Trung Nguyen marketing department has makes a lot of adverting campaign to expand its brand, always launch the new product lines to attract the attention of customers. Trung Nguyen also notes detail on each product to show all of the best of the product.
- Bargaining power of customers
The target market of Trung Nguyen is Vietnam. Vietnamese people income is just at an average level, so the purchasing power is not high. Vietnamese people tend to bargain when they buying something. They are always suspicious about the correlation between price and quality of product. Moreover, there are a lot of coffee brand in the market, each brand name has a particular price, flavor; so the customers have to think carefully before choosing the best one. To serve this point, Trung Nguyen has launched three type of product for all status in society including premium products, intermediate products, and universal products.
- Bargaining power of suppliers
This is the power which drives up the prices of Trung Nguyen’s inputs. When the Trung Nguyen brand name develops more and more; additionally, prices of fertilizer, labor, water… are increasing, the suppliers have a right to enhance the input prices. Another reason is that there are new entrants or big coffee manufacturer are willing to pay for the higher input prices. This is actually hard matter for Trung Nguyen. It has to give a competitive input material prices to the suppliers to make sure a quality and stability of coffee bean. Trung Nguyen also has to seek for the long term contract with suppliers to ensure the stable price and supplying. Trung Nguyen also must treat fairly with all of the suppliers. At present, Trung Nguyen owns a lot of coffee farming in Lam Dong, Dac Lak, and Dac Nong in order to make sure the stable supplying.
- Competitive rivalry within an industry
The coffee market in Vietnam is highly competitive. At the present, Trung Nguyen has three main competitors namely Nescafe, Vinacafe. Besides, there are also some small coffee manufacturers try to duplicate the model, quality or even the slogan of Trung Nguyen Coffee brand to make the profit illegally. To overcome these matters, Trung Nguyen has implemented some activities. Trung Nguyen has registered for its Intellectual Property Rights. It is also a member of Vietnam Coffee and Cacao Association (Vicofa). At the present, Trung Nguyen gives a variety of product which is suitable for any people. In the future, Trung Nguyen should add the anti- counterfeit label on each product to avoid the duplication.
Whether the coffee market is in Vietnam or in other countries, it is always competitive and severe for Trung Nguyen Corporation. In Vietnam, Trung Nguyen has a lot of competitors such as Nescafe (Nestle’), Vinacafe (Bien Hoa Coffee Corporation), Café Vinamilk (Vietnam milk joint stock Company), and Maccoffee (Maccoffee of Singapore). Although Trung Nguyen faces to the drastic competition from other coffee brands, Trung Nguyen Corporation still competes fairly and positively against its competitors. From this point of Trung Nguyen and other prestige brands, the strong competition creates the best outcomes for consumers. This behavior of Trung Nguyen has been considered as a good business performance.
Each coffee company has a specific competitive strategy. Since founded in 1996, Trung Nguyen Coffee Corporation has implemented many of strategies to gain its reputation as well as the market share in domestic and foreign markets.
According to a studying of what Trung Nguyen has done in the past years and at the present, the competitive strategy could be divided into two ways:
- Taking an approach to product and market
Penetration strategy
Before August 20, 1998, Trung Nguyen had failed to penetrate into Saigon (Another name of Hochiminh city). However, after that disappointment, Trung Nguyen did a unique strategy that it provided free coffee for the customers within 10 days. Through this activity, Trung Nguyen introduced to the Saigon resident the flavor of mid land coffee in Vietnam and guided people to have coffee under the style of Trung Nguyen. Consequently, Trung Nguyen coffee has sold at all provinces in Vietnam only after 5 years. This is really a fantastic and strategic penetration of Trung Nguyen.
Expanding the market strategy
After conquering the fastidious domestic consumers, Trung Nguyen has looked for a new horizon. Trung Nguyen has implemented franchise strategy to bring its brand out of Vietnam’s border. Consequently, Trung Nguyen coffee name has presented at a lot of wealthy countries such as U.S, Australia, Singapore, China, France, Germany, Czech…
Developing product strategy
“Creative coffee” is a very popular term in Vietnam. This product line includes five types of flavor which is to meet the various flavor of consumer even he is the most fastidious customer.
Type 1: Culi Robusta (250g)
Type 2: Arabica Robusta (250g)
Type 3: Arabica Sparrow (250g)
Type 4: Unique Culi (250g)
Type 5: Premium Culi Arabica (250g)
Diversified strategy
Base on the authentic Vietnamese flavors, Trung Nguyen has studied and developed 30 types of coffee – each one has a specific flavor. Trung Nguyen also divides its product line into 9 levels. Recently, Trung Nguyen has produced and developed Weasel Coffee which is the most expensive type of coffee in the world.
- Marketing mix strategy
Developing product strategy
Trung Nguyen has a revolution in gaining its product element such as design (background color is brown and black), improving quality (stronger of ingredients). Trung Nguyen also gives a various net weight for each type of product. These ways have gained the value of Trung Nguyen in the market. For instant, in 2003, G7 instant coffee was launched in a grand event, dubbed as “G7 Instant Coffee Festival”, held at the Independent House on November 23, 2003 with 50,000 participants. This established G7 as the preferred brand” over Nescafe, one of the most popular and favorite brand of instant coffee, through a voting system. With a total 13,000 respondents, 89% voted for in favor of G7 coffee, while 11% chose Nescafe.
Distribution and expanding scale production strategy
Franchise largely contributes to the distribution map of Trung Nguyen. In 2006, Trung Nguyen Corporation owned 500 mini supermarkets (G7Mart).
In 2009, the new Trung Nguyen Coffee factory in Buon Ma Thuot city was built, with the investment of more than 40 million USD and with the most modern technology in the world. The firm’s short and long term objectives are dominating the domestic market and conquering the international market by moving from the width to the depth, investing in coffee industry, and developing internal and international franchise system.
Promotion strategy
It is actually surprised that Trung Nguyen does not advertise as much as people think. Trung Nguyen Coffee keeps the traditional features in coffee shops and on the packet model of each product. Trung Nguyen has inspired traditional trend in its logo and slogan “Raise the creativity”. This is actually an effective way of PR. People will realize the value in every time they come to franchisees.
The Competition Commission 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. In Vietnam, one of the most popular regulatory body is Vietnam Competition Authority (VCA) and competition commission is Vietnam Coffee and Cocoa Association (VICOFA).
The Vietnam Competition Authority (VCA) is an organization that under the Ministry of Industry and Trade. The VCA is a legal entity and have a seal in the shape of the national emblem, may open bank accounts at the State Treasury and use its own seal for transactions in accordance with law. Its head quarter is based in Hanoi.
The organizational structure of the VCA consists of 6 divisions (the Antitrust Investigation Board, the Competition Policy Board, the Unfair Competition Investigation Board, the Consumer Protection Board, the Trade Remedies Board, the International Cooperation Board, the Departmental Office, the Center for Competition Information and Data, the Center for Investigator Training and Branch Offices in Da Nang and Ho Chi Minh city.
VCA mainly has 6 functions in its authority and responsibility includes:
(Source: http://www.qlct.gov.vn/Web/Default.aspx?lang=en-US)
- The most criteria of the VCA is to create and maintain a fair competition environment with fair business opportunities for all market participants. The organization encourages and promotes the competition between enterprises and in so doing ensure the legitimate rights and interests of consumers, the development of technology and social advances.
For Trung Nguyen Coffee, VCA helps company to have a sustainable development and fair competition with its competitors, especially big rivals such as Nescafe, Vinacafe and a chain of Highland coffee shop in big cities. Trung Nguyen shall feel secure when doing business in Vietnam.
- VCA is responsible for investigating cases concerning practices of reduction, distortion or prevention of the competition in the market, which mainly are cartel, abuse of market dominance and anti-competitive economic concentration. After the completion of investigation, the department will refer the investigating reports and its proposal to the Competition Council or other competent authorities for decision.
When Trung Nguyen is influenced by an unfair competition, VCA will organize an investigation to protect the company’s right.
- Preventing and terminating unfair competition activities such as deceptive and misleading indications, violating the others’ business secret, emigrating or disturbing other competitor’s business, advertising and promoting for unfair competition purposes, illegal multilevel sale, etc…to protect enterprises and consumers’ rights. The department has authority to apply competent sanctions to deal with unfair competition cases.
- The VCA combines with the Ministry of Industry and Trade in state administration over consumer protection issues. To complete this responsibility, VCA has been cooperating with other authorities and consumer protection organizations in Vietnam for ensuring the legitimate rights as well as interests of consumers to be respected by manufacturers and suppliers of goods and/or services.
In case of violating the right of the customers/consumers, Trung Nguyen Coffee or other coffee enterprises are responsible for their performances equally. In fact, Trung Nguyen has well implemented these regulation criteria about protecting consumers’ rights.
- The VCA has its responsibility for proposing legal safeguard measures, giving such young industries a reasonable period of time for necessary adjustment. Besides, in order to establish a fairer competition environment for domestic industries, the VCA is trying to eliminate the negative effects of dumping and subsidy concerning the imported products into Vietnam.
With the penetration of many foreign coffee brands, Trung Nguyen and other Vietnamese coffee enterprise have to confront with the tough competition from the outside. Trung Nguyen is a leader coffee enterprise in Vietnam, so the VCA shall commit to protect the rights and opportunities in order to keep the development of domestic coffee enterprise.
- The VCA also has its responsibility in assisting the Ministry of Industry and Trade in coordinating with other related authorities to support industry associations, exporting enterprises in preventing and defending against foreign anti-dumping, anti-subsidy and safeguard cases to Vietnamese exporting products.
VICOFA has 6 functions and responsibilities:
- Petition to the government for coffee developed strategy, production and business planning and policy to stimulate the producing, exporting.
- Corporation and scientific study to improve the quality of Vietnam coffee.
- Responsible for setting technical standard system (ISO) under the state criteria.
- Collecting the production result of domestic and foreign coffee market to experience.
- Setting up the Export Insurance Fund in 09/2000/NQ-CP Revolution in 15/6/2000.
- Statistic of technical information, international trading, economy to inform the members.
In summary, VCA and VICOFA have a very important role in business performance of Trung Nguyen. It protect the rights and also create a fair opportunities for Trung Nguyen to develop. Likewise, Trung Nguyen must commit to ensure that the company implements correctly the regulation criteria to abide by the rule and keep the corporated image of company.
Vietnamese coffee is a famous brand in the world. This explanation below will bring out the importance of international trade, economic integration and global markets to Trung Nguyen Corporation.
The Advantage of Vietnam in planting coffee
Vietnam has a favorable condition for planting coffee. That is the reason why Vietnamese coffee is a famous brand in the world. Vietnam has a large size of basalt soil which is very suitable for planting coffee tree. The climate is cool and rainy. The cost for coffee land and the cost of employee are cheap. Moreover, Vietnam is a big stock of famous coffee beans namely Arabica, Robusta… Additionally, the watering system of Vietnam is also good. From the clues above, we can see that Trung Nguyen has many opportunities to develop not only in domestic market, but also foreign market.
International economic organization that Vietnam joined which impact on Vietnam coffee and Trung Nguyen Corporation
Trung Nguyen Coffee Corporation was established in 1996 which was 1 year later since Vietnam was a member of ASEAN and AFTA (1995). In 1998, Vietnam became a member of APEC. Especially, Vietnam official has been the 150th member of WTO since 2007. These moment marked a new step forward the foreign markets of Vietnam which is also an advantage of Vietnam coffee and Trung Nguyen Corporation.
After integrating in the international trade and economy, Vietnam coffee industry had a lot of outstanding achievement in producing and export.
Vietnam is one of the countries that have a quick development in coffee industry. This assessment comes from the increasing in coffee planting size and the export turn- over.
Coffee cultivated area and output in period 1980-2004
The increasing in domestic producing leads to the increasing in the export. The export turnover increased 92,000 tons in 1990 to 700,000 in recent years. Especially, with the highest output 900,000 tons in 2001 and 844,000 tons in export gave the 2nd rank for Vietnam in the top of coffee exporting countries. However, there was an illogical matter that the more export quantity in coffee of Vietnam, the less coffee turnover.
Producing outputs and turn-over 1990 - 2004
(Source: )
Trung Nguyen Coffee Corporation has some advantages when Vietnam has become a member of international economic organization:
- The trading barriers are removed
- Having a fair business environment
- Receiving some concessionary tariffs and interest rates
The opportunity for Trung Nguyen
When Trung Nguyen integrates into the global market and economics, the company will have a lot of opportunities:
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Trung Nguyen has chances to expanding the market. Although domestic market is still the target market, Trung Nguyen always seeks for a new market. The products of Trung Nguyen have been sold at ASEAN countries after Vietnam became member of AFTA. At present, when Vietnam is member of WTO, the goal of Trung Nguyen is to dominate the global instant coffee market. This is actually difficult for Trung Nguyen. However, Trung Nguyen’s products also have been exported to more than 40 countries around the world such as U.S, U.K, France, Germany, Singapore, … When penetrating to new markets, Trung Nguyen brand will be well- known and famous.
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Nguyen has a chance to expand the production scale. Trung Nguyen can implement this plan through opening the factories in the foreign market or combining with other indigenous coffee enterprise. Trung Nguyen also can invest in infrastructure and raw materials at foreign countries.
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This is a chance for Trung Nguyen Corporation to develop the franchise system. Franchise is also a quick solution to gain the Trung Nguyen brand. At the franchisee, from the decoration and coffee flavor bring a specific feature of Vietnam coffee. People in the world not only drink coffee, but they also feel Vietnamese coffee through Trung Nguyen brand.
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Trung Nguyen can look for new partnerships. Because of doing business in foreign countries, Trung Nguyen also has some limitation. These business partnerships can be importers, wholesalers, coffee bean suppliers, stockholders … They can help Trung Nguyen in many of area and industry.
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Trung Nguyen can learn from other foreign enterprises. This is also a condition for Trung Nguyen management and employee to learn the operation system of other foreign enterprises that they can apply to improve the company. Moreover, Trung Nguyen can innovate its technology to give the better products.
- Finally, the most important thing when doing business is to gain the profit. The products of Trung Nguyen will be exported to many countries around the world. Trung Nguyen also can gain the profit especially when the value of Vietnam currency is downward compared to dollar.
At present, EU is the most important client of Vietnam. Exporting coffee to EU dominates 50% of total turn-over which reached 878.8 USD million in 2007. The result increased 63% compared to 2006.
(Source: )
The challenge for Trung Nguyen
Beside the opportunities, Trung Nguyen also has some challenges:
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Trung Nguyen has to innovate the production line technology to meet the demanding technical and qualitative requirement of new markets which are usually developed countries. Some developed countries such as U.S, England, Japan, or Russia are very strict in controlling. The coffee product of Trung Nguyen must meet one of several standards like UTZ Certified, Rein Fruit Alliance, Organic Coffee, 4 C…
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When Trung Nguyen engages in the international trade, the company will be impacted by the fluctuation of world coffee price. Not only Vietnam is a big export coffee countries, there are some big other countries like Brazil, Colombia, Indonesia … If there is a fluctuation even in one of those countries; Trung Nguyen also will be influenced.
The relationship between domestic and foreign coffee market
Example: From the chart above, we can see that the domestic coffee price (red line) is always lower than the coffee price of the world. It is the reason why Vietnam coffee exports very much, but the profit is not equivalent. Trung Nguyen has to pay attention to this problem to give the relevant solution and strategies.
- There will be a fierce competition between Trung Nguyen Coffee and other reputable coffee brand names. Trung Nguyen is planning to expand its production in U.K. However, there are a lot of difficulties there.
Trung Nguyen is in group of 3% which means to say the company has to try hard to have a position in U.K coffee market.
Conclusion
The integration of Trung Nguyen into global market gives a lot of opportunities for Trung Nguyen to develop and introduce the authentic Vietnamese coffee to the world. However, the advantage always comes with the challenge for Trung Nguyen. If the company cannot follow the competition, it will be eliminated off the market.
The world economic crisis in 2008 which mainly came from the United State has largely impacted on the European area’s economy. In 2009, the GDP of EMU decreased 1.7%. Additionally and the domestic consumption also declined 3.1% made the GDP of Euro zone decreased 4.8% (Source: ). Confronting with this “disaster”, European Union has implemented two policies that affect to Trung Nguyen Corporation business performance namely fiscal and monetary policy.
FISCAL POLICY
2008 is not a good year for EU and other related countries, Trung Nguyen is also affected. The economic recession let the European countries control the fiscal policy tightly, that is actually disadvantage for Trung Nguyen Corporation. EU has implemented policies to protect the internal area economics, so it’s really difficult for Vietnamese enterprises to export to EU.
Taxation
Some product namely shoes, bicycle, clothes, and especially coffee are the main exported products to EU. In 2009, to anti- dumping, EU has taxed at 10% on those products of Vietnam. Moreover, the product such as coffee and shoes do not receive the Generalized System Preferences (GSP). That is the reason made the coffee turn- over decreased 18% in 2009. This is actually disadvantage for Trung Nguyen. The company will lose profit and chance for expand production scale when receiving high taxation and an elimination of some preferences.
Government spending
The critical economic recession in some countries such as Greece, Ireland, Portugal … make some countries restrict the spending, but it just happens in a minority. In overall of EU, economic recovery is at the heart of spending and the proposal channels the biggest share of funds (45%) into growth and employment measures – a 3.3 % rise on 2009 – to help restore competitiveness across the Union.
(Source: )
The 2010 budget has been adopted during the European Parliament plenary on 17th December 2009 and amounts to €141,5bn in credit engagements.
As we can see, EU will spend a big of money for investment to recover its economy.
In spite of facing to a lot of difficulties, the situation may be better in the near future. The government of EU spends more creating jobs, social funds, small and medium enterprises that can directly affect the consumption habit of EU citizen. The infrastructure is also improved which a favorable condition for Trung Nguyen to build factories in European countries.
Finally, when the living condition of EU is gained, the people have time and money for secondary demand such as coffee consumption which affect Trung Nguyen’s profit.
MONETARY POLICY
In European Union, European Central Bank (ECB) is responsible for overseeing EU monetary policy. In this part, two things mainly affect Trung Nguyen Corporation are interest rate and exchange rate.
Interest rate
(Source: )
The European Central Bank (ECB) has cut its key interest rate to 1.5% from 2.0%, the lowest since it started setting euro rates in January 1999. Such a low interest of EU creates a favorable condition for Trung Nguyen to invest and expand the production scale here. The company can receive the help from banks or investors without worrying too much about the interest rate. However, Trung Nguyen’s competitors also get this advantage, so the company must have a careful plan for each period.
Moreover, the inflation rate in 2009 was always below 2% which means to say the purchasing power in EU is rather high and this is a chance for foreign exporter such as Trung Nguyen Coffee Corporation.
Exchange rate
The exchange rate of EURO/VND was rather from May 2009 to April 2010.
The inflation of Vietnam in 2010 is 11.7% while the European inflation is just below 2%, which states that the VND is devalue compared to Euro. At present, in 12 Jan 2011, 1€ = 27,261 VND.
This is an advantage for Trung Nguyen Corporation. The company can speed up exporting to gain the foreign currency earnings. It’s actually an opportunity for Trung Nguyen to increase the profit when penetrating to European market.
Conclusion
Although the economic recession is happening in Europe, but the fiscal and monetary policy are rather favorable for Trung Nguyen to do business at this time. However, Trung Nguyen should only export instead of investing. Because of investing to Europe at this time contains the high risk of failure.
The European Monetary Union came into being on the 1st January 1999, with an initial complement of 11 out of the 15 EU countries. Eligibility for participation depended on satisfying a set of criteria laid out in the Treaty of European Union (more commonly known as the Treaty of Maastricht). However, UK decided to opt out but retains the right to join at a later stage. At present, UK still uses 2 units of currency namely Pound and Euro. However, if UK joined the EMU, what could UK receive from it?
FOR
Trade, investment and productivity: UK could enhance productivity by increasing trade flows between the UK and other EU nations; boost investment and stimulate competition in product markets. It could also help to promote supply-side reforms in the EU and encourage specialization and further exploitation of the UK’s comparative advantage in several sectors of the economy in the longer term.
Britain’s flexible labor market would enhance our performance within the Euro Zone: Britain's flexible labor market would be highly effective inside a single currency area and would help to attract even more inward investment from outside the EU.
Higher wages and employment for UK workers: EMU could have long-term benefits for households, including potentially lower prices and higher wages – although the potential benefits here do depend greatly on the degree of sustainable convergence between the UK and other Euro Zone countries
Political and economic influence: Britain stands to lose political and economic influence in shaping future economic integration if it remains outside the monetary system.
AGAINST
Loss of domestic monetary policy freedom: Joining a single currency reduces Britain’s monetary policy autonomy. Britain might wish to retain the flexibility to set short term interest rates to meet her own internal macroeconomic objectives. Entry to the Euro Zone means a permanent transfer of domestic monetary sovereignty to the ECB.
Constraints of the fiscal stability pact: Countries joining the Euro signed up initially to the fiscal stability pact which limited the scale of government borrowing to 3% of national income. Several nations have already broken the conditions of the pact and it has now effectively been abandoned. But remaining outside the Euro Zone gives the UK a degree of fiscal policy freedom not available to member states.
Foreign investment issue: Opponents of Euro membership argue that Britain can continue to attract capital inflows outside of the Euro Zone. Favorable supply-side factors in both product and labor markets make the UK attractive for foreign investment.
Adjustment costs: The change over process to the introduction of the Euro will involve substantial menu costs for businesses and banks. These menu costs will bear heavily on small-medium sized enterprises.
(Source: http://tutor2u.net/economics/revision-notes/a2-macro-european-monetary-union.html)
CONCLUSION
Trung Nguyen Coffee Corporation has achieved a lot of success in domestic and foreign market. The company has been introducing the authentic of Vietnamese coffee to the world. However, the economic world fluctuates day by day that directly affect the coffee prices and purchasing power of the customers. Trung Nguyen must follow quickly and being flexible to the changing of world’s economy to avoid the risks and threat
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