International Marketing Case Study: Vinamilk in Thailand, Exercises of International Business

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Instructor: Mrs.Pham Thi Liên

Reporters:

Giang Thu Huyền ( Leader) - 17071083

Nguyễn Thùy Linh - 17071108

Phạm Tường Vi – 17071215

Đào Chí Công - 17071035

INTERNATIONAL MARKETING

INS3042 3

REPORT

INTRODUCTION

Vinamilk is the leading dairy brand in Vietnam, it is also the most chosen brand in Vietnam in the dairy product industry in both urban and rural areas for 7 consecutive years. Moreover, Vinamilk is rapidly expanding its markets overseas, especially in Southeast Asia such as China, Myanmar, Cambodia, and the Philippines. We see Thailand as a potential market because of many favorable factors for market penetration. This report will analyze and develop a relevant marketing strategy for Vinamilk in the Thailand market. The first parts are the study of external and internal factors that influences the firm. The second parts are a marketing plan for one year of Vinamilk in Thailand.

A: Preliminary analysis and screening

I: Company review  1976: Thong Nhat dairy factory, Truong Tho dairy factory, and Dialect powdered milk factory was inaugurated and put into operation  2003: Equitised and officially became a joint-stock company under the name of Vietnam Dairy Products JSC.  2006:

• Vinamilk was officially listed on HOSE on 19/01/2006.
• An Khang Clinic was opened in Ho Chi Minh City. This was the first clinic managed information online in Vietnam.
• In November, Vietnam Dairy Cow One-Member Ltd, was established.  2010:
• Vinamilk contributed USD 10 million, as equivalent to 19.3% of the associate’s share capital. In 2015, Vinamilk raised its share capital in the subsidiary, Miraka Holdings Ltd., to 22.81%.
• Vietnam beverage factory was inaugurated and put into operation.  2017:
• Cu Chi Raw Milk Center came into operation.
• Invested in the sugar industry by acquiring 65% share capital of Vietnam Sugar JSC (formerly known as Khanh Hoa Sugar JSC)
• Acquired 25% share capital of Asia Coconut Processing JSC.  2018:
• The first company in Vietnam to produce A2 milk.
• Invested a 51% share of Lao-Jagro Development Xiengkhuoang Co., Ltd.  2019:
• Started construction Phase 1 of Laos’ 5,000-hectare Organic dairy farm with 24,000 head cows.
• Doubled the capital at Driftwood Dairy Holding Corporation, from USD 10 million to USD 20 million.
• Completed the acquisition of 75% share capital of GTNFoods JSC, thus controlling Moc Chau Milk JSC whose total head cows are 25,000 ones.

III: Product porfolio 3.1: Liquid milk

3.2: Powered milk for children and adults

3.3: Baby cereal

3.4: Eating yogurt

3.7: Condensed milk and ice-cream

IV: Macro economic

3.1: Home country 3.1.1: Political VN has a stable social and political under the leadership of one party – VN communist party. After 1986, VN implement “Doi Moi” policy and it brings a huge chance in doing business for the country. 3.1.2: Economic Viet Nam participated in ASEAN in 1995 and signed in ASEAN free trade area (AFTA) in 1996. In 2007, VN joined in world trade organization (WTO). In 2015, the Trans-Pacific Trade Partnership Agreement are officially adopted. In July 2020, Europe's Vietnam free trade agreement (EVFTA) officially takes effect. From 2002 to 2008, GDP per capita increase 2.7 times, reached 2.700 USD in 2019. In 2020, Vietnam's GDP increase by 7.02%, exceeding the National Assembly's target from 6.6% to 6.8%. FDI in 2019 accounts for 38 billion USD. The structure of the economy (2019): Agriculture, forestry, and fisheries account 13.96%; Industry and construction account 34.49%; Service account 41.64%; Product taxes minus product benefits account 9.91% The rate of poor households decreases strongly from 70% to under 6%. 3.1.3: Social The population in Viet Nam change rapidly about population structure and social (from 60 million in 1986 to 97 million in 2018) and expect to reach 120 million in 2050. “70% population are under 35 years old with the average life expectancy nearly 76 years. However, the population is aging fast. The middle class is taking shape - currently accounting for 13% of the population and is expected to reach 26% by 2026.” (World Bank, Vietnam Overview, 2020). School education in Vietnam is relatively good. Vietnam achieved impressive results in the 2012 International Student Assessment Program (PISA) in 2012 and 2015, whereby the achievement of Vietnamese students far exceeds many OECD countries_. (World Bank, Vietnam Overview, 2020)._ Health also made great progress when living standards improved. From 1993 to 2017, the infant mortality rate decreased from 32.6 to 16.7 (per 1,000 births). The average life expectancy increased from 70.5 to 76.3 years between 1990 and 2016. The universal

3.2: Host country (Thailand)

3.2.1: Poticical

Thailand is a nominally constitutional monarchy. It is also a parliamentary democracy. The hereditary monarch is the Head of State and is protected by lèse-majesté (to do wrong to majesty) laws which allow any critics to be sentenced to jail for three to fifteen years. However, the monarch has limited powers. The prime minister is the head of government. It is worth noting that the country’s military seized power in a coup that took place in 2014. 3.2.2: Economics Thailand is the 25th largest economy in the world. Its nominal GDP for the year 2018 was $455.378 billion (Statistics Times, 2019). Industry accounts for 36.2%, agriculture: 8.2% and services: 55.6% of GDP. It has made great economic progress and moved from a low-income to an upper-income country in a relative short time (World Bank, 2019). It is widely known for its sustained and impressive poverty reduction efforts. Thailand is one of the largest export economies in the world. Its main exports are machinery including computers, electrical equipment, vehicles, mineral fuels, broadcasting equipment, organic chemicals, and plastics. Its main imports are gold, vehicle parts, crude petroleum, integrated circuits, and office machine parts. Poverty declined substantially over the last 30 years from 65.2% in 1988 to 9.85% in 2018 (based on official national estimates). However, the growth of household incomes and consumption growth both have stalled nationwide in recent years. 3.2.3: Social

The total population of Thailand, as of December 2019, is around 69 million. There is no official state religion in the country; however, Buddhism is the most widely practiced religion. Other major religions are Islam, Christianity, and Hinduism. Thai people are very friendly and hospitable. But, If you step on money in Thailand, you are breaking the law. The king is highly revered in Thailand, so the notes printed on the king are also highly respected. The life expectancy for men is 71 years, while 79 years for women. The major language in Thailand is Thai. (Vietnam export) The number of people who can read and know is 93.8%, male: 96%, female 91.6%. The Thai state attaches importance to education and always invests in education. Elementary education is compulsory and free for 6 years. University has not yet expanded, so college entrance exams are strict "cross-disciplines".

3.2.4: Technology Thailand is gradually becoming a technologically advanced country. The government offers a variety of incentives for organizations to adopt new technologies. The investment of Thai companies in innovation and tech infrastructure is also noteworthy. Consequently, the country is expected to see a rise in e-commerce and similar tech activities in the coming years. 3.2.5: Ecological Tourism is an important contributor to the country’s GDP and employs 6 million people. A record of 38.27 million tourists visited Thailand in 2018, and the number of tourists is set to rise in the coming years (Bangkok Post, 2019). However, rapid economic development has taken a toll on natural resources. Loss of biodiversity, air and water pollution, deforestation, water scarcity, and desertification are some of the major environmental challenges facing Thailand today.

3.2.6: Legal

Thailand has a standard labor law to ensure the rights of people at work. It has some strict rules in areas such as disrespect for the Royal Thai family, bribes, drug use, drinking alcohol, gambling, indiscriminate littering, overdue domestic use, and smoking. 3.3: Comparation two countries

V: Micro economic

5.1: Threat of new entry Much big milk company doing business in Thailand: Nestle, Dutch Lady, Danone, etc. They have large economies of scale in the industry. These companies gain a big network effect from the customers. Capital requirements to the industry especially the milk industries is low when the input has already existed in the country. You only need to invest in manufacturing and distribute the products to the customers. Existing companies in the industry (Nestle, Dutch Lady) have cost advantages thanks to possessing patents or exclusive partnerships with the best and cheapest suppliers, favorable locations, etc. The regulatory policies to enter the industry are open. “Under the tariff reduction roadmap of the ASEAN Trade in Goods Agreement (ATIGA), the import tax of milk and milk products of ASEAN countries, including Vietnam into Thailand market, will not be subject to import tax quotas and enjoy 0% tax rate” (VnEconomy 2018).

But the demand from buyers grows slowly due not only to the downturn of the Thai economy in recent years but also the hit from the Covid-19 pandemic. These reasons strike straight into the income of the customer. The threat of rivals is high.

VI: SWOT analysis

6.1: Strength 6.1.1: Trusted brand

Vinamilk is a familiar brand and trusted by most Vietnamese customers for over 34 years that is accounts for 39% of the dairy market in Vietnam (Vietnam dairy market, 2019). It continuously innovation in products to pursue the buyer's demand as well as compete with other counterparts. Aiming to spread market to overseas, since 1998, Vianamilk has distributed its products at 64 cities and provinces such as the USA, .ustralia, China with a turnover of 649.1 million USD (trang thông tin nội bộ của công ty cổ phần sữa Việt Nam). With a long journey of formatting and developing, they can understand exactly what a certain segment needs and reach a goad more effectively, especially, Extention distribution and sales networks in Thailand. Furthermore, Thailand’s customers can trust this brand because Vinamilk was ranked in-ground as the “Top 10 high-quality Vietnamese goods” from 1995 to now.

6.1.2: Diversity of product category

Currently, Vinamilk Company has more than 200 milk products with various flavors and packages such as sweet milk, condensed milk, powder milk, etc.which helps Thailand’s consumers have different options on product milk. Besides, the provision of diverse products to customers with different packaging sizes insists on drinking and eating. Nevertheless, the price of Vinamilk a bit higher than Thailand’s milk, the quality of the product recognized and has the certification. All product lines are the application of modern technology to production.

6.1.3: Effective strategy of promotion

Vinamilk has been implementing its effective strategy of promotion, advertising, community development establishment that impressive image to consumers, providers as well as the society as a whole. Moreover, the company has been implementing programs of raising community awareness in the milk-drinking to children, warning the malnutrition children in Vietnam that is one of the elements encouraging the demand for milk. Based on its experience, for the Thailand market, Vinamilk will promote widely in ads and mass media such as television, newspapers, etc. Providing information and image of its product regularly and frequently.

6.1.4: High knowledgeable human resources

With the development strategy of dairy nowadays, Vinamilk Company has defined that the “human” element shall decide the success or failure of the enterprise. It recruited an excellent graduate student in Vietnam studying abroad. Owing to these sound policies, Vinamilk has trained a high-quality engineer force and a great leader to jump in the Thailand dairy market whose skills demonstrated and win its consumers.

6.2: Weakness 6 .2.1: The high cost

Due to importing material, Vinamilk still depends on the big demand (60%) that has to seek prestigious providers such as New Zealand, Europe, and the USA-developed countries exporting milk materials with international standards. additionally, it was imposed on import tax and transport expense, stage, therefore, the high cost of yogurt results in the high price in the Thailand market (about THB 17-19 per cup equivalent to VND 10,000 – 12,000).

6.2.2: Competitive market There are many rivals that Vinamilk has faced both domestic and international brands in Thailand, especially, this is a new market. The weakness of Vinamilk is, nevertheless having good products, even the strong trademark, the weak marketing resulting in the ineffective message for the promotion to customers on the strength of the company. Dealing with strong domestic milk, and high-standard international milk, Vinamik shall promptly re-organize the marketing division, short-term and long-term marketing strategy with particular criteria, and setting up the strong trademark in Thailand.

6.3: Opportunities

6.3.1: Positive trend of customer toward milk and yogurt usage

The development of the economy leads people to take more care of the health of family members. Not only provides nutrients but also additional factors such as vitamin C, D, ADM, calcium, Thailand’s consumer too. When they recognize the benefits and qualities that Vinamilk provides, people will tend to use it more. The average usage of Vietnamese is 14l per year that is lower than in Thailand (23l/person/year).

7.1.2: Geographic segmentation

Thailand has a tropical climate, the temperature is around 30 degrees. With the summer weather, the demand for drinks is also greater, the dishes are processed with milk. Thailand has many large and small islands, beaches on the south side, and big cities where the development of popular tourist and resort services attracts many western tourists. Therefore, Vinamilk products can penetrate the Thailand market. Besides, Thai culinary culture is diverse, they have street food made from condensed milk and fresh milk such as famous fruit donuts, ice cream, and Thai milk tea.

7 .1.3: Psychographic segmentation

Adults always want their children to increase height and have enough nutrients for the body to develop well. Therefore, milk products will be an essential commodity for the needs of the citizen. 71.01% of the population is adolescent and middle-aged, they usually use milk for breakfast and milk drinks. Recently, many people tend to use less sugar and healthy drinks, so Vinamilk can offer unsweetened milk and nutritious seed milk products.

7.1.4: Behavioral segmentation

Thailand people have a habit of using milk for breakfast, and they also prefer to use it with other foods like ice cream and scones. Cafes and restaurants also need to buy milk to serve foreign tourists, who are used to drinking milk. The intensity of consumption is high for this market. The loyalty of the product chain will be high.

7.2: Targeting Customers

As the data collected above, Vinamilk should target customers from 18 to 40 years old. The main object is the labor force, who have a certain income and need to use milk every day. The income of workers and office workers is from 10000 THB to 14238.13 THB (around 7,000,000vnd - 10,000,000vnd) per month. They are more likely to pay for this item than the lower income group. Moreover, Vinamilk can increase the marketing of its products to business customers such as restaurants, hotels and street eateries to sell products in larger quantities. There are 17.09% of Thailand's population aged 0 to 14, this is a group of customers who consume a lot of fresh milk, so this is also an object to be targeted. 11.9% of the population is elderly, the group of customers prefer seed milk and nutritious milk products, so Vinamilk can offer products that are suitable for this customer segment. 7.3: Positioning After 40 years as a leading nutrition corporation in Vietnam and 18 years of export experience in the world, Vinamilk is not only responses to the increasing demand of domestic customers, but they also expand their operation to an international market. Currently, Vinamilk has a milk powder factory located in New Zealand - one of the biggest milk supplying countries in the world. In the US, Vinamilk acquisition Driftwood Dairy to sell "Made in Vietnam" products in the most demanding market in the world. The ongoing efforts of Vinamilk are shown by presence in 40 countries. In Asia, the demand for using milk products in Myanmar and Thailand are climbing, where Vinamilk considers as the potential market in the company strategy.

B: Marketing Mix

I: Product

1.1: Cataloge and features Vinamilk provides 10 different group of product lines insistes of tons of product with many flovors and packaging sizes for customers to choose from including liquid milk, powered milk, baby cereal, eating yoghurt,etc. (Vinamilk anually report 2019). Besides, due to the product line cycle patterns and possibility of mishap with product, the requirement of creating more types of product is apparent. They also contains essential nutrients supplement of ADM, vitamin, purest of nature to maintian the beauty and well- being daily. However, after demonstrates the Thailand market where the hot weather is the main feature. Eating yogurt and drinking yogurt is the main product that is going to Thailand's markets. Based on many benefits of yogurt such as vitamin B12, 49% calcium, protein, etc ( Healthline, 7 impressive health benefits of Yogurt), are suitable for Thailand