09 STRATEGY TO ENTER THE MARKET MALAYSIA OF COFFEE TRUNG NGUYEN LEGEND

HỌC VIỆN NGÂN HÀNG KHOA KINH DOANH QUỐC TẾ BÀI TẬP LỚN MÔN THƯƠNG MẠI QUỐC TẾ ĐẠI CƯƠNG ĐỀ TÀI: CHIẾN LƯỢC GIA NHẬP THỊ TRƯỜNG MALAYSIA CỦA CAFÉ TRUNG NGUYÊN LEGEND Giảng viên hướng dẫn: Nguyễn Thu Hương Nhóm thực hiện: Nhóm Nhóm lớp tín chỉ: BUS12A06 Hà Nội, ngày 22 tháng 05 năm 2022 Contents I Introduction II Company background .4 III Reasons for finding a new foreign market IV Select a potential country market and PESTEL analysis to support your choice V Select a method of entry and explain your choice VI Conclusion .12 I Introduction Today, the world is developing more and more, the global economy is increasingly advanced, and developing countries are also gradually coming up with new strategies to not be left behind A go-to-market strategy is the basis for how your business wants to engage with new customers, achieve business goals, and establish lasting relationships in new markets Currently, Vietnam is the second largest coffee exporter in the world after Brazil, and Malaysia is one of the countries with increasing coffee consumption trends in the world Therefore, market expansion to Malaysia has great potential and looks promising for Vietnamese coffee exporters Trung Nguyen Coffee Group is used as a case study in this article to reflect the current situation Based on the results obtained through the business environment, the study will design a business plan for entering the destination coffee market accordingly Trung Nguyen Coffee Corporation, which was founded by Dang Le Nguyen Vu in 1996 in Buon Ma Thuot – the capital of coffee in Vietnam, is the biggest domestic coffee brand in terms of production, processing, and distribution of coffee Trung Nguyen Coffee is imported by more than 60 countries over the world, including the Asian markets, such as Japan and Singapore Trung Nguyen Group is an enterprise operating in the following fields: coffee production, processing and trading; franchise; distribution services, modern retail and tourism Its products include: Premium Trung Nguyên coffee, Weasel coffee, Legendee weasel coffee, Creation 8, Roasted coffee and Pure coffee beans Slogan: “Connect and grow coffee enthusiasts around the world” With the desire to bring Vietnam’s coffee industry to a new height, raise the value of coffee not only as a regular drink but also at the level of cultural coffee, artistric coffee, spiritual coffee … to philosophical coffee, worthy of the position of the coffee power of the world – Trung Nguyen Legend Group has spent time and enthusiasm for many years to research history, culture, art … of coffee in all fields of human life so that coffee becomes “Philosophical Coffee” Currently, the Company maintains a Franchise system of 1,000 coffee shops throughout Vietnam and shops in foreign countries such as: USA, Japan, Singapore, Thailand, China, Cambodia, Poland, Ukraine II Company background  From the business side – Thrust - The demand for coffee in our country is very low While each Northerner consumes 10 kg of green coffee per year, in Western Europe it is 5-6 kg, while Vietnamese people only consume about 500g - Favorable natural conditions and investment in production scale make excess capacity - The profit margin when doing business in the country is not high - Trung Nguyen coffee is gradually losing its domestic market share, with great domestic competition pressure from competitors such as Highlands, Nescafe, Vinacafe, etc and from the world coffee giant, Starbucks - In the not too distant future, multinational corporations will penetrate the Vietnamese market more  From overseas market – Traction - Compared to the domestic market, the international market consumes a much larger amount of coffee, especially the countries of Northern Europe, Western Europe, etc - More potential and quality resources - Opportunity to develop brand and bring in great profit  - Strength Be the first to follow system permissions Wide partition system The brand rights strategy has been proven effective when a series of coffee shops with Trung Nguyen signboard - High quality and good brand - Good information channel, public relations company (PR-Public Relation) plays an important role -> it can be said that the main PR has created the Trung Nguyen fever - Abundant human resources, cheap labor   - Element Points Implementing the right strategy quite massively, the quality is out of control Poor management and supervision company Chance Head in the head of Vietnamese coffee, still no match There are many opportunities and advantages to attract foreign investment - Trung Nguyen coffee appears in more than 40 countries around the world, accounting for 20% of the product volume (USA, Japan, China, Singapore, Cambodia, )  Challenge - Competitors: + Domestically: Trung Nguyen coffee is losing market share to Highland Besides but have Nescafe and Vinacafe + International: in the future are two world famous coffee brands Stacksbuck and Gloria Jeans Coffee, these are two famous coffee franchise giants In the near future, multinational corporations will enter Vietnam Loss of market share, loss of direction, confusion about policy and strategy as well as management III Reasons for finding a new foreign market During 22 years of development, Trung Nguyen Legend has been known as a leading brand in the Vietnamese coffee industry with important contributions to the growth of Vietnamese coffee brands in the world market Trung Nguyen Legend's coffee products have been exported to more than 80 countries and territories and have been selected as "diplomatic ambassadors" connecting Vietnamese culture with the world Highlights G7 is one of the most popular instant coffee products and Trung Nguyen is the national brand However, there are some difficulties which Trung Nguyen needs to consider in order to expand in global Trung Nguyen is till a small and young company from a developing country It is not avoidable to the invasion of the giant coffee holders in global market such as coffee Nero from Italy and Stabuck coffee from America The taste of Trung Nguyen coffee is not unique enough to compete with the flavour of Italian coffee – Nero G7 instant coffee is considered a strategic product to expand into global market However, this production just serves generally the majority of customers Therefore, Trung Nguyen cannot empression its image to customers and its image as well Another obstacle that Trung Nguyen need to overcome is that Trung Nguyen should learn the way to adapt in competitive environments with different languages, cultures, laws and business practices So why doesn't Trung Nguyen try with neighboring countries like ASEAN? IV Select a potential country market and PESTEL analysis to support your choice Malaysia is a country with the 4th largest economy in ASEAN, geographically quite close to Vietnam This is a fairly dynamic economy, with a stable and high growth rate, combined with the deeper and deeper integration of ASEAN countries, which will be a potential market for Trung Nguyen Coffee Gillespie A (2007) stated that “There are many factors in the macro-environment that will affect the decisions of the managers of any organisation” External environment has impact on the growth of a firm It brought not only opportunities but also challenges to Trung Nguyen Coffee and therefore it is important for managers to examine to give visionable decisions PESTEL Analysis below will conduct external factors that have impact on the development of Trung Nguyen Coffee Economic Factors Growing Incomes - Malaysia’s GDP in 2019 was $364,684 million The GDP per capita of the country in the same year was $11,193, which was higher than that in 2017 (Country Economy, 2021) This means consumers have more money to spend every year While this can hugely impact consumer goods industries (such as the consumer electronics industry), it also impacts food and drink industries As consumers get richer, they are more likely to consume tea, coffee, and other such luxury beverages Also, with growing incomes, consumers are more likely to splurge on higher quality produce It was an advantage for Trung Nguyen Coffee Secondly, Trung Nguyen with the difference from competitor such as service and productions, Trung Nguyen had firmly position in the market Thirdly, coffee was very in favour of customers when it was consider the most favourite drink As analysis above, Trung Nguyen could overcome obtacles and less suffered from crisis than the others Sociocultural factors Due to the strong increase in coffee consumption habits of Malaysians, coffee drinking culture has exploded across Malaysia since 2008 Coffee is consumed daily in Malaysia Rural consumers prefer fresh, branded or unbranded coffees, while urban consumers, especially young people, tend to choose instant or powdered coffee Consumers increasingly attach importance to the evaluation of coffee quality Therefore, quite a few people buy coffee machines to enjoy delicious coffee at home, even a few choose "excellent" and branded coffees like Nestlé's Nespresso In order to compete well in this market, Trung Nguyen needs to have new innovations in packaging methods and flavors to attract young people - the main consumers Regarding packaging, Trung Nguyen needs to use convenient, easy to use, as well as diverse in designs to create attraction With various types of coffee, Trung Nguyen gives more choice for their customers Trung Nguyen created G7 instant coffee to counter the biggest multinationals – Nescafe – the most widespread foreign coffee in Vietnam In “G7 Instant Coffee Festival” in 2003, 89% of 13000 coffee testers voted in favour of G7 while 11% selected Nescafe (16 Bùi, 2010) What is more, Passionate coffee which is the coffee for women appeared the first time in Vietnam has added collagen and vitamin P It attracts the interest of many women Now, women can drink their coffee comfortably without worry about the harm of coffee a lot Weasel coffee for the rich class who wants to discover the unique favour of the King of coffee (25 Lê, 2010) It is clear to say that Trung Nguyen sastisfiy their customers from all classes with different jobs Legal constraints The Malaysian government is moving towards a more business-friendly environment by establishing a task force for business facilitation called PEMUDAH, which means "simplification" Highlights include easing Loosening restrictions and requirements for hiring foreigners, shortening transfer and storage times As a product designed for consumption, coffee falls under food and drink regulations in nearly all of the world’s jurisdictions This means it’s subject to a wide range of laws on how it should be stored, transported, and brewed Further to this, coffee contains large amounts of caffeine, so it’s subject to caffeine standards in some parts of the world These standards are only becoming tighter with time, but safe coffee handling is so easy to get right that it shouldn’t be a problem for Trung Nguyen Technological factors Another big change in the coffee industry is the introduction of new equipment specifically for coffee Coffee grinders, drippers, espresso machines are now available at all Trung Nguyen stores in Vietnam Selling coffee with these devices makes it easier than ever to consume coffee, thus encouraging consumers to brew their own at home This won't affect the overall size of Trung Nguyen Coffee, but could lead to more consumers making and drinking coffee at home, with fewer consumers drinking coffee outside their home than going to a coffee shop and coffee chains V Select a method of entry and explain your choice In recent years, the coffee shop business market in the ASEAN region has been on the rise along with many potentials exploited by domestic and foreign brands Five typical markets in the region are Vietnam, Malaysia, Thailand, Indonesia and the Philippines (hereinafter referred to as TIPMV) thanks to the high sales Sales revenue is superior to other countries These five countries make up a total market value of about 6.5 million won USD, up 8% in 2014 In Figure 1, we can see that of the five markets in question, Vietnam is the largest coffee shop market, then to Malaysia Meanwhile, despite having almost the same size, Indonesia proves to be a potential market with outstanding growth despite very low average consumption in 2014, the Philippines is a less potential market Thailand is the last country in terms of market size There is also a big difference in the average consumption between the five countries, especially when Malaysia has an outstanding consumption rate (68.8 USD) The first reason can be mentioned is the difference in urbanization speed Specifically, Malaysia has an urbanization rate the highest, at 73%, followed by Indonesia at 52% In other words, Malaysia is a market that is easy for customers to access closest to the coffee shops With the above parameters, we can see that Trung Nguyen can penetrate into the Malaysian market So what is the right penetration method for Trung Nguyen ? First of all, we need to know what methods of entering are available There are five methods of entering: Indirect export, Co-marketing, Joint venture and Licensing/ Franchising After researching, we think that the way for Trung Nguyen to penetrate the Malaysian market is Licensing/ Franchising This is also the method that Trung Nguyen uses with many other countries Advantages of franchising that you may need to know For franchisors: MAKE THE MOST OF EXTERNAL CAPITAL Capital is always the most important concern when a business wants to expand its business But in this franchise business model, the person who spends the capital to expand the business is the franchisee This helps the franchisor to expand its business with other people's capital and reduce its own costs when entering the market Besides, having to invest in business capital is a motivation to motivate the franchisee to try to operate effectively and bring more profits to the franchisor PROMOTE BRAND PROMOTION The more effective the advertising activities, the more enhanced the image of the product and the brand will be, from which the greater the company's intangible value will bring more advantages to the franchisee when using it use trademarks and trademarks of the franchisor Thus, both the franchisor and the franchisee will increasingly benefit from the application of this form of franchising When using this form of franchising, the franchisor has advantages in advertising, Promote your brand more effectively Expanding the business and the ubiquitous presence of the chain of stores will bring the product's image into the customer's mind much more easily QUICKLY SCALE UP YOUR BUSINESS The benefit of franchising to another party is that you can expand your business as quickly as possible Today, changes in the market always happen very quickly, if you not change, develop and expand with the market, you will be overtaken by other competitors, and business opportunities will also be lost from there it passed within reach Franchising will also help the franchisor expand its business, making its presence everywhere quickly with hundreds of stores at home and abroad without a business form which can MAXIMIZE INCOME AND UTILIZE “LOCAL” RESOURCES When franchising, the franchisor must pay royalties and fees to continue doing business with the franchisor's name and system At the same time, the franchisee must also buy the franchisor's products and materials, so that the franchisor can maximize his or her income Penetrate and explore investment performance in new markets more quickly with the lowest cost of risk Reduce market development costs and add a stable source of income from franchise fees Build a strong linkage system in trade and finance For franchisees: USING THE FRANCHISOR'S TRADEMARK When you get a franchise from a franchisor, you'll take advantage of that brand to continue to bring your products to more customers Licensed to use the franchisor's trademark You know that creating a brand for a product will take a long time to create, the franchisor has had to spend a lot of effort and time to build a brand closer to consumers 10 SUPPORT PROFESSIONAL MARKETING STRATEGY One of the biggest benefits of getting a franchise is that the franchisee will receive support for marketing and promotion strategies from the franchisor In addition, the franchisor will give useful advice to the franchisee to develop marketing strategies that will bring high efficiency in business In the marketing strategy, the franchisor may be responsible for the cost of developing national or local promotional activities UTILIZE HUMAN RESOURCES The franchise benefit that you get is making the most of human resources When you acquire the franchise, you simply focus on running the business Other issues such as developing marketing and promotion strategies or operating procedures will be responsible for and transferred to you by the franchisor CONSUMER LOYALTY This is the biggest benefit that the franchisee gets Because consumer loyalty about the franchisor's products will help the business better, bring greater profits for the franchisee LESS RISK The benefit of getting a franchise is the least amount of risk, because the franchisor's business is already very solid And the franchisor's products and services have all been successfully launched into the market At the same time, the franchisors are well aware of their own products and service promotion campaigns Therefore, the franchisor will face the least risk in the future of his business APPLYING ESTABLISHED BUSINESS MODEL The franchisor will provide management support, including financial procedures, experienced staff, and management system The franchisor will help the franchisee overcome the difficult period when applying the business model established by the franchisor GET PREFERENTIAL TREATMENT WHEN BUYING PRODUCTS AND MATERIALS Franchisees will always receive special incentives when purchasing products and materials of the franchisor Franchisees, when purchasing raw materials in bulk, also receive attractive depreciation rates 11 VI Conclusion It can be seen that in order to be successful a business must better than its competitors in satisfying the needs of its key customers Trung Nguyen can be soon on top the most influential coffee brands worldwide if it can make use of all the neighboring countries Trung Nguyen has becoming more and more popular in many global countries Although Trung Nguyen faces many difficulties and challenges in terms of capital, competitors, markets, and technology, its brand is strongly affirmed and prestigious in the world market, highly appreciated by the world 12 ... the harm of coffee a lot Weasel coffee for the rich class who wants to discover the unique favour of the King of coffee (25 Lê, 2010) It is clear to say that Trung Nguyen sastisfiy their customers... of the giant coffee holders in global market such as coffee Nero from Italy and Stabuck coffee from America The taste of Trung Nguyen coffee is not unique enough to compete with the flavour of. .. Vietnam’s coffee industry to a new height, raise the value of coffee not only as a regular drink but also at the level of cultural coffee, artistric coffee, spiritual coffee … to philosophical coffee,