Discuss about the Business Analysis and Valuation a Case of Vietnam.
Advancement in technology makes the world appear smaller. Business has become easier than before as it can be conducted in any country in the world due to advancement in international trade. Brands originating in one country are available in another country such as BMWs. Globalization offers multiple opportunities which in turn give serious challenges to the business. Innovative marketing strategies are required for the business to sustain the competitiveness. The complicated process in product marketing is coping up with new changes. Effective marketing is meeting the changing demands and wants of the customer. Launching products in a new market brings forth new hurdles. Before developing marketing strategies, it is necessary to have a clear understanding of the new target market both its external and internal environment. Therefore, before assessing the results of international marketing strategies, it is essential to properly scrutinize the political, economic, cultural and legal factors of the target market.
The report deals with marketing of Yeo Hiap Seng Ltd or Yeo’s products in the new target market- Vietnam. The purpose of this report is to develop a market strategy for launching Yeo’s products. The report presents the overview of the organization. Further, it gives detailed PESTEL and SWOT analysis of the target market along with the detailed market analysis. Further, it discusses the marketing strategy of Yeo’s Company to launch its products in Vietnam. In this context, the report provides details such as objectives and strategies, a positioning of the product, marketing mix, implementation, and control.
Yeo Hiap Seng Ltd is a drink manufacturing company in Singapore (Wong et al., 2013). This company is also an investment holder in Malaysia and Singapore. This company has rich heritage since several hundred years. It has laid its strong footprints not only in Singapore but also in Europe, Australia, New Zealand, US, Japan, China, Hong Kong, Myanmar, Pacific Islands, and Cambodia (McNeill, 2013). It manufactures its Asian drinks, and with the license from Pepsico, it also produces Mug Root Beer, Mountain Dew, Pepsi, and 7Up. The Asian beverages manufactured by Yeo include Justin and Pink Dolphin (Wong et al., 2013). It firmly believes in producing high quality of food and beverage products. Additionally, Yeo smartly manages other international brands such as Evian, Red Bull, Gatorade, Erika Diaries and Uni-President. This “well-loved household brand” is excelling continuously due to its innovativeness and intimate knowledge regarding customers’ needs and wants. With its hard work and effort, Yeo’s has successfully established itself as the international brand and is expanding beyond Asian horizon (Lee et al., 2015).
The vision of YHS is to be a leading food and beverage company in the global market. Its mission is to satisfy its customers with high quality products with its innovative strategies and by embracing excellence (Wong et al., 2013). Currently, it aims to launch its food and beverage products in Vietnam. For this purpose, it performs the market analysis of Vietnam. Along with it Yeo’s marketing strategies, a positioning of the product, marketing mix, implementation and control will be discussed in the subsequent sections.
A company must perform a detailed research on the target market before launching its products (Baker & Saren, 2016). Therefore, Yeo performs Vietnamese functional food market research and considers both the internal and external factors that may influence its product launch. The first step of country analysis includes PESTEL analysis tool. It helps in investigating macro environmental factors that may affect Yeo Hiap Seng Ltd (Kotler et al., 2015). In the business world, the word macro environment refers to external factors that affect decision making, performance, and strategies of organization (Nguyen, 2013). It will be followed by SWOT analysis that is useful to address the marketing pillars- “price, product, place of sale and promotion.” Next to it a more in-depth market analysis is performed to review the market characteristics of Vietnam.
Figure: Decision framework for entry into foreign market
(Source: self-created)
Figure: PESTEL model with two additional components
(Source: Nguyen & Ha, 2013)
Political factors- According to (Nguyen, 2013) since 1975, Vietnam is holding a tight grip on its power. This single-party state follows a communist ideology. Since 1986, Vietnam is undergoing serious political and structural reforms. It has become more open for civil participation, which in a way supports its vision to become a “modern and industrialized nation” (Griffin, 2016). In comparison to other countries Vietnam has lesser political turmoil or a threat of terrorism. Its political stability is the key to growth. Recently, Vietnam has been accepted as a member of World Bank, Asian Development Bank, Asia-Pacific Economic Cooperation forum, United Nations, International Monetary Fund and World Trade Organization (Nguyen & Ha, 2013). These are the traits which make it an attractive trade and investment partner.
According to Wertheim-Heck et al., (2014) Singapore and Vietnam have outstanding and multifaceted bilateral relationship. In 2012, there has been the improvement in trade figures. Singapore exports to Vietnam grew by 13% and Vietnam exports to Singapore increased by 18% (Gates et al., 2014). In 2014, the third largest foreign investor in Vietnam was Singapore, which contributed 1300 projects and a total investment of 32 billion US dollars. Both the countries have good cultural relations as well. The Vietnamese students who are highly proficient in English and have completed junior secondary school receive scholarships from “Ministry of Education” of Singapore. Both the countries have a shared interest in endorsing “mutual trade and investment”. The fast growing economy of Vietnam along with its structural reforms is a great opportunity for further development of trade and investment relations (Bachelor, 2013).
Economic Factors There is a robust transformation in the economy of Vietnam. It has changed from the “poorest country in the world” to “lower-middle income country”. In 2010, its income per capita was reported to be 1130 USD. In 2013, the GDP per capita of this country reached 1765 USD (Griffin, 2016). According to Wertheim-Heck et al., (2014) Foreign Direct Investments level in Vietnam has been sustained for 10-12 billion USD/year. Vietnam is leading in the world regarding stock market. In 2014, the net foreign inflow was found to be 107 million USD. In 2012, the consumer spending in Vietnam had increased by nearly 100 billion USD. The value of food expenditure has increased from 23,102 million USD to 31,500 million USD in the period of 2010-2013 (Gates et al., 2014). According to reports of Nguyen & Ha, (2013), Vietnam is found to be the “fastest growing FMCG market” particularly in the area of dairy products, beverage, and foods showing 21.5% growth in the year 2013. In 2013, the inflation rate has significantly reduced by government’s intervention to below 6%. The central bank is reducing the interest’s rates to support business in Vietnam. Therefore, foreign investors can easily access funds in Vietnam (Griffin, 2016).
Social Factors According to Wertheim-Heck et al., (2014), the total population of Vietnam is approximately 94 million and for every dependent individual with age 15 or above 60, there are two or more working individuals of age range 15-60. There are several health concerns in Vietnam rising due to modern lifestyle, which includes, increasing consumption of fast food, tobacco, and alcohol abuse. Hence, there is a number of cardiovascular diseases reported in Vietnam. According to reports of (Lee et al., 2015), there is massive growth of middle-class consumer segment and spending with 46 billion USD in 2012. There is the increase in food and beverage industries in Vietnam (Gates et al., 2014).
Technological Factors- Vietnam is developing in the field of technology. It spends 10% of its GDP annually in telecommunication, energy, sanitation, and water and transport system, which are essential for modernization and industrialization in the country (Tuan & Yoshi, 2016). The government of Vietnam is planning to purchase patent in the areas such as information technology, automation, and manufacturing. The country is the week in food process technology because of which it does not manufacture high quality of food which is an influential factor for Yeo (Gomez et al., 2014).
Environmental Factors Vietnam experiences diverse climate. The summer temperatures may rise to 400C. It hampers businesses depending on hydroelectric plants due to regular power failure (Griffin, 2016). Yeo may suffer in its business as many of its products needs refrigeration. Additionally, Vietnam is reported with the high level of pollution that may trigger high-risk conditions such as heart strokes (Gates et al., 2014).
Legislative Factors- The food and safety laws of Vietnam indicates that to be licensed the food products must meet the health and quality standards. It must meet all the requirements related to advertisement, labeling, importing and exporting. The import tariff for functional food products is marked at 30% in addition to 10% VAT tax (Lam et al., 2016).
Conclusively, Vietnam welcomes foreign investment because of its political stability and strong economic growth. Vietnam has transparent, and open market and other factors are also favorable for Yeo’s product launch. It has an inexpensive workforce, abundant resources, and a good geographic position. However, there are some challenges faced by Vietnam, which are, poor infrastructure, an absence of predictability, low education attainment, and skills.
Strength- Vietnam attracts foreign investment due to rapid growth in food processing industry. There is the increase in brand recognition among the Vietnam consumers particularly the wealthy and the young class. Alcohol and another beverage consumption are significantly increasing in Vietnam. The main advantage for domestic manufacturers in current global instability includes a stable supply of raw materials, agricultural products, and pricing system (Gates et al., 2014).
Weakness- The income consumers face disparity due to a difference in income earnings between urban and rural areas. Except for sectors like dairy and confectionery, the overall food processing industry is very fragmented. The country is too slow in adopting latest technology in the food and agricultural sector. It may significantly hamper Yeo’s production system. Although the government is giving its best effort, Vietnam’s infrastructure is still weak. The transport system is weak with ports and railways not meeting the economic growth and has the little link with the outside world (Gomez & Tuan, 2014).
Opportunity- The market barriers may be eliminated if Vietnam joins the WTO, which may benefit the exporters. The competition may increase with redesigning of trade restrictions. The lifestyle changes in urban areas are positive with consumers mainly demanding high quality and expensive food items (Tuan & Yoshi, 2016). Additionally, there is the increase in income and convenience in urban areas. There are more investment opportunities in Vietnam due to its increasing domestic market, export facilities, cheap labor, and successful privatization of food companies. There is the increase in investment in food and beverage industry due to higher consumer spending in soft drinks and alcohol. Therefore, drinks manufacturers can come up with diversified products with health benefits to attract consumers. The tourism industry is growing with increased profitability and convenience for packaged goods. The agricultural sector, however, requires a strong investment, which may enable the investors to count on “support policies of the state” (Nguyen et al., 2015).
Threats- following the Vietnam’s WTO membership, the small companies may remain behind in the fierce competition due to lack of affordability to exist in the market. The inflationary pressure may arise due to “Vietnam Dong devaluation”. In 2010, there was the rise in consumer price inflation. The BMI predicts a rebound in the mid double-digit year. Manufacturers in the food industry may face a risk of profit due to increase in the cost of agricultural commodities (Griffin, 2016).
There are several health concerns in Vietnam rising due to modern lifestyle, which includes, increasing consumption of fast food, tobacco, and alcohol abuse. Hence, there is number of cardiovascular diseases reported in Vietnam. People are increasingly opting for health drinking habits, which is an added advantage for drinks manufacturers. The health supplement market has grown by 11% by the year 2013. Evidently, the Asian consumers are demanding products that may support their busy lifestyle. Therefore, Vietnam welcomes more entrances in the health supplement industry (Wong et al., 2013). Since last five years, there is a tremendous growth in the food market. By the year 2012, there were 1785 enterprises in Vietnam selling more than 10,000 functional food products. The high cost of the food products is due to the lack of development in technology and high import tax. Yeo may reap added advantages by manufacturing functional foods in Vietnam. To combat the growing health disasters especially the cardiovascular diseases the government is advocating higher consumption of functional foods by supporting the customers. However, the “Vietnam Association of Functional foods” fails to supervise the market appropriately with inadequate punishments for the derogations (Griffin, 2016).
The consumer survey by Gates et al., (2014) in Ho Chi Minh City showed the higher preference for health among consumers and high spending on milk, food, and other beverage products. The major channels for distribution include supermarkets, drug stores, online stores and specialty stores. The drug stores will be permitted to sell the functional foods only if it has “Certificate of Food Hygiene and Safety” (Gomez & Tuan, 2014). Supermarkets were found to be an effective distribution channel for drinks and other beverages. Consumers in Vietnam are not comfortable with online marketing. Yeo must carefully choose its distribution channel depending on its product types and storage requirements.
The Yeo Company has analyzed the external and internal factors of the target market- Vietnam. Therefore, the next objective to the market entry is to develop a marketing strategy. However, there is no specific strategy; best action should be taken depending on the circumstances. A business must identify the risks, the controlling level, and the required resources.
Figure: Target market entry, risk resources, and control
(Source: Nguyen & Ha, 2013 )
Firstly, the target segment includes people from all groups, with the geographic region in the market segmentation being the urban area. Yeo’s beverages are applicable for consumption by both the middle and the upper-class consumers. Yeo’s products contain low calories. Therefore, it has health benefits that may give the advantage to the diabetic patients.
The product shall be positioned in the market in a manner that will attract the early adopters. The positioning of the product includes sports segments, women, and men of all ages groups as well as children. Firstly, Yeo must explain its customers about the usefulness of the product, its innovativeness and its difference from the other products of the competitors. Simultaneously, it must vigilantly note customer’s feedback and expectations. Secondly, it must create an appeal for its brand by vigorous advertisements (Cushnan, 2016).
Creating awareness among the consumers is a vital step in any business. According to Kotler et al., (2015), the key strategy is to use sports person for endorsing the food related product. The reason being sports person are the icon of fitness and health, therefore; clients tend to believe the health benefits of the products and eventually accept them. The strategic positioning of the product can be enhanced by using blogs in the internet and online marketing through Facebook, Twitter. This will help stimulate the young consumers quickly. Digital marketing (using viral videos, SEO) can easily increase product awareness (Cushnan, 2016).
The three core elements of product strategy include- “distribution, promotion and customer support” (Baker & Saren, 2016). Yeo can choose from one of the distributing channels in the Vietnam discussed above after carefully considering the pros and cons. Promotion greatly depends on the online presence of the product and rigorous advertisements. The crowd based campaign is an additional boost to increase the customer support. Such campaigns provide an opportunity to speak with media analysts to brief details of a product and its relevance and ensure long-term market presence (Rundle-Thiele et al., 2015). A successful promotional activity determines the success rate of a product after its launch in the market. Customer will develop a positive concept of the product once they are convinced that it offers both mental and physical vitality. This will work as the template for the next step that is expanding the product distribution (Baker & Saren, 2016). Packaging plays the major role while marketing, however, it must meet the food and safety standards as discussed earlier. It must have a distinct catchy logo and relevant product information as per the guidelines of Vietnam. The product must receive approval from FDA.
One can determine pricing rates by using the cost-plus method. It involves getting the desired profit by calculating the overall production and other promotional costs of products. At the initial level, penetration pricing system can be used which means setting the product at the lower price initially for faster diffusion of product in the market (Tuan et al., 2016). The organization has to initially trust the agents as the product moves from the “from supplier to manufacturer to wholesaler to retailer to consumer” (Kotler et al., 2015). The distributors will ultimately deliver the product to the customers. They must be paid high fees initially as they are the final representatives of the product. See the Appendix for the action plan.
Conclusion
Conclusively, the food and beverage industry is growing well in Vietnam, which is attractive for foreign investment. Consumers are more interested in buying local Vietnamese products. Therefore, YHS ltd must work hard to establish its market. The great potential of Vietnamese market is evident through PESTEL analysis. Food manufacturers can generate huge profits by delivering health benefits to the consumers. It is apparent from the market analysis that Yeo Hiap Seng Lt. has great opportunities in the Vietnamese market. Vietnam welcomes foreign investment because of its political stability and strong economic growth. Vietnam has the transparent and open market, and other factors are favorable for Yeo’s product launch. It has an inexpensive workforce, abundant resources, and a good geographic position. However, there are many threats as discussed under SWOT analysis that is not under the control of Yeo Company. Therefore, Yeo must take appropriate decisions keeping in mind all the pros and cons of the Vietnamese market. However, further research regarding competition among the food and beverage sector in Vietnam is recommended before Yeo makes its entry into Vietnam. The learning outcome of this study includes clear concept about business strategies, market research, analysis of the external and internal market environment, a positioning of product and services and finally reaching the customers.
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