Explain how market structures in the above case study deviate from the model of perfect competition. Explain the behavior and competitive strategies employed by Trung Nguyen coffee and discuss the role of the competition commission and regulatory bodies.
Business Environment Task 3a Explain how market structures in the above case study deviate from the model of perfect competition Market structure Market structure is devided into four main types: Monopoly Oligopoly Monopolistic competition Perfect competition Company Logo Trung Nguyen Coffee belongs to monopolistic competition Stores in 61 cities and provinces of Vietnam Free entry or exist the market Monopolistic competition and perfect competition Similarities Each firms acts independently without regard to the responses of its competitors Free entry guarantees that firms earn zero economic profits in the long-run Monopolistic competition and perfect competition Differences •Monopolistic competitors are not price takers •The firm’s equilibrium price exceeds its marginal cost •Firms have excess capacity in long-run equibibrium Trung Nguyen’s case deviates from perfect competition The products of Trung Nguyen are not perfect substitutes: classic blend coffee (strong aroma and deep flavor) can’t replace for passiona (elegant aroma and bright flavor) Trung Nguyen’s case deviates from perfect competition The quality of each product is different when it is made from different kinds of coffee leading different prices e.g Creativity coffee, blend coffee, G7 instant coffee Task 3b Using a range of examples to illustrate the relationship between market forces and Trung Nguyen coffee responses Market forces of Micheal Porter Rivalry amongst current competitors in the industry number and size of firms industry size and trends fixed v variable cost bases product/service ranges differentiation, strategy Task 3c Explain the behavior and competitive strategies employed by Trung Nguyen coffee and discuss the role of the competition commission and regulatory bodies Strategies Trung Nguyen used market segmentation Geography area: • HaNoi • HoChiMinh city Sex • Woman: Passiona coffee Income: • Luxury products: Weasel, classic blend, legendee or diamond collection • Common products: brown coffee I (ambition) and S (conquer) Market mix Place Franchising system all over VietNam G7 Marts Trung Nguyen coffee stores Online order on Trung Nguyen’s web Promotion Advertising on TV Coffee festivals Coffee cultural festival weeks Competitive strategies color difference _ the color of Tay Nguyen highland Values: Inspired Creativity Consumer'sOrientation satisfaction Build the success upon the partner's success Promote social responsibility and community development Competition Commission The Competition Commission (CC) is one of the independent public bodies which help ensure healthy competition between companies in the UK for the benefit of companies, customers and the economy It was established by the Competition Act 1998 It replaced the Monopolies and Mergers Commission on 1st April 1999 The role of Competition Commission (CC) Mergers In order to qualify for investigation by the Office of Fair Trading (OFT), a merger must meet all three of the following criteria: two or more enterprises must cease to be distinct; the merger must have taken place not more than four months ago; One of the following must be true: • the business being taken over has a turnover in the UK of at least £70 million; • the combined businesses supply (or acquire) at least 25 per cent of a particular product or service in the UK In exceptional cases where public interest issues are raised, the Secretary of State may refer mergers to the CC for in-depth investigation, the CC has wideranging powers to remedy any competition concerns, including preventing a merger from going ahead It can also require a company to sell off part of its business or take other steps to improve competition The role of Competition Commission (CC) Market investigations In market investigations, the CC has to decide whether any feature or combination of features in a market prevents, restricts or distorts competition, thus constituting an adverse effect on competition (AEC) If the CC concludes that this is the case, then it must seek to remedy the problems that it identifies either by introducing remedies itself or by recommending action by others The role of Competition Commission (CC) Regulatory references The CC’s role is dictated by the relevant sector-specific legislation Companies regulated under the gas, electricity, water and sewerage, postal services, railways or airports legislation generally have a formal instrument (a licence) setting out the terms of their operation If a regulated company doesn’t agree to a modification of its licence proposed by the regulator, the regulator must refer the question to the CC The CC will consider whether any matter referred to in the reference may be expected to operate against the public interest and whether this could be remedied by modifications to the licence The CC also has roles under the Financial Services and Markets Act 2000 and the Legal Services Act 2007 The role of regulatory bodies in Vietnam Making policies to protect environments, consumers, and so on about the standards of quality, tax, and other areas Make recommendations on the use of reasonable price for shoe manufacturers Planning for effective regional shoe manufacturing Organize production, increased capital investment for businesses and the shoe manufacturing industry The role of regulatory bodies in UK Giving law imported shoe products more closely to ensure quality Make regulations on tax and customs import of shoe products Products have to follow the standards of International Standardisation Organization – ISO was established in 1964 For example, when exporting in EU and UK, Giay Viet hs to follow the standards of ISO 9000 including three standards ISO 9001, ISO 9002, ISO 9003 Simplifying customs tax to speed up the process of importing References porter's five forces model http://www.businessballs.com/portersfiveforcesofcompetition.htm Monopolistic Competition http://ingrimayne.com/econ/International/MonoComp.html UCLA Center for East Asian Studies http://www.international.ucla.edu/eas/newsfile/vietsociety/001102-feer.htm The country of coffee http://queuetea.wordpress.com/ The most special from Trung Nguyen http://www.trungnguyen.com.vn/en/default.aspx?n=1021#content The role of competition commission http://www.businesslink.gov.uk/bdotg/action/detail? itemId=1084809907&site=210&type=RESOURCES The role of competition commission http://www.competition-commission.org.uk/about_us/ ... where more than 12, 000 people presented in November 20 03 - “Top five brand” of agricultural product & foods in “The Vietnamese High Quality Commodities Award” 20 00, 20 01, 20 03 and 20 04 by the selection... brand” of agricultural product & foods in “The Vietnamese High Quality Commodities Award” 20 00, 20 01, 20 03 and 20 04 by the selection of consumers Attract the eyes of the means of media in their