Microeconomics Cung Cầu Cân bằng thị trường Phân tích TH True Milk

Can Tho University School of Economics Essay on Microeconomics KT103H Topic: THE ANALYSIS OF SUPPLY - DEMAND, AND MARKET EQUILIBRIUM AND THE SITUATION OF SUPPLY AND DEMAND OF DAIRY BRAND TH TRUE MILK Nguyen Thien Quang – B2006315 Class KT20W4F3 C6 School year 2021-2022 – Semester 1 Contents CHAPTER1: INTRODUCTION  Reason for choosing the topic  Overview of TH True Milk and TH True Milk's milk market in Vietnam milk market in Vietnam .3 CHAPTER 2: THEORETICAL BASIS .6 Demand Supply .11 Market equilibrium 15 CHAPTER 3: TOPIC APPLICATION 19 I ANALYSIS OF THE TOPIC’S THE CURRENT STATE 19 Demand of TH True Milk’s dairy products in Vietnam market 19 Supply of TH True Milk’s dairy products in Vietnam market .22 II PROPOSED SOLUTION .32 Impulse products advertising strategies to consumers 32 Research and develop products to meet consumers’ needs 33 Take advantage of benefits to maintain revenue during the Covid-19 pandemic 33 CHAPTER 4: CONCLUSION 35 CHAPTER1: INTRODUCTION  Reason for choosing the topic Supply - demand and market equilibrium are always issues that economists pay much attention to when studying basic economic issues In this essay, we will look at how market fundamentals such as demand and supply behave, how they interact to determine the equilibrium price, and what factors will cause this price to change Understanding these is an important foundation for understanding the other complexities of a market economy, where buyers and sellers conduct the exchange of goods Furthermore, this thesis will include the analysis of the actual supply and demand situation of dairy company named TH True Milk in the milk market and then point out products’ pros and cons Lastly, some solutions will be proposed to contribute to remedying deficiencies and enhancing the position of the company in domestic and foreign markets  Overview of TH True Milk and TH True Milk's milk market in Vietnam milk market in Vietnam TH True Milk – “The one” who dominates the Vietnamese pure fresh milk market TH True Milk has the full name of TH Milk Joint Stock Company, under the management of TH Group The business was established based on financial advice from Bac A Commercial Joint Stock Bank Starting its business in 2010, TH True Milk always aspires to the goal of bringing true fresh milk products to consumers History of formation and development:  TH True Milk Company has been built since 2008  The TH True Milk project was started in 2009 with the import of dairy technology from Israel, thousands of cow breeds from New Zealand  Currently, the enterprise has become a leader in the production of pure fresh milk, with a herd of up to 45,000 cows imported and cared for under a special regime TH Group's product portfolio now includes TH True Milk products: pure pasteurized fresh milk made from 100% fresh cow's milk, pasteurized fresh milk with sugar, and low pasteurized fresh milk with sugar, strawberry-flavored pasteurized milk, chocolate-flavored pasteurized milk In addition to dairy products, TH also has other products: TH True Yogurt, TH True Ice Cream, TH True Cheese, TH True Butter, TH True Water, TH True Nut, TH True Food, Beverage Although being present in the market for more than 10 years, TH True Milk has achieved many achievements such as:  Inaugurated a clean fresh milk factory with a capacity of 500,000 tons/year in 2013  Received the title of high quality Vietnamese goods for consecutive years  Become a reliable supplier in Vietnam, a reputable brand in 2011 until now  Reached the top 100 trusted and used products with TH True Milk branded product line  Awarded the (Global Performance Excellence Award – GPEA) 2021 by APQO International Awards in the highest category named WORLD CLASS AWARD for mass production According to retail market measurement data in November 2018, TH True Milk dairy products grew by nearly 22% in volume and 30% in revenue Up to now, the market share of fresh milk in urban retail channels has reached 40%, leader in the fresh milk segment Vietnam is considered a potential dairy market This is because Vietnam is a densely populated country with a young population structure with a high population growth rate of about 1.2%/year, GDP growth rate of 6-8%/year, per capita income increase 14.2%/year These factors combined with the trend of improving the health and stature of the Vietnamese people make the demand for dairy products always keep a high growth rate Through the above figures, although TH True Milk entered Vietnam's dairy market late, we can fully see the potential and its respectable growth rate, rising to become a formidable opponent of the leader Vinamilk with experience in the market, especially in the market of pure fresh milk CHAPTER 2: THEORETICAL BASIS Demand Definition: The quantity demanded of any goods is the amount of the goods that buyers are willing and able to purchase at a given price  Law of demand: other things equal, when the price of a good rises, the quantity demand of the good falls and vice versa In other words, the relationship between commodity price and the quantity demand is inverse correlation - For instance, this is the demand schedule of Jennie: it shows how many cups of coffee Jennie buys each month at its different prices At $1.00 per one, Jennie buys 16 cups each month As the price rises further, she buys fewer and fewer When the price reaches $6.00, Jennie just buys one cup of coffee a month  -  - - Price of coffees (P) Quantity of coffees demanded (Q) $1.00 16 $2.00 13 $3.00 10 $4.00 $5.00 $6.00 Table 1.1 Demand schedule of Jennie A demand schedule: a table that shows the relationship between the price of a good and the quantity demanded, holding constant everything else that influences how much consumers of the good want to buy Jennie’s coffees demand schedule obey the law of demand Quantity of coffees demanded will increase when their price falls, vice versa Demand curve A demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time A demand curve can be derived from a demand schedule The slope of the demand curve is ΔQD/ΔP, with ΔP is a decrease in P and ΔQ is an increase in QD A demand curve is described a demand function taking a standard form like: QD = a – bP or P = α - βQD, with a≥0 and b≤0; α = 1/b and a/b And the inverse demand function (or price function) treats price as a function g of demand quantity: P = f-1(QD) = c – dP, with c = a/b and d = 1/b >0 For instance, considering Table 1.1, we can write the demand function as: We have QD = a – bP, at P = 2, Q = 13 (1): -  - -  - = = -3 = slope = -b, thus: QD = a – 3P (2) Substitute (1) into (2)  13 = a – 3.2  a = 19 Thus, we have the demand function of Table 1.1 is: QD = 19 – 3P or P = 6.33 – 0.33QD, with c = a/b = 19/3 and d = 1/b = 1/3 A demand curve is a downward-sloping line from left to right showing negative correlation between price and quantity demanded, other things equal For example, we have the demand curve from the demand schedule Table 1.1: Figure 1.1 Demand Curve Movement along the demand curve As the price changes, the quantity demanded also changes In concrete, as the price increases, the quantity demanded decreases and vice versa, that makes the movement (upward or downward) of points on a demand curve Considering figure 1.1, we can see that at point A, price is higher and quantity demanded is lower when compared to point B, which means that there is an increase in quantity demanded and a decrease in price when there is a movement of the demand curve from point A to point B Market demand versus individual demand Figure 1.1 is an example for an individual’s demand for a product Market demand is the sum of all the individual demands for a particular good or service To analyze clearly what is market demand, we have table 1.2 shows the demand schedules for coffee of two individuals in this market – Jennie and James At any price, Jennie’s demand schedule tells us how much cups of coffee she buys, and James’s demand schedule tells us how much cups of coffee he buys Price of coffee Quantity of coffees demanded by Jennie Quantity of coffees demanded by James Market demand (1) (2) (3) (4) = (2) + (3) $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 16 20 13 16 10 12 4 Table 1.2 Market demand schedule 26 29 22 15 The market demand at each price is the sum of the two individual demands Shown on the graph: The market demand curve is the horizontal addition of the individual demand curves at any price - Since individual demand curves are downward sloping, the market demand curve is also downward sloping - The market demand curve shows how the total quantity demanded of a good varies as the price of the good varies, while all the other factors that affect how much consumers want to buy are held constant For example, when the price of a good (P) falls, the quantity demanded of each individual increases, so the total quantity demanded of the whole market also increases  Shifts in the demand curve - A shift in the demand curve caused by a change in a factor (income, expectations ) which may make the product more attractive/ unattractive and changes the quantity demanded at any given price - Figure 1.2 Shifts in the demand curve Demand shift to the left (D to D1), meaning that people will demand less of the product at a given price Demand shift to the right (D to D2), meaning that people will demand more of the product at a given price - Main factors that affect the demand for products and services: + Income; + Prices of related goods; + Tastes; + Expectations; + Number of buyers A change in demand for a product resulting from a change in consumer buying power is called the income effect Income E.g.: When income increases without any change to prices, this makes consumers able to purchase more normal goods at the same price, and they tend to spend less on inferior goods Normal goods Inferior goods Goods whose demand rise when consumers’ income rises Goods whose demand decline when consumers’ income rises Example When the income level gets higher, people gain more extra money to buy furniture, clothes, automobiles When income increases, people gain extra money, leading to the decrease in needing shoddy goods as noodles, canned food, second-hand clothes; which are substituted by higher quality goods Mathematical ƏQD/ƏI > (i.e., positive partial derivative of QD with respect to (w.r.t) I) ƏQD/ƏI < (i.e., negative partial derivative of QD with respect to (w.r.t) I) Meaning Prices of related goods The effect of a change in the prices of other products on a product's Substitutes Meaning: A pair of products that could generally take the place of (substitute for) each other Example: Pepsi is a substitute goods for Coca Cola, and viceversa When the price of Coca Cola demand curve depends on the type of relationship between the products There are two types of relationship between the products: substitute products and complementary products goes up, the demand for Pepsi will subsequently rise (if Pepsi does not raise its price) Mathematically, Ə/ƏPY < 0, if Y is a complement for X Meaning: A pair of products is called complement when a rise in the price of a good reduces the demand for another good Complement s Example: Complements are often goods that are used together For example printing paper and ink cartridges; if the price of ink cartridges increases, consumers may print less and purchase both less ink cartridges and printing paper Mathematically, Ə/ƏPY < 0, if Y is a complement for X Changes in consumers’ tastes also affect a product’s demand curve Tastes In modern times, tastes of people may be affected by advertisement, among others E.g., if a report that links eating chocolate to better health is published, demand for chocolate bars may increase Both the expected future price and current demand move in the same direction Expectations Number of buyers E.g.: If consumers expect that the price of rice will increase as a result of a shortage, the current quantity of rice demanded may increase as consumers accumulate it to avoid paying a higher price in the future In addition to the preceding factors, which influence the behavior of individual buyers, market demand depends on the number of buyers E.g.: If Lisa were to join James and Jennie as - -  The vast field of sunflowers is fodder for cows About sugar supply, surpassing 20 international investors, on April 20, 2011, Nghe An Tate & Lyle Sugar Company transferred shares to TH Milk Joint Stock Company from the UK's largest Sugar Group - Tate & Lyle PLC, which is an abundant source of sugar ingredients for TH True Milk's products Regarding packaging, in the past, TH only used the packaging of Tetra Pak (Sweden) - the number supplier of UHT packaging in the world However, along with the increase in consumer demand, TH has ordered more Combibloc packaging from SIG company (Germany) - also one of the leading suppliers of technology and packaging Thus, TH True Milk completely ensures the supply of packaging before the increase or decrease of consumer demand  Because of TH True Milk’s autonomy in input materials, TH True Milk can completely ensure a stable supply in the production process without too much impact on price fluctuations of input materials in the market Technology Modern and state-of-the-art technology is applied in both breeding and production processes  Regarding the farm, built at Nghia Dan – Nghe An, TH Group's concentrated and high-tech dairy farms spreads over a vast area of 37,000 hectares and is considered as a model breeding farm, applying all the most modern and advanced technology in the field of dairy farming and agricultural production In 2015, the Asia-based record organization based in India officially confirmed that TH Group’s Farm in Nghia Dan District, Nghe An, was awarded the title of “Centralized dairy farm with CNC application.” has the largest scale in Asia” - Panorama of TH True Milk's farm For cow feed, sunflowers are grown as fodder for cows under the consultation and technology transfer of Israeli experts for very high yields, much higher than corn and grass With Afitag electronic chips (Afitag) attached on feet, TH’s cows are classified and fed with 12 to 15 ingredients The feed rations are established by nutritionists and mixed by machines programed and controlled by a computer system at the feed center The feed includes: (a) Silage or fermented forage (sunflower, maize or sorghums, Alfalfa grass, dried straws, etc.); (b) Concentrate feed; (c) Complementary food Large corn fields are grown only to feed the dairy cows on the farm - - In addition to food, at TH farm, the cows enjoy the water treated and purified by Amiad advanced technology with auto-filtration screen AMF to eliminate micro impurities Advanced Amiad water purification technology ensures clean water for cows Not only that, the technology is also applied to the harvesting of agricultural products as feed for cows - Harvesting corn with modern mower system: The cars cut corn, grass or sunflower look simple, but each can replace the work of 800 athletic young men Every minute, the machine can cut the grass, long, short as you want to … ton of grass; If you count the whole day, you can cut up to 500 tons of grass The world’s advanced standards and specifications of cow sheds are applied at TH farm At TH farm, the herd management is conducted by AfiFarm program With the chips Afitag at their feet, the cows’ health is closely monitored This equipment also gives days in advance alert of mastitis, the most common disease recorded for the dairy cows, so the unqualified and/or contaminated milk will be rejected Herd Management Veterinary Milking At TH farm, the herd management is TH’s cows are very comfortable in the roofed, Each fully automated milking parlor has conducted by AfiFarm program (Isarael) With the chips Afitag at their feet, the cows’ health is closely monitored This equipment also gives days in advance alert of mastitis, the most common disease recorded for the dairy cows, so the unqualified and/or contaminated milk will be rejected ventilated and cooled shed Daily bathing and music are provided to stimulate their natural lactation The Vet center and the lab of international standards allow rapid diagnosis, disease prevention researches and effective treatments capacity of 120 cows/shift, milking times/day The milking, collection and storage are closely and strictly monitored and managed to ensure the highest hygiene conditions This prevents the milk from being contaminated by the microclimate or losing the natural pure taste  In the production process, in order to keep a closed process in raising cows and producing milk, TH Group invested in building TH Fresh Milk Processing Factory This factory has the largest scale in Southeast Asia with the most modern equipment and machines in the world - - Overview of TH milk factory From the milking parlors, the milk is shock-frozen in closed pipeline system to reduce its temperature to 2-4°C, then collected to chilled bulk tanks and transported to the factory by the chilled trucks The TH’s clean and fresh milk plant applies the world’s leading technology and has become Southeast Asia’s largest milk processing factory, equipped with state-of-the-art equipment imported from the G7 and European countries The - operation system is run in accordance with ISO 22000 standards to meet the strictest qualifications of food safety TH true MILK sterilized fresh milk applies UHT sterilization processing technology with ultra-high heat treatment and ultra-fast cooling to kill all harmful bacteria, microorganisms or fungi while keeping maximize the nutrients and natural taste of the product The finished milk is then packaged in 6-layer sterilized paper bags in a completely sterile environment, where each layer will have a different function TH true MILK pasteurized milk products are therefore very safe and have a shelf life of up to months without the use of preservatives and refrigeration Currently, TH true MILK pasteurized fresh milk products are using packaging of Tetra Pak (Sweden) and SIG Combibloc (Germany), both of which are manufactured on modern technological lines the most advanced in the world The TH True Milk production process is closed to ensure clean milk products Professionally trained operating staff TH True Milk’s products packaging line  Expectations TH True Milk is the only enterprise in Vietnam exporting milk to China From January 1, 2020, China reduced the import tax on milk formula products from 15% to 5% That created great conditions in the milk export of TH True Milk company Export tax is reduced  can export more  produce more  supply increases  Sellers and distributors - In order for the products to reach consumers across the country, the main distributors of TH company are: TH Milk Joint Stock Company, and TH Logistics and Transport Joint Stock Company Milk is a popular drink of all families, so the distribution of products must also ensure that when consumers need to buy it, they will be able to find TH true milk TH true milk has been present at major retail systems such as Co.opMart, Big C, LotteMart… At the same time, it is easy to find this box at stores and distributors Besides, with the utmost desire to give full value from nature to consumers’ hands, TH Group has invested in and developed an international standard channel of distribution; it is a chain of stores named TH true Mart, where TH products are stored in the safest and best conditions The retail chain TH True Mart has more than 300 branches present in all regions of the country In addition, TH true mart's retail stores also distribute to consumers, specializing in providing clean, fresh, safe, and nutritious packaging - - - Home Delivery provides distribution services to shorten and remove intermediaries in the process of transportation and distribution, to bring the safe and fresh products of full natural essence to consumers at the soonest and most convenience HOME DELIVERY II PROPOSED SOLUTION Impulse products advertising strategies to consumers - First of all, the popularity and coverage of products from the brand is mainly concentrated in the North and Central Vietnam, while the South has not yet captured much market share before major competitors This can lead to a lack of market share as well as revenue for the company - Moreover, as 2020’s ranking dairy and dairy’s substitutes, TH True Milk does not have much market share in rural areas compared to urban areas although there are also many advantages in terms of price or product quality compared to other big brands or the market price  Therefore, the company needs to promote more advertising activities, such as:  Promoting advertising activities, advertising campaigns, community campaigns in a diversified and stronger way into potential areas (densely populated, large consumption capacity) but with little market share such as the South or the rural areas  Increasing product display, hang banners in large commercial centers, hightraffic areas such as bus stations, hospitals, schools  Promoting communication activities such as posting in newspapers and magazines whenever there are new products or new campaigns are launched Online newspaper platforms, or social networks like Facebook, Instagram also need to be cared for in terms of images and content to be able to advertise the company's products  Currently, video and short video viewing platforms like Youtube or TikTok are now also an effective tool for businesses and brands to promote their products TH True Milk can create interesting content about its brand and products and then post it on those platforms  Another way is to cooperate with celebrities, content creators, KOLs In new product promotion campaigns to increase the effectiveness of advertising campaigns Here are a few photos of TH True Milk's Instagram page and celebrity campaigns: Research and develop products to meet consumers’ needs TH True Milk has successfully entered the Vietnamese dairy market within 10 years with bold and new strategies and visions The future task of TH True Milk is to win more trust from consumers and increase revenue for businesses as well as gain more market share in the market To that, the company must further improve the quality of its products in terms of nutrition, variety and product safety First, the company needs to invest in facilities, machinery, factories, and nutrition research institutes to develop nutritional formulas which are delicious, good and safe for consumers' health Second, research and apply scientific advances of advanced countries in order to shorten the finishing process in order to produce more quality products for consumers Finally, find out the needs and expectations of consumers through statistics or consumers’ opinions, especially children because milk is an indispensable source of nutrition for each child Therefore, when meeting the needs of consumers, especially children, the company will have a stronger foothold in the hearts of dairy consumers and the milk market Take advantage of benefits to maintain revenue during the Covid-19 pandemic Thanks to the self-sufficient resources in the production process of TH True Milk, in the context of the pandemic Covid-19, the company did not face too many difficulties in supplying its products Especially, during the Covid-19 pandemic, consumers tend to consume more nutritious dairy products to improve their health, so the company's demand is still increasing The proof is: Since the pandemic broke out in Vietnam in March 2020, TH is one of the few businesses that has maintained its production chain, achieved double-digit growth and fully ensured employee benefits Up to now, TH's leading position in the fresh milk segment in Vietnam with nearly 45% market share and double-digit growth even during the pandemic, is an affirmation of the trust of consumers in TH's products In addition, from March 2020 until now, when the COVID-19 epidemic broke out and re-emerged, TH Group and Bac A Commercial Joint Stock Bank through the Fund “Vì tầm vóc Việt” were present at hot spots to donate products, medical equipments and necessities: - The three units have donated more than million glasses of fresh milk and healthy drinks, - 36 high-frequency ventilators and many medical supplies, - contributed 46 billion VND to the Vaccine Fund and tens of billions of VND for supporting activities and take care of the health of people directly affected by the epidemic across the country Until now, the total value of TH's support for COVID-19 prevention activities has reached more than 104 billion VND TH True Milk joins hands with the government and community to repel the Covid19 pandemic CHAPTER 4: CONCLUSION  In summary, in this essay, in the first part, we have learned about supply and demand, their interplay and the factors that can change them At the same time, the market equilibrium as well as its characteristics and effects on supply demand and prices of the market  In the second part, we learned and analyzed the supply and demand of TH Dairy Joint Stock Company With these analysis of supply and demand, the essay has given a more general view in a real case of supply and demand and from there, proposed solutions and goals for TH True Milk  Finally, to have a better understanding of the supply and demand of TH True Milk company, here are the analysis of the company's advantages, disadvantages, opportunities and challenges:  Strengths: - Large investment, leading modern equipment in Vietnam Revenue and profit are constantly increasing over the years Stable capital source from Bac A Bank Autonomy in input materials Advantage of pioneering pure milk brand in Vietnam Clear and specific strategic goals Experienced, enthusiastic and professional staff and management team Cow farm and factory meet international standards The process is closed and modern, ensuring the quality of each product when it reaches consumers, thus attracting and building consumers' trust in the company  Weaknesses: - Compared to big competitors like Vinamilk, TH True Milk has a relatively low market share High operating cost of dairy farming system The distribution system has not yet created high coverage Relatively high prices make it difficult to reach the middle and lower classes who account for a large proportion of consumers in Vietnam Mainly doing business and relying heavily on the domestic market, the foreign market has not really had a foothold  Opportunities: - The income and living standards of Vietnamese consumers are increasing day by day, consumers tend to focus on health and invest more in functional foods as well as nutritional products - Opportunities for global development, access to large markets: + The first dairy company in Vietnam has a batch of milk officially exported to the Chinese market + In the Russian market, TH already has a company in districts of Kaluga province with a farm and factory that has started – when it inaugurated, it will be the factory with the largest milk processing capacity in Russia In the Moscow province, the farm has been built, and the fodder storage area has also been completed The Russian Far East and the Republic of Bashkortostan have invited TH to invest, it is expected that in early 2020, these project areas will start cultivating and building farms  In Russia, TH has regions implementing investment plans With the support and investment facilitation from Russia, TH will be able to create a foothold in the dairy industry in a potential market, thereby promoting the introduction of TH true milk's fresh milk brand to the world  Threats: - Competitors are more and more powerful: For instance, in addition to familiar domestic competitive brands such as VinaMilk, Nutifood , currently on the market, there are also "dairy giants" from the US, UK, France, Japan When the EVFTA has officially taken effect, the tax rates of 5-20% on European dairy products will be eliminated in the next 3-5 years, so Vietnamese people have the opportunity to have more access to foreign dairy products with cheaper price And along with the tastes of foreigners, it will create a pressure on TH to constantly improve the price as well as the quality - Challenges in properly implementing TH's commitments in the future Faced with strong competition from imported and domestic milk brands, can TH True Milk maintain and improve the quality of the brand's milk products while keeping the benefits and advantages of the community campaign? After the recent analysis, for a new milk brand in the market, we can see the difficulties and challenges that TH True Milk has been, is and will have to face But with what TH True Milk has proven through its achievements and sales in just 10 years, TH True Milk is still considered a phenomenon and a potential player in the dairy market in Vietnam as well as the world in the future Here is the full essay: "The Analysis Of Supply - Demand, And Market Equilibrium And The Situation Of Supply And Demand Of Dairy Brand TH True Milk" Finally, the essay still has many shortcomings due to the lack of knowledge and practical information, so I hope that the lecturer will correct and contribute more! REFERENCES - Retrieved from: Microeconomics Textbook by Associate Professor Ph.D Le Khuong Ninh - Retrieved from: TH True Products https://www.thmilk.vn/en/products-eng/ - Retrieved from: TH True Story https://www.thmilk.vn/en/th-true-story/ - Retrieved from: VTV https://vtv.vn/kinh-te/th-true-milk-quan-tri-ben-vung-trongboi-canh-covid-19-20211203160813296.htm Retrieved from: https://www.thmilk.vn/en/th-group-exported-first-batch-of-milkto-china/ Retrieved from TH True News: https://www.thmilk.vn/en/news/ Retrieved from: vietnamcredit https://vietnamcredit.com.vn/news/top-dairycompanies-in-vietnam-2020_14388 - ... also has other products: TH True Yogurt, TH True Ice Cream, TH True Cheese, TH True Butter, TH True Water, TH True Nut, TH True Food, Beverage Although being present in the market for more than 10... “Organic” such as TH True Milk Top Kid formula fresh milk for children, TH School Milk, TH True yogurt, TH True yogurt drink, TH True ice-cream, TH True butter and cheese, TH True water, TH True Food... refined sugar; TH True Milk Light Meal with Cereal; TH True Beverage with organic juices, teas and rice water; TH True Nut: natural and nutritious nut milks, , TH True TH True Milk Organic,