Documente Academic
Documente Profesional
Documente Cultură
Introduction
1.1. Background
Transition from a centrally-planed economy to market-economic structure, the Vietnamese market becomes more dynamic. All business and production activities are encouraged investment to contribute into economic growth and stabilization of the nation. Like other light industries, investment in soft drink production locally is welcomed and facilitated. The Vietnamese soft drink industry has rapidly developed. Together with rising the living standard, demand for soft drinks quickly increases and high quality brands are much preferred. More and more foreign soft drink producers enter into the Vietnamese market. At present, all players are facing the fierce competition between local and foreign brands. There are 25 local producers who produce more than 30 soft drink brands including cola, orange, soda, sarsi, lemonade lime and other flavors, and plus presence of the giants in soft drinks market such as Pepsi, Coke and Schweppes. Most of the producers try to exploit their distinctive competencies to gain competitive advantages and select the appropriate competitive strategies. They face the need of designing marketing strategies in order to attract the consumers to buy their products. In this situation, International Beverage Company (IBC) recognizes that development of effective marketing strategies have to be considered as a priority in order to protect its leading position in HoChiMinh city (HCMC) soft drinks market. Through developing marketing strategies help the company to identify its target markets, position its products in the consumers mind and develop marketing mix strategies in order to achieve its marketing objectives and meet consumer needs and wants in a better way than its competitors. Thus, the company needs to identify its strengths and weaknesses as well as find out opportunities and threats in the marketplace in which it operates. In such a context, this research study deals with the development of marketing strategies for International Beverage Company in HCMC. IBC, a joint venture between Saigon Processing Company (S.P.Co), Macondray and Company Inc., Hong Kong, and Pepsi Company Inc, Holland produces and distributes well-known soft drink brands such as Pepsi Cola, 7-Up, Schweppes and Crush.
IBC needs to develop the marketing mix program for each local market to defend its current market share. This research study examines how to develop the effective marketing strategies for International Beverage Company in HoChiMinh city in order to increase the market share, and protect its leading position in this soft drink market.
Chapter 2
Literature Review
This chapter discusses the general concepts which relate to the fundamental ideas on designing marketing strategies including marketing situation analysis, marketing strategy design, marketing program development for products, price, distribution and promotion, and implementing and managing marketing strategy.
organization would be involved but left open the details of how each product or product line would be marketed. While the corporate strategy presents a plan developed by top management to guide the total organization, a marketing strategy is usually developed by a middle manager to guide a firms activities for a product or a line of related products. More specially, a marketing strategy is a plan which indicates how a manager deploys marketing resources on an individual product or product line in order to achieve a specified product objective (such as market-share growth or maximizing cash flow).
The internal environment analysis is to help the company recognizing itself in terms of strengths and weaknesses. The internal analysis includes the corporation's structure, resources, production and business and marketing activities. Corporation resources are the assets that include people, managerial skills, financial circumstances, facilities, information technology and the skills and abilities within functional areas. In general, the situation analysis identifies opportunities and threats in the business environment and the organizations strengths and weaknesses. This information helps companies deciding how, when and where to compete in a given environment.
Positioning strategy should take into account: The criteria or benefits the buyer considers when purchasing a product, including the relative importance of the criteria. How the firm is differentiated from its competition. The limitations of competing products regarding important buyer needs and wants.
The positioning strategy indicates how the firm or its brands would like to be perceived in the eyes and minds of the market target customers. Therefore, decisions about products, distribution channels, price, and promotion should create a cohesive marketing program aimed at meeting the needs and wants of consumers in the firms target market. The marketing program combines the firms marketing capabilities into a package of actions intended to position the firm against its competitors. Marketing strategy selection Selecting a marketing strategy takes into account the factors such as the rate of growth of product-market, the diversity in the needs and wants of buyers, the structure of competition, the organizations competitive advantage in which an organization encounters. Strategy selection may involves the developing a new marketing strategy or changing an existing strategy. As argued by Guiltinan and Paul (1991) to choose the best marketing strategy, a manager must consider several kinds of information, as follows (Figure 2.2). Product objectives to help company determine the necessary basic type of strategy. For example, if market share objectives are important, managers will employ selective demand strategies to retain or expand market share. Alternatively, the greater the importance of cash flow and profitability objectives, the more likely a manager will be to select retention strategies and strategies for increasing repurchase rates. That is, these strategies will, in general, be less cost than acquisition strategies or strategies aimed at increasing the number of users. Nature and size of the market opportunity should be clearly established based on the market analysis and market measurements. Managers must have a sense of the success requirements in terms of the kinds of competitive advantages necessary and the level of marketing expenditures that will be necessary to meet profitability goals.
Craven (1990) proposed the comprehensive possibility of marketing strategy alternatives that can be used to achieve marketing objectives. They consist of (1) new product strategy, (2) market targeting strategy, (3) market program positioning strategy, (4) productivity improvement strategy, (5) organizational design, (6) exploiting special advantage, (7) acquisition/ merger/ strategic alliance and (8) exit from market.
Product Objectives
Market Analysis
Market Measurement
Competitive Analysis
Competitive Advantages
Market Opportunity
Marketing Strategy
Figure 2.2 Selecting a marketing strategy Source: Guilinan and Paul, 1991
Another selections of marketing strategy include entry strategy into new market, strategies for growth, mature and declining markets and global strategies. Concerning with this research study, IBC needs to develop a marketing strategy to protect its leading position in the soft drinks market in HoChiMinh city. A marketing strategy for market leader faces three challenges: expanding the total market, protecting the market share and expanding market share. The market leader is interested in expanding total market because it is the main beneficiary of any increased sale. To expend the market size, the leader will have to look for new users, new uses or more usage. To protect its existing market share, the market leader has several defense methods: position defense, flanking defense, preemptive defense, counteroffensive defense, mobile defense or contraction defense. The most sophisticated leaders cover themselves by doing everything right, leaving no openings for competitive attack. Leaders can also try to increase their market share. This makes sense if profitability increases at higher market share levels and the companys tactics do not invite antitrust action.
10
To select a product strategy, the company needs the following information on current and anticipated performance of the products in the business unit: Consumer evaluation of the companys products, particularly their strengths and weaknesses vis--vis competition (that is, positioning by market segment information) Objective information on actual and anticipated product performance on relevant criteria such as sales, profits and market share.
This information helps management formulate strategies for each product in the mix or line. The product strategy includes: Developing plans for new products, this process consists of eight stages: idea generation, idea screening, concept development and testing, marketing strategy development, business analysis, product development, market testing and commercialization. Managing programs for successful products, and Selecting strategies for problem products (e.g., to reduce cost or improve the product).
Price strategy Price is the only element in marketing mix that produces revenue, other elements produce cost. Pricing is a problem when a firm has to set a price for the first time. This happens when the firm develops or acquires a new product, when it introduces its regular product into a new distribution channel or geographical area and when it enters bids on new contract work. Thus, before setting a price, a firm must identify the role that price will play in the products overall marketing strategy. There are three generic pricing strategies that a firm might adopt: skim pricing, penetration pricing and neutral pricing (Nagle and Holden, 1995). Each strategy is defined by the role pricing plays in the products marketing strategy. Skim pricing (or skimming) is designed to capture high margins at the expense of high sales volume. By definition, skim price are high in relation to what most buyers are willing to pay. Consequently, this strategy is viable only when the profit from selling to a price-insensitive segment exceeds that from selling to the large market at a lower price. Penetration pricing involves setting a price far enough below economic value to attract and hold a large base of customers. It is a strategy designed to generate sale volume even at the expense of high margins and, like skim pricing, is favored by a particular environment. Penetration prices are not necessarily cheap, but are low relative to value. Neutral pricing involves a strategic decision not to use price to gain market share, while not allowing price alone to restrict. Neutral pricing minimizes the role of price as a marketing tool in favor of other tools that management believes are more powerful or costeffective for a products market. A firm generally adopts a neutral pricing strategy by default, because the conditions are not sufficient to support either a skim or penetration strategy. For example, a marketer may be unable to adopt skim pricing because the products in a particular market are so generally viewed as substitutable that no significant segment will pay a premium. That same firm may be unable to adopt a penetration pricing strategy because, as it is a newcomer to the market, customers would be unable to judge its quality
11
before purchase and would infer low quality from low price, or because competitors would respond vigorously to any price that undercut the established price structure. Neutral pricing is especially common in industries where customers are quite value-sensitive, precluding skimming, but competitors are quite volume-sensitive, precluding penetration. According to Kotler (1991), when a firm sets price strategy, it has to consider the following factors in setting its pricing policy: Selecting the price objectives such as survival, maximum current profit, maximum current revenue, maximum sales growth, maximum market skimming and product-quality leadership. Determining demand schedule, which shows the probable quantity purchased per period at alternative price level. Because each price that company might charge will lead to a different level of demand and will therefore have a different impact on its marketing objectives. The more inelastic the demand, the higher the company can set its price. Estimating cost: demand largely set a ceiling to the price that the company can charge for its product, and company costs set the floor. The company wants to charge a price that covers its cost of producing, distributing, and selling the product, including a fair return for its effort and risk. The firm therefore, estimates how its costs vary at different output levels and with different levels of accumulated production experience. Analyzing competitors prices: the firm needs to learn the price and quality of each competitors offer and use them as a basis for positioning its own price. Selecting one of the following price methods: markup price, target-return price, perceived-value pricing, going-rate pricing and sealed-bid pricing. Selecting the final price: the firm select its final price, expressing it in the most effective psychological way, coordinating it with the other marketing mix elements, checking that it conforms to company policies and making sure it will find acceptance with distributors and dealers, company sales force, competitors, suppliers and government.
The point of views of Stanton et al. (1994), the price determination process consists of selecting price objective, selecting method of determining the base price and designing appropriate strategies. Figure 2.3 illustrates this process. Distribution strategy A distribution channel is a set of organizational units (such as manufacturers, wholesalers, and retailers) that performs all the functions required from a seller to the final buyer. The structure of the channel is determined by three elements: the tasks and activities to be performed by intermediaries, the types of distributors to be used and the number of each type of distributor. Channel design objectives derive from strategic market and financial goals. Such objectives as sales volume, market share, profitability and return on investment must be supported by the distribution channel. To operate, market coverage and market control objectives must be developed to guide channel design. Market coverage objectives concern customers expectations and degree of product-availability intensity. Market control
12
objectives are to ensure product quality, selling effort by channel partners, demand stimulation by promotional activities and the quality of after-sales-support offered to consumers. Decisions regarding market control and intensity objectives may be interrelated. Channel strategy consists of decisions regarding channel organization, definition of channel structures, development of criteria for evaluating channel structures and the selection of an appropriate structure Regarding the level of dependence and commitment among channel members, there are tree categories of channel organization for managerial purposes: Vertical Marketing Systems, Free Flow Channels and Single Transaction Channels (Bowersox, 1987). This classification is accepted by the most of the authors (Boone and Kurtz, 1993) Channel structures differ based on the number and types of intermediaries involved and their specified roles. The basic choice is between direct and indirect structures. Kotler (1991) proposed an approach for using consumer marketing channels. It consists of four levels of channel of different lengths: zero-level, one-level, two level and three-level channel. Selecting Channel of Distribution , most of the authors agree that there are basically five factors for consideration in choosing distribution channels: market products, producers, competition, availability of intermediaries and consumers characteristics, as follows (Boone and Kurtz 1993): Market factors emphasize the need and geographic location of the firms market, for example, whether the product is intended for the consumer or industrial market. Product factors also play a role in determining optimal distribution channels. In general, the more standardized the product, the longer channel. Another generalization about distribution channels is that the lower the products unit values, the longer the channel.
13
Cost-plus pricing
One price vs. flexible price Leader pricing Unit pricing Psychological pricing Resale price maintenance Price vs. nonprice
14
Producer factors concern adequate financial, managerial and marketing resources. The producers need of control over product also influences channel section. For example, if aggressive promotion is desired at the retail level, the producer often chooses the shortest available channel. Competitive factors are important when some firm is forced to develop unique distribution channels because of inadequate promotion of its products by independent marketing intermediaries. Intermediaries may not always be available, regardless of how desirable they are from the manufacturers point of view. Wholesalers and retailers independently owned businesses and both have their own objectives to satisfy. They availability of intermediaries is therefore important to consider. Consumer characteristic, i.e. where, when and how consumers choose to buy the goods, is also the indispensable factor to be studied carefully.
Some authors have emphasized the consumer-oriented approach in selection of the distribution channel (Stern and Strodivant, 1987), (Bowersox, 1987). Another approach using the key-factor scoring method may be realistic and appropriated. This method requires that all of those factors deemed critical by the channel selectors be considered. Then the channel selector will either use weighted averaging or preference ordering method to rate the channel alternatives. Promotion strategy Promotion mix strategy consists of four major tools: advertising, sales promotion, personal selling and public relation in which all help the organization to communicate with its consumers, cooperating organizations, public and the other target audiences. Promotion strategies perform essential roles in positioning products in the eyes and minds of consumers. Promotion informs, reminds and persuades buyers and others who influence the purchasing process. Concerning with consumer goods, especially soft drinks, the company needs to emphasize on designing the promotion strategy to convince the consumers to buy its products. According to Kotler (1991), to develop the promotion program, the companies have to consider the following steps: Identifying the target audience and its characteristics, including the image that audience has of product. The audience could be potential buyers of the companys products, current users, deciders, or influencers. They could be individuals, groups, particular publics or general public. The target audience will critically influence the communicator s decisions on what, how, when, where and whom to say it. Defining the communication objectives, whether it is to create awareness, knowledge, linking, preference, conviction or purchase. Designing the message, ideally, the message should gain attention , hold interest, arouse desire, and elicit attention (AIDA model). Formulating the message will require solving four problems: what to say (message content ), how to say it logically (message structure), how to say it symbolically (message format ) and who should say it (message source).
15
Selecting message.
the
Establishing the total promotion budget. Deciding on the promotion mix, most of companies face the task of distributing the total promotion budget over the four promotion tools of advertising, sales promotion, personal selling, and public relations. Companies are always searching for ways to gain efficiency by substituting one promotional tool for another as its economics become more favorable. When deciding on the promotion mix, companies should consider factors involved such as type of product market, push versus pull strategy and product-lifecycle stage. Monitoring to see how much of the market becomes aware of the product, tries it and is satisfied in the process. Managing and coordinating the marketing communication process.
16
1. Marketing plan and budget The marketing plan typically includes a situation analysis summary; a market target description and strategic evaluation; overall objectives and specific objectives for each market target; a marketing program positioning strategy; specific strategies for product, price, distribution, and promotion; marketing research; coordination with other business functions; forecasts and budgets and contingency plans. 2. Implementation strategy The marketing plan should specifically include action guidelines concerning the activities to be implemented, who does what the dates and location of implementation, and how implementation will be accomplished. Several factors contribute to implementation effectiveness, including the implementation skills of people involved, organizational design, incentives and the effectiveness of communication within the organization and externally. 3. Evaluation of marketing performance Marketing strategy is a continuing process of making decisions, implementing them and monitoring their effectiveness over time. Evaluation and control are concerned with tracking performance and , when necessary, altering plans to keep performance on track. Strategic evaluation also includes looking for new opportunities and potential threats in the future. It is the connecting link in the strategic marketing planning process, therefore, strategic evaluation assures that strategy is an ongoing activities. In general, marketing strategy is the analysis, planning, implementation and control process designed to satisfy customer needs and wants. It stars with an understanding of the corporate mission and objectives and the strategy of each strategic business unit. The strategic marketing planning process consists of market analysis, deciding marketing strategies, developing marketing mix strategies and implementing and managing marketing strategy. Regarding with the case of IBC, to formulate marketing strategy, it is necessary to analyze the Vietnamese soft drinks market and assess strengths and weaknesses of the company.
17
Chapter 3
Research Methodology
3.1 Analytical Framework
This research is presented in the form of a case study exposing the complexities of a real business environment in the Vietnamese soft drinks market. The purpose of this research is to develop marketing strategies for International Beverage Company in HCMC. Thus, it is necessary to the analyze market situation and current marketing strategy of IBC in order to formulate the marketing strategy. A framework may enable to understand the various linkages and interactions between the variables and to develop the marketing mix program in order to achieve the marketing objectives of the company. Figure 3.1 illustrates this analytical framework. The company mission sets out the reason why the company exits and what it should be doing and the companys marketing objectives give a guideline of what it wants to gain and become. This will serve as a guide for the process of diagnosing both external and internal factors affected the business performance of IBC. The objective of external analysis is to identify opportunities and threats in the business environment in which IBC has to face. Two interrelated environments should be examined at this stage: the macro environment of the Vietnamese market and the micro environment referred to the industry in which IBC operates, the Vietnamese soft drink industry. The analysis of the macro environment focuses on examining the key achievements and limitation of the Vietnamese economy and HCMC economy and political factors and government policies on the soft drink industry which strongly affect the soft drink industrial evolution. The analysis of the micro environment involves an assessment of industrial growth, production, consumption pattern and the competition between existing soft drink manufacturers in HCMC in which the analysis the main competitors of IBC is examined in the terms of strengths and weaknesses about their marketing activities. The internal analysis is devoted to pinpoint the strengths and weaknesses of IBC. Therefore, it is necessary to assess the production and business of the company in the terms of production capacity, market share, sales volume, finance and marketing mix activities. After having analyzed the internal and external factors, the marketing strategy alternatives can be developed. To select the best solution, IBC needs to evaluate the alternatives with respect to the possibility to achieve the marketing objectives. Because of time constraint, this research cannot cover the implementing and managing the marketing strategies. Thus, IBC should focus on evaluating and improving organizational effectiveness and marketing strategy implementation and control. Once the marketing strategies are implemented, their outcomes are constantly revealed by the company performance which should be monitored. So feedback is necessary to adjust a part or the whole strategic Designing External Analysis Internal Analysis management process.
Marketing Strategy
Overview of Product Marketcapacity, Targeting Positioning Strategy Vietnamese economy market share, sales Marketing Mix Production volume & Developing Marketing activities Companys Product consumption of soft Opinion of consumers, Marketing Price drinks in last yearsFigure 3.1 Framework distributors toward of the research 18Distribution Objectives Major competitors attributes of IBCs Opportunities Marketing Strategy Strengths Promotion & products Substitutes Gap Analysis & Threats Alternatives Weaknesses FEEDBACK
19
The same way were used to choose 9 respondents out of the wholesalers population of 327, and 18 respondents out of the retail outlets of 4238. Moreover, because most of soft drink wholesalers and retail outlets in HCMC sell multi soft drinks brands. So conducting personal interviews with IBCs wholesalers and outlets, it means that conducted the interview with Cokes wholesalers and outlets and Tribecos wholesalers and retail outlets. In-depth interview also conducted with Mr. Rich, the Marketing Manager of Coca Cola Indochina Company in HCMC, Mr. Chinh, the Sales Manager of Coca Cola Chuong Duong, Mr. Chuong, the Director of Tribeco and Mr. Bong, the Sales and Marketing Manager of Tribeco. Personal interview conducted with soft drink drinkers who were randomly selected in districts of HCMC. All respondents were soft drink drinker at age range from 10 to 50 years old. They were asked to fill in questionnaire according to their opinion. A geographical cluster sampling was employed for the drawing the sample. Sampling procedure Sampling size of 100 respondents was drawn from total population of HCMC by visiting big-size coffee shops and restaurants which have logo of Pepsi or Coke or Tribeco in the front of the shops. To choose randomly 100 respondents, the following steps were preceded to draw sample: The map of HCMC was divided into 672 blocks, numbered each block, and 50 blocks were randomly chosen. Suppose the first selected block is 26, then the second block is
20
39 (26+672/50 = 39), and so on. If the selected block is located at areas such as rivers, airport, farm land, it is replaced by the next upward block and so on. To conduct personal interview, the author went the south-west corner of each block, walked north and interviewed the respondents in the fist coffee shop or restaurant of the selected block. For each coffee shop or restaurant in the selected block, two respondents who sit at first table from entrant were interviewed.
21
Chapter 4
External Analysis
This chapter discusses general the Vietnamese economy, economic condition of HCMC, production and consumption of soft drinks and competition on the Vietnamese soft drinks market.
22
9.5
10 9
7 6 5 4 3 2 1 0
Year
Figure 4.1 GDP and GDP growth rate in Vietnam during 1990-1995 Source: General Statistics Bureau
70 60
67
50 40 30 20 10
17.5 5.2
14.4 12.3
1994 1995
14(est)
0 1991
1992
1993
1996
Year
Figure 4.2 Inflation rate in Vietnam during 1991-1995 Source: General Statistics Bureau
23
Besides, to support the economic liberalization process, the government has enacted a series of economic laws such as the Law on Foreign Investment, the Cooperative Law, the Business Law, etc. In 1996, Bidding Statute will be submitted to the Nation Assembly for approval. Other economic policies aimed to encourage private sectors have been passed. All of them have formed a favorable environment for economic development. Like other light industries, the soft drink industry is always encouraged to invest production locally. The government has imposed on import tax on soft drink and beer at high rate of 80 percent to protect domestic production This is an advantage for the local soft drink producers and joint ventures in general, and IBC in particular in expanding their production and distribution. In general, apart from these achievements, however, there are still many difficulties and challenges that Vietnam has to face in coming years. Economic efficiency is still low, and the financial and monetary systems are weak. Vietnam faces strong competition in context of global economic development, while its level of economic and technological development is still low because of limited financial capability, poor socio-economic infrastructure, poor legal system and inadequate skilled labor. Particularly, transportation system is serious degraded. It cannot meet future demands. This will influence the region pattern of soft drink distribution and increase costs. There is also a significantly gap in economic development between regions.
24
Table 4.1 The improvement in living standards of HCMC residents 1991 Destitute Poor Average Stable Well-off Total 10.00 36.00 38.00 13.00 3.00 100.00 1992 7.00 25.00 36.00 27.00 5.00 100.00 1993 4.40 19.50 34.00 33.90 8.20 100.00 1994 2.80 12.50 32.10 44.40 8.20 100.00
Table 4.2 Spending trend of HCMC residents Items Food and Drinks Clothing Travel Education Health care Recreation Others Total 1992 69.90 6.40 4.60 1.81 6.27 2.11 8.91 100.00 1993 68.90 6.81 6.80 2.07 7.50 2.70 5.22 100.00 1994 67.37 6.24 7.20 3.62 8.40 3.20 3.97 100.00
quality. There are now 25 soft drink producers in Vietnam. Most of the large producers are located in HCMC, Ha Noi and Da Nang. Besides some local brands, well-known brands such as Pepsi, Coca Cola, 7-Up, Sprite are available in big cities as well as in remote towns in the whole country. The production volume of soft drinks quickly increased from 110 million litters in 1991 to 250 million litters in 1995. However, it is difficult to measure exactly the actual production volume of soft drinks due to the following reasons: The State is unable to control the actual production and sale volume of soft drink producers and distributors. Because local officials and corporate executives sometime twist data to meet bureaucratic objectives. In addition the wholesalers and retailers distort data in order to avoid paying full tax. It has not been possible to calculate carbonated drinks imported officially under quotas. Even Ministry of Commerce elicited the response that there were no recorded imports of soft drinks. It is also difficult to calculate soft drinks unrecorded imported due to unreliable sources of data on soft drinks smuggled.
According to General Statistic Bureau and combined with some forecast from the International Marketing and Economic Services (IMES), the consumption in more recent years is shown in Table 4.3. At present, soft drinks consumption per capita is about 3.3 litters per year. It is lower than of other countries in the region such as consumption of soft drinks per capita of Thailand at 17.4 litters per year, 28.2 litters in Philippines and 60 litters in Singapore. Table 4.3 Soft drinks production in Vietnam in period 1991-1995 Year 1991 1992 1993 1994 1995 Production volume (million liters) 110 125 177 200 250 Population (million) 67.7 69.2 70.8 72.6 74.5 Consumption per capita (litters) 1.62 1.81 2.50 2.75 3.35
26
27
SARSI 5%
OTHERS 3%
COLA 42%
Figure 4.3 Consumption of soft drinks in Vietnam-divided by flavors Source: General Statistics Bureau
o7PET
h h
Figure 4.4: Structure of Soft Drinks Packaging in Vietnam Source: General Statistics Bureau
28
Improvements in both quality of products and packaging standards, as well as presence of new brands and containers. A improvement in living standards and disposable incomes with accelerated economic growth. The anticipated sharp increase in leisure tourism and business arrivals. The positive impacts of increase in soft drink consumption of the countries in the region
Official predictions provided by General Statistical Bureau combining estimates of producers, the consumption of soft drink in the period of 1996-2000 will increase at annual growth rate of 15 percent. This gives a very optimistic prospect for producers and leaving room for expansion.
Besides, soft drinks are recorded to be consumed increasingly at home. According to the survey of SGR in Vietnam, soft drinks consumed at home accounted for more than 40 percent, followed by coffee shops 26 percent, The rest were consumed at restaurants, hotels, canteens, schools, transportation centers and street stalls. This proved that there is the fast growth of the take-home market. Moreover, the soft drink consumption is also strongly affected by age. Most of the soft drink consumers are young, at range from 10 to 35 years old. This creates opportunities for the producers to increase production capacity and business because Vietnams population is very young. In the south, 57 percent of population is lees than 25 years old while in the north, the percentage is 53 percent.
30
Obviously, both Coke and Pepsi launched fierce marketing campaigns in Vietnam in an effort to win consumers allegiance to their brands. Overall, Vietnamese soft drinks market is to be harder competition for rival participating in this arena. And the fighting for a share of the domestic market between soft drink producers becomes harder and harder as most of large player are very ambitious to expand their market share.
31
already prepared. Coca CD plans to produce 136 million liters per year including Coca Cola and Sprite in returnable glass bottles and cans. 4.6.1.3. Production Capacity and Market Share of CCI in Vietnam Production capacity Up to now, two joint ventures of CCI are producing canned and bottled soft drinks including Coca Cola, Sprite and have plans for bottling Fanta mid 1996. Its current production capacity is 76 million liters per year .Table 4.4 shows the production capacity of Coca CD and Coca NH in detail. To capture the market share in canned soft drinks in HCMC, Coca CD has the plan for assembling one canned production line at Cola CD plant. Table 4.4 The current production capacity of CCI Production capacity (million liters) Ha Noi: Coca Cola Ngoc Hoi Company Bottle line Can line HCMC: Coca Cola Chuong Duong Co Bottle line of Chuong Duong Co Bottle line of Saigon Cola Total production capacity 25 20 11 20 76
Source: Report of Coca Cola Indochina Pte Ltd Market share Last year, CCIs sales volume was 28 million liters, and its market share in the whole country was 12 percent. In HCMC, its sales volume was 16,5 million liters, and CCI gained market share of 17 percent in total HCMC soft drinks market. CCIs production plan in 1996 will be 75 million liters and project to obtain the market share at 25 percent in the total Vietnamese market (CCIs report). To implement this plan, CCI has prepared to produce Sprite and Fanta at the Coca Chuong Duong plant and the Saigon Cola plant in 1996. With strongly financial resources, CCI will continue to expand its production capacity in Central provinces through establishing a joint venture with Da Nang March 29 Garment Company and waiting for approval of SCCI. 4.6.1.4. Marketing Activities of Coca CD Product CCIs product line consists of Coca Cola, Sprite and Fanta, but at present, Fanta has been not yet produced anything in Vietnam. The product line of Coca CD consists of Coca Cola and Sprite. Before 1975, Coke has created its awareness in the Vietnamese consumers mind and Coca Cola was considered as number one in soft drinks market at that
32
time. Nowadays, to capture its position in Vietnam market, CCI has applied the same formula as in other countries: availability, affordability and acceptability. At present, CCIs products consists of two packaging types: can of 330 ml and returnable glass bottles including volume of 296 ml and 200 ml. At the first time, Coca Cola was bottled in bottle 296 ml, but because the volume of this bottle is not suitable to Vietnamese drinking size. Then, CCI has continued to launch the bottle 200 ml. Price By focusing mainly on high and upper middle income class, the prices of Coca CD products were set higher than the prices of local brands. Table 4.5 shows the prices list of Cola CD products. The difference between wholesale price and pick-up factory price is profit margin for its wholesalers.
Table 4.5 Price List of Coca CD products Items Coca Cola- Bottle 200 ml Coca Cola- Bottle 296 ml Coca Cola- Can 330 ml Sprite-Bottle 200 ml Sprite-Can 330 ml Wholesale price (VND) 1,250 1,650 4,200 1,250 4,200 Pick-up factory price (VND) 1,200 1,550 4,000 1,200 4,000
33
Distribution To increase the sales volume and obtain a higher market share, Coca CD has established its distribution networks in HCMC and South provinces. At present, Cola CD uses wholesalers and retail outlets of Saigon Cola and Chuong Duong company to distribute its products. Its distribution channels consist of direct and indirect channels. Majority of its products were distributed through indirect channel: the Coca CD plant to wholesalers to retail outlets and finally to end users. In addition, its direct channel is used to distribute products from its plant to retail outlets. The Coca CD has been concentrating on opening up both direct and indirect channels through developing retail outlets and wholesalers. The Coca CD distributes its products through 136 wholesalers and 460 retail outlets in HCMC. The Coca CD has applied the incentive policies in delivery, payment, discount and other incentives for its wholesalers and retail outlets to stimulate them to purchase at big volume. the quantity discount from 1 percent to 4 percent of the purchased value is often given to its wholesalers and retail outlets who meet the sales quota pre-set. Advertising At the beginning of the production, Cola CD has been launching the aggressive advertising campaign with its slogan Coca Cola, The Real Thing to recall awareness of its brands. According to a survey of the author, there were over a half of respondents who know the slogan of Coke. The Coca CD has often used media such as television and newspapers and supported the point of purchase materials for advertising name and logo of its products. Coca CD also sponsors the sport activities, especially football to create the awareness of its products. In general, Cola CD has large investment capital and strongly financial resource. It has used modern equipment and advanced technology in soft drink production. Its production capacity is high. The company has experiences in the marketing activities due to CCI has in-depth experience and expertise in marketing such as advertising, distribution and sales promotion. Coca Cola is much preferred by majority of consumers whereas Sprite is less preferred. Coca CD has created the awareness of Coca Cola in the Vietnamese market and good reputation brand. At present, the Coca CD has constantly focused on expanding its production, distribution channels and emphasizing on advertising in order to convince consumers to buy its products in order to increase its market share.
34
obtained 50 percent of HCMC soft drinks market, and 20 percent of total national market at period of 1992-1993. Its target market consists of low and middle income. During the past years, Tribeco has secured a good reputation with its target consumer. Last year, the sales volume of Tribeco was 39 million liters, and Tribeco gained market share of 17 percent in Vietnamese soft drinks market and 23 percent of HCMC market. These figures proved that its market share has decreased. However, its sales volume in 1995 was higher than in 1994 because of increase in demand for soft drinks in low income consumers. Thus, the Vietnamese soft drinks market is still open for local companies like Tribeco, who have good marketing, understanding of the local consumer taste and a wide distribution networks. By targeting low and middle income consumers, Tribeco offers its products at low price. Ex factory prices are equivalent to VND 800 per unit of 200 ml bottle, and VND 3,200 per unit of 330 ml can. Wholesale prices are VND 850 per unit of 200 ml bottle, and VND 3,400 per unit of 330 ml can. Tribeco distributes its products through 300 wholesalers in HCMC, 125 wholesalers in provinces, and 2300 retail outlets in HCMC. Regard to advertising and sales promotion, it can be said that Tribeco lacks attention to this activities. Last year, Tribeco made an exclusive bottling agreement with Pepsi to produce Mirinda orange and Mountain Dew soda in order to diversify its products and maintain existing market share.
4.7. Substitutes
It is very important to analyze substitutes impacted the development of Vietnamese soft drinks market. Substitutes consist of mineral water, fruit juices, milk, tea and coffee. Mineral water: in resent years, demand for mineral water has slightly increased. There are some brands such as La Vie, 333 mineral water, Vinh Hao, Aquapure, Mountoya which were produced by local producers and joint ventures. Currently consumption per capita is very low by compared with other countries in the region. The scope for expansion is clearly enormous. Because Vietnam is abundant in mineral and spring water sources, there is no doubt that the potential for development is very promising. However, most of the Vietnamese people less prefer to drink mineral water. Fruit juice: the fruit juice in Vietnam is underdeveloped. Due to almost Vietnamese consumers appear to favor either juice freshly squeezed from fruit, or carbonated beverages. Flavored milk: demand for milk consumption has increased but low level. For refreshment, most of Vietnamese people prefer carbonated soft drinks rather than milk. Moreover, the price of milk is high compared carbonates. Tea: tea is the national drink of Vietnam, the market is mature and relatively stable and is unlikely to growth dramatically. Most of people like to drink tea at age over 35 years old.
35
Coffee: coffee is much less widely drunk in Vietnam than tea. Coffee is a relatively minority taste and consumption is concentrated mostly in the south. For refreshment, coffee is less preferred rather than soft drinks. From analysis of above substitutes, it can be said that threats of substitutes are low, therefore, soft drink industry is assumed to develop in the next years.
36
Chapter 5
Internal Analysis
This chapter analyzes IBCs production and business, marketing activities including products, price, distribution and promotion. In addition the attitude of soft drink consumers toward attributes of IBC products compared the competitive brands is also discussed.
37
production and other strategies have to synchronized with the overall corporate strategy (IBCs document).
38
In 1994, IBCs the production volume was 33 million liters, and its turnover was over VND 171 billion. Its market share in the whole country was more than 20 percent. In 1995, due to the fact that the demand for foreign brands continued to increase, IBC doubled its sales volume and gained a market share of 28 percent of the total Vietnamese soft drinks market (Figure 5.1) and 42 percent of HCMC market (Figure 5.2). Last year, IBCs sales volume was over 71 million liters in which its soft drinks were sold in HCMC accounted for 58 percent, in Ha Noi 18 percent, the South provinces 14 percent and Central provinces 10 percent (Figure 5.3). Obviously, its key target market is HCMC market. By looking at the monthly sales volume of IBC, we can see that its sales was slightly influenced by seasonal consumption. Figure 5.4 shows the increase and decrease in sales volume between the different seasons in the year. In July and August are in rainy season, thus, sales volume felt down.
39
Figure 5.1 Market Share of Soft Drink Manufacturers in Total Vietnam Market
IBC 42%
COKE 17%
TRIBECO 23%
Figure 5.2 Market Share of Soft Drink Manufacturers in HCMC Market (Source: HCMC Statistics Bureau)
40
HANOI 18%
HCMC 58%
Figure 5.3 IBCs sales volume, divided by geography. Source: IBCs reports
9,482 8,732 6,129 5,452 6,943 6,122 5,566 6,432 4,641 4,370 6,538 7,549
10
11
12
MONTH
Figure 5.4 IBCs monthly sales volume in 1995 Source: IBCs reports
41
5.5.1. Product
5.5.1.1. Product Line IBCs product line consists of two soft drink brand groups of Pepsi Co Inc and Cadbury Schweppes Group (CSG). The former consists of Pepsi Cola and 7-Up which have been produced after lifting the US embargo. The later includes Schweppes soda, Schweppes sarsi and Crush orange which have been produced since April 1993. Pepsi Before 1975, the Vietnamese consumer was familiar to consume Coca Cola. At that time, Pepsi was not present in Vietnam. But only two years ago, Pepsi was recognized by most of consumer in big cities, especially in HCMC. According to Survey Research Group (SRG) in Vietnam, up to now, Pepsi has made some head starts in creating awareness compared to Coke. The consumers are more spontaneously aware of Pepsi than Coke, especially in Da Nang where Festi is the dominant brand. Pepsi is getting more popular there. Pepsi is consumed more than Coke in the last year both at home and outside. Both Pepsi and Coke have equal share for both last occasions and most often consumption. While consumption of local brands such as Tribeco, Festi, etc., has declined dramatically. Mentioning the brand awareness, SRG found out when asked for unaided brand awareness (i.e. a list of brands was not shown) in HCMC that Pepsi was mentioned as first brand, followed by Coke. When asked for aid brand awareness (i.e. a list of brand was shown), Pepsi and Coca Cola achieved almost the same level (nearly 100 percent of respondents in sample size). From this result, it can be said that IBC has created the awareness of Pepsi in the Vietnamese soft drinks market, especially in HCMC. 7-Up 7-Up was not produced in Vietnam before 1975. It was, however, available in the Southern markets earlier than Pepsi by imported products. 7-Up has been produced at IBC plant since February 1994. Up to now, it can be said that in the lemon lime flavor market, 7-Up is mostly preferred by most of the Vietnamese consumers. 7-Up has also a high awareness in the market by advertising itself as Uncola. According to the survey of SRG, of soft drink consumers, their preference of lemon lime flavor was rated 75 percent voted for 7-Up and 25 percent for Sprite. Schweppes
42
IBC has produced Schweppes with flavors such as cola, lemonade, soda and sarsi since April 1993. Until January 1995, Schweppes cola and lemonade was not produced at the IBC plant. At the first time, when Schweppes was launched, it provided a range of high quality fruit flavored carbonated drinks and focused on target consumers at 18-45 years old with middle and high income. Its sales volume increased rapidly in 1993 and the first five months of 1994, then decreased gradually, especially from the presence of Pepsi, Coke, 7Up and Sprite. Facing the problem of the decline in sales volume, IBC has launched advertising campaigns to convince its target consumer to drink Schweppes. Crush Crush is a unique formula and blend of ingredients which include real orange juice. Crush was the first international brand available in Vietnam in 1993. Crush is positioned as a young, international orange brand. At present, Crush is much preferred by majority of soft drink consumers but Crush is facing the competition from Mirinda and Fanta in which Mirinda is produced at Tribeco plant under the exclusive bottling agreement of Pepsi and Fanta will be produced at Cola Ngoc Hoi Soft Drink Co Ltd and Cola Chuong Duong Soft Drink Co Ltd in mid 1996. 5.5.1.2. IBCs Product Line Sales To analyze the product strategy of IBC, it needs to assess the percentage of the total sales contributed by each item. In total sales volume, Pepsi accounted for 60 percent, followed 7-Up (29 percent), Schweppes soda (6 percent), Schweppes sarsi (2 percent) and Crush (3 percent). Obviously, Pepsi and 7-Up are very successful in achieving high brand recognition in the Vietnamese market, especially in HCMC. Schweppes soda is dominant in soda flavor market in Vietnam. While sales volume of Schweppes sarsi and Crush have rapidly declined. 5.5.1.3. Pack Types IBCs products are packed in three types: returnable glass bottles (RGB), cans, and PET bottles (polyethylene terephthalate). Pepsi and 7-Up are bottled in returnable glass bottles with volume of 207 ml. Bottles with volume of 285 ml consist of Schweppes and Crush. For soft drinks cans, Pepsi, 7-Up, Crush and Schweppes Soda are canned with volume of 330 ml. Besides, Pepsi, 7-Up, and Crush are bottled PET bottles with volume of 1.5 liters. In IBCs sales pattern, RGB accounted for 68 percent of total sales, followed cans (28 percent), PET bottles (4 percent). The PET bottles has consumed increasingly, especially in consumption at home. According to the survey of IBC, last year, bottle 207 ml is suitable to Vietnamese drinking size, while bottle 285 ml is a little big for drinking. This is a reason that Schweppes and Crush are the slow-selling items from IBC product line.
43
5.5.2. Price
5.5.2.1. Pricing Objectives IBC pricing objectives should be set up to accomplish the companys objectives: profit goal, return on investment, market share, stabilization, and market penetration. At present, the first objective of the pricing activities is to increase the market share and maximum sales growth by providing the products with high quality and at reasonable price. So price is considered as the crucial device for penetrating and expanding market. 5.5.2.2. Pricing List To implement the pricing objectives, the IBCs Board of Directors decided to purse the pricing stabilization policy for its products during period 1993-1994. Its pricing policies have been considered as a primary device to encourage on soft drink consumption and persuade soft drink consumers to switch to its products. After April 1995, due to an increase in price of imported materials and import tax, IBCs pricing list was adjusted to ensure profit for each item (Table 5.3). By looking at IBC pricing list the wholesale prices of Pepsi bottles and cans are lower than Coke, the wholesale prices of 7-Up bottles and cans are lower than Sprite. So the prices of IBC products can meet the purchasing power of the middle and high income consumers. IBC gives its wholesalers at margin (difference between price paid: ex-factory and price sold: wholesale price) of 4.67 percent for bottled carbonates and 5.55 percent for canned carbonates. Obviously, IBC gives margin for wholesalers is higher than margin of Coke offering for its wholesalers (margin of 4 percent for Coca Cola and Sprite bottles and 4.76 percent for Coke and Sprite cans). In addition IBC has applied the quantity discounts at a range from 1 to 5 percent of purchased value for its wholesalers and retail outlets who meet the sales quota pre-set.
Table 5.3 Price list of IBC products Items Pepsi 7-Up Schweppes Soda Schweppes Sarsi Crush Orange wholesale price (VND) Bottle Can 1.050 3,600 1.050 3,600 1.050 3,600 1.050 3,600 1.050 3,600 (Source: IBCs report) Ex-factory price (VND) Bottle Can 1,000 3,400 1,000 3,400 1,000 3,400 1,000 3,400 1,000 3,400
44
5.5.2.3. Pricing Structure The prices of IBCs products are set up basically relying on cost-based method and considering the prices of its competitors. IBC has not set a single price for all its products, it set a pricing structure that covers different products reflecting variations in product costs and other costs. The pricing structure of IBCs bottled and canned soft drinks is shown Table 5.4 and Table 5.5. By looking at the pricing structure, for bottled soft drinks, Schweppes soda has the highest net profit (106.56 VND per unit), following Schweppes sarsi (70.4 VND per unit). But sales volume of these products was very small, so their profit contributed to the total profit of product line was very small proportion. Pepsi and 7-Up bottles make the lower profit per unit (48.50 VND and 43.30 VND respectively per unit), these items hold the highest percentage in total profit over 87 percent (IBCs report). In canned soft drinks, Pepsi and 7Up constituted higher profit margin per unit (256 VND and 247.65 VND respectively per unit). Schweppes soda both bottles and cans, this item is on the leading position in Vietnamese soda flavor market and made the highest profit margin per unit, however, because limited consumption of soda, it accounted for 6 percent of total sales. Table 5.4 Pricing Structure of IBCs products-bottles Brands Selling price Discount Sales Tax Net Price Variable product Cost Manufacturing Cost Marginal Contribution General & Administration Selling & Delivery Advertising & Marketing Operating Expenses Profit Before Tax Tax Provision Profit After Tax Pepsi 1,050.0 0 50.00 63.00 937.00 447.00 152.90 337.10 54.10 141.80 80.57 276.47 60.63 12.13 48.50 7-Up 1,050.00 50.00 63.00 937.00 453.51 152.90 330.59 54.10 141.80 80.57 276.47 54.12 10.82 43.30 Schweppes Soda 1,050.00 50.00 63.00 937.00 392.4 122.60 422.36 109.68 129.84 49.64 289.16 133.20 26.64 106.56 Crush 1,050.0 0 50.00 63.00 937.00 531.60 102.60 302.8 105.80 129.84 49.64 285.28 17.52 3.50 14.02 Schweppe s Sarsi 1,050.00 50.00 63.00 937.00 441.12 122.60 373.28 105.80 129.84 49.64 285.28 88.00 17.60 70.4
45
Table 5.5 Pricing Structure of IBCs products-cans Brands Selling price Discount Sales Tax Net Price Variable product Cost Manufacturing Cost Marginal Contribution General & Administration Selling & Delivery Advertising & Marketing Operating Expenses Profit Before Tax Tax Provision Profit After Tax Pepsi 3,600.0 0 200.00 216.00 3,184.0 0 2,252.9 8 169.60 761.42 87.00 226.00 128.42 441.42 320.00 64 256 7-Up 3,600.00 200.00 216.00 3,184.00 2,263.34 169.60 751.06 87.00 226.00 128.42 441.42 309.64 61.99 247.65 Schweppe sSoda 3,600.00 200.00 216.00 3,184.00 1,699.44 288.56 11.96 282.12 489.44 132.16 903.72 292.28 58.46 233.82 Crush 3,600.00 200.00 216.00 3,184.00 1,879.48 288.56 1,015.96 282.12 529.68 132.16 943.96 72.00 14.4 57.6 Schweppe sSarsi 3,600.00 200.00 216.00 3,184.00 1,821.72 288.56 1073.72 282.12 529.68 132.16 943.96 129.76 25.95 103.81
In IBCs sale pattern, last year, the indirect channels contributed the remarkable sales volume at 78 percent, followed direct channels 19 percent and a small proportion of 3 percent in total sales was exported to Cambodia.
46
Channel 1
RETAILER
I B C
Channel 2
POSTMIX
Channel 3
WHOLESALER RETAILER
C O N S U M E R S
Among its distribution networks, the channels in HCMC accounted for 58 percent of the total sales. IBC has constantly developed and expanded its channels in HCMC including direct channels (retail outlets, postmix), indirect channels. Among the total sales in HCMC, indirect channels accounted for 67 percent, followed by direct routes 25 percent, Horeka 7 percent and postmix 1 percent. IBCs distribution channels in HCMC consist of the following channels. IBC to retail outlets to end users Based on the features of each local market and the capability of the company, IBC has selected the suitable distribution channels alternatives for each territory. Channel: IBC to retail outlets to end users also called direct channels which have established since 1993 in HCMC in order to help the company and the final consumer deal with each other. In fact, up to now, IBC has offered good services for consumers in this channel and developed 4,238 retail outlets. IBC made the agreements with the retail outlets to sell directly its products to them. These outlets are divided into 42 direct routes and one salesman is responsible for managing each route. IBC has the plan for further developing the sales force. This direct channel can be divided into two sub-channels: direct routes and Horeka. Direct routes The direct routes are responsible for distributing IBCs products to the end users through retail outlets such as side-street food stores, coffee shops and canteen at schools, universities, hospitals. IBCs products sold through the direct routes accounted for 25 percent of total sales in HCMC. IBC has constantly concentrated on expanding the direct routes to increase sales and collect information about its products against competitors from the end users. The direct routes are divide into two territories: inside and outside districts of HCMC.
47
Horeka Horeka is a word combined by hotel, restaurant and karaoke clubs. Stemming from this name, this channel is used to distribute products to target consumers including hotels, restaurants, cafeteria, dancing clubs, entertainment places, karaoke clubs and supermarkets. Thus, IBC has used this channel to penetrate the market segments of high income and entertainment places To capture and develop this channel, IBC has used the incentive policies for outlets of Horeka. These policies consist of offering the quantity discounts at a range from 2 to 6 percent of purchased value for its Horeka who meet the sales quota pre-set. IBCs products sold through Horeka achieved at 7 percent of the total sales. It can be seen that the success of IBC in developing Horeka depended on activities of trade promotion. Postmix machines: IBC to postmix to end users Postmix machines is a system of selling soft drinks by machine. Soft drinks sold through Postmix machines are not popular in Vietnam. Most of the Vietnamese people like to drink soft drinks with their friends at coffee shops or street vendors, or with their family at home. However, to convince the consumers, mainly young people to be familiar to drink soft drinks from vending machines, IBC has installed Postmix machines as a direct channel to distribute its products. Up to now, IBC has 62 Postmix machines (vending machines) located at primary and high schools, universities, stadiums, swimming pool clubs, train stations and theaters. To manage the Postmix machines, IBC allows the retail outlets to rent Postmix machines with rental price at 85,000 VND (equal to 8 USD) per month for each Postmix machines and the company sells materials including carbonates and flavors at lower price. In addition, to promote sales throughout this channel, IBC has offered free charge for Postmix machines achieved 200 liters per month. In fact, however, most of outlets said that this figure is high and hard to achieve. Concerning conditions of installing Postmix machines are still the problem in which IBC is facing such as location, maintenance and security as well as problem of technique. In addition the power cut-off often occurs in Vietnam and water supplying source is not suitable to standard stipulated by Pepsi Co for producing soft drinks. Indirect channel: IBC to wholesaler to retailer to end users At the beginning of operation, IBC has constantly concentrated on building, consolidating and upgrading the indirect channels in HCMC and provinces. By looking at the value of products sold through the indirect channels at each years, it can be said that this channel is strategic one. Last year, the its products sold through wholesalers accounted for 67 percent of the total sale in HCMC. The use of wholesalers as intermediaries can help the company to facilitate the distribution process and offer more attractive services to the buyers. It can be either exclusive wholesaler of IBC meaning under the contract to sell IBC products solely or nonexclusive wholesaler is allowed to sell IBC products and other soft drinks brands simultaneously. However, it is difficult for IBC to control sales of its exclusive wholesalers, because most of wholesalers are multi-brands distributors.
48
Up to now, IBC has developed 658 wholesalers in which 452 wholesalers are located in inside and outside districts of HCMC and 145 wholesalers in South and Central provinces, 61 wholesalers in Ha Noi. Although IBC requests all wholesalers to sell at price stipulated, most of wholesalers sell products at flexible price. They can sell IBC products at high price any whenever exceeds demand and dumping price to increase sales volume. To develop the wholesalers network, IBC has applied the following policies: 1. Discount (margin) IBC adapts the discount price which differs between nonexclusive and exclusive wholesalers as indicated in the Table 5.6
Table 5.6 Discount list of IBCs wholesaler Discount For Nonexclusive Wholesaler (VND) 50 200 600 Discount For Exclusive Wholesaler (VND) 60 215 620
Bottle 207 ml and 285 ml Can 330 ml PET bottle 1.5 liters
Source: IBCs report (Note: discount i.e. margin between wholesale price and ex-factory) 2. Delivery IBC delivers its products to all wholesalers in HCMC and is charge of transportation expenses. For wholesalers in provinces, IBC subsidies 50 percent of transportation expenses to encourage them to purchase at large quality.
49
3. Payment Payment term applied for IBCs wholesalers is cash on delivery. However, to expand distribution networks at new markets, IBC will apply the flexible payment term such as credit or 50 percent cash payment and 50 percent credit term from 1 to 3 months.
5.5.4.2. Advertising To convince the soft drink consumers to switch to IBC products, the company has launched a dynamic advertising campaign with slogan Pepsi, The Choice of New Generation and 7-Up, From Transparent To Wonderful and Crush is your Life and Color on the commercial programs on television. Obviously, its target consumer is all soft drink consumers, mainly young people. So the producer, distributors try on diffuse attributes of Pepsi to its target consumers by words such as freedom is yourself, freshness and intelligence, attraction and reality and modern and following the trend. It can be said that IBC is very interested in advertising activities. In 1995, its advertising budget accounted for over 65 percent of total promotional budget and accounted for 8.6 percent of total sales (IBCs report). The company has used the media such as television, radio, newspapers, magazines, billboards and public transportation for advertising Pepsi and 7-Up, Crush and Schweppes. Television Television is one of the effective advertising media compared to others, it can diffuse the information, picture and shape of product to all the consumers. Based on the advantages of this media, the company often uses television as the tool to introduce its products. Every night, Pepsi, 7-Up, and Crush are advertised on Vietnam Television, and local Television such as HCMC, Can Tho and Da Nang.
50
Radio To maximize awareness of IBCs products in the whole country, the company sometime introduces its products on radio at beginning and last minutes of the programs for children, traditional music because most of audience like to listen to these programs. Newspapers and Magazines Simultaneously, the commercial program on television and radio, IBC also used trade publication for advertising its products and logo of Pepsi in newspapers, magazines such as Youth newspaper, Saigon Time weekly and daily, Saigon Liberation, Vietnam Investment Review, Marketing magazine, Labor newspaper, etc., Billboard and public transportation IBC is also interested in introduction its products throughout using bill board and public transportation. To attract the consumers interest, all most bill boards are located at the central of HCMC such as Ben Thanh market, Tan Son Nhat airport, and cross roads. The logo of Pepsi, pictures of 7-Up, Crush bottles and cans are advertised in trucks, buses in HCMC, especial airport-buses. 5.5.4.3. Sales Promotion Sales promotion is one of the marketing tools in which IBC is very interested in promoting its sales. Its sales promotion consists of trade promotion and consumer promotion. Trade promotion The company uses trade promotion to stimulate quicker and greater purchase of its products by its wholesalers and outlets in order to increase the sales volume. IBCs trade promotion tools consist of offering free goods, supporting facilities for outlets development and point of purchase materials. Free goods are sometime held in special occasion, new year by offering extra products of purchase to wholesalers and retail outlets who buy a certain fixing quantity, for example, if IBCs wholesalers and outlets buy 6 canned soft drink pack get free 1 can or buy 12 PET bottles soft drinks pack get free 1 PET bottle Developing new retail outlets and wholesalers, especially the exclusive outlets and wholesalers, IBC has supported facilities for retail outlets and wholesalers to decorate and advertise the logo of Pepsi. The plan for developing outlets is mainly concentrated on hotels, restaurants, big coffee shops and entertainment places such Dam Sen, Ky Hoa, Van Hoa parks. Point of Purchase materials are supported by IBC for its wholesalers and retail outlets aimed at creating and maximizing the awareness of Pepsi and 7-Up in the consumers mind. Supporting the point of purchase materials consists of shop-sign, lightbox, freezes-sign, visi-coolers, ice-chest, canopy, parasol, poster, bunting, sticker, banner. Up to now, IBC develops shop-signs at almost its wholesalers and outlets in HCMC. The shop-signs have the high effectiveness of advertising the logo of Pepsi. Through the shopsign, the consumers know Pepsi more and more, because majority of consumer, especially
51
outside districts of HCMC, they confused Pepsi was beer. Beside shop-sign, IBC has designed more than 620 light-boxes with picture of Pepsi bottle which are located at front of the outlets. Consumer promotion The purpose of consumer promotion is to create demand and persuade soft drink consumers to switch to IBC products. The company used consumer promotion tools such as lucky draws based on numbers under crow, gifts, wet sampling and product challenges. All activities of consumer promotion are sometime held at entertainment places and schools. 5.5.4.4. Special Events Sponsorship IBCs sponsorship activities aim not only to create awareness of its products but also improve public goodwill. Throughout sponsorship activities, the company created the good relation ship with government. Last years, IBC sponsored for cultural and music activities and sport events and other social activities such as scholarship fund for student at schools and universities in HCMC, sponsoring for homeless children. Clearly, IBCs sponsorship activities can make more memorable impact on public awareness and credibility than advertising.
52
The majority of consumers would prefer cola flavor to lemon lime flavor. Orange and other flavors would be less preferred. In addition most of respondents prefer foreign brands to local ones. Pepsi and Coke are considered as the favorite products. They are much preferred by most of consumers. There is not significant difference in brand preference between Coke and Pepsi (Appendix 4, Exhibit 1). Whereas, Tribeco is less preferred. As a result, that demand for foreign brands increases and demand for local ones decreases. There is the significantly difference in age groups who very much like to drink Pepsi. The younger people (from 10 to 20 years old) very much prefer Pepsi rather than the old group (from 31 to 50 years old) (Appendix 6, Exhibit 1). While there is no significant difference in preference of Coke between age groups (Appendix 6, Exhibit 2). The survey shows that lemonade lime flavor is less preferred to cola flavor. 7-Up is rated at fair average level of brand preference, Sprite is much less preferred by most of respondents. Regarding orange and sarsi flavor, the findings show that Schweppes and Crush are the soft drinks with low brand preference. This is a reason why Schweppes and Crush are the slow-selling items. Table 5.8 Mean score of brand preference Brands Pepsi 7-Up Coke Sprite Schweppes Tribeco Crush Mean 6.010 4.290 6.250 2.760 2.480 3.520 2.840 Std dev 1.010 1.493 .821 1.280 1.210 1.845 1.692
53
7-Up is considered as a very good item and most of respondents indicates that their friends say 7-Up is very good quality. While Sprite is rated as an average brand. Schweppes and Crush are assessed as average quality items. Table 5.9 Mean score of words of mouth Brands Pepsi 7-Up Coke Sprite Schweppes Tribeco Crush Mean 6.070 6.260 6.450 4.040 3.920 4.330 3.860 Std dev .795 .812 .672 1.082 1.061 1.092 1.025
with consumers, they say that almost soft drink consumers in HCMC would like to drink sweeter carbonates. So Pepsi should mention this attributes to attract more users. Assessing the sweetness of Pepsi, the analysis shows that there is a relation in ranking between sweetness and age groups. Two fifths of respondents in the 10-20 age group indicate that Pepsi is as sweet as Coke and the same proportion of respondents in the 1020 age group rank that Pepsi less sweet than Coke. For the 21-30 age group, there are three fifths of them who rank Pepsi is much worse than Coke. There are two fifths of consumers in the 31-50 age group who rank that Pepsi is less sweet than Coke (Appendix 5, Exhibit 1). Gas (carbonation), Pepsi is evaluated at higher gas than Tribeco. When compared with Coke, there is over two fifths of consumers who say that Pepsi is much less gas than Coke. When conducted in-depth interviews, most of young people disclose that they would like to drink carbonates with stronger gas. Therefore, Pepsi needs to improve this attribute to convince more young people. Package, this element is considered as an important attribute to appeal to the interest of consumer. There are more than three fifths of respondents who mark that Pepsi is same Coke. Nearly one fourth of consumers rank Pepsi is much better than Coke. Almost consumers say that Pepsi is much better than Tribeco. Availability, the findings show that two fifths of respondents indicates Pepsi is more available than Coke in HCMC. This is an advantage of Pepsi because Pepsi has been produced in the South earlier than Coke and IBC has developed the wide distribution network in HCMC. There also were over half of respondents who rank Pepsi is more available than Tribeco. Reputation , Pepsi gains good reputation in HCMC market. There are more than half of consumers who mark Pepsi and Coke are as same as reputation. Over four fifths of consumers indicate that Pepsis reputation is better than Tribeco. Obviously, Pepsi is to become top of mind brands.
55
Table 5.10 Comparison the attributes of Pepsi with Coke Attributes Taste Sweetness Gas Package Availability Reputation 7-Up and Sprite For lemon lime flavor, the majority of consumers rank very high for 7-Up in all attributes such as taste, sweetness, gas, package, availability and reputation. The survey shows that there are more than half of consumers who rank 7-Up is much better than Sprite in taste, sweetness, gas, availability and reputation. Regarding the package, half of consumers say that 7-Up is the same as Sprite. Obviously, 7-Up wins over Sprite for all attributes. Concerning with taste, all age groups rank that 7-Up is better than Sprite and there is the relation in ranking between taste and groups. 7-Up is ranked better than Sprite by four fifths of respondents in the 10-20 age group. More than haft of respondents in the group of 21-50 years old say that 7-Up is better than Sprite( Appendix 5, Exhibit 2). Discussing gas, all groups rank higher for 7-Up, there are over half of respondents in group of 21-50 years old who rank higher for 7-Up, whereas one third of respondents in the 10-20 age group rank that 7-Up is better than Sprite( Appendix 5, Exhibit 3). . Table 5.11 Comparison the attributes of 7-Up with Sprite Attributes Taste Sweetness Gas Package Availability Reputation 7-Up is much better than Sprite (%) 62.0 57.0 48.0 29.0 59.0 66.0 7-Up is the same as Sprite (%) 14.0 31.0 36.0 52.0 36.0 31.0 7-Up is much worse than Sprite (%) 24.0 12.0 16.0 19.0 5.0 3.0 Pepsi is much better than Coke (%) 35.0 26.0 22.0 18.0 38.0 16.0 Pepsi is the same as Coke (%) 26.0 26.0 34.0 67.0 58.0 54.0 Pepsi is much worse than Coke (%) 39.0 48.0 44.0 15.0 4.0 30.0
56
Schweppes sarsi Schweppes sarsi is considered as a soft drink with low brand preference because its attributes are not completely suitable to the Vietnamese consumerstaste. The survey finds that its taste is rated at average level and its sweetness at below average level. In addition Schweppes is not much available in the market. And it had not gained yet at good reputation. So Schweppes lacks of favorite attributes to attract soft drink consumers. Table 5.12 Mean score of attributes of Schweppes sarsi Attributes a. Taste b. Sweetness c. Gas d. Package e. Availability g. Reputation Mean 4.380 3.750 5..500 5.050 3.070 3.140 Sta dev 1.030 .892 .916 1.123 1.008 1.005
57
6 5 4 Mean 3 2 1 0
5.76
3.85
Pepsi
Coke
Tribeco
Seven-up
Sprite
Figure 5.6 Mean score of the prices of soft drinks (Note: 1: very low, 7: very high) Schweppes and Crush Schweppes and Crush were considered as having a fairly high price (mean 5.310 and 5.220). The findings also shows that high income consumers rate Crush is fairly average price, whereas low income consumers say that its price is fairly high (Appendix 6, Exhibit 5).
58
Mentioning prices of soft drinks, most of wholesalers and retail outlets say that the Pepsi, Coke, 7-Up and Crush have the reasonable prices and suitable to purchasing power of consumers, while Sprite and Schweppes price is fairly high. In addition they indicate that almost consumers when buying soft drinks they are interested firstly in choosing soft drink brands with high quality, then price.
(Note: 1: strongly disagree, 7: strongly agree) Sales promotion gifts Most of consumers disclose that sales promotion gifts of soft drink brands are not very attractive. The survey indicates that consumer promotion tools of Pepsi and 7-Up are not very attractive. Thus, IBC needs to pay more attention to sales promotion activities for end users in order to create awareness of its products. Table 5.14 Mean score of sales promotion gifts
59
(Note: 1: not attractive at all, 7: very attractive) Suggestion of retailers When asked the suggestion of retailers to consumers in choosing soft drinks consumption, the findings indicate that retailers do not suggest to consumers to buy Schweppes, Crush, Tribeco and Sprite. The retailers sometime suggest to consumers to buy Pepsi, 7-Up and Coke (Appendix 2, Exhibit 6). The suggestions of retailers to end users can influence their buying decision. Because the survey finds that there are one fourth of respondents who switch to brand which is suggested by the retailer. Three fourths of consumers buy regular brands (Appendix 3, Exhibit 8). So, IBC should pay more attention to promotion its retail outlets who in turn will promote to end users to buy IBC products.
60
slogan Pepsi, The Choice of New Generation known by most of consumers in HCMC market. The prices of Pepsi and 7-Up are lower than prices of Coke and Sprite. So its prices can be met the purchasing power of its target consumers. This is a factor to stimulate more end users to buy IBC products because of high quality products at a reasonable price. IBC has developed its wide distribution channels system covering all districts of HCMC including direct and indirect channels. The company has also developed distribution channels of wholesalers in Ha Noi, Da Nang, the South and Central provinces. In addition, profit margin for wholesaler of IBC is higher than Coke. IBC has continuously launched the advertising campaigns to maximize the awareness of its products in the market and convince soft drink consumers to buy its products. In addition the company has constantly supported sales promotion for its wholesalers and retail outlets in order to build good relationship with its distributors. Weaknesses Among IBCs product line, Schweppes sarsi is less preferred because the attributes of Schweppes are not completely suitable to local taste. The company has not created yet good reputation brand for Schweppes and Crush. Schweppes is not much available in the market. Information contents of IBCs advertising program on television are evaluated lack of the honest. This can cause negative impact for its advertising. IBC lacks attention to sales promotion activities for consumers, there is several sales promotion activities but they are not attractive. IBCs sales force is not strong enough in terms of number of salesman to manage its retail outlets while at present direct routes have continuously developed.
61
Chapter 6
6.1. Conclusions
This research examines how to develop the marketing strategies for International Beverage Company in HCMC through an analytical process of external and internal factors. On the basis of the result of this research, the following conclusions are drawn out: 1. The Vietnamese economy has gained a remarkable growth during the period of 19911995. The GDP averaged growth rate was 8.2 percent per year. The government has issued a series of economic laws to encourage local and foreign investors to invest production locally and imposed on import tax on soft drinks and beer at high rate. So the soft drink industry has dramatically developed. There are currently 25 soft drink producers with more than 30 brands flooded in the market. Some foreign brands such as Pepsi, 7-Up, Coca Cola, Sprite, Schweppes and Crush are available in cities and small towns in the whole country. 2. During the last five years, production and consumption of soft drinks has increased yearly. The average growth rate of the soft drink industry was 17 percent per year. The consumption per capita is currently lower than other countries in the region. According to General Statistics Bureau, the forecast consumption of soft drinks will be increased significantly in the next five years at annual growth rate of 15 percent. And with population of 74 million people, Vietnam actually becomes an attractive and potential market for food and drinks. This gives opportunities for players to expand their production and business. 3. HCMC is the key soft drink market in Vietnam. Together the rapid growth rate of economy and rising in the living standard, HCMC market becomes an attractive one for beverage producers. 4. There are currently significantly changes in consumer preference. Most of soft drink consumers prefer foreign brands rather the local ones. Demand for foreign soft drink brands increases while demand for local brands decreases. Soft drinks are consumed at home increasingly, this is a signal of fast growth of the take-home trade. 5. The cola war really occurs in the Vietnamese soft drinks market, especially the competition between Pepsi and Coke. The competitive environment becomes fiercer and harder. At present, however, the problem facing the players is not survival because the market is still unsaturated and promising. IBC has been in the growing stage. 6. IBCs strengths and weaknesses are examined through internal analysis process including its production capacity, market share, sales and marketing activities. At present, IBC continues to invest to expand its production and business in HCMC, Ha Noi, the South and Central provinces. IBC has highest market share in Vietnamese
62
markets(28 percent) and HCMC market (42 percent). The company is very interested in marketing activities, with particular emphasis on advertising and sponsorship activities in order to convince and remind its target consumers to buy IBC products. IBC pays more attention to trade promotion, however, it lacks the sales promotion for consumers. In general, IBC has achieved the success by understanding and meeting the needs of its customers and consumers. The company has created the awareness of its products, especially Pepsi and 7-Up in the market. However, Schweppes sarsi and Crush are less preferred because their attributes are not suitable to the Vietnamese consumerstaste. With a strong financial position, IBC is able to meet contingencies and to fund its further growth. Currently, facing the intensified competition, IBC has to develop the effective marketing strategies based on analyzing threats and opportunities in environment as well as its strengths and weaknesses in order to protect its leading position.
6.2. Recommendations on Developing the Marketing Strategies for IBC in HCMC 6.2.1 Market Segmentation
To design and develop the marketing strategies, the starting point is to understand what kind of groups of consumers the company wants to serve. So the market segmentation becomes a meaning concept for the players. Regarding the case of IBC, the company need to decide which and how many segments to serve. According to Kotler (1991), in general, a company can adopt three basic alternative strategies forward market segmentation: undifferentiated marketing, differentiated marketing and concentrated marketing. Undifferentiated marketing, the company may ignore market segment differences and go after the whole market with one market offer. One advantage of this strategy is production efficiency. However, there are dangers involved in the strategy of undifferentiated marketing. The company that attempts to satisfy everyone in the marketplaces faces the threat of competitors who offer specialized products to smaller markets of total market. Thus, if IBC follows this strategy, it should have a single marketing mix to offer to the entire market. However, this strategy rarely succeeds because consumers in different location differ taste and preference. Consumers wants and needs also differ among age groups, obviously, there is the significant difference in soft drink consumption between young and old people. In addition, Vietnamese people are not habit drinking soft drink a lot and soft drink is not the necessity product and soft drink consumption is still influenced by personal income level. Therefore, following this strategy means that the company has to cope with a market risk since it can not minimize the costs and maintain the acceptable price for all the segments at the same time. Differentiated marketing, the company may divide total market into different segments and develop the different marketing mix strategies for each market. Following this strategy, the company captures consumers from many different market segments by providing increased satisfaction for each of numerous target markets. This strategy requires large investment capital because of increase in production costs and promotion costs. So differentiated marketing leads to both higher sales and higher cost than undifferentiated marketing. At present, IBC has the strongly financial resource and produces canned and
63
bottled soft drinks with high quality. To appeal to consumers with difference in taste, income and age groups, IBC should pursue the differentiated marketing for market segmentation. Concentrated marketing, the company can choose to focus on its efforts on profitably satisfying a smaller target market or niches. Following this strategy allows the company to compete in just one segment and develop the marketing mix program to serves that segment. Regarding the capability of IBC, it is a large-size soft drink company and facing the intensified competition from Coca Cola Indochina Pte, Ltd. Currently, IBC has plans for expanding its operation in order to increase market share and protect the leading position in HCMC. Therefore, IBC can not purse this strategy. Overall, the differentiated marketing should be strongly recommended for IBC as regard of the market segmentation. Moreover, because consumption pattern of soft drinks in Vietnam is strongly affected by regional taste, personal income level, thus, IBC should base on geographic variable for segmenting Vietnamese soft drinks market such as HCMC, Ha Noi, Central and Mekong Delta provinces. For HCMC market, the company should base on income segmentation. The income level of HCMC residents is classified three groups: high, middle and low income
64
Regarding IBC products, it is necessary for the company to position its products in order to gain the competitive advantages. IBC is thought of as the largest soft drink company in Vietnam. At the beginning of operation to now, IBC has continuously created the awareness of its products: Pepsi, 7-Up, Crush and Schweppes soda in HCMC market. Pepsi and 7-Up are much preferred by majority of consumers and gain high reputation brands. 7Up is the number-one Uncola in the Vietnamese lemonade flavor market. Therefore, IBC should position its products as high quality products at the reasonable price to strengthen their own current position in the consumers mind in HCMC market. To implement its positioning strategy, IBC needs to develop marketing mix strategies for products, price, distribution and promotion.
65
6.2.4.1. Product Strategy Developing IBC's product strategy aims at stimulating soft drink consumers to buy its products by offering high quality products. To develop its product strategy, IBC should focus on improving attributes of its products, designing new type of packs. Improving attributes of product Pepsi As analyzed in the previous chapters, most of consumers indicate that Pepsi is less sweet than Coke and Tribeco. While majority of consumers in HCMC have habit of drinking the sweeter carbonates. So IBC should pay more attention to improvement its quality in terms of sweetness in order to attract more consumers. Moreover, the survey indicates that Pepsi has less gas than Coke. While young people prefer to drink strong gas carbonates. Thus, it is necessary to improve its gas level to convince more young people to buy Pepsi. Schweppes and Crush Schweppes sarsi is less preferred by a majority of consumers because its taste, gas and sweetness are not completely suitable to Vietnamese consumer's taste. IBC should research on manufacturing formula of Schweppes to improve it quality in order to attract soft drink consumers. Currently, Schweppes is unavailable at retail outlets in HCMC, thus, IBC should make Schweppes to be more available to consumers in order to create its awareness in the market. With the presence of Pepsi, 7-Up, Coke and Sprite in HCMC, sales of Schweppes has decreased. The purpose of diversifying its products, IBC should do market research, produce and distribute other flavor of Schweppes such as cream soda, tonic, pineapple and Schweppes sport plus to attract the new consumers. Developing new pack types Soft drinks have been increasingly consumed at home. This proves that there is the fast growth of the take-home trade. IBC should bottle it products in PET bottles with volume of 500 ml, 1 liter, 1.25 liters or 1.5 liters to cover this segment. Beside Schweppes bottle with volume 285 ml, Schweppes ought to bottled with volume of 207 ml to meet the different drinking size of Vietnamese consumers. Stemming from strongly financial resource, IBC often supports sport, music as main sponsor for these activities. Thus, it should design label attached to its products in special events such as sport, music, or national celebration, new year and so on, in order to enhance high brand recognition and more attractive. 6.2.4.2. Price Strategy
66
The purpose of IBCs price strategy is to support its marketing mix strategies. As analyzed earlier, developing IBCs marketing strategies is to protect its leading position. Its price strategy should be developed to increase either numbers of buyers or the rate of purchase. At present, the prices of IBC products are evaluated at fairly average level and meet the purchasing power. The company should continue to maintain the stabilized pricing policy to stimulate demand for soft drink consumption. IBC ought to apply the market oriented price policy in which the prices of its products are higher than prices of local brands to affirm high quality products and reap profit. Moreover, the prices of Pepsi and 7-Up are lower than Coke and Sprite to meet competition and purchasing power of consumers. Pursuing the lower price policy compared Coke will be an important factor to convince more consumers to buy IBC products because most of soft drink consumers has a little price sensitive. In fact, the selling prices of Schweppes and Crush per unit (bottle) are the same as the prices of Pepsi and 7-Up. If compared Schweppes with volume of 285 ml and Pepsi 207 ml, Schweppes is lower price than Pepsi but most of consumers are not interested in the volume difference. Therefore, Schweppes and Crush should bottled with volume 207 ml at lower prices in order to attract more consumers and can target the segments of middle and upper low income people. In addition IBC should use the price-adaptation strategies to varying conditions in the marketplace such as price discounts and allowances, promotional price and geographical pricing. To develop new wholesalers and retail outlets and maintain good relationship with its existing dealers, IBC should use the flexible price discount policy and higher incentives compared Coke. Moreover, the company should establish the special price as promotional price in special events such as new years, holidays. To capture the new markets such as Central and South provinces, at the first time, IBC should charge the same prices to all consumers regardless of location and apply the subsidized policy for its wholesalers in new markets, especially in rural areas. 6.2.4.3. Distribution Strategy IBCs current distribution channels system in HCMC covers all inside and outside districts. The company has continuously expanded direct and indirect channels to make its products to be more available. In the future, its distribution channels will require periodic modification to meet new conditions in the marketplace. Modification becomes necessary when consumer buying pattern changes, market expands, competition rises. To distribute its products to right consumers in right place at right time with cost efficiency, IBC should continue to follow the intensive and effective distribution strategy to cover in the whole country. Following this strategy, the company should expand its current distribution channels region by region, penetrate and develop distribution networks at rural markets effectively by using more flexible distribution techniques. For HCMC market, IBC should focus on the following aspects: Opening up the selling its product by vending machines : at present postmix of IBC faces several problem as mentioned in previous chapter. In the future, however, when demand for soft drinks increases significantly, competition becomes sharpest, establishing and developing this channel will be very important for the company to compete with its competitors. Thus, IBC should invest to install more vending machines (postmix) at entertainment places, train station, theater, high schools, factories and so on. In addition launching the advertising campaigns and sales promotion for postmix are necessary to
67
convince more consumers to drink soft drinks. By developing this channel will create high awareness for the company and its products. Developing new retail outlets through expanding direct route and Horeka : as analyzed in consumer survey, majority of consumers most often buy soft drinks at coffee shops, retail outlets. Stemming from this characteristic, IBC should focus on developing new retail outlets including exclusive retail outlets by offering a higher range of incentives and discount prices. Furthermore, IBC should significantly focus on penetrating and developing more retail outlets in channel of Horeka because Coca Cola Chuong Duong Soft Drink Company is consolidating and enhancing its channel in this segment. To capture more outlets of Horeka, IBC should often use the offers of free carbonates, discount coupons for purchase, or holding lucky draw on weekend of each week. Expanding wholesaler networks: IBC should plan for developing new wholesalers, especially exclusive wholesalers and offering incentive policies for the wholesalers who gain higher sales volumes. Moreover, the company has also plan for dropping wholesalers whose sales are below a certain amount. Creating good relationship between IBC with its distributors , the relationship is very important to win and hold customer loyalty. Thus, the relationship can be built if the company will keep supplying, carry out its promises, provide promotional support, manage and solve conflict in channels, give adequate incentives and profit margins. Besides, IBC should mention in developing distribution networks at provinces. For cities such as Ha Noi, Da Nang and Can Tho, the company may build Horeka to penetrate into segment of high income people and establish sales department at these regions and control the selling price of wholesalers. Once the plant will be built at these locations, direct routes can be developed. 6.2.4.4. Promotion Strategy The promotion strategy that IBC should undertake is aimed at creating the image and maximizing awareness of its products, especially Pepsi and 7-Up in the consumers mind as well as convince them to buy its products. The company should follow the pull promotion strategy to communicate existence and value of its products to target market and create sales. The pull strategy involves marketing activities, mainly advertising and sales promotion directed at end users to induce them ask distributors (wholesalers and retail outlets) for product and thus induce the distributors to order the product from the company. To persuade and remind its target consumers to buy IBC products, the company should emphasize on the use of promotion tools, as follows: Advertising: the survey disclosed that the information contents of IBCs advertising program on television are lack of honesty. This can cause a negative impact about its products. Thus, IBCs advertising program should be adjusted to be suitable local. Sales promotion : IBC ought to enhance in trade promotion by offering free goods or promotional price in special events, supporting promotional materials and point of sale display in order to stimulate their purchase, build brand loyalty of wholesalers and retailers, maintain good relationship and gain entry into new retail outlets. For consumer promotion, this activity is not attractive in last time, so IBC should stress on using consumer promotion tools such as discount coupon for purchase, lucky draw and gift to convince consumer to
68
switch to its products. All activities of consumer promotion should be often held at entertainment places, schools, dancing clubs, karaoke clubs, etc., to attract young people. Special events sponsorship : the company should sponsor the local cultural festivals, international music programs, sport activities, scholarship funds and charity activities. Personal selling : the company should emphasize on training and developing its sales force to manage direct routes and build the good relationship with retail outlets, especially outlets of Horeka.
69