Global Marketing: National Audit and Foreign Markets Research Paper

Executive Summary

In order to grow and obtain a strong market position, many companies enter foreign markets and sell their products to international consumers. Vietnam represents an individual geographic market that offers great opportunities. It has good geographical location and trade relations with other countries in this region. as a developing country, Vietnam relies chiefly on an efficient technology innovation system, and creates a unique culture of its brand and products which will attract wide target audience. a product line, American biscuits, have opportunities to enter this market as a follower, and create a core of loyal supporters in Vietnam.

In spite of political and economic risks, sales in Vietnam provide additional profits and are all that enable some companies to make any profits at all. International expansion is one of the best methods to sustain strong market position and increase sales.

Chapter 1 Country Profile: Vietnam

Physical and Political Environment

Vietnam is part of Indo-China. Vietnam is considered a potential market for packaged food products proposing great opportunities for growth. In July 2000, U.S. President Bill Clinton signed a trade pact with Vietnam that promised a new era in two-way trade between the former adversaries. Since 60 percent of Vietnam’s population is under the age of 25, it is no surprise that PepsiCo and the Coca-Cola Company were also quick to make moves in Vietnam.

Experts agree that the Vietnamese market holds tremendous potential over the long term. It may be two decades before Vietnam reaches the level of economic development found in Thailand today. Meanwhile, the country’s location in the heart of Asia and the presence of an ample, low-wage workforce are powerful magnets for foreign companies. Overall FDI peaked at about $3.1 billion in 1997 after rising steadily since the early 1990s. Investment pledges totaled $1.48 billion in 1999, down dramatically from $4 billion in 2004. U.S. investment in Vietnam has lagged well behind that of other countries (VIETNAM: Economic Policy Analysis, 2006)

The population is very poor, with 2005 annual per capita income of only about $350. However, urbanites with savings estimated at $1 to $2 billion com­prise one-quarter of the population. The infrastructure is undeveloped: Only 10 percent of roads are paved, elec­tricity sources are unreliable, there is less than one tele­phone per 100 people, and the banking system is unde­veloped. The Communist Party of Vietnam (CPV) is struggling to adapt to the principles of a market econ­omy, and the layers of bureaucracy, built up over decades of communist rule slow the pace of change. Part of the problem was the “currency contagion” that had gripped Asia since mid-1997.

Asian countries that had been major investors were scaling back their activi­ties in Vietnam. In January 2000, for example, the regula­tory environment improved with the enactment of an enterprise law that streamlined the process of setting up a business; a stock market was also opened (VIETNAM: Economic Policy Analysis, 2006).

Socio-Cultural Issues

Operating in Vietnam involves the company addressing the issue of cultural difference and conse­quently developing a balance between standardization and adaptation. In Vietnam HRM is the prerogative of senior management. HRM has elevated human resource issues to a position of key strategic importance. Vietnam is a food-sensitive country with deep historical traditions and values. Metaphorically, “If cooking were painting, Vietnam would have one of the world’s most colorful palettes” (Vietnamese Food, n.d.). The main opportunity for the company is that the Vietnamese like to try something new.

In societies like Vietnam the power distance is large and formed the basis of social relations. It is important to note that collectivistic society shows concern for a much wider group and emphasizes belongingness which can extend to organizations (Daniels et al 2006).

Language differences represent an important area of concern for a foreign company. In global marketing, of course, language is a crucial tool for communicating with customers, channel intermediaries, and others. One impact of globalization on culture is the diffusion of the English language around the globe. Today there are more people who speak English as a foreign language than there are people whose native language is English (Hanson et al 2005).

Packaging is probably the cheapest, quickest, and easiest way to adapt a product to make it more suitable for foreign markets. Language may not be a problem, because in Vietnam it is common to find products from English-speaking countries packaged using English. However, it is better to use the country’s language if the company wants to tap the full potential of the market. A special attention should be paid to colors and national symbols. Multilanguage packaging is becoming more and more prevalent for consumer goods (Tayeb 2000).

PESTEL

Today, political situation in Vietnam is stable marked by democratic processes and liberalization reforms. Strong political traditions have a great impact on Vietnam. After WWII, the country has been bisected roughly according to the pattern of the 1945 occupation zones, an arrangement that clearly reflects the realities of external power rather than of local national aspirations. Political interference and corruption are the main risks for a foreign company.

Legal Environment: Vietnam introduces laws and regulations in order to support foreign subsidies and attract FDI (foreign direct investments). In order to support national economy, the government prevents price rises, or even to rolls them back in basic industries such as steel. Governmental involvement seems to relate price increases to the impact on inflation and increased productivity. Government has the influence to block or roll back price increases (Hanson et al 2005).

Economic situation in the country is marked by high inflation rates and low income per capita. Thus, liberalization and high level of investments can be considered as opportunities for a company to enter this country. Southern Vietnam has higher standard of living than the north part. For a foreign company, there are also the necessities of making long-run capital commitments, meeting the requirements of joint ventures with nationals, and the imposition of special income taxes and import duties on necessities, as well as differences in social legislation, location considerations, protection of home products, governmental attitudes and control, laws affecting labels and standards, transportation and communications problems, and the risks o inflation, currency devaluation, and expropriation (Hanson et al 2005). All these create many additional uncertainties for those encountered in national marketing.

Social-demographic factors suggest fast population growth and decreased mortality rates. Both in physical appearance and in most aspects of their culture-notably, their language, their traditional form of administration, and their religion, which contains elements of animism, Taoism, Confucianism, and Mahayana Buddhism–the Vietnamese show much the closest affinities of any Southeast Asian people. It is the northern half of Vietnam which has the larger population, and, in spite of provisions for moving refugees to the south, this distinction is not likely to disappear entirely (Johnson and Scholes 2003).

Technological factors involve the Internet access and development of telecommunication infrastructure, new methods of doing business and information availability. Such factors as continued economic growth, increased disposable income, vigorous domestic and foreign competition, accelerating technology, automation, population decentralization, expansion, and innovation will spur the appearance of this new marketing form. The application of computer technology and the use of new analytical techniques have added greatly to the efficacy of planning activities. Such tools as critical paths, input-output analysis, payoff matrices, decision trees, linear programming, and simulations, discussed in later chapters, are used extensively in marketing-planning operations (Johnson and Scholes 2003).

Chapter 2 National Audit

Product Line

The product line to be marketed in Vietnam is ready-made American biscuits. There is no need to adapt this product line to new market, for this reason it will be kept standard. In recent years, international food preferences are gaming increased acceptance In Vietnam., for instance, McDonald’s and Coca-Cola Inc. Heads of families in Vietnam are pressed for time and need home-cooked meals. Also, young people are experimenting with different foods, and the global tourism boom has exposed travelers to American biscuits and other ethnic foods. Shorter lunch hours and tighter budgets are forcing workers to find cheap food. Also, as cultural differences become less relevant, such conve­nience products will be purchased in any country when consumer disposable income is high enough. Also, packaged ready-made American biscuits can be marked for Italian restaurants and fast food bars.

This product line will suit the needs of the market including cheap but high-quality products. This product line will be available for different consumers including low-income and middle-income families, and fast-food restaurants. The choice of Vietnam is not accidental (Keegan & Green 2007). This market is considered as the most potential one for food industry because it has the poorest infrastructure development among other countries in this region.

The main challenge is that American biscuits are well-positioned to take on this important global leadership role. The basic advantage of this product is absence of seasonality in purchases, which allows the company to calculate revenue growth and the degree of market penetration. In summer months, there can be a decline in sales, but it will not have a great influence on revenue and growth patterns (McDonald & Christopher, 2003).

Target Market

The target of American biscuits will be based on income segmentation and benefits segmentation. This approach is based on superior understanding of the problem a product solves, the benefit it offers, or the issue it addresses.The potential target market for American biscuits is low-income families. Most low-income families are not able to snack in the restaurants and prefer to cook themselves. Also, American biscuits can create a separate low-cost offer for fast food restaurants based on their purchasing potential. American biscuits can propose competitive prices to its customers (Keegan & Green 2007).

In relation to minor competitors, American biscuits can provide comparable buyer value but perform the activities more efficiently so as to attain a cost advantage, or perform the activities in a unique way that raises the value to consumers. Low-income families represent 80% of the market and for this reason this customer segment is the most attractive for American biscuits. Also, experts predict that the Vietnamese fast food market will grow in the next five years which creates long-term opportunities for the company (McDonald, Christopher 2003).

American biscuits are based its strategy on a differentiation criterion. This allows American biscuits to shift its focus to brand image and price reduction measures. This strategy will help American biscuits to maintained high-speed growth through continuous optimization of its product mix. Positioning of the brand can be characterized by establishing trustworthiness, confidence, and competence for customers. Degree of differentiation is not large, and American biscuits should represent a market where competitors can differentiate their products and that is why have less rivalry (Keegan & Green 2007).

Rivalry will be reduced where customers have high switching costs – i.e. there is a significant cost associated with the decision to receive products from an alternative competitor. American biscuits propose to its customer’s competitive prices to ensure customer satisfaction (Tayeb, 2000). American biscuits can use parity pricing or going rate strategy. This strategy will help the company to attract buyers and create a core of loyal brand support. Nevertheless, penetrating pricing strategy can also be used at the initial stage of marketing campaign. It allows demonstrating product benefits for potential customers (Johnson & Scholes 2003)

Country of Origin

Also, American biscuits should take into account country of origin and its influence on consumer’s choices. The country of origin affects consumer perceptions of product quality and has a significant influence, beyond advertising and marketing techniques, on the acceptance and success of a product (Johnson & Scholes 2003). The goal of global marketers is to take advantage or benefit from positive, and to neutralize negative, country of origin biases (Gardiner, 2005).

So-called national stereotypes and buyer attitudes toward particular countries of origin can affect the way in which export prices are interpreted in foreign markets. Customer reactions to price and the judgments that customers make will be conditioned by their perceptions and attitudes toward the country of origin of imported goods (Tayeb, 2000). The objectives for American biscuits are: to initiate co-operative marketing with supermarkets and stores in the big cities around the country, to contract with fast-food restaurants around the country, to expand regionally with both media and sales personnel, to constantly achieve cost benefit through an expanding provider network while not compromising patient care. As American biscuits compete in a progressively fiercer marketplace for a larger wallet share of an increasingly discerning and diverse customer base, they become ever more communication-dependent (Johnson & Scholes 2003)

SWOT

The main strengths for American biscuits are strong brand equity and country of origin image, innovative approach to cooking and unique taste appealing to mass consumers. The main weaknesses are lack of flexibility in value proposition and product differentiation (the company will have to focus on price). Also, lack of patient protection and high-cost structure will have an impact on American biscuits.

The opportunities involve positive economic conditions and market growth. American biscuits can gain a strong reputation among customers. An unfulfilled customer need and loosening of regulations will help the company to enter this new market. The follower strategy will help American biscuits to obtain a strong market position and compete with national producers of confectionary. The threats are competition from national and international companies specialized in confectionaries and biscuits. Substitute products like chocolates and other types of biscuits will have a dominant impact on the company and its growth (Stacey, 1996).

Conclusion

In order to enter Vietnam, the company should take into account threats and opportunities and cross-cultural differences between a native and foreign countries.

Achieving strate­gic fit in international marketing, today rarely means stable fit and, increasingly, strategic man­agement means change management. Finally, American biscuits need to recognize that doing business in Vietnam involves cross-cultural communication in all aspects of the relationship. American biscuits have high potential to occupy a niche in this market. Successful promotion and advertising campaigns will help the company to attract wide target audience and increase sales in a year to sustain strong market position and loyalty of customers.

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