Introduction
Aussifresh is a company that sells fresh fruits, vegetables and Wine in the Australian market. It should be known that the company wishes to expand to the Asian market and this is a good development. Considering the fact that the company has a market share of 16%, it will be wise for them to expand their business and operations overseas for long term sustainability.
This is because international expansion is a good strategy that can be used to expand a business. Vietnam is a market that has a great growth potential for Aussiefresh (Johnson et al 2008, p. 17). This is based on various positive economic prospects that have been witnessed in recent years. It is advisable for the company to go international because this is a good approach of ensuring that shareholders get maximum returns.
Vietnam is a densely populated country that has had some considerable success in recent years and this is commendable. As far as economic growth rate is concerned, the country has made some considerable progress. This has been done after various economic reforms that have been initiated by the government.
The country has a population of approximately 89 million people (General statistics office 2011, p. 15). Its capital city is Hanoi and this can be a major entry point. As a matter of fact, most people buy fruits and vegetables in the capital and this is a good signal.
The major religion is Buddhism and the country has an area of 329,247 sq km (General statistics office 2011, p. 23). In recent years, the government has been coming up with the right polices to enhance growth.
The country has a dynamic private sector and this can help to improve the business climate. The private sector has been encouraged to invest in the country because the government wants to spur growth. Vietnamese primary occupation is agriculture ands this is the right place for an agricultural company like Aussifresh.
As a matter of fact, the country has a GDP growth rate of 8.5% and this shows that there is great potential. Vietnam has a labor force of 46.42 million with an unemployment rate of 5.3% (General statistics office 2011, p. 27). This labor force will be instrumental in enhancing the company’s operations in this new market. It should be known that the country has a lucrative agricultural sector because it contributes 19.5% of the GDP (Vuong 2010, p. 14).
Executive summary
Vietnam’s trade policies
Vietnam can be said to be a transitional economy. This is because it is moving to a market based economy (Vuong 2003, p. 14). The government has been advocating for businesses to run their operations without any interruption and this is commendable. In this case, there have been various economic reforms.
Most of these reforms are aimed at making the economy to be more market and private oriented to attract investors. The private sector is given various preferences that are aimed at making it easy for them to launch their operations in the country. The country has acknowledged that the key to its growth will be in foreign direct investments and this is good (Jahn 2006, p. 13).
Just like any other developing country, Vietnam is committed to increase foreign direct investments for sustainability. As a matter of fact, the government has a free trade and investment policy and this is a good indicator to show that it is commitment to attract investments.
Foreign companies have been given a clear timetable that will help in the removal of protection as time goes by. This is based on the argument that foreign companies can threaten local businesses if they are not regulated. As much as this is a reality, Vietnam has reduced some taxes depending on the sector.
Because agriculture is the mainstream of the economy, the government has been welcoming proposals on the way forward. There are various efforts to restructure different sectors of the economy and this will enhance trade in a broad way (Doing Business 2011, p. 14).
As a matter of fact, there is the regulation of investments and this will provide a systematic transition. There have been various efforts to increase access to credit and this is aimed at upgrading the business environment (Karrnow 2006, p. 9). Currently, the central bank is pushing commercial banks to reduce interest rates to encourage lending and uptake of loans.
This will provide businesses with enough credit that they need to enhance their operations. In this case, Aussiefresh should not worry that the country lacks enough credit. The country has a tax rate adjustment policy that is aimed at foreign investors to promote their businesses. This will provide these businesses with enough support for sustainability.
Industry Analysis (Porter’s Forces model)
The fruits and vegetable industry in Vietnam is a key asset for income generation and improvement of lives. As much as most rural households grow fruits and vegetables, the industry has not been fully exploited (Johnson et al 2008, p. 32). This is because such farming is done on a subsistence level that can not sustain the demand for fruits and vegetables in the country.
Commercial production is mostly based in the south and this is good because there are large farms. Most companies have based their operations in these regions because fruits and vegetables are highly perishable. Importation of fruits and vegetables has increased drastically in recent years and this is good business for the company. As a matter of fact, this proves the fact that the demand for fruits and vegetables will continue to grow as the population increases.
The country and industry does not have barriers to entry because the government has been encouraging investors through good policies. Such policies can be seen in the provision of affordable land for foreign companies. This is based on the fact that land is an important factor of production that every company should take into consideration before going in a new market (Johnson et al 2008, p. 38).
As a matter of fact, the ministry of trade has been wooing investors from different countries and this is commendable. There is no retaliation because the demand for fruits and vegetables has not been met. In this case, there have not been any instances of hatred towards foreign companies in Vietnam.
This means that any attempt to cover up this deficit will be highly appreciated by the government and the population at large. There is commonality of products in the industry and therefore the company should not fear for other suppliers (Johnson et al 2008, p. 24). This is based on the fact that they are all selling fruits and vegetables.
The determining factor will be value addition to the company’s products (Porter 2008, p. 19). Production infrastructure is good and there are no high costs of production. In this case, pricing is determined by market forces. In a broad perspective, the market does not have a dominant player and there should be no cause of alarm that one company will dictate to others.
Customer/client profile (VRIO system)
The VRIO system gives something that is valuable, rare, and inimitable. To a large extend, it explains an aspect that the organization can fully exploit to its advantage. Aussifresh has been successful in the Australian market because of offering unique products. This is the key factor to its success in Vietnam (Murray 2007, p. 18). The company has been growing because of a good brand name in the Australian market and it can still replicate this in Vietnam for sustainability.
The fruit and vegetable market requires a lot of customer service and product differentiation because of commonality in products and the company needs to capitalize on this. To penetrate this market, the company needs to be unique through its business model that will attract customers (Armstrong 2006, p. 16). Based on the fact that it has a 16% market share in Australia, it can still get a sizeable market share by responding to customers needs through unique products.
SWOT analysis
The Vietnam fruit and vegetable industry has a great potential and this can be analyzed by looking at the SWOT analysis. The strengths of the industry include climatic advantages and a year round production of fruits and vegetables (Johnson et al 2008, p. 32). The country’s climate favors the production of fruits and vegetables and this is good.
In extreme cases, irrigation can also be used to supplement rain fed agriculture in the country. As a matter of fact, the ministry of agriculture has been moving in to subside some agricultural inputs and this will lead to an increase in the production of fruits and vegetables.
It should be known that the country has experienced farmers who have continued to give good returns (Johnson et al 2008, p. 29). This means that Aussifresh will have enough supplies. Opportunities can be seen in the great demand for vegetables and fruits in the domestic market. There is a reduction in taxes and this is good for business.
The rise in the number of supermarkets means that the company will not have problems in supplying its products. The number of supermarkets and the retail sector as a whole has been on a rapid growth and this will give the company a good market. This increase has been brought about by a good consumer confidence. There are a number of policies that are favoring investments in the country for long term sustainability.
The industry has weaknesses in small production unit size (Johnson et al 2008, p. 54). A small production unit size limits the use of technology and this is a big challenge. Therefore, there is need to enhance production for the general wellbeing of all stakeholders. Generally, the industry has a below yield average of 87% (Johnson et al 2008, p. 32).
It should be known that the industry has underdeveloped supply chains. The dominance of foreign companies with a large financial base is a threat. There is a lot of reliance on traditional practices and this can affect productivity.
Hofstede Dimensions
Hofstede argues that culture can be a source of conflict rather than a synergy. This means that every company that wants to operate in a new and unique market should first of all strive to understand the society’s culture. Australia and Vietnam have different cultures and the company should evaluate this to suit well in this new market (Itm 2011, p. 21).
The company should study Vietnams’ culture to understand various business dimensions. Any misunderstanding will make them to be out of touch as far as culture is concerned. For instance, in Australia, managers are not supposed to see themselves as superiors.
This is the direct opposite of Vietnam, where there is a strong sense of authority (Vietnamculture 2011, p. 12). Therefore, the company will have to adjust its management model to suit well in Vietnam.
In Vietnam, business relationships can be social while in Australia, such relationships remain strictly professional (Worldbusinessculture 2011, p. 17). In this case, Aussiefresh should relate well with all stakeholders and the business community for sustainability. Seniority is very important in Vietnam and the company should understand this to suit well in the country’s operations.
All the aspects of Hofstede Dimensions like individuality, power distance index, long term orientation and masculinity should be evaluated for long term sustainability (Itm 2011, p. 21). This is because the company can not come in with its own way of doing things and expect the whole society and customers to follow suit. As long as the company understands such aspects, it will be successful in its operations in Vietnam.
Business problem (conclusions and clear recommendation)
As far as the viability of entering Vietnamese market is concerned, it will be a noble idea for Aussifresh to venture in this market. There are good indicators that the economy is picking up based on an economic growth rate of 8.5%.
The growth of supermarkets and a god demand for fruits and vegetables means that the company is not venturing in a bad market. As much as there are good indicators that the market is not fully saturated, there are a number of recommendations that need to be evaluated for long term sustainability (Hoskisson 2007, p. 21).
The company should establish a strong brand because it is entering a new market that it is not used to. Vietnam has more than 20 fruit and vegetable companies and this means that Aussiefresh should expect a lot of competition as time goes by (Johnson et al 2008, p. 22).
In this case, value addition and product differentiation will be instrumental in ensuring that the company has the market share that it deserves to enhance its operations. As a matter of fact, customer service should be used to gain competitive advantage.
Aussifresh should invest in research and development to know what customers need for market satisfaction. To satisfy its new customers and market, the company should come up with a unique way of doing business to avoid imitation (Hoskisson 2007, p. 29). As much as it has been doing this in Australia, value addition should be done in relation to Vietnam’s culture.
It is undeniable that almost all households consume fruits and vegetables and the company can capitalize on the country’s 89 million people to grow its business. Wholesomely, Vietnam offers Aussifresh a good opportunity to enhance its business operations internationally.
Reference list
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