Table of content CONTRIBUTION REPORT 4 Introduction 5 I. Business environment research in Kenya 6 1. Macroenvironment of Kenya 6 1.1. Political Factors 6 a. Government regulations 6 a. Political stability 7 1.2. Economic Factors: 7 b. Economic Growth: 7 c. Price and Affordability 7 1.3. Sociocultural Factors: 7 1.4. Technological Factors: 8 1.5. Environmental Factors 8 1.6. Legal Factors: 9 2. Microenvironment 9 II. Proposal: strategy and mode of market entry of Vinamilk in Kenya 11 1. SWOT analysis of Vinamilk 11 2. Proposal for Vinamilks mode of market entry in Kenya 13 2.1. Vinamilk’s mode of market entry in New Zealand and the United States 13 2.2. Vinamilk’s mode of market entry recommended in Kenya 14 3. Proposal for Vinamilk’s business strategy in Kenya 14 III. Estimated profit and growth of Vinamilk in Kenya 15 1. Vinamilk’s estimated profit in Kenya 15 1.1. Estimate cost: 16 1.2. Estimate revenue 17 2. Vinamilk’s estimated growth in Kenya 18 Conclusion 20 Reference 21 Table of figures tables Table 1. Porter’s Five Forces framework of Kenyan dairy industry 10 Table 2. Vinamilk’s mode of market entry in New Zealand and the United States 14 Figure 1. Integration – Reponsiveness Framework 15 Figure 2. Vinamilk’s exports see rapid growth since 1998 17
https://tailieuluatkinhte.com/ FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS *** INTERNATIONAL BUSINESS Business Project of Vinamilk in Kenya Instructor: PhD Phan Thi Thu Hien Class: KDOE307 Group: Hanoi, June 2023 https://tailieuluatkinhte.com/ Table of content CONTRIBUTION REPORT Introduction Business environment research in Kenya .6 I Macro-environment of Kenya .6 1.1 Political Factors .6 a Government regulations a Political stability .7 1.2 Economic Factors: b Economic Growth: c Price and Affordability 1.3 Sociocultural Factors: 1.4 Technological Factors: 1.5 Environmental Factors 1.6 Legal Factors: Micro-environment Proposal: strategy and mode of market entry of Vinamilk in Kenya 11 II SWOT analysis of Vinamilk 11 Proposal for Vinamilk's mode of market entry in Kenya 13 III 2.1 Vinamilk’s mode of market entry in New Zealand and the United States .13 2.2 Vinamilk’s mode of market entry recommended in Kenya .14 Proposal for Vinamilk’s business strategy in Kenya 14 Estimated profit and growth of Vinamilk in Kenya .15 Vinamilk’s estimated profit in Kenya 15 1.1 Estimate cost: .16 1.2 Estimate revenue 17 Vinamilk’s estimated growth in Kenya 18 Conclusion 20 Reference 21 https://tailieuluatkinhte.com/ Table of figures & tables Table Porter’s Five Forces framework of Kenyan dairy industry 10 Table Vinamilk’s mode of market entry in New Zealand and the United States 14 Figure Integration – Reponsiveness Framework .15 Figure Vinamilk’s exports see rapid growth since 1998 17 https://tailieuluatkinhte.com/ Introduction Vinamilk is a leading dairy company in Vietnam that produces and distributes a wide range of products, such as milk, yogurt, cheese, ice cream, coffee, and infant formula It was founded in 1976 and has grown to become the largest dairy company in Vietnam and one of the top 50 dairy companies in the world The company has over 600 stores across the country and exports its products to more than 50 markets, including China, the US, Canada, Australia, and Japan With the help of over 13,000 employees and 13 factories, Vinamilk aims to provide highquality and nutritious dairy products to consumers, while also contributing to the social and economic development of Vietnam As with any fast-growing company, Vinamilk wants to extend its scope of operation to as many continents and countries as possible in order to maximize profit Africa, having one of the highest per capita consumption of dairy products in the world at 34.8 kilograms in 2022, is one such destination for extensive investment But to conquer big, one must first start small, and Kenya, a country in East Africa, fits most checkboxes in Vinamilk’s list for an ideal country to set up their dairy business in Kenya’s dairy industry plays an important economic role both at household and national levels It is one of the largest and most advanced in the Africa continent, contributing about 14% of the agricultural GDP and 4% of the national GDP The industry has a high potential for growth, as the demand for dairy products is increasing due to population growth, urbanization and changing consumer preferences A foreign dairy company like Vinamilk setting up a branch in this African country without prior extensive preparations would only lead to waste of precious capital and human resources On that note, our team members have decided that a holistic review of the sector would be of significant importance, serving both as an academic suggestion on the investment activities of Vinamilk as well as a subjective evaluation of the dairy sector in Kenya Other companies that have dairy products as their forefront of operation would also benefit from what https://tailieuluatkinhte.com/ we have to offer in this paper https://tailieuluatkinhte.com/ I Business environment research in Kenya Macro-environment of Kenya The macro-environment refers to the external factors that influence a company's operations and decision-making on a global scale It includes broad, uncontrollable forces that exist outside the organization and affect its overall business environment These factors are typically categorized into the PESTEL framework, which stands for Political, Economic, Sociocultural, Technological, Environmental, and Legal factors The macro- environment analysis helps businesses understand the broader context in which they operate and adapt their strategies accordingly 1.1 Political Factors: a Government regulations: Trade Policies and Regulations: - Financial support: The government provides financial support to the milk industry through various initiatives This includes the Agricultural Finance Corporation (AFC) and the Kenya Dairy Board (KDB) offering loans and credit facilities to farmers and dairy processors to invest in equipment, infrastructure, and technology - Special Economic Zones (SEZs): Kenya has established SEZs to attract FDI and promote export-oriented industries These zones offer various incentives such as tax exemptions, duty-free importation of raw materials and machinery, and streamlined regulatory processes - Tax Incentives: The government provides several tax incentives to attract FDI These incentives may include corporate tax exemptions or reductions for specific industries, accelerated depreciation allowances, and VAT exemptions on specific goods or services Bilateral and Multilateral Agreements: - Bilateral Investment Treaties (BITs): Kenya has BITs with various countries, including China, Germany, France, the Netherlands, Switzerland, and the United Kingdom, among others These agreements provide legal protection and https://tailieuluatkinhte.com/ guarantees for investors from both countries, including provisions on nondiscrimination, fair and equitable treatment, protection against expropriation, and mechanisms for dispute resolution https://tailieuluatkinhte.com/ - Multilateral Agreements: World Trade Organization (WTO): Kenya is a member of the WTO, which establishes a framework for international trade, including rules for investment and dispute settlement African Continental Free Trade Area (AfCFTA): Kenya is a member of the AfCFTA, a multilateral agreement aimed at creating a single market for goods and services across the African continent The AfCFTA provides a framework for investment facilitation and protection, including provisions on investment promotion, treatment, and dispute resolution a Political stability: - Kenya's economic growth and development have played a role in maintaining political stability Stable economic conditions, improvements in infrastructure, and investments in various sectors have contributed to the overall stability of the country 1.2 Economic Factors: b Economic Growth: - As Kenya experiences economic growth, rising disposable incomes may contribute to increased consumer demand for a wider range of dairy products, including imported brands like Vinamilk - By establishing local production, Vinamilk can mitigate potential trade barriers, such as import restrictions or tariffs It reduces the reliance on international trade and enhances resilience to trade-related risks, such as changes in trade policies, currency fluctuations, or geopolitical tensions Local production can provide a stable and secure supply of milk products for the Kenyan market c Price and Affordability: - Vinamilk, as an imported brand, would be subject to factors such as transportation costs, import duties, and taxes These additional costs can impact the final price of Vinamilk products in the Kenyan market By setting up a milk factory in Kenya, Vinamilk would contribute to increasing the local milk supply This can potentially lead to greater availability of milk in the domestic market With a larger supply of milk, there might be downward pressure on prices due to https://tailieuluatkinhte.com/ increased competition among local milk producers 1.3 Sociocultural Factors: - Dietary habits and preferences:Kenya has a diverse population with various ethnic groups, each having its own traditional food preferences While milk and dairy https://tailieuluatkinhte.com/ products are commonly consumed in Kenya, the types and flavors preferred may vary across regions Vinamilk should conduct market research to identify the popular dairy products, flavors, and packaging formats preferred by Kenyan consumers - Cultural considerations: Kenya has a heavily Christian population, which poses little to no problems when it comes to including dairy in the people’s diets 1.4 Technological Factors: - Technology infrastructure: While major cities in Kenya generally have better infrastructure, rural areas may face limitations Vinamilk should focus on areas with reliable infrastructure for initial market entry and gradually expand operations to other regions as infrastructure improves - Supply chain management: Implementing technology-based solutions for supply chain management can improve efficiency and reduce costs Vinamilk can utilize inventory management software, transportation tracking systems, and data analytics to optimize the supply chain - Quality control and traceability: Implement technology-enabled quality control measures to ensure consistent product quality Vinamilk can use automated monitoring systems, sensors, and data collection tools to track and control the production processes 1.5 Environmental Factors: - Environmental regulations: This includes regulations on waste management, pollution control, water usage, and land conservation Vinamilk should ensure compliance with these regulations to minimize any negative environmental impact and avoid legal issues - Sustainable practices: Increasingly, consumers are becoming conscious of eco- friendly practices and are more inclined to support companies that demonstrate sustainability efforts Vinamilk can consider implementing sustainable practices such as energy-efficient production processes, waste reduction and recycling initiatives, and responsible water management https://tailieuluatkinhte.com/ Table Vinamilk’s mode of market entry in New Zealand and the United States 2.3 Vinamilk’s mode of market entry recommended in Kenya To successfully enter the Kenyan market, Vinamilk could consider partnering with a local company using a joint venture mode of market entry The local company should have strong local knowledge and expertise, proven operational efficiency, and possess the resources to help Vinamilk establish its formula milk production factory in Kenya The type of partner Vinamilk seeks could be a business with a proven track record of successful joint ventures, existing infrastructure in place that could be used to build Vinamilk’s formula milk production factory, and excellent knowledge of the regulatory environment One potential partner for Vinamilk could be Brookside Dairy, a leading Kenyan dairy processing company that has been in operation for more than 20 years, with an extensive distribution network across Kenya and other East African countries Partnering with Brookside Dairy could provide Vinamilk with the local knowledge and expertise of a respected company in the region, access to existing networks of suppliers, distributors, and retailers, and assist in maneuvering the local regulatory environment Brookside Dairy is already producing a wide range of dairy products including fresh milk, yogurt, and butter, and it could be possible for them to create a collaboration with Vinamilk in formula milk production Proposal for Vinamilk’s business strategy in Kenya The concept of fusing great quality with affordable pricing is the inspiration behind our team's proposal for Vinamilk’s business strategy in Kenya With high pressure for local responsiveness and demand for global integration being minimal, the best approach for Vinamilk to adopt for its operations in Kenya is multidomestic strategy This strategy lets Vinamilk maintain local relevance, allowing Vinamilk to create products and marketing strategies that are tailored to the specific needs and preferences of the Kenyan market, but with a reduced focus on the collaboration and interdependence between its parent company's headquarters, its subsidiaries, and its production factory in Kenya