Strategic marketing plan for Casumina 2008 to 2010

EXECUTIVE SUMMARY Casumina has had good business on tire and tube production during past years when the brand knowledge was scarce and not an important component of success.. The Strateg

MINISTRY OF EDUCATION & TRAINING UNIVERSITEÙ LIBRE DE BRUXELLES

MBMM PROGRAM

Huynh Ba Chan Nhu

STRATEGIC MARKETING PLAN

FOR CASUMINA 2008-2010

FINAL PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT

Tutor: Dr Tran Xuan Kiem

Ho Chi Minh City

2007

I trust the legality of all references, information sources, and materials using to complete the project And I am confident to submit it to Professors and MBMM Faculty members

ACKNOWLEDGEMENT OF APPRECIATION

I would like to say thank you so much to many people who have given me helping hands in this project Your inputs and encouragement are treasureable for my project accomplishment

First of all, I would like to show my great appreciation towards Dr Tran Xuan Kiem who has provided me a lot of insightful feedbacks and devoted guidance to

my work I simply can say, it is a great chance for me to be with you

I’m also thankful to Mr Le Van Tri, Sales and Marketing Director of the Casumina for giving me an opportunity to study about Casumina case and spending your valuable time giving me a lot of market insights Next, I’d also like to send many thanks to Mr Bui Quoc Long and Mr Pham Duc Dat, Sales Executives for their strong supports

I’d also like to take this opportunity to present my grateful heart to all professors, lecturers and tutors from the Open University of Ho Chi Minh city and the Solvay Business School In the last one and a half year, you have full-heartedly directed us

to the broad path of updated knowledge treasure Besides, I’d like to present my deep thanks to the Post Graduate Office and our program coordinators, Ms Bui Phan Bao Tran, Mr Serge Bywalki for your kind supports, and especially Ph.D Le Thi Thanh Thu for her encouragement at the enrollment stage

I’d like to convey my sincerely thanks to my classmates and my group who have shared with me a lot of information and help

Last but not least, I wish to express my gratitude to my beloved dad, my husband and the whole family members who give me strength to fulfill the project as well as the whole program

TABLE OF CONTENTS

Page

CHAPTER 3 MARKETING STRATEGIES FOR AUTOMOBILE

ABBREVIATIONS

LIST OF CHARTS AND TABLES

CHARTS

Page

TABLES

EXECUTIVE SUMMARY

Casumina has had good business on tire and tube production during past years when the brand knowledge was scarce and not an important component of success It was enough to develop a product with right balance of quality and price, and good distribution Certainly, the quality, price and distribution are still highly important factors for success in the marketplace But today success requires more Brand equity and long-term strategic marketing plan count a lot

to sustain a company’s competitive advantage The Strategic Marketing Plan has prepared for Casumina to outline analysis on Casumina’s problems, opportunities, ambitious goals, and actionable programs to enhance its brand image perception and obtain the leader position in the new automobile tire market of Vietnam

The main marketing objectives anchor on intensive growth of radial tire in domestic market, opportunity search to export automobile tire to other developing countries, and strong brand building With the positive growth rate of the industry, 10% per year, we stretch for the goal of 30% increase in revenue in the three coming years 2008-2010 And to achieve the goals, we propose the strategies of horizontal growth for market penetration, general market share expansion with creating differentiation in after-sale services, customer services and brand reposition towards “good quality” and “reliable brand” attributes

In fact, the most difficult strategy of Casumina is to change customers’ prejudice

on Vietnamese goods quality Therefore, building a new brand concept and thematic brand building programs for Casumina automobile tire have been strongly highlighted in this plan Sub-brand for radial tire is also considered

optional in this plan The message of “international quality standards” is found key for the brand communication

Next, price plays an important role in a brand success, especially in B2B segment However, it is better to be perceived “cost effective” than “reasonable price” In short, the quality and price factors of Casumina automobile tire need

to be in balanced equation, or even better with “value for money” perception Thus, research on Brand Price Trade Off and Brand Health Tracking are also designed in the program to ensure that Casumina has adequate tools to keep track the market trend

Moreover, other marketing programs are also very critical for Casumina to gain leading position in automobile tire market They are considered as milestones of Casumina’s strategic planning

• In line with above the line activities, we giving Casumina a new and outstanding identity in showroom, point of purchase

• B2B sales will be more focused for its great contribution to sales and potential growth

• Modern tools to improve management like ERP and CRM are on development As the market leader, Casumina is actually looking at best supports to the business development

• Marketing budget has been raised from 0.5% to 4% of total turnover More

PR campaign and marketing activities targeting to customers have been considered in the plan

Furthermore, to implement these programs, Casumina commits to some changes

in terms of organization and corporate values Firstly, the company is bound to build professional and specialized teams which have separate functions Then, the corporate values will be more customer orientation than sales But easy said than done We all knew that these changes are critical as they are so deep and wide in an organization and might effect to the resource turnover However, they are also found critical for Casumina to sustain in the marketplace nowadays

The following parts will help you further understand the business case and how

we plan actions to achieve the goals

INTRODUCTION

Today many Vietnamese companies are taking advantage of bilateral trade agreements like AFTA, PNTR and WTO to expand their business to the international marketplace And at the same time, these same trade agreements are bringing more foreign competition into Vietnam These foreign competitors often have decades of branding experience behind them, and more liberal taxation policies that permit freehanded marketing expenditure For these reasons, most of Vietnamese companies have faced a lot of difficulties in domestic as well as international markets, especially when their operations are sales driven and almost neglect branding strategies

The Southern Rubber Industry Company with Casumina brand is one of the cases Though the company achieved the revenue of 100 billion US dollar, 40% share of tire and tube market, and 94% mindshare in 2006, its brand has not yet been perceived very positive by their customers Therefore, I have decided to work on the Strategic Marketing Plan for Casumina 2008-2010 in the hope that I can contribute some ideas for the Management Board to improve their brand performance and to succeed in competition

The Strategic Marketing Plan for Casumina 2008-2010 focuses to promote Casumina automobile tire products in domestic market which has been forecasted the most potential and fast growing market in coming years In this market, there are currently two main segments: bias tire (suitable for long run, low speed and poor road condition) and the newly introduced radial tire (suitable for fast run and good road condition) The radial tire is considered a replacement

of bias tire in the future Therefore, the plan has also given an emphasis on promoting Casumina’s radial tire products

The plan is supported by secondary information from desk research and primary information from two research studies as follows:

Axis Research in January 2006, with 10 in-depth interviews to automobile tire retailers and a sampling survey of 200 purchasers of transport service companies

in HCMC

Research in October 2006, amongst three actors in the brand decision making process: retailer (n=100), car/ truck owners (n=100) and drivers (n=240) The survey covered four main regions: HCMC, Dong Nai, The Central (Hue, Danang) and Hanoi

CHAPTER 1 ABOUT THE COMPANY

1.1 ESTABLISHMENT AND ACHIEVEMENT

From a state owned company having been established since 1976, the Southern Rubber Industry Company (Casumina) became a Joint-Stock Company in 2005 The company has 7 factories and 2500 employees Casumina is now the largest tire and tube producer in Vietnam, with the turnover of 100 million US dollar in

2006 and 40% share of Vietnamese tire and tube market Casumina is also a partner in a joint venture with Yokohama (Japan) and Continental (Germany)

More than past 30 years, Casumina has got several significant achievements In particular, for years Casumina has been largely voted by consumers as a Vietnamese High Quality Goods Producer, and it continuously improves its production standard with ISO 9001-2000 management Furthermore, with the newly invested assembly lines of radial tire in 2003, it became the first local producer introducing radial tire into Vietnamese marketplace in 2005 Especially, Casumina ranks 69 amongst 75 top tire and tube producers in the world, being one of the only three producers ranked in ASEAN By any standard, this is a great success of Casumina

1.2 MISSION

Casumina commits to be a reliable companion to drivers The company is driven towards high international standard of quality but affordable price to Vietnamese customers And more importantly, the company strives for the top Vietnamese brand in terms of awareness and quality perception

1.3 CORPORATE GOALS

In the coming years, Casumina aims to achieve the following major goals: Non-financial goals:

1 To maintain the leadership in the tire production industry of Vietnam

2 To promote to higher rank in top 75 tire producers in the world by considerably increasing its turnover

3 To support and control up to retail outlet level in order to maximize sales volume and to ensure consistently strong brand exposure

4 To leverage the brand image so that the company can tap into a more premium segments of the market

Financial goals:

1 To capture a turnover growth of 20%-30% per year

2 To obtain a return on equity of 30%

1.4 CORE COMPENTENCY AND SUSTAINABLE COMPETITIVE ADVANTAGE

with profound know-how, rich experience, and nationwide distribution network

affordable price

tires and pre-empting competitors in this segment

sustain in an increasing competition environment in the next coming years

CHAPTER 2 SITUATION ANALYSIS

2.1 SLEPT ANALYSIS

2.1.1 Social factors

earn more than USD 1,000 (Appendix 1)

- The fast industrialization and improving Vietnamese living standards lead to high social mobility, i.e the expenditure on transportation is getting higher

associated with modern technology, convenience and comfortability, e.g better transportation service

2.1.2 Legal factors

- Distribution of tire is not open to foreign companies until 2012

- Ongoing reforms to the bureaucracy in Vietnam, in a bid to speed up the approval regime for foreign investors and make it more transparent

2.1.3 Economic factors

past five year, average growth of 7.5% per year Real GDP growth (percentage

change from a year earlier) is estimated at 7.7% in 2007 (Appendix 2)

- The opening up of its own market will bring mixed blessing for Vietnam Cheaper imports and increased competition will reduce inflation, which is currently running at 7.7%, and thus increase purchasing power for Vietnamese consumers

- Investment, together with consumption, is key driver of Vietnamese growth Investment grew in real terms by 19.3% and FDI inflows by 10.6% in 2005

- The economic boom has lifted many Vietnamese out of poverty, with the official poverty rate in the country falling from 58% in 1993 to 20% in 2004

- Vietnam has fully joined WTO in early 2007, i.e more chances to exports tire products to other countries in the world

- Vietnam is in the trend of fast urbanization and infrastructure development,

which facilitates the increase of vehicles, especially cars (Table 2.1, page 9)

2.1.4 Political factors

reforms necessary to double 2000’s GDP by 2010, as targeted

- The government shows to work more efficiently and effectively, with the obviously seen red tape cut off to attract more foreign investment

Permanent Normal Trade Relation (PNTR) in late 2006

2.2.1 Market demand

Table 2.1 Automobile registration

Source: The Office of Transport Registration – Vietnam (2006)

As illustrated in the above table, the number of vehicles in Vietnam increases every years, e.g by 16% in 2006 compared to 2005 And according to the survey conducted among 204 transportation service companies in Jan 2006, most of the automobile owners (87% of the total) would replace with the new tire when the current hemp liner is worn out, and about three fourths (76% of the total) do the

replacement every 6-12 months (Appendix 3) This certainly results in the

greater demand for tire year by year

The growth rate of Vietnamese automobile market is estimated around 10% in

2007 (versus the world growth rate of 3%) and will be even greater in the coming years for the following reasons:

- Automobile import tax rate declines from 100% to 80% in 2007

- The government has policy to expand the infrastructure network

- Power of car purchase among Vietnamese customers is stronger due to

the economy growth (Appendix 4)

2.2.2 Raw material supply

The supply of natural rubber in Vietnam seems to be abundant, 600,000 tons whereas rubber industry only consumed 70,000 tons in 2006 In addition, a lot of

raw materials still have to be imported from oversea (Appendix 5)

2.2.3 Industry capacity and output

When producers all over the world move to radialization from bias-ply, Vietnamese producers fail to meet the market demand of radial tire, the local capacity is just 38% of the total consumption Casumina is the only domestic producer of radial tires with 50,000 pieces in 2006

Table 2.2 Capacity versus Consumption of Automobile Tire

Capacity

Total consumption Local supply ImportRadial tires 500,000 1,312,000 50,000 1,262,000

New investors like Kumho and Chengshin expect to export 95% of their production to oversea This is obviously a common trend of other well-known tire producers that they move their factories to developing countries like Vietnam and other Asian countries (Thailand, Indonesia and China) and back import products to developed countries

2.3 COMPETITOR ANALYSIS

Casumina is just on par with Danang Rubber Company (DRC) in terms of

automobile tire’s output volume in 2006 (Appendix 6)

The findings of the nationwide survey conducted among three actors (retailers, owners and drivers) in early 2006 show that DRC is apparently the direct competitor of Casumina across regions on availability, brand awareness, levels

of selling (retailer), buying (owner) and using (driver) (Appendix 7, 8, 9)

- DRC has the same retail coverage with Casumina (78% versus 79%)

- DRC is just right behind Casumina on all levels of brand awareness in general and in particular HCMC, Hanoi and Dong Nai Located in Danang, DRC

is obviously dominating the Central regions (Hue & Danang) on all measurements; it gains even higher brand awareness and purchase levels than

Casumina (Appendix 10)

- In addition, DRC especially appears leading in bias segment with high brand

awareness among retailers, high purchase levels among owners (Appendix 11, 12)

- DRC also gains higher conversion rate from ever purchase to most often purchase compared to Casumina among owners (57% versus 44%)

- Similarly, DRC is almost on par Casumina on most often usage level among

drivers in Hanoi (Appendix 13)

- Last but not least, DRC is also perceived slightly better Casumina on “quality

attributes” (durable, takes long to be worn out) (Appendix 14) This is probably a

critical reason for owners tentatively to be more loyal to DRC than Casumina

(Appendix 15)

While the segment of bias tire is clustered with local brands like Casumina, DRC and Sao Vang Rubber Company (SRC), the other one of radial tire is dominated by well-known foreign brands like Bridgestone, Michelin, Chengshin, Yokohama, Kumho, Goodyear and Hankook

- SRC obtains even higher brand awareness than Casumina among retailers

and drivers in the Central (Appendix 16)

- The above mentioned foreign brands are especially main threats to Casumina’s growth in the segment of radial tires with higher availability, selling, buying and using levels than Casumina among retailers, owners and

drivers (Appendix 17, 18, 19) Moreover, these brands are also better associated

with “quality” and “prestige” attributes than Casumina

Michelin and Bridgestone clearly have similar positioning as they

both are well-perceived of “reliable”, “well-known”, “consistent quality” and

“technology advanced” brands

Yokohama, Hankook and Chengshin seem to be close to each others

in terms of positioning They all have been associated with positive attributes

such as “durable”, “high safety”, “smoothly run”, “reliable”, “consistent quality”, technology advanced”, “wide range” and “popular brand” by either retailer,

owners or drivers

Chart 2.1 Brand Positioning Map - Owners

Row profiles and Column profiles on axes 1 and 2 (78% )

Advanced technolgy Reasonable price

Recommended by sellers

Prestigious brand Good customer services

Fast, good maintenance service

Good brand publicity/

advertisement

Has many attractive promotions

Suitable to Vietnamese w eather &

road condition Diversified types/ sizes

-2.4 COMPANY ANALYSIS

2.4.1 Strengths

- Management: Casumina’s management has successfully captured the market trend and its opportunities It has had a right and in-time strategy to change the product focus from motorcycle to automobile tire since 2000

- Technology/Know-how: Casumina has solid experience and technology in manufacturing tire especially for Vietnam’s weather and road condition Casumina invested 100 billion dong in JIS for radial tire production in 2003 in order to pre-empt other competitors and meet the market demand Casumina also has the best laboratory in rubber industry in Vietnam

- Offerings: Casumina’s product strategy used to work on price base and economy of scale Casumina is therefore well-perceived of “reasonable price”

As the market leader, Casumina now tentatively levers its price It currently sets its price on par with its direct competitor-DRC on most of its products and even higher price than DRC on some particular products that Casumina leads ahead in terms of quality and technology Its price however remains lower than foreign competitors, Michelin and Bridgestone by 20-30% Besides, Casumina has provided customer services like replacement and maintenance

- Branding: Casumina automobile brand has inherited its good imagery from its umbrella brand in motorcycle as a mass and leading brand This is apparently

a competitive advantage of Casumina in automobile tire market

- Distribution: Similarly, since its launch in 2000, Casumina automobile tire has benefited from its nationwide distribution network Casumina has organized the best distribution network in Vietnam compared to all other competitors, including 90 distributors and wholesales across Vietnam; thousand of specialty stores are developed, offering a spectrum of maintenance service From the research findings, Casumina appears to have the most effective distribution

network as it has highest availability (78%, nationwide), especially in the South

East (97%) (Appendix 7)

Casumina follows a geographical distribution strategy and control up to wholesale level, as follows:

Chart 2.2 Casumina Distribution System

Overall, Casumina sales’ distribution has been assessed highly effective Casumina has cleverly taken advantage of the distribution network which is developed by distributors, sales agents and wholesalers, as such Casumina has established long-term relationship with partners, saved cost on sales personnel and found opportunities to further distribution expansion

- Marketing and Sales supports: Also from the research findings, Casumina

is well-associated with good marketing and sales support activities to all three actors (retailer, owner and drivers) such as: good after –sales services, regularly updates knowledge about products and market, continuously have attractive

promotion, good brand advertising and publicity, good sales supports (Appendix

14, 16, 20) In terms of brand most often selling/ buying and using, Casumina

gains the highest score, 34%, 29% and 30% respectively (Appendix 7, 8, 9)

Casumina also proves itself a dominant player of bias tire with most often

selling, buying and using 41%, 30% and 34%, respectively (Appendix 9, 21, 22)

2.4.2 Weaknesses

- Research & Development (R&D): Casumina has not yet a standardized process of R&D in which technical test is in close connection with consumer poll Though Casumina conducted product trial tests among transport companies prior the launch of radial tire, these tests have not been done in an objective way and up to professionalism standard (i.e branded test, lack of comparison with competitors’ performance and quality control during data collection) Any innovation should not be treated as the R&D department’s task alone but a project assigned for a team including R&D, Marketing, Sales, Sales planning, Production Planning and all kinds of Buyers

- Offerings: Casumina has not yet well-perceived as a “good and consistent

good quality product” (Appendix 14, 16, 20) It is commented of “reasonable

price”, but not “value for money” In other words, we have offers to the market reasonable priced product but not as good quality as customers’ expectation Therefore, this is a major problem that Casumina needs prompt actions in its strategic plan

- Branding: Casumina seems lacking a long-term strategic plan of brand building and clearly defined brand positioning As revealed in the research findings, it has been strongly associated with “reasonable price” and “easy to find” but not with other positive attributes such as “durability, safety, cost-

effective/ economical, and reliable” like competitors (Chart 2.2, page 10)

Furthermore, Casumina’s product differentiation has not been well-defined and communicated to customers Last but not least, Casumina fails to obtain a highly recognized brand personality Casumina’s image is more of a commodity than of

a brand (Appendix 23)

- Distribution: Sometimes, there remain sales conflicts among region, i.e a distributor of one region sells products to others’ regions Moreover, Casumina

emerges weakest in the North and the Central (Appendix 24, 25)

- Marketing/ Sales supports: Not many marketing activity has been done to pull customers to Casumina during past years Therefore, image of Casumina from customers’ eyes does not come out clearly while customer’s recalls of sales supports and after sales services to “push” products in the market come out vigorously “Pull” strategy is somehow neglected Furthermore, annually marketing budget has not been set aside for the whole year program, but only allocated according tasks This does not give us a good control on the marketing program and its effectiveness as a whole picture

2.4.3 Opportunities

- Domestic supply of natural rubber is abundant

- Labor is low cost, but skilled, well-trained and experienced

- With best distribution network in Vietnam, Casumina is considered as the most potential partner for any foreign producer looking for business opportunities in automobile tire or in particular radial tire market

production for exports

- The tire and tube industry, on one hand, has very positive investment outlook

as the local automobile market grows approximately 10% per annum Moreover,

a lot of well-known producers tend to transfer production from their countries to Vietnam, bringing more opportunities to consume its abundant natural rubber, to recruit local labor and improve know-how/ technology

Kumho Joint Venture has its factory being constructed and expects its full operation in 2008 The factory is designed for 3,000,000 radial tires per annum

Chengshin hopes to operate its factory in the end of 2007, with the capacity of 3,000,000 radial tire per annum

- Besides, VinaChem, a local producer is also in search for partners in its tire production plan, with capacity of 2,000,000 radial tires per annum

- Open policy to foreign producers in distribution could be a danger for Casumina, especially when Vietnamese customers are more likely to favor imported product than locally produced products, and radial tire product is not

very much sensitive to price like bias (Appendix 26)

2.5 CUSTOMER ANALYSIS

2.5.1 Customers’ decision-making process

Tire is an industrial product of high value, thus the decision making process involves more than one actor There are two main actors in the decision making process: buyers and users The buyers of tire can be individual car owners with personal usage, original equipment manufacturer (OEM) and purchasers of transport service companies for commercial usage However, the users of tire products are not always the same persons with the buyers, most of the time the users of tire are drivers, working for car owners or transport service companies 2.5.2 Influencers

The research findings highlight some insights underlying in the decision making

process of this kind of product (Appendix 27), in details:

- The buyers are mostly dependable on their own experience when comes to the decision of buying tire products

- Colleagues in transport industry are the second most influencing factor to their buying behaviors

- The following factors are also found very important are drivers and sellers’

industry than any else (Appendix 28, 29, 30)

2.5.3 Purchasing drivers

Moreover, purchasing drivers for buying radial or bias tires are different Buyers

of radial tire are mainly owners or purchasers of passenger cars, light truck, thus they needs tires for comfortability of passengers and high speed, in particular

“high durability, long-lastingness”, “smooth run”, “good loading capability”,

“high grip to road” and “high safety” Meanwhile buyers of bias tire are mainly purchasers of goods transport service companies owning heavy trucks or special vehicles, therefore they are more favorable to commercial benefits like “good loading capability”, “high durability, long lastingness” and “reasonable price”

(Appendix 26)

2.5.4 Key success factors

As such, key factors to success of tire products are in general identified as “high durability, long lastingness”, “good loading capability”, “reasonable price”,

“smoothly run” and “high safety” Moreover, the segment of bias products tends

to be more price sensitive whereas the other of radial products is highly quality driven That indicates a key point for Casumina to comply in their pricing and communication strategies

CHAPTER 3 MARKETING STRATEGIES FOR AUTOMOBILE TIRE

3.1 MARKETING AND PRODUCT OBJECTIVES

In the trend of radialization, Casumina sets its strategic focus on the growth of radial tires in the next coming years; to become the first and best producer of radial tires in Vietnam

Moreover, Casumina also aims at expanding its radial tire products to export markets That Casumina targets to become the most preferred local partner to foreign investors in tire industry is assessed achievable for the two main reasons:

- Casumina has strongest distribution arm in Vietnam

- Almost all well-known tire producers in the world are looking for their opportunities to transfer production base and technology to countries which have

a plentiful source of natural rubber

Last but not least, another main marketing objective of Casumina is to further improve radial tire’s product quality as well as customers’ perceived quality

As such, any opportunity to cooperate with foreign investors in radial tire industry might help Casumina take advantage of its partner’s know-how And marketing communication is suggested to focus on quality matter of Casumina radial tire in coming years

3.2 MARKETING GOALS

The following goals are set for both domestic and export automobile markets:

- Sales target of automobile tires is 700,000 units in 2007, increased by 14% compared to previous year (in which radial tire contributes 30% of sales, i.e 210,000 units) and approximately by 30% in the consecutive years as both domestic and export market are growing very fast and radial gradually replace bias tires The market share of automobile tires is expected to increase from 18% (2006) to 25%-30% in the planning years

- Firmly set foot on all channels in all regions, Casumina aims to increase its

competitors in display and selling with strong branding, vigorous communication

on quality

- Since 2006, Casumina has also worked for the benefits of share holders It expects a net profit of 67 billion VND (4% of turnover) in 2007 and even more in the following years (4-5% of turnover), in comparison with 45 billion VND, (3% of turnover) in 2006

- Development of brand strategy is an important task of Casumina when it enters international markets and competition in local market gets tough

The brand is actually in the situation that urges a need of repositioning in the way that it can obtains relevant market leader’s associations, unique brand personality, mainly anchoring on “brand reliability/ reputation” and “product quality” (consistence, durability, safety), especially

in radial tire segment Otherwise, it can be defeated by foreign and established brands

long-
The brand also needs a strong brand identity which also clearly communicates “quality” message

Sub-brands for each segment which are more customer-oriented are suggestively considered to help Casumina have different customers’ associations by segment and more importantly create a more premium image for Casumina’s sub-brand of radial tire