tiểu luận kinh tế kinh doanh phân tích 5 forces của VNG corporation

1 Introduction to VNG Corporation 1.1 Basic information - Established 09/09/2004 as VinaGame; - In 2008, the brand was changed to VNG Corporation; - Industry: Technology and the Internet; - Scale: 3000 employees; - Mission: "Build Technologies and Grow People For a better life" VNG believes in the power of the Internet and sets the mission of giving Internet users a meaningful experience  VNG is currently the only Internet and technology company, Vietnam's only billion USD + unicorn technology 1.2 Scope of activities VNG’s products and services operate in a cutting edge ecosystem covering four key product groups, focusing on bringing a richer and simpler online experience to your life - Online games + Develop, produce and publish games to the global market; + Import and publish the world’s most famous games to Vietnamese users Products: Võ Lâm Truyền Kỳ, Rules of Survival, Crossfire Legend… - Platforms + Connect diverse platforms to deliver comprehensive communication, entertainment and search services to individuals and organizations + The OTT platform Zalo and Zing ecosystem (Zing TV – video platform, Zing MP3 – music platform, Bao Moi – news aggregator platform…) + 123Go and 123Phim platforms, Laban.vn search tool,… - Finance and Payments + Spearhead innovative platforms and services for intermediary payments and personal finance + Products: Intermediary payment gateway – 123 Pay, Digital wallet – ZaloPay - Cloud Services + Provide comprehensive and ground-breaking cloud services to organizations, companies and local authorities on this burgeoning ultra-smart platform + Smart systems and technology solutions on Internet of Things platform; + Products: vCS, Cloud server, IoT HUB, vCloudStack, vObjectStorage, Tape Backup, vCloudcam, Vending Machine, Stages of development - 2004 - 2005: Establising - 2006 - 2008: Accelerating - 2009 - 2012: Positioning - 2013 - 2016: Leveraging - 2017 - Now: Integrating + In 2017, signed a memorandum of listing on the Nasdaq stock exchange (USA); + 2018: Zalo platform reaches 100 million users, not only in Vietnam Continued to be announced by Google and Temasek as one of the unicorn (unicorn) technologies of Southeast Asia, along with Grab, Go-Jek Analyze in terms of forces framework 2.1 Supplier power In Porter’s five forces, supplier power refers to the pressure suppliers can exert on businesses by raising prices, lowering quality, or reducing availability of their products Supplier power is affected by how many suppliers a company has, how big each supplier is, how diverse and different the products of its supplier are, and how much it would cost it the company were to find a new supplier In the case of Zing MP3, the majority of its Vietnamese music comes from small individual artists in the country with similar level of popularity Therefore, with so many options that Zing MP3 can choose from when it comes to V-Pop, the cost of switching to a new artist is not especially high However, this is not the case with music from outside Vietnam The sole supplier of foreign music for Zing MP3 is Universal Music Group and without them Zing MP3 will not have the right to distribute a great number of foreign music Regarding online games, VNG's suppliers in the gaming industry provide physical products and materials, such as software, graphics cards, network infrastructure, and intellectual property, such as video game content and software code Because a wide array of ingredients makes up a VNG game (some notable names are: Võ lâm truyền kỳ, Khu vườn mây, Gunny, etc.), the company uses a wide array of suppliers With this diversification among suppliers, one or two suppliers raising prices represents only a small increase in the company's total cost of doing business Lastly, in terms of Zalo and some applications in VNG’s finance and payment system such as ZaloPay, there is little to no supplier power involved This is because VNG built most of its platform using its technology and resources, so there is a absence of suppliers involved in these areas Platforms Product Switching differentiation cost None None None Individual artists Small Low Low Universal Music Group Big High High Small Low Low None None None Number of supplies Size Zalo None Zing MP Online Games Finance & Payment Kingsoft, NetEase, Gravity, Changyou, Smilegate, road None 2.2 Buyer power The ability that customers have to drive prices lower or their level of power is one of the five forces It is affected by how many buyers or customers a company has, how significant each customer is, and how much it would cost a company to find new customers or markets for its output A smaller and more powerful client base means that each customer has more power to negotiate for lower prices and better deals A company that has many, smaller, independent customers will have an easier time charging higher prices to increase profitability - Zing MP3: over 50 million download on Google appstore - Zalo: over 100 million download on Google appstore; 100 million users - Games: One of the four main game publishers in the Vietnamese market; undeniably enormous amount of fans and users The vast majority of VNG’s customers are middle and lower class people from the countryside all the way to the big cities They are mostly office workers, labour workers and their income level varies widely from mil a month to 15 mil a month There are also students, from very young age of to Uni student, who we assume they have to depend on their parents Business men and women use some of VNG’s app such as Zalo on a regular basis, as well as wealthy people who are fans of VNG’s games and apps Over the past decade, it is clear that many users are ready to pay a hefty amount for in-app purchase to improve their user experience, and many game enthusiasts are keen on trying out new games when VNG has published them In Vietnam, VNG is very famous for its product Many people are using the apps, creating an enormous community of users Kids want to play with their friends and have a good time, family members reaching out to each other using the apps… This helps attracting new users with little effort and difficulty As soon as VNG drops a new product, they has had a solid amount of users already In conclusion, buyer’s bargaining power is low VNG has a great amount of customers, few of whom is significant enough to have an advantage over VNG The customers are not reluctant to pay VNG more to improve their user experience This means VNG will have an easier time charging higher prices to increase profitability, as well as expanding their portfolio without the fear of not being supported by users Platform Number of Significance of Cost to find new customers customers customers High Low Low High Low Low Low Low High (Zalo/ ZingMP3) Online games Finance & Payment 2.3 Threat of substitution Porter’s threat of substitutes definition is the availability of a product that the consumer can purchase instead of the industry’s product A substitute product is a product from another industry that offers similar benefits to the consumer as the product produced by the firms within the industry According to Porter’s Five Forces, threat of substitutes shapes the competitive structure of an industry The threat of substitution in an industry affects the competitive environment for the firms in that industry and influences those firms’ ability to achieve profitability The availability of a substitution threat effects the profitability of an industry because consumers can choose to purchase the substitute instead of the industry’s product The availability of close substitute products can make an industry more competitive and decrease profit potential for the firms in the industry On the other hand, the lack of close substitute products makes an industry less competitive and increases profit potential for the firms in the industry A threat of substitutes example is the beverage industry due to a market with many competitors The table below summarizes the determining factors of “Threat of Substitutes” of three groups products owned by VNG Corporation, each represented by well-known products Competitors Switching Cost Platforms - ZingMP3 Quality Equal NCT, Apple Low Music, Spotify - Zalo Price to Equal LINE, Low KakaoTalk Online Vietnam Games (Võ Esports Substitutes Quality (Free) Lâm Development Truyền Kỳ) (VED) Finance & Momo, AirPay, Payment ViettelPay, (Zalo Pay) Moca Substitutes Quality (Free) to Substitutes Substitutes Quality (Free) Equal Low to Substitutes Inferior to Equal Low to Substitutes Inferior to Equal Viber, Performance to Equal to Substitutes Substitutes Quality (Free) Equal Better than Substitutes Worse than Substitutes Worse than Substitutes From the summary above, we can conclude that although there are group products that VNG Corporation gain advantages in the marketplace compared to substitutes, there remains a lot of risks from its competitors and VNG Corporation is suggested that their board director should continuously change, adapting to the new demand of the society to ensure sustainable profitability 2.4 Threat of new entrants The threat of new entrants is high in the multimedia and graphics software industry, and particularly in the video game production segment The segment's barriers to entry are low, with minimal government regulation and manageable costs Programming video games does not require expensive or hard-to-find materials; more critical is the intellectual capacity to develop a new or innovative concept and bring it to life through effective programming and coding One brilliant idea that leads to a blockbuster game is all it takes for a new company to catapult itself into the top echelon of video game producers - Entry costs, Sunk cost + Platform and software development does not require much capital, material or labor to be successful as it relies heavily on innovation and effective programming + However, expenses on Marketing, campaigns to gain popularity are usually high - Network effects, Switching costs + Network Effect (Economies of scale): users tend to use apps with a significant user base, rather than trying a new app alone + Switching cost: the price users have to pay to change from one familiar app to a new one Switching cost is usually low in the multimedia and online gaming industry as most apps charge a low price for registration or even allow free use of the apps What cost the users more are the in-app purchases - Access to channels: Many e-wallet apps nowadays are linked to various channels (banks, supermarkets, convenience stores, restaurants,…) like ZaloPay, Momo, Payoo, AirPay, Even though there is no limit to the number of payment methods at each channel, it is unlikely for the channels to accept too many payment methods as well as the unpopular ones - Government Restraints + The Vietnamese Government is encouraging the development of e-payment and finance, heading towards a cash-free society The Vietnamese market still has room for more entrants; + The government of Vietnam does not prohibit any development of legal apps Entry Platforms (ZingMP3/ Zalo) Online Games Finance & Payment Cost, Network effect, Government Sunk Cost Switching cost restraints Medium High Low High High Medium High High Low 2.5 Competitive rivalry The main driver is the number and capability of competitors in the market Many competitors, offering undifferentiated products and services, will reduce market attractiveness With a population of about 97 million people, including 58 million internet users, along with the rapid development of technology, Vietnam is considered as one of the countries with a relatively high growth rate of digital economy in ASEAN The demand for services of Vietnam is increasing by about 5-10%/year Therefore, technology and the internet are fertile and competitive market  Fast industry growth In fact, VNG is increasingly facing many challenges from the very fast acceleration of other competitors: - FPT, with over 30 years of operation and development in the field of technology, is doing business in many fields of software and information technology products - VCCorp owns the largest online market value ecosystem in Vietnam with more than 40 products spanning the fields of media, e-commerce and social networks - VNPGroup is one of the first domestic companies to pioneer in the field of technology Number of competitors Platforms NCT, Spotify, Facebook, Size of Product competitors differentiation Same Same Exit barrier s High (ZingMP3 Skype, Mocha Messenger, / Zalo) Viber, Line, WhatsApp, Online VTC Game (Fifa, Đot Kich, Games Audition), Garena (Lien Minh Huyen Thoai, Fifa Online); Soha Game (web game, Same Same Low Same Same High mobile game); Gamota (Y Thien 3D, Kiem Vu) Finance & Momo, AirPay, ViettelPay, Payment VNPay, Moveek, iRace  There are many businesses competing with each other, similar in size and power, not much difference in the product, but no one can afford to dominate the remaining businesses Although the pressure from customers is not significant, due to high fixed costs, high investment in technology, capital, and labor, the barrier to exit from the technology industry is high  Rivalry is high Solutions for its sustainable industry profits Digital economics in Vietnam is growing very fast, online advertising and online games grow more than 50% every year Not only that, Vietnam is also the country with the largest proportion of total goods value (GMV) of the digital economy to GDP in ASEAN The scale of Vietnam is forecast to increase very rapidly, only years later, by 2025, our country's economic scale will reach 33 billion USD The number of Internet users in Vietnam has increased to 64 million, approximately 67% of the population, currently ranked 13th among the top 20 countries with the largest Internet use in the world - An ideal platform for digital economy development Starting as a startup, VNG has moved very quickly to catch a series of the hottest technology trends in the world today such as cloud services or personal finance and mobile payment In order to maintain its leading position in the rapidly developing industry, VNG needs clear strategies and sustainable development: - Enhancing some business segments at a larger market size + When VNG understands and has had great success in the domestic market, VNG poses a challenge to reach out internationally Setting the goal of 2023, VNG will have 320 million customers worldwide, while currently they only have 60 million customers, Vietnam is the main one + VNG will continue to pursue the 'Go Global' strategy, in which the game segment will be expanded to overseas markets such as Thailand, Myanmar, Singapore, Indonesia, Japan However, when going out In international markets, VNG will have to invest a lot in operating costs, as well as marketing and promoting products to build brand awareness for the first time Therefore, VNG must balance the assurance of revenue of the domestic market and develop abroad + VNG is also operating representative offices in Thailand, Myanmar, Singapore and here is the Philippines, the important gateway markets of Southeast Asia - Entering new businesses, new products that have not been done before + Starting from the game field, this is the oldest business segment with the advantage of understanding the Vietnamese market, VNG has changed from PC games to mobile games, then from role-playing games to Esports Platform is the field that brought VNG great successes like Zing system, Zalo + Payment & Finance is a fledgling business that has been invested by VNG in recent years, and initially brought positive results + Currently, VNG is investing in the cloud field, going further than blockchain, AI, big data in the future, because technology is constantly changing, VNG also needs to adapt and transform with the trend - Invest in human resources and create sustainable values for the future + VNG considers human development to be the foundation of the organization Because in the future, VNG can change its business strategy, operate, occupy new markets the people of VNG will create this VNG has consistently implemented a talent training program called Game Development Fresher for the past 10 years + Therefore, if VNG has done well, it must be maintained and done better for a long-term goal of "Creating technology and developing people For a better life.” + VNG regularly organizes activities to create a comfortable working environment for employees such as team building, picnics, quality training In addition, VNG attaches importance to developing young human resources for the future through investing in major universities to attract talents, developing CSR through many charitable initiatives, sports, education, and working environment REFERENCES (214)_21, N 7.-L (n.d.) 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