International marketing group exercise 1 sabeco the journey to the international market

5What challenges would SABECO face when entering into an international market?...6What international market would you recommend SABECO to explore?...8REQUIREMENT II.... 5 Trang 5 REQUIR

UNIVERSITY OF FINANCE – MARKETING



INTERNATIONAL MARKETING

GROUP EXERCISE 1 : SABECO & THE JOURNEY TO

THE INTERNATIONAL MARKET

Ho Chi Minh City – 2023

LIST OF TABLES II LIST OF FIGURES III REQUIREMENT IV

REQUIREMENT I 1

Why Sabeco still not go international ? 5

What challenges would SABECO face when entering into an international market? 6

What international market would you recommend SABECO to explore? 8

REQUIREMENT II 10

Compare and Contrast between Polycentric & Geocentric Management 10

Which orientation would you recommend they adopt when diversifying? 12 REFERENCES LIST A

LIST OF TABLESTable 1 SABECO Business Model 3

LIST OF FIGURES

Figure 1 Core Value of SABECO 2

Figure 2 SABECO’s Beer Categories 4

Figure 3 SABECO’s Wine & Beverage Categories 4

Figure 4 SABECO’s Sales & Income (2018-2022) 5

Figure 5 SABECO’s SG&A Expense (2018-2022) 5

Figure 6 The world top 40 Brewers by BARTHHAAS 7

REQUIREMENTRequirement 1: Choose a Vietnamese company which have no international presence, one only

appearing in Vietnamese Market, then give analysis to answer folowing questions:

 Why did they only sell their product in Vietnam?

 What challenges would they face when entering into an international market?

 What international market would you recommend they explore?

Requirement 2:

These are four types of company orientations: (1) ethnocentric, (2) polycentric, (3) regiocentric,(4) geocentric management Discuss, Compare and Contrast the two orientations out of four (2/4) Keep the Vietnamese Corp your group had chose above, then use these analysis ask an answer

to questions below:

 What would be the different challenges faced with each orientation

 Which orientation would you recommend they adopt when diversifying?

REQUIREMENT I

 General Information

• Company name : SAIGON BEER – ALCOHOL – BEVERAGE CORPORATION

(SABECO)

• Headquarter : 5th floor, Vincom Center Building, 72 Le Thanh Ton, Ben

Nghe Ward, District 1,Ho Chi Minh City, Vietnam

• Main business : Producing and trading Beer, Wine and Beverage (FMCG

sector, B2B)

 Vision

Developing SABECO into a top corporation leading beverage industry of Vietnam, has a position in the region and international market.

 Mision

• Contributing to the development of

Vietnam's beverage industry world level

• To fulfill all obligations towards the State onthe basis of business transparency

• Promote Vietnamese culinary culture • Actively participate in community activities

• Bring practical benefits to shareholders,

customers, partners, employees and society

• Ensure development towards internationalintegration

• Improving quality of life by providing high

quality, safe & nutritious beverage products

• Fullfill International food safety andhygiene standards “An food hygiene &

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 Core Value

Figure 1 Core Value of SABECO

Source : [CITATION SAB22 \l 1033 ]

Traditional Value (Original Taste of Product, Familiar Brand)

Accessibility by diversity in distribution channel Social Value through social campaign

Custumer Relationship s

Create online content

or offline event (music fest) to engage customers and push comsumption

Custumer Segments

Mass Market (some product line has preference customer) Ex:

SaiGon Chill & SaiGon Special focus on upper- middle class customers While “Saigon Export focus on foreign market

 Product Categories

Source : [CITATION SAB22 \l 1033 ]

Figure 2 SABECO’s Beer Categories

Figure 3 SABECO’s Wine & Beverage Categories

Why Sabeco still not go international ?

Sabeco already has export to the international market BUT, their active in the international

market is so small that can be consider “insignificant” Direct quote from Sabeco’s Annual Report

(2022) : “…export segments only accounted for an insignificant proportion of the Group’s revenueand did not require a separate report Accordingly, the financial information presented mainlyreflected the business activities of the Group in the territory of Vietnam.”

We suggest there are several reason that make Sabeco still don't really want to expand andgradually shift their focus to the international market

 The Pandemic !

Pandemic had cause serious damage to the development of Sabeco as well as beer industry ingeneral Sales and Revenue of Sabeco had suffer huge drop in 2020 and 2021 due to the Pandemic(-5.68% in 2020 and about -26.22% in 2021) Despite the decrease in revenue, SG&A remained at ahigh level and rebounded quickly after the pandemic ended duel to the increase simultaneously ofraw material (malt,aluminum, labels ) and labour cost These figures show the drop in beerconsumption the VietNam market which is always in the top 10 countries that consume the mostbeer in the world This indicates that the beer market is not at a good shape at the moment

Figure 4 SABECO’s Sales & Income

Sales/RevenueTrilion VNĐGross Income Net Income

Figure 5 SABECO’s SG&A Expense

(2018-2022)

2018 2019 2020 2021 2022 0

1000 2000 3000 4000 5000 6000

SG&A Expense

Trilion VNĐ

Source : Summary from [CITATION SAB221 \l 1033 ]

& SABECO’s Annual Income Statement – [CITATION Wal23 \l 1033 ]

 The mission of leading the beer market in VietNam !

In the shareholder structure of Sabeco, even though there are more than 60% are belong toforeign shareholders (53,6 of Vietnam Beverage Company Limited (ThaiLan) & 9% of other Foreignshareholders) But there are still a significant portion control by the gorvernment/ state (about36% of State Capital Investment Corporation) [CITATION SAB22 \l 1033 ] This make Sabeco isn’t aninternational corp but still a “VietNamese company” to some extend

And just like most of other VietNam companies, dominating and take over the home market Vietnam is strongly emphasized That why the Vision and Mission of Sabeco are alway includeVietNam, these mention the wisdom to grow Sabeco into a “National Company”, making Sabecothe face of Vietnam's beer industry

-For these reason, Sabeco still mainly forcus on growing in VietNam market rather than gointernational

What challenges would SABECO face when entering into an

international market?

 Big Market - Big Competitors

As every other company have to deal with when they first expand into the international market,SABECO has to deal with a lot of “Whale” dominating the beer industry A report of BARTHHAAS(2021 -2022) had shown that SABECO was at rank 17 in the world top 40 brewing groups, withabout 0.8 % share of world beer production This is remarkable for a Vietnamese business.However, Sabeco still has to face many competitors with huge scale and potential such as Heineken

or Carlsberg

Although Sabeco has succeeded in competing equally with these competitors in the Vietnamesemarket (Sabeco is only behind Heineken in terms of beer market share in Vietnam with more than30% market share), but in order to be able to develop in the international market where there aremany differences in culture, law, great competitiveness,…requires Sabeco to put in much moreeffort

Figure 6 The world top 40 Brewers by BARTHHAAS

Source : [ CITATION Bar22 \l 1033 ]

 Difficulty by Differences

Beer or Alcoholic can cause a lot of social problem, so it is fundermantal for a gorvenment torestrict and control the consumtion of those Vietnam has a law banning the sale of alcohol topeople under the age of 18, but in fact, young Vietnamese can still access alcoholic beverages veryeasily This is also happening in some other Asian countries, The New York Times wrote an articleabout this phenomenon in Thai Lan, where they ironically called it "Unevenly Enforced"

This not so true with regions that are far apart, the cultural and social differences in these regionsare greater, so there will be distinct points For example in the US, which is known for its strict legalpolicies on alcohol, a person can face hefty financial penalties and even jail time for selling beer topeople under the age of 21 This is also true to a lot of Europe contries

Differences are always a big challenge for integration, whether in daily communication or incorporations that want to expand the market Therefore, before entering these markets, Sabecohas to invest a lot in market research to be able to reduce the probability of failure to as low as

What international market would you recommend SABECO

According to the Brewers of Europe (The Brewers of Europe) , Europeans consumed over 39 billionliters of beer in 2019 The per capita beer consumption in Europe is among the highest in theworld, with countries like the Czech Republic, Austria, and Germany leading the rankings

 Market Size

Europe has a significant market size with a large population and diverse economies Countries such

as Germany, the UK, France, and Belgium are known for their beer consumption and offerpotential growth opportunities for Sabaco

Europe is home to approximately 740 million people, offering a significant consumer base for beerproducts Major European beer markets such as Germany, the UK, France, Spain, and Italy providesubstantial opportunities for expansion [ CITATION Ric20 \l 1033 ]

 Craft Beer Trend

There is a growing trend of craft beer consumption in Europe, with an increasing number ofconsumers seeking out specialty and artisanal beers Sabaco, with its focus on quality andcraftsmanship, can tap into this market segment and position itself as a premium craft beer brand The craft beer market in Europe has been growing steadily in recent years According to Statista,the craft beer market size in Europe was estimated at around €4.35 billion in 2020 and is projected

to reach €8.45 billion by 2025 The number of microbreweries and craft beer bars has beenincreasing across Europe, catering to the demand for unique and high-quality beer.[ CITATIONChr89 \l 1033 ]

 Export-Friendly Environment:

Europe has established trade agreements and a relatively open market for imported goods, making

it easier for Sabaco to enter and operate in the region The European Union's single market andcustoms union facilitate trade and simplify logistics for exporters

The European Union is known for its open trade policies and strong import/export relationships.The EU is the world's largest importer and exporter of beer.The EU has trade agreements with

 Cultural Appreciation

European consumers often value and appreciate products with a strong cultural heritage Sabaco,

as a Vietnamese beer brand, can leverage its unique Vietnamese identity and brewing techniques

to appeal to European consumers seeking authentic and exotic experiences

European consumers often appreciate and seek out products that represent different cultures andoffer unique experiences Sabaco, as a Vietnamese beer brand, can leverage its authenticity andcultural heritage to attract consumers looking for distinct and exotic beer options

REQUIREMENT II

Compare and Contrast between Polycentric & Geocentric

Management.

 Definition

Is an approach where a company treats each

foreign subsidiary as a separate and

independent entity The decision-making

authority is decentralized to the local

management team

Key characteristics :

• Local Autonomy: Each subsidiary has

significant autonomy and independence in

decision-making

• HCN Dominance: Key management positions

are filled by host-country nationals

• Limited Integration: There is limited integration

and coordination be seen the headquarters and

subsidiaries

Is an approach where a company takes a globalperspective and integrates its subsidiaries into aunified, cohesive organization

Key characteristics :

• Global Integration: High level of coordination,collaboration, and integration between theheadquarters and subsidiaries

• Best-Person Approach: Management positions arefilled with the most suitable individuals, regardless oftheir nationality

• Transfer of Knowledge: Emphasizes the transfer ofknowledge and expertise across differentsubsidiaries, facilitating learning and innovation

Source : [ CITATION Chr89 \l 1033 ], [ CITATION Dan07 \l 1033 ]

• Local responsiveness: Local managers have a better

understanding of local markets => respond quickly to

changes & opportunities

• Cultural sensitivity: The use of host-country

nationals enhances cultural sensitivity & adaptation

=> reducing the chances of cultural clashes

• Government relations: Local managers have better

relationships & understanding of the host country's

government => facilitating smoother operations

• Global coordination: The centralized allow betteralignment of strategies, sharing of best practices &resource optimization

• Talent utilization: Allows the company to leveragethe best talent from around the world, enabling adiverse & highly skilled workforce

• Knowledge transfer: The emphasis on knowledgesharing fosters innovation & the spread of bestpractices across the organization

 Benefits

Source : [ CITATION Dan07 \l 1033 ][ CITATION Ric20 \l 1033 ]

 Drawbacks

• Lack of global coordination: The decentralized can

result in => A lack of coordination & communication

between subsidiaries, leading to inefficiencies or

missed opportunities

• Limited career mobility: As the top management

positions are typically for local managers => Reduced

career advancement opportunities for employees

from headquarters

• Resistance to change: Local managers may resist orfeel threatened by the increased influence ofheadquarters, leading to challenges in implementingglobal strategies

• High costs: The centralization of decision- makingand coordination may result in increased costs due tothe need for extensive communication, coordinationmechanisms

Source :[ CITATION Dan07 \l 1033 ][ CITATION Ric20 \l 1033 ]

 Overall Chanllenges

 Lack of Global Integration

 Communication and Coordination Issues

 Limited Transfer of Knowledge

 Limited Career Mobility for Headquarters'

Employees

 Resistance to Global Initiatives

 Cultural and Language Barriers

 High Coordination Costs

 Talent Management and Diversity

Which orientation would you recommend they adopt when

diversifying?

Management orientation for SABECO

 Variety in beer favourite

Different market has very distinguish preferences when it comes to beer For example, Lager Beerlike Budweiser, Coors Light, Corona…, are very popular in the US market According to Winemagmagazine, large beer producers accounts for roughly 87% of the US beer market While Chibukubeer, a traditional beer make from sorghum, is the most popular beer in the Southern Africanmarket

This distinguish in beer culture require a company must have very deep understand about the localmarket Fortunately, Local responsiveness & Cultural sensitivity are big advantage of PolycentricManegement, which make it is the most suitable for a beer coporation like SABECO

 Advantage in operation

Beer or Alcohol Beverage in general has a lot of restriction from the local gorvernment laws orpolicy Recruiting local staff who understand their country's policies very well will be a huge plusfor SABECO when entering foreign markets In addition, the relationship of these employees withthe local government will certainly contribute greatly to smoothing the operation of SABECOoverseas