Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.
Abstract
It is important to understand that even though the market opportunity in Vietnam seems to be promising, there are associated risks for the foreign investors. Continuous consultation from competent and qualified market analysts is the key to success any company that intends to invest in Vietnam.
The organizations should be able identify the evolving market trends and make the necessary long-term and short-term reinforcements in order to survive in the market. Aussie Fresh should adopt direct export as the entry strategy since the other entry modes seem unfavorable in Vietnam.
Introduction
Background
The production of wine in Australia has drastically increased in the past leading to oversupply of wine in the Australian market. Even though the rate of local consumption has increased, the production rates have increased more forcing the wine industries to seek foreign investment (Davis, 2005, p.1).
In order to have a successful foreign investment, the company has to understand the market environment at the foreign market and adopt a marketing strategy that can help it gain a competitive advantage over the other companies in the same market. It needs to understand the internal and external forces that might influence its operations at the foreign establishment.
The export market also receives increasing competition. This calls a continuous assessment and evaluation of the market trends by the company (Davis, 2005, p.2). It should be the aim of the organization not only to have a competitive advantage over the others but also to sustain the advantage for long (Peng, 2008, p16).
Purpose of the report
The report is intended to help in developing a marketing strategy that Aussie Fresh can adopt when establishing a foreign investment in Vietnam. The wine industry in Vietnam, the analysis of internal and external factors the company, the country profile for Vietnam, and the suggested strategies are presented in details.
In-depth Business case analysis
Vietnam country profile and PESTEL
Vietnam is a country in Southeast Asia, which seceded from China in the first half of the tenth century A.D. During their struggle for independence, the Vietnamese were almost thrown out of their home country by the colonial power. The result was a politically divided nation and this rivalry continued and was evident during the Vietnam War.
The war continued and in 1975, the war between the North Vietnamese and the South Vietnamese ended resulting into of the two in 1976. Vietnam was now a politically stable nation after a very long struggle.
Various political and economic reforms could now be put in place by the government. The country could now feature and participate in the international market as it developed good relations with other countries. Vietnam joined the World Trade Organization in 2007, and was committed to its terms and conditions.
The country has succeeded in making good international relations and this has led to a rapid economic growth in the country in the recent past. It has been projected by Citigroup that the rapid economic growth is set to continue being experienced in the country in the future.
The report by Citigroup ranked Vietnam the top among the countries termed as Global Growth Generators (Citigroup, 2011). The country is expected to have a high growth rate of real per capita Gross Domestic Product of 6.4% between 2010 and 2050.
The population census that was conducted in April 2009 showed that the country had about 86 million people. The figure is projected to be about 89 million people currently in the country and is expected to hit 112 million mark in 2050 (Citigroup, 201). Out of this population, about 85% percent belong to the Kinh community.
There are over 50 other minor ethnic groups but the Kinh community dominates most parts of the country. It has the greatest control on both the political and economic development in the area. Their culture dominates the region suppressing the other cultures in the country. The official language in the country is Vietnamese, which traces its roots from the Chinese language as it uses some of the Chinese characters.
Most studies that were carried out in Vietnam were mainly in the areas of humanities. Scholars had much attention in areas like philosophy and linguistics for a relatively long period. This has, however improved gradually with studies in fields like mathematics and social sciences. Their applications in the adoption of the modern technologies started to be seen.
The use of media in Vietnam is one f the technological aspects that were seen in the country. Media in Vietnam has had the challenge that most of the operations of the media outlets are under the control of the government. There are no independent outspoken media outlets that can operate contrary to the governments restrictions (Amnesty international, 2010, p2).
The country has a national radio broadcasting service that goes beyond the country through satellite transmission. There is also the Vietnam television that is also a state-owned media house. Print media is also available in Vietnam and has been useful to the government in informing the public of the government policies in relation to the local and international trade.
The use of internet is also available in Vietnam. However, the government puts both the technical and legal restrictions on its use. There had been cases where internet users are arrested and charged in court due to their online activities (Amnesty international, 2010, p2).
The legislations in Vietnam are not friendly to the citizens and foreigners. The government restrictions on human rights and privileges are evident. Their 1992 constitution talks of the right of freedom of expression but on condition, that it is in accordance the other strict requirements of the law (Amnesty International, 2010, p.2).
An institutional analysis
The market in Vietnam is not fully developed and can be likened to the other upcoming global markets. The country has a civilized population with unique cultural values and practices. However, it has been observed that the business environment in the country is uniquely defined and marketing strategies that have proved successful in the other parts of Asia may not be applicable in Vietnam (Diep, 2011).
Even within the country, there is an evidence of difference in consumer cultures, which calls for an integrated system of marketing strategies. It was observed that a marketing strategy that was successful in one part of the country might not be successful in the other part of the country due to the cultural diversity (Diep, 2011).
Just like in any other country where the citizens tend to adopt the Western lifestyle, the urban population is often attracted to the new and modern brands from the west. The population often chooses their brands in regard to the financial and social status of an individual in the society. The same scenario is witnessed in the wine consumption in Vietnam.
It has also been noted that this population positively respond to the advertisements and sales promotions that are performed on new brands (Diep, 2011). It was also pointed out that once the consumers have been attracted to a particular product brand, it takes a relatively longer period for another competing company to lure them into their products.
Wine industry in Vietnam and other Asian countries
Porters five forces analysis
Wine production in the Asian countries like China and Vietnam is set to increase in the near future due to the increased production of raw materials. Most of these countries do not have a climate that favors the production of grape. However, they have opted to adopt mechanized farming systems and modern technology in the production of wine (Griffin, 1996).
The learning institutions have also established curriculum that provides an extensive research on wine and win production. The increased wine production using the modern technology that has been seen in China and Vietnam is the project of a foreign wine production company called Allied Domecq (Griffin, 1996). This implies that there are chances that more investors will be attracted to the industry.
The advantage that a foreign investor in the wine industry in Vietnam can enjoy is that the production by the Vietnamese is in the process of developing. It has been pointed out that the French only introduced the techniques of coffee and bread making and never introduced the technique of wine making in Vietnam (Griffin, 1996).
Besides, the variety of grapes that is set to be used for wine making has been found to be unfit for such production and is set to adopted tentatively as other fit varieties are being developed. A competing company with reliable source of recommended raw products can easily utilize this looming opportunity to gain a competitive advantage.
One of the challenges that are to be faced by the companys operations in Vietnam is the poor infrastructure in the country. Good means of transport is one of the key drivers of globalization (Ghemawa 2007, p.14). Even though the country is developing and it is in the process of improving the limited infrastructure, the system of distribution channels requires further strategies by the business organization.
Another challenge to be faced in exporting wine to Vietnam is the high rate of import tax levied on the imported products (Diep, 2011). However, there is an expectation that the tax rates will go down due to the intervention by the World trade Organization in the monetary and fiscal policies that are to be used in Vietnam.
The market analysis of the consumption of wine in relation to other substitute products still indicates a possible increase in wine consumption. It was observed that even though a bottle of wine could buy more than a dozen f beer, there was a constant by the natives especially in the urban centers from beer to wine consumption (Diep, 2011).
There has been a remarkable change in the channel of distribution for wine products in the country with the product being available for sale at both the local retail stores, supermarkets, and the hypermarkets.
The latest report by the Australian trade Commission showed that the promising areas of the wine industry in Vietnam include white and red wines, rose, desert wines, sparkling wines, cask and bulk wine for local bottling and the hospitality industry (Diep, 2011).
The wine that is imported from Australia into Vietnam forms about 15% of the total imported wines in the country (Diep, 2011). The largest percentage of the imports is the French wine with Australian wines having the second largest share of the imports
In the past couples of years, there has been a remarkable economic growth rate experienced in the country, which makes it a suitable export market for the Australian wines. The region has about 87 million consumers of wine and the rate of sales at the local retail stores is promising (Diep, 2011).
The figure is set to increase in the coming years due to the changing life styles that are currently being experienced in the region. Traditionally, the consumers of wine used to be the foreigners in the country o the countrys nationals who had been to the western country and back.
However, the adoption of the western culture and the growing economy in the area that leads to improved living standards makes the local population the major consumers of wine in Vietnam (Diep, 2011). This provides handsome opportunities for the Australian wine producers to compete for the market of their product in Vietnam.
SWOT analysis and VRIO summaries
The proximity of Australia to Asia provides a good opportunity for expansion the companys business operations. The cost of transportation is relatively lower and shipment of products can be done daily (Peterson et al 2000, p.32).
The company can also boast of the ability to obtain the raw materials throughout the season. This leads to a constant production of the companys products in relation to the prevailing market demands.
The high use of modern technology in Australia can also enable Aussie Fresh to manufacture products that are modern to capture the Vietnamese consumers who are attracted to new and modern products.
A high cost of production is one of the problems faced by the company. The agricultural products in Australia, which are the raw material for wine production, are relatively expensive perhaps due to the farming practices that are adopted by the farmers (Peterson et al 2000, p.32).
The market for wine in Vietnam is under a stiff competition from other investors like France. The French wine is currently the leading imported wine in the region and might sustain the competitive advantage due to their improved technology.
Besides, one marketing technique that might be adopted is use of sales promotions and advertisements through the media. This is not very possible due to extensive legislative regulations put on the media usage.
However, it is important to note that wine production by the local companies in Vietnam is still very low due to lack of resources and the appropriate expertise.
Evaluation of two modes of entry
There are different modes of entry that a company seeking to establish a new foreign investment. Two of these modes are examined below.
Franchising
This is an entry strategy whereby a new company enters a deal with an existing company to use the latters brand name. In franchising, a company (franchisor) develops a marketing model and sells its operation to another company (Spinelli et al, 2004, p.2). It has the advantage that the establishment of a foreign investment is faster and cheaper when the operations are managed by some third party established in the region.
The franchisor does not have to bear the full risks of foreign investment. However, it requires that there be a true commitment between the franchisees and the parent companies (Kutz, 2004). The production and marketing processes are not under the full control of the parent company (Peng, 2008, p171).
J.V.P
This involves two or more companies forming a joint company. A foreign company collaborates with some local partner to have a joint operation. It has the advantage that risks and costs of production are shared among the partners. The foreign company is also able to learn more about the host country in order to develop future independent marketing strategies (Peng, 2008, p172).
However, it is important to note that the operations in these joint companies are not smooth due to the diversities that often exist among the partners. There are always disagreements in decision-making process. It does not provide the foreign partner a substantial control over the operations (Peng, 2008, p172).
Conclusion- summary and recommendation
Both the above entry modes have the disadvantage of the lack of full control over its operations.
The entry strategy that should be adopted by Aussie Fresh is direct export as it has less associated risks in relation the evaluated market situations in Vietnam. It has the advantage the company has a direct access to its foreign customers (Peng, 2008, p139). The company may tentatively use local distributors by carefully examining and assessing the trade agreements that have been signed between the two nations
The company should attempt to adopt the business culture that prevails in Vietnam. It should identify the suitable distributors and sales agents for their products. To win a large market share, it should liaise with retailers like supermarkets, hypermarkets, hotels, and restaurants for the distribution of their products. This will improve the consumers access to the products.
The companys warehouses should be located in convenient places that are easily accessible by water transport. The most convenient locations are near the Vietnamese local distribution centers that are definitely accessible by some sea freight. Much of the products should be shipped through the sea while a small proportion of the shipment can be through the air.
Advertisement and promotions are a better means of ensuring that the company captures a large market share in the Vietnam market. It was noted that the consumers in Vietnam are highly sensitive to advertisement and promotion of new products.
Reference List
Amnesty International. 2010. Amnesty International testimony on religious and human rights situation in Vietnam. Web.
Citigroup. 2011. Vietnam tops 11 fastest-growing countries by 2050: report. Web.
Davis, T., 2005. Using the Bulk Wine Market to Explain Oversupply in the Australian Wine Industry. Journal of Wine Research, Vol. 16, No. 3, pp. 249258. Web.
Diep, A., 2011. Vietnams market for Australian wine. Web.
Ghemawa, P., 2007. Redefining global strategy: crossing borders in a world where differences. NY: Harvard Business Press. Web.
Griffin, J., 1996. The art and science in modern Asian wines. Asian Business Review. Web.
Kutz, R., 2004. To Franchise, Or Not To Franchise. Inc, Vol. 26, Issue 2, p34-36. Web.
Peng, M. W., 2009. Global Strategy. Second edition. Ohio: South-Western Cengage. Web.
Peterson, J. et al. 2000. Chain Stocktake of some Australian Agricultural and Fishing Industries. Bureau of Rural Sciences, Canberra. Web.
Spinelli, S. et al. 2004. Franchising: pathway to wealth creation. Upper Saddle River: FT Press. Web.
Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.