability.
- Value Chain Analysis:
- Dai Viet: Strong in project management, engineering, and construction expertise. Weaknesses in marketing and financial management.
- Chien Thang: Strong in product development, manufacturing, and sales. Weaknesses in logistics and supply chain management.
- Business Model Innovation: Both companies have the potential for innovation, with Dai Viet focusing on adopting new technologies in construction and Chien Thang exploring new product lines and distribution channels.
Family Dynamics:
- Leadership Styles: Mr. Tran Van Minh, the father, is a traditional leader with a strong emphasis on family values and loyalty. His sons, Tran Van Dung and Tran Van Thang, have different leadership styles, with Dung being more cautious and risk-averse, while Thang is more entrepreneurial and ambitious.
- Succession Planning: The lack of a clear succession plan creates uncertainty and potential for conflict. The family needs to establish a transparent process for leadership transition and ensure the involvement of all stakeholders.
- Communication and Trust: Open communication and mutual trust are crucial for resolving potential conflicts and ensuring family harmony.
4. Recommendations
Strategic Recommendations:
- Strategic Planning: Develop a comprehensive strategic plan for both companies, outlining long-term goals, growth strategies, and financial projections. This plan should be aligned with the family's overall vision and values.
- Diversification: Encourage both companies to diversify their operations to reduce dependence on specific markets or industries. Dai Viet could explore new construction segments, while Chien Thang could expand into new product lines or geographic markets.
- Innovation: Foster a culture of innovation and encourage the adoption of new technologies and business models. Dai Viet could invest in BIM software and digital construction techniques, while Chien Thang could explore e-commerce and online marketing platforms.
- International Expansion: Explore opportunities for international expansion, particularly for Chien Thang, which has a strong growth potential in emerging markets. This requires careful market research, strategic partnerships, and cultural sensitivity.
- Mergers and Acquisitions: Consider strategic mergers and acquisitions to accelerate growth, gain access to new markets, or acquire complementary skills and resources. This requires careful due diligence and integration planning.
Organizational Recommendations:
- Restructuring: Consider restructuring the organizational structure to create clear lines of responsibility and accountability. This could involve establishing separate management teams for each company, with clear reporting lines to the family board.
- Professional Management: Recruit experienced professionals to manage the day-to-day operations of both companies, freeing up the family to focus on strategic decision-making.
- Corporate Governance: Implement strong corporate governance practices to ensure transparency, accountability, and ethical behavior. This includes establishing a board of directors with independent members and implementing clear financial reporting procedures.
Family Recommendations:
- Communication: Establish open and transparent communication channels between family members, encouraging open dialogue and resolving conflicts constructively.
- Succession Planning: Develop a clear and transparent succession plan, outlining the roles and responsibilities of family members in the future. This should involve a process for selecting and training future leaders.
- Family Council: Establish a family council to provide guidance and oversight for the family business empire. This council should include all family members with a vested interest in the companies.
5. Basis of Recommendations
These recommendations are based on a thorough analysis of the case study, considering the following factors:
- Core competencies and consistency with mission: The recommendations focus on leveraging the existing core competencies of both companies, while also exploring new opportunities for growth and diversification that align with the family's long-term vision.
- External customers and internal clients: The recommendations consider the needs of both external customers and internal clients, including employees, suppliers, and investors.
- Competitors: The recommendations take into account the competitive landscape and identify strategies for gaining a sustainable competitive advantage.
- Attractiveness ' quantitative measures if applicable: The recommendations are based on a qualitative assessment of the potential benefits, considering factors such as market size, growth potential, and profitability.
6. Conclusion
The Tran family has a unique opportunity to build a successful and sustainable family business empire. By implementing the recommended strategies, they can achieve growth, maintain family harmony, and create long-term value for all stakeholders. The key to success lies in developing a shared vision, fostering open communication, and embracing a strategic approach to managing their businesses.
7. Discussion
Alternative Options:
- Selling the companies: The family could consider selling one or both companies to focus on other ventures. However, this would require a significant financial commitment and could lead to a loss of control over the businesses.
- Maintaining the status quo: The family could continue to operate the businesses as they currently are, but this could lead to stagnation and missed opportunities.
- Focusing solely on one company: The family could choose to focus their efforts on one company, either Dai Viet or Chien Thang, but this would require making difficult decisions about the future of the other company.
Risks and Key Assumptions:
- Economic downturn: A significant economic downturn could negatively impact both companies, particularly Dai Viet, which is heavily reliant on government contracts.
- Competition: Increased competition from both local and international players could erode market share and profitability.
- Family conflicts: Internal conflicts within the family could hinder decision-making and affect the overall performance of the businesses.
8. Next Steps
- Develop a comprehensive strategic plan: The family should immediately begin developing a detailed strategic plan for both companies, outlining specific goals, objectives, and action plans.
- Establish a family council: The family should establish a formal family council to provide guidance and oversight for the businesses.
- Recruit professional management: The family should recruit experienced professionals to manage the day-to-day operations of both companies.
- Implement a succession plan: The family should develop a clear and transparent succession plan, outlining the roles and responsibilities of family members in the future.
By taking these steps, the Tran family can ensure the long-term success of their businesses and maintain family harmony for generations to come.
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Case Description
In 2019, the three Do sons, Nam, Hoa and Giang were shocked when their parents, Mr Hanh and Mdm Nghi, announced that they would hand over the joint running of their two companies-Dai Viet (DV) and Chien Thang (CT), to them. Since 1999, the Do family had consecutively founded and operated multiple sanitary- and porcelainware factory businesses that included Mdm Nghi's CT in 2002, and the family's DV Group, in 2013. CT and DV were vastly different in their employee base, organisational cultures, and operational processes. Unfortunately, given their proximity at work, cracks soon appeared when family disputes started affecting company operations, and vice versa. This disrupted decision-making at times and escalated to the point of shouting matches in front of employees. Eventually, by early 2019, Mr Hanh and Mdm Nghi were adamant that the brothers had to learn to work with one another to eventually merge and manage the two companies together. Giang however, being the only son who had worked with his father through complex financial and operational challenges, felt the crushing weight of responsibility bearing down on him. He wondered if the two companies ought to be merged despite the cultural, operational, and personal differences. Alternatively, he could hire professional consultants to help iron out the various issues in both companies. The most drastic measure would be to consider selling one of the companies. If so, which of the two companies should the family sell? Their parents had worked hard to grow DV and CT-what would they think if their sons sold off the embodiment of their legacy in the sanitary- and porcelainware industry?
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