Introduction and 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.

Chapter 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 consumer’s 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 1.2 Problem Statement As competition rises, developing effective marketing strategies for a company is the key to success in its target market But how can the company develop such a marketing strategy, identify the target market or proper niches for its products, and consolidate its position in the target market? Regarding the case of IBC, last year, IBC obtained the highest market share of 28 percent in total national market and 42 percent of HCMC market At present, IBC is facing the intensified competition from Coke, the question is how can IBC protect its position in Vietnam in general, and HCMC in particular? To answer this question, 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 1.3 Objectives of the Research Study The objectives of this research cover the following issues: To analyze the business environment of the Vietnamese soft drinks market including production and consumption of soft drinks, consumer preference, governmental policies on the soft drink industry and competitors of IBC To analyze and assess the current situation of IBC in term of strengths and weaknesses of its production capacity, market share, and marketing activities including products, price, distribution and promotion To develop the marketing strategies for IBC in HCMC which consist of market segmentation, market targeting, positioning strategy and marketing mix strategies The specific marketing mix strategies for products, price, distribution, and promotion will be developed to implement the selected positioning strategy 1.4 Scope and Limitation of the Research Study This research study is conducted at International Beverage Company in HoChiMinh city, Vietnam The study has been undertaken purely from a viewpoint of marketing relating to develop the marketing strategies for IBC in HoChiMinh city This research relates to the development of the marketing strategies including market targeting, positioning strategy and marketing mix for products, price, distribution, and promotion Regarding product strategy, the research does not discuss the development of new products because IBC has not planned yet for developing new products In the area of distribution, the physical distribution channels such as inventory, logistic, warehouse, and transportation are not included Data are collected just in HoChiMinh city which is the key soft drink area in the Vietnamese market 1.5 Organization of the Research Study This research is organized in six chapters, as follows: • Chapter provides an introduction including background, problem statement, objectives, scope and limitation of the research study • Chapter presents the literature review of the study and summarizes the work of previous studies, it relates 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 • Chapter discusses research methodology including the framework of research, information needed, methodology of data collection, sampling size and data analysis • Chapter analyzes external factors covering the soft drinks market situation and competitors in order to find out opportunities and threats in the environment in which the company operates • Chapter analyzes and assesses the current position of the company regarding strengths and weaknesses of IBC about production capacity, market share and marketing activities • Chapter presents conclusion and recommendations for developing the marketing strategies for IBC in HCMC including market targeting, positioning strategy and develops marketing mix strategies Chapter 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 2.1 Concept of Marketing Strategy Nowadays, most of companies are increasingly embracing targeting marketing Target marketing helps sellers or suppliers identify marketing opportunities better The sellers can develop the right offer for each target market They can adjust their prices, distribution channels, and advertising to reach the target market effectively Therefore, designing the marketing strategy is very important for success The marketing strategy is always a determinant constituent of effective competitive strategy Cravens (1994) defined that marketing strategy is the analysis, strategy development, and implementation activities in selecting market target strategies for the product-markets in each business unit, setting market objectives, and developing, implementing, and managing the marketing program positioning strategies designed to meet the needs of the customers in each market target Strategic marketing is a market-driven process of strategy development, taking account a constantly changing business environment and the need to achieve high levels of customer satisfaction Thus, marketing strategy builds competitive advantage by combining the customer influencing strategies of the business into integrated array of market-focused actions Strategic marketing links the organization with the environment and views marketing as a responsibility of the entire business rather than a specialized function Because of marketing’s boundary orientation between the organization and its customers, channels members, and competition, it is central to the business strategy planning process (Day, 1984) Strategic marketing provides the expertise for environmental monitoring, for deciding what customer groups to serve, for setting product specifications and for selecting which competitors to position against 2.2 Link Between Marketing Strategy and Corporate Strategy Corporate strategic planning involves the activities such as developing a clear sense of the company’s mission, identifying the company’s strategic business units, allocating resources to the various strategic business units, and expanding present business and developing new ones to fill the strategic-planning gap The corporate strategy is concerned with what types of business the company as a whole should be in and is therefore concerned with the scope Marketing strategy, on the other hand is part of functional strategy which emerges in each strategic business unit as part of corporate strategy According to Guiltinan and Paul (1991), corporate strategy is type of plan which outlines how a firm should use its resources to produce and market a specific array of products and services in order to achieve an overall corporate objectives In essence, the corporate strategy provided a general statement It defined the products in which the 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 firm’s 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) 2.3 Strategic Marketing Planning Process Various steps in designing strategic marketing planning within an industry can be found in literature and basically there principles are all similar An approach for strategic marketing process consist of marketing situation analysis, designing marketing strategy, marketing program development, and implementing and managing marketing strategy (Craven, 1994) It is shown in Figure 2.1 So there is a need to discuss this in more detail 2.3.1 Marketing Situation Analysis The marketing situation analysis is the first step in the design of new strategy or examining an existing strategy It comprises the external and internal environment analysis These analysis guide the choice of marketing strategies The marketing environment is a place where the company must start its search for opportunities and possible threats It consist of all the actors and forces that affect the company’s ability to transact effectively with its target market The external environment can be divided into macroenvironment and microenvironment • The macroenvironment includes more general forces which often influence the long run activities of the company It consists of economic, socio-cultural, technological, political, legal forces in relation to the firm's total environment Thus, the achievements, difficulties and challenges of Vietnamese economy and governmental policies will influence the development of the soft drink industry • The microenvironment includes the actors in the company’s immediate environment that affect its ability to serve its markets especially, the company itself, suppliers, market intermediaries, consumers, competitors and public One key aspect of external analysis is evaluation of competitors' strategies, strengths and weaknesses Competitor analysis includes defining competitive arena, analyzing the strategic group and describing and evaluating each key competitor in terms of strengths and weaknesses At present, the Vietnamese soft drinks market becomes fiercely competitive So the analysis of production, consumption and competition are necessary to identify opportunities and threats for the company Market Situation Analysis Analyzing markets Market segmentation Analyzing competition Marketing information systems and research Implementing and Managing Marketing Strategy Designing Marketing Strategy Designing effective organizations Marketing strategy implementation and control Market targeting Positioning strategy Marketing strategies for selected situations Planning for new products Marketing Program Development Product portfolio strategy Pricing strategy Distribution strategy Promotion strategy Figure 2.1 Strategic marketing process Source: Cravens, 1994 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 organization’s strengths and weaknesses This information helps companies deciding how, when and where to compete in a given environment 2.3.2 Marketing Strategy Design Designing marketing strategy includes market segmentation and targeting, positioning strategy and the marketing strategy choice Market segmentation and targeting Market segmentation is the act of dividing a market into distinct groups of buyers who might merit separate products and/or marketing mixes The marketer tries different variables to see which reveal the best segmentation opportunities For each segment, a customersegment profile is developed The effectiveness of segmentation analysis depends on arriving at segments that are measurable, substantial, accessible and actionable After evaluating market segmentation, the companies have to target the best market segment(s) Market targeting selects the people or organizations that company wishes to sever in the product-market To this, it must first evaluate profit potential of each segment, which is a function of segment size and growth, segment structural attractiveness, and company objectives and resources Then, company must decides how many segments to cover It can ignore segment differences (undifferentiated marketing), develop different market offers for several segments (Differentiated marketing) or go after one or a few market segment (concentrated marketing) Thus, once the company’s product-markets are identified and their relative importance to the firm determined, it selects the targeting strategy This decision is the focal point of marketing strategy, since targeting guides the setting of objectives and developing a positioning strategy Positioning strategy Regardless of the types of market coverage chosen, the company must develop and communicate for every market selected A positioning strategy that will clearly differentiate it or its products from competitors Positioning is the act of designing the company’s offer so that it occupies a distinct and valued place in the target customers’ minds (Kotler, 1991) 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 firm’s target market The marketing program combines the firm’s 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 organization’s 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 Corporate Marketing Planning Product Objectives Market Analysis Market Measurement Profitability and Productivity Analysis Competitive Analysis Needs of Target Markets Size of Market Opportunity Marketing Budgets Required Competitive Advantages Market Opportunity Market Success Requirements 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 company’s tactics not invite antitrust action 2.3.3 Marketing Program Development Market targeting and program positioning strategies for new and existing products guide designing strategies for each part of the marketing mix Developing marketing mix strategies for products, distribution, price and promotion is to implement the positioning strategy selected and in order to achieve a coordinated combination of its components that will accomplish the market target objectives in a cost-effective manner Product strategy Product is the first and most important element of the marketing mix The product strategy calls for making coordinated decisions on product mixes, product lines, brands, packaging and labeling • A product mix (also called product assortment) is the set of all product lines and items that a particular seller offers for sale to buyers (Kotler, 1991) The product mix can be describes as having a certain range (how many different product lines the company carries), length (total number of items in its product mix), depth (how many variants are offered of each product in the line) and consistency (how closely related the various product lines are in end use, production requirements, distribution channels or some other way) • A product line is a group of products that are closely related because they perform a similar function are sold to the same customer groups, are marketed through the same channels or make up a particular price range Each product line is usually managed by a different executive The product line manager should study the sales and profit contributions of each product item as well as the way the items are positioned against competitors’items This provides information needed for making product line decision such as line stretching, line filling, line modernization, line featuring and line pruning • Developing brand policies for individual product items in line • Packing and labeling decisions to protect, economy, convenience and promotion 10 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 Pepsi’s 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 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 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 2150 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 56 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 Schweppes sarsi Schweppes sarsi is considered as a soft drink with low brand preference because its attributes are not completely suitable to the Vietnamese consumers’taste 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 Sta dev 4.380 3.750 500 5.050 3.070 3.140 1.030 892 916 1.123 1.008 1.005 (Note: 1: very poor, 7: excellent) 5.6.5 Prices of Soft Drink Brands Pepsi, Coke and Tribeco The perception of the consumers about price of Pepsi and Coke is indicated that Pepsi price is fairly high and Coke price is high There is the difference in price between Pepsi and Coke (Appendix 4, Exhibit 3) The high income consumers say that price of Coke is fairly high in Whereas, middle and low income consumers indicate that price of Coke is high (appendix 6, Exhibit 4) For Tribeco, the survey discloses that the its price is rated at average level by majority of respondents 7-Up and Sprite There is the significant difference in rating the price of 7-Up and Sprite, the former is rated at fairly high, the later is rated at high (Appendix 4, Exhibit 4) 57 5.76 5.61 5.2 5.15 3.85 Mean 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) 5.6.6 Places of Consumption The majority of the consumers most often buy soft drinks at coffee shops, followed retail shops, mainly on street vendors For consumption at home, most of consumers buy soft drinks at wholesalers or retail outlets Only a small proportion of consumers (9 percent of respondents) often drink carbonates at restaurants The survey finds that four fifths of the consumers most often drink soft drinks at coffee shops and three fifths of consumers often buy soft drinks at retail shops There are half of respondents who sometime buy at wholesalers The respondents who often drink soft drinks at restaurants counts only for one tenth When conducted in-depth interviews with soft drink wholesalers, they say that a large proportion of soft drinks are sold for retail outlets and most of the consumers buy soft drinks at wholesalers for “occasion” consumption at home About incentives including profit margin and quantity discounts offered by soft drink companies for wholesalers and retail outlets, most of the respondents disclose that incentives which are given by IBC are better than Coke and Tribeco IBC has supported point of purchase materials and facilities for decorating stores and advertising its logo They also say that profit margin is important elements for keeping a particular brand in their stores 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 58 almost consumers when buying soft drinks they are interested firstly in choosing soft drink brands with high quality, then price 5.6.7 Promotion Activities Advertising At the beginning of production Pepsi in Vietnam, IBC launched the heavy advertising campaign with slogan “Pepsi, The Choice of New Generation” The survey shows that majority of respondents know this slogan Look like Pepsi, Coke launched advertising campaign with slogan “Coke, The Real Thing” The survey finds that there are half of respondents who knows this message Thus, it can be said that Pepsi creates its awareness in the consumer’s mind Assessing the advertising program of IBC on television, most of the consumers strongly agree about information content at aspects such as very easy to understand, very informative and very hard to forget However, the honesty of the commercial program is disagreed This may cause the negative impact for its advertising About the aesthetic content of advertising, the considerable number of consumer agreed at this aspect Table 5.13 Mean of the contents of advertising program of Pepsi Mean 5.710 5.500 5.460 3.220 5.170 4.700 4.560 5.340 a Very easy to understand b Very informative c Very hard to forget d Very honest e Please to see f Artistic g Intelligent h Amusing Sta dev 1.183 916 1.141 1.315 1.295 1.068 1.149 1.199 (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 Brands Mean 4.510 4.370 a Pepsi b 7-Up 59 Sta dev 1.283 1.143 c Coke d Sprite e Schweppes f Tribeco g Crush 4.410 3.860 3.190 3.150 3.270 1.296 1.400 1.285 1.336 1.355 (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 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 5.7 Summary of IBC’s Strengths and Weaknesses By analyzing current position of IBC in terms of production capacity, market share, financial situation and marketing activities, the strengths and weaknesses of IBC that were assessed in comparison with its main competitors are drawn out, as follows: Strengths IBC has strong financial position of stockholders and the remarkable profitability reaping from production and business in last years It continues to further invest for expanding its production and business in order to increase its production volume IBC has used the modern equipment and advanced technology for production soft drink production IBC has the highest market share in total Vietnam market, as well as HCMC market At present, IBC gains the market share of 28 percent in the whole country and 42 percent of HCMC market IBC has the experiences in marketing activities because its partners Pepsi Co and Cadbury Schweppes Group are giants in soft drinks market in the world They have the experiences in marketing activities The company has created the awareness of Pepsi and 7-Up in the market and good reputation brands Pepsi and 7-Up are much preferred by most of Vietnamese people 7-Up is considered as a dominant product in lemonade lime flavor in Vietnamese market IBC has also created the image of Pepsi as soft drink for young people through its advertising with 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 60 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 IBC’s 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 IBC’s 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 IBC’s 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 Conclusions and Recommendations This chapter presents the results of the research and recommendations for developing the marketing strategies for International Beverage Company in HCMC 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: 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, 7Up, Coca Cola, Sprite, Schweppes and Crush are available in cities and small towns in the whole country 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 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 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 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 IBC’s 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 markets(28 percent) and HCMC market (42 percent) The company is very interested in marketing activities, with 62 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 consumers’taste 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 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 63 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 6.2.2 IBC’s Market Targeting Together with rapid growth rate of economy, rising in the living standard, the proportion of high and middle income people in HCMC will significantly increase in the next years This points out potential consumption of soft drinks will increase these segments In addition the soft drinks consumption is also affected by age Most of soft drink consumers are young population at range from 10 to 35 years old This age group has big share in population structure and increases yearly Thus, IBC's target market should be focus on soft drink consumers with high and middle income, with particular emphasis on young age people At present, IBC should concentrate on selling canned carbonates including Pepsi, 7Up, Crush, Schweppes soda with high quality at a reasonable price in the segment of high income consumers The consumption of these items is mainly in hotels, restaurants, snack bars, dancing clubs, karaoke clubs and entertainment places To segment of the middle income people, IBC should focus on selling returnable glass bottle of soft drinks and PET bottles at the reasonable price 6.2.3 Positioning Strategy Positioning strategy is the combination of product, channel of distribution, price and promotion strategies, the company uses to position itself against its key competitors in meeting the needs and wants of the market targets Therefore, IBC needs to link its marketing activities including the analysis of its products’ attributes, prices compared its competitive products, developing the distribution channels to make its products more available to end users and emphasizing on promotion to persuade and remind them to buy its products 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 7-Up is the 64 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 consumer’s mind in HCMC market To implement its positioning strategy, IBC needs to develop marketing mix strategies for products, price, distribution and promotion 6.2.4 Developing Marketing Mix Strategy for IBC in HCMC At present, IBC’s market share is 28 percent in the whole country and 42 percent of HCMC market IBC has the highest market share in Vietnamese soft drinks market and HCMC market The company is facing the intensified competition in which Coca Cola Chuong Duong Soft Drink Company Ltd is main competitor in HCMC To protect its current leading position, IBC needs to strengthen it strengths and improve weaknesses This calls for action on three fronts: finding ways to expand total market demand, protecting its current market share through good defensive and offensive actions, trying to increase further its market share To expand the total market, IBC should look for new users, new uses or more usage of its products To increase the number of users, the company must either increase consumer’s willing to buy or their ability to buy products The willing to buy may be increased by demonstrating the benefits already offered by products, or developing new products with benefits that will be more appealing to certain segments, or promote new benefits from its existing products The ability to buy can be improved by offering high quality, or lower price, or by providing greater availability (through having more distributors, more frequent delivery) In addition to increase rate of purchase (more usage) the company must design advertising campaigns to convince the target consumers to buy its products more often or in more volume While trying to expand total market size, IBC must retain its current customers and consumers and continuously defend its current business against rival attacks Therefore, it must keep its costs down and its prices must be consonant with the value in which the consumers recognize in its brands The company needs to build good relation with its wholesalers and retail outlets as well as will produce its brands in several sizes and forms to meet varying consumer preference Besides, IBC must increase its market share by improving its products, opening up distribution networks and launching advertising campaign to persuade the consumers to switch to its products In general, IBC should develop the feasible marketing mix strategies to protect its leading position 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 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, 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 The purpose of IBC’s price strategy is to support its marketing mix strategies As analyzed earlier, developing IBC’s marketing strategies is to protect its leading position Its 66 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 IBC’s 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 convince more consumers to drink soft drinks By developing this channel will create high awareness for the company and its products 67 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 consumer’s 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 IBC’s advertising program on television are lack of honesty This can cause a negative impact about its products Thus, IBC’s 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 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 68 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” 6.3 Recommendations for Further Research This research of developing marketing strategy for the International Beverage Company in HCMC, the author just concentrates on developing marketing strategies including market segmentation, market targeting, positioning strategy and developing marketing mix strategies The implementing and managing marketing strategy including designing the marketing organization, evaluating and controlling marketing performance are important issues The research does not discuss, thus, it needs to study in detail in order to ensure the success of marketing strategies Regarding the product strategy, new product development is not discussed It is necessary to study in detail to ensure the success of product before producing and launching new product in the market The physical distribution channels play a critical role in developing distribution systems So, the activities such as inventory, logistic, warehouse and transportation need to study carefully in order to complete the work on distribution channel 69 ... 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... technology and the skills and abilities within functional areas In general, the situation analysis identifies opportunities and threats in the business environment and the organization’s strengths and. .. Implementing and Managing Marketing Strategy Implementing and managing marketing strategy focus on evaluating and improving organizational effectiveness and marketing strategy implementation and control