Marketing Case Study. MPPL decided to expand the sale to Vietnamese market bringing along the three traditional condensed milk as well as the new product line, Filled Milk. This report is produced in order to consider the marketing environment in Vietnam,
NATIONAL ECONOMICS UNIVERSITY, HANOI
BTEC HND IN BUSINESS (MARKETING)
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UNIT TITLE
Unit 1: Marketing
ASSIGNMENT TITLE
MILKY PRODUCTS PRIVATE LIMITED (MPPL)
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of 2
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2nd November 2009 (Monday)
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Unit Outcomes
Outcome
Evidence for the criteria
Feedback
Assessor's decision
Internal Verification
Investigate the concept and
process of marketing
(1)
Compare alternative definitions of marketing
a
Identify the main characteristics of a marketing oriented organisation
b
Explain the various elements of the marketing concept
c
Identify and assess the benefits and costs of a marketing approach
d
Explore the concepts of segmentation, targeting and
positioning
(2)
Identify and explain macro and micro environmental factors which influence marketing decisions
a
Propose segmentation criteria to be used for two products in different markets
b
Outline the factors which influence the choice of targeting strategy
c
Explain how buyer behaviour affects marketing activities in two different buying situations
d
Merit grades awarded
M1
M2
M3
Distinction grades awarded
D1
D2
D3
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( ) Well-structured; Reference is done properly / should be done (if any)
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COMMON SKILLS & COMPETENCIES ASSESSED (indicated by X)
A. MANAGING & DEVELOPING SELF
D. MANAGING TASKS & SOLVING PROBLEMS
. Managing own roles & responsibilities
2. Use information sources
X
2. Manage own time in achieving objectives
X
3. Deal with a combination of routine & non-routine tasks
3. Undertakes personal and career development
4. Identify & solve routine & non-routine problems
4. Transfer skills gained to new/changing situations & contexts
B. WORKING WITH & RELATING TO OTHERS
E. APPLYING NUMERACY
5. Treat others beliefs and opinions with respect
X
5. Applying numerical skills and techniques
6. Relate & interact effectively with individuals & groups
7. Work effectively as a team member
F. APPLYING TECHNOLOGY
C. COMMUNICATING
6. Use a range of technological equipment and systems
8. Receive and respond to a variety of information
X
G. APPLYING DESIGN AND CREATIVITY
9. Present information in a variety of visual forms
7. Applying a range of skills and techniques to develop a variety of ideas in the creation of new / modified products, services or situations
0. Communicate in writing
X
1. Participate in oral & no-verbal communication
8. Use a range of thought processes
X
Chapter 1
INTRODUCTION ON MARKETING CONCEPT
Milky Products Private Limited (MPPL) was founded in 1969 to manufacture sweetened condensed full-cream milk under license from a Dutch company. In 1974, the company turned public and obtained listing on the Stock Exchange of Singapore. The new issued share was to finance their expansion program aimed at diversifying into the production and marketing of a wider range of food products.
By 1978, the company was marketing three brands of sweetened condensed full-cream milk. The best of them in terms of quality, FresMilk is still regarded as one of the finest brands by Singaporean households. DresMilk and CreamyMilk are secondary brands mainly purchased by coffee or tea houses and households within the lower income groups.
MPPL has been manufacturing and marketing a brand of powdered milk for infants under the name Calac since 1976, it also been acting as agent for several foreign-made products such as Doroma instant coffee and PP food sauce. Moreover, with the increased capacity for producing sweetened condensed milk, the company has been able to manufacture for several private brands.
With such highly experienced operation, MPPL decided to expand the sale to Vietnamese market bringing along the three traditional condensed milk as well as the new product line, Filled Milk. The new one is expected to make the difference when it contains palm oil instead of butterfat, which is claimed to be good for customers' health. This report is produced in order to consider the marketing environment in Vietnam, concerning market segment, targeting strategy and positioning.
Before coming to study further on marketplace, it is necessary to have the basic concepts of marketing.
.1. Alternative definitions of marketing.
Figure 1: Arriving at a definition of marketing (Edexcel, 2004, p7)
After World War II, due to many changes in social and economical factors, business activities concerning marketing coming to new challenges. With a wide range of income levels, customers could afford to be selective and buy only those products that precisely met their changing needs, and these needs were not immediately obvious. The key questions appeared to be:
• What do customers want?
• Can we develop it while they still want it?
• How can we keep our customers satisfied?
In response to these group of customers, firms started to adopt the marketing concept, which involves:
• Focusing on customer needs before developing the product
• Aligning all functions of the company to focus on those needs
• Realizing a profit by successfully satisfying customer needs over the long-term
The marketing concept relies on marketing researches to define market segments, their size, and their needs.
Over many years of developing, different definitions of marketing have been defined. Here are some definitions which we have considered:
Marketing is the management of exchange relationships. (Edexcel, 2004, p7)
This definition focuses on the vital role of the relationship between the organisation and the outside world, which basically are parties involving any activities of the company. It is obviously that the company alone cannot afford to achieve any result simply because every part of the operation is supported by one or many external parties. For example, in order to process the material, the company needs machinery, which must be purchased from a supplier. Even a connection with a particular competitor is also to be considered as an important relationship, since it helps to clarify the company's market position as well as a direction for shaping new strategy. Managing relationships, therefore, is not a job of nowhere but a process to reach the company's final goal, and, on the other hand, "creating a positive image" (Edexcel, 2004, p8) towards publics.
If the definition above focus on the role of marketing in relating to the world outside the organisation, these definition makes clear the role of marketing in satisfying customer's need and want.
Marketing is concerned with meeting business objectives by providing customer satisfaction.(Edexcel, 2004, p8)
Obviously, in such a complicated market as we can see, the company has no choice other than offering customers what they want. But this is not enough as there are so many competitors out there who clearly understand the market demand. Thus, "customer satisfaction" became the key for success. It is somehow to be considered as a mission for any marketers: find out what customers want, and provide them not only what they want but also "added value" to achieve their satisfaction. Other words, on the perspective raising by this definition, it is important to turn customers satisfactions into the company's competitive advantages.
However, there is no question that whatever the company do, the final goal is just profit, so it is not only about satisfying customer , according to CIM (Chartered Institute of Marketing)'s definition:
"Marketing is the management process that identifies, anticipates and satisfies customers requirements efficiently and profitably".
The points here are efficiency and profitability. It is not contrasting with the previous definition but adding how the company could satisfy their customers. Sometimes, the resources of the company could not support for a totally comprehensive marketing solution, it is time to think about a long-term objectives and to choose what solution is the most suitable.
Another perspective that marketing is concerned is about marketing process:
Marketing is a social and managerial process by which individuals and groups obtain what they need and want through creating, offering, and exchanging products of value with others. (Kotler, 2003)
Or:
Marketing is the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organisational goals. (American Marketing Association(AMA)(Edexcel, 2004, p8))
This definition emphasizes the wide scope of marketing, looks not only at identifying customer need, but also satisfying them (short-time) and forecasting them in the future (long-term retention). Some research methods must be used to identify customer's need for firms to produce and deliver to the market and predict customer's demands in the future to have plan to satisfy them as soon as possible. The definition provided by the AMA expands on the definition provided by CIM and explains how to satisfy not only the customers but also the companies, their partners as well as the whole society (Edexcel, 2004) by combining a range of activities. In short, if the other two types of definitions having been gone through are more into strategic point of view, the approach of these two definitions are about managing different steps within a marketing process effectively and efficiently to reach certain goals and objectives, which simply is the implementation.
Figure 2: Comparing different marketing definition (Learnmarketiing.net, 2009)
In short, marketing is all about communication in which relationships, marketing processes and organizational objectives being put together in a very effective way. Each marketing definition provides a different perspective that worth considering along the continuous change in the market. Thus, combining all these perspective will give marketers and the company a whole picture of what marketing is all about.
.2. Main characteristics of a marketing-oriented organisation.
A marketing orientated organization is one that focuses on the needs and the wants of customers. It also clarifies the importance of customers to help the company make the right decisions. In order to find out the customers need, the organization always has to conduct the marketing research. If this process is done correctly, the company will know what they have to produce to sell instead of selling what they produce. Moreover, the market research provides the company with a sustainable competitive advantage.
A marketing orientated organization typically shows 4 main characteristics:
First of all, a marketing orientated organization always applies the marketing concept. Before making business decisions, marketing orientated organizations need to base on the wants or the needs of customer. Therefore, they can have the information to create the products with high value to satisfy their customers needs while still making profit.
Secondly, nowadays, a good marketing orientated organization is an organization which has a structure that is shown in figure 3:
Figure 3: Structure of a marketing oriented organization.
This kind of structure plays an important role in the communication between the members in an organization. With this structure, the top management is easy to get the information from all members in the organization such as the ideas, the attitude and the feed back from all members. They also can get the feedback and the suggestion about their products from the customers. Therefore, the top management can know clearly how the organization is operating, how the customers think about their product and so on.
Thirdly, the strategy is an important part that cannot be missing in a marketing organization. To be a well-operated organization, the strategy of a marketing orientated organization should be flexible. This flexibility is represented in the strategic planning, the implementation and the control process of an organization. For example: when organization identifies their mistake, with a flexible strategy, they can change their plan in a better way to fix the mistake. With a flexible strategy, the organization is easy to adapt with new business environment. They can change the business plan, the product plan, and the implementation plan in the best way which is suitable with the new business environment.
Finally, before making any decisions, a marketing orientated organization not only focuses on the customers needs, it also considers the stakeholders' expectation.
In order to understand more about a marketing oriented company, it is better to look at its advantages and disadvantages.
As putting customers in the center, research and development activities to updating new information and trends. At this time when the Vietnamese market is matured, if MPPL want to get success in this market, they need to have a good marketing orientation. There are a lot of dairy and milky brands in the Vietnamese market now. To become the winner in the competition with other brands, MPPL should know clearly about the Vietnamese market. As having known and understood the customers, the company will be able to build a good communication between them and their new customers. The most importance thing to get success in this market is that the producers need to focus on a long-term relationship with high customer satisfaction because customer is people who will judge if the company is doing well.
Although doing research is very expensive and time consuming but if MPPL can do this, they will have a lot of valuable information. The company also needs to be aware of the "me-too" effect, when the competitors introduces the same product as ours without R & D activities. On the other hand, there are a group of trendy customers who always follow the trend of consuming in the market. Their response can lead to bias data collection. And the last thing, market is changing every hour, so it requires highly concentration and adaptability.
Knowing what the ...
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Although doing research is very expensive and time consuming but if MPPL can do this, they will have a lot of valuable information. The company also needs to be aware of the "me-too" effect, when the competitors introduces the same product as ours without R & D activities. On the other hand, there are a group of trendy customers who always follow the trend of consuming in the market. Their response can lead to bias data collection. And the last thing, market is changing every hour, so it requires highly concentration and adaptability.
Knowing what the customer's wants, MPPL can make the right decisions to produce what they can sell. Vietnam is a good market with a lot of potentialities. When everything is done correctly, MPPL will have the key to open the Vietnamese market.
.3. Various elements of the marketing concept.
In order for organizations to survive through threats from competitors, changes in the politic, economic, social, technology and environment, business decisions should meet the needs and wants of customers. This is commonly known as the marketing concept. In other words, the marketing concept is about matching a company's capabilities with customer wants while still making profit.
There are many approaches to define elements of marketing concept, according to marketing course book from EDEXCEL HNC & HND BUSINESS (2004, p.12), the marketing concept can be divided into three elements: customer orientation, co-ordination of market led activities and profit orientation. However here we want to identify and explain more clearly with specific detail about those elements so we are referring to core marketing concepts of Philip Kotler.
Figure 4. Core marketing elements (Kotler, 1999, p8)
First of all, what are customer needs, wants and demands? A need is a basic requirement of everybody; physical needs for food, water, clothing and shelter, individual needs for knowledge and self-development. Many of these needs are created from human biology and social relationships. Therefore customer needs are very broad. However, a want is a desire for a specific product or service to satisfy the need so customer wants are quite narrow. For instance, people need to eat and drink to survive but what they want to eat and in what kind of environment are various. For some, eating fast foods satisfies the need while for others; only five-star restaurants can meet their needs. Customer wants are shaped by culture and individual personality; for example, students in countryside wish to have bicycles to go to school, in contrast, a normal motorbike seems to be not enough for a student in big city. This leads onto another important concept - customer demands. People's wants are unlimited but the sources may help them satisfy are limited. Customer demand is a want for a specific product supported by an ability and willingness to pay for it. One of the facts is that many people in over the world love to wear Levi's Jeans but are all of them able to spend 500$ for one trousers? The answer is no. Learning and understanding about customer needs, wants and demands plays an important role in not only making suitable marketing strategies but also the way leading to success of companies.
Due to customer needs, wants and demands, products appear to satisfy customer. Philip Kotler (1999, p.11) comments that "The concept of product is not limited to physical objects - anything capable of satisfying a need can be called a product. It includes physical objects, services, persons, places, organizations and ideas." Take an example from MPPL; a new kind of condensed milk - Filled Milk - which uses palm oil instead of butterfat is marketed at 60 sen, the cheapest price for condensed full-cream milk. It was aimed at catering services such as coffee and tea houses. We all know that the adiposity becomes more and more serious in every country, when this kind of product is launched in market with that price, it will attract many kinds of customer such as people on diet or those want to keep fit. Therefore getting information about what customers need, want and demand might help firm minimize cost and maximize profit.
Nowadays, sometimes it becomes really hard for the customers to choose what they should buy because of various products and services which might satisfy their needs. The question is about how the customers make buying choices. Customers' decisions are based on the value that the products and the sellers deliver. Customer value is the difference between what a customer gets from a products and what they have to give in order to get it. When the product's performance meets or excels buyer's expectations, customer is satisfied. If customers are not satisfied, they will eventually find other products or suppliers that will meet their needs. Satisfied customers will become loyal customers; they will not only repeat buying but also use "words of mouth" to tell others about the products.
In the primitive world, people found out that they can produce more than they needed and started exchanging their food for someone else's clothes. As time went on, people might get money, other goods or services in return for food. When the concept of exchange appeared, people can concentrate on producing what they are good at and then trade goods with others. Whilst exchange is the basic definition of marketing, transactions are the basic unit of exchanges. A transaction might consist of at least two things of value (such as money, service or even products), agreed-upon conditions, a time of agreement and a place of agreement. However when many people have the same products to exchange, relationship is applied. Building stable relationship between company, customers, distributors and suppliers is one of the fastest and safest ways to reach the mission and vision of firm. Market existed as soon as goods started to be exchanged. A market is the place where buyers and sellers interact to trade goods or services relied on the needs and wants of customers.
In conclusion, even though each element of marketing concept plays different role, they closely link with each other and create a perfect circle based on the customer. Satisfying the customer by researching and producing what they need and want in term of balance creating more value for customer while still making profit for company; building long-term relationships with customer, supplier and intermediary; these actions will take an important part in leading the company to success.
.4. Benefits and costs of a marketing approach.
In general, marketing approach is a closed process of four stages from the first step is getting to know a market to understand the customers' true needs and desires. In this light, a company hence develops (step #2) its production just enough to adapt those customers. It then seeks for relevant ways in which to commercialize (step #3), which means communicating its existence and its solutions. Once this is accomplished, then it is in a better position to manage (step #4), sell and deliver value to customers while trying to persuade them to repeat their purchases (generation tactic, 2009)
Figure 5: Process of marketing approach
In other words, marketing approach is the focus so far on getting the right message, about the right idea, to the right people, at the right time and place.
Then, following Marketing approach is a smart choice with MPPL, especially in the conditions of Vietnam where is a fast developing country in Southeast-Asia. Moreover, according to recent researches, the demand of consuming milk of Vietnamese markets is increasing and the capability to providing of Vietnamese's dairy industry is not enough to the market. Several benefits and costs of using marketing approach can be dealt with as below.
There are some benefits in doing business in Vietnam. Firstly, Vietnam is a large market because up to 2009, population of Vietnam is approximately 86 million people so MPPL can get more profitability of comparing with other markets. Secondly, Vietnam is a developing country and the government of Vietnam is trying to make positive policies such as taxation policy, to encourage foreign business invest to Vietnam. The cost to doing business in Vietnam is also not expensive. The costs follow this process: pre-selling, whilst selling and post-selling. In pre-selling step, the business needs to do marketing research to find out Vietnamese customers' needs and wants and buying behavior of them. This step will help MPPL making sure that the products issued can fit customers' need. Then MPPL has to pay for advertising for its product on television, posters, newspapers or magazines. It may cost MPPL a fortune however investing on advertisement is a necessary and effective step to attract directly consumers' attention. In addition, MPPL can hold some special activities such as raising funds for charity, financing for sport events etc. The most significant purpose of all these activities is to bring MPPL's image near to Vietnamese customers' hearts. In the next step, the company has to pay for rent store and employees. In general, the average of salary grade of Vietnamese employee's requirement is not very high so MPPL can have benefits from this. Final step is very important because this helps to get profitability for long-term. After selling, a company has to pay for post-selling service such as maintaining and repairing products. With the product is a kind of food, MPPL does not pay for maintaining or repairing but have to pay for keep contact with customers and gather feedbacks from them to satisfy the demands of customers. All of payment can expand a great amount of money but in the long-term, the company will have loyalty of Vietnamese customers, it will bring long-term profitability for the company.
On the other hand, marketing approach may lead to some costs. First, when MPPL spend time and money on doing Marketing research, which is sometimes hard to get the right information because Vietnamese customers do not trend to pay attention and be serious with the research activities. Therefore, it does increase research expense. This also delays introduction its product to the market. Second, there is the risk of irrational consumer behavior when the researches do not reflect truly what the customers want; for sometimes the customers do not know exactly what they want until they pay for it and use it. Moreover, nowadays, products become out of date very quickly, so do trends of demands. At the moment of researching, the new products of MPPL may be the number one, but at the moment of selling, it may be the number three. Thirdly, to obtain customers' belief and love, MPPL has to attracting attentions of customers by advertising. It is not only cost a lot of money but also sometimes becomes a hard duty if MPPL do not have a wide and deep knowledge about Vietnamese culture and consumers' habit or buying behavior. Another cost is MPPL has to building long-time relationships with: customers, suppliers or distributors. This will take time because people trend to use what they are familiar with. In business field, there is a fact that, getting consumer purchases one's product is hard but it is ten harder to keep that consumer to become a faithful customer. Then, if MPPL is successful in approaching Vietnam market, it will have to plan a long-term investment to get customer retention.
In the end of the day, marketing approach may take some costs. However, the most important thing is it helps MPPL successfully launch its new product - filled milk and product line - FresMilk, DresMilk and Creamy Milk into Vietnam.
Chapter 2
CONCEPT OF SEGMENTATION, TARGETING AND POSITIONING
2.1. Macro and micro environmental factors influencing marketing decisions.
A company does not stand lonely in the world; it is a part of a complex and changing market. In term of Marketing, "marketing environment" relates to whatever internal and external factors influencing an organization. Before launching new product line into a market, we need to be identify and explain the macro and micro environmental factors of that market which might influence company' marketing decision.
The marketing environment can be categorized into Micro environment and Macro environment.
The Macro environment consists of the macroscopic factors such as Demographic, Economic, Natural, Technological, Political and Cultural forces. There are many tools to analysis macro factors e.g. PEST, STEER, DESTEP, PESTEL, etc. Among these, PESTEL can be considered as an effective one; for it is quite simple and focuses on the most influenced factors with a company. PESTEL stands for Politic, Economic, Society, Technology, Legal and Environmental factors.
Figure 6. PESTEL model
Politic and law is the first two macro factors that a foreign company must deal with, simply because unstable politic leads to unstable businesses. Vietnamese political environment is considered as a stable one, for there is only one Party nationally, and there is no sign of terrorism in Vietnam. In the time of confliction and terrorism nowadays, Vietnam is an ideal place for any company to locate because of its peace and security. Vietnam economy is a mixed one, but the State still has a significant impact on the nation economy. The policy of Vietnamese Government about international trading is encouraging and supporting. Vietnamese Government also has built a Law on Foreign Investment in Vietnam in order to help foreign firms approach business environment in Vietnam easily. Another advantages comes from Vietnamese politic is that there no policy against dumping of foreign firms in Vietnam. Therefore, foreign firms like MPPL who are able to sell goods at a lower price can take these advantages without worrying about the law. However, Vietnam is still a developing country with a developing system of law and administration. The irrational and unprofessional issues still occur. Recently, many businesses have meet difficultly about pricing flats in apartment block; for only in a statement of Law on housing, there are two different guidelines. Another disadvantage in Vietnamese politic, which can be considered as the worst one, is the corruption. Vietnam has been ranked as the 96th country in the world that has to face with corruption.
The second issue to be considered is economy. Entering WTO, Vietnam has committed many important agreements; one of them is step by step reducing business taxes. According to Vietnamese Ministry of Foreign Affairs, in the next 7 years, taxes on import will be reduced from 17.4% to 13.4%. Stated by the Ministry of Finance, after applying administration innovation, 340 types of trading and commercial fees have been collapsed, this helps avoid many difficulties for firms, especially foreign firms, in operating in Vietnam. Shipping fees also went down 30% while road transportation fees went down 20%. According Justin Wood, the director of Corporate Network in Asian, forecasts the rate of growth in Vietnam will be 0.3% because Vietnamese economy is affected by global economic crisis. This rate is not low if compare with other country in Asian have the rate of growth with negative number (-). In addition, in forecast, Vietnam's inflation will not increasing more. Therefore, MPPL launch new product line to Vietnam has more advantage than launch that to other country in Asian. Furthermore, operating in Vietnam, the company can save a large amount of money, for the employment salaries in Vietnam are quite low in consideration with other economies worldwide.
The social and cultural influences on business vary from country to country. Acknowledging the national society before operating business is necessary because it helps to avoid misunderstanding between the company and the customers. Vietnamese culture is quite simple and peaceful. It is also an advantage for foreign firms like MPPL that most of Vietnamese consumers consider foreign brands as the high quality ones. It is Vietnam where people are quite easy and trendy. If the company can bring a good imagine with an attractive message into the society, consumers will buy MPPL's products. Finally, Vietnamese people are really into using mobile phones and Internet; so MPPL can advertise through these means of communication and the traditional means of communication such as TV, newspapers, magazines, extensively papers, posters to consumers know about this new product line.
Technology is vital for competitive advantage. Bigger companies often have more advantages about HR and finance for innovation of technology. Technology may help to boost up the standard of quality and/or reduce the price of products. Technology also used to communicate with customers in convenient ways, i.e. the company can communicate with customers not only by traditional way but also through phones, mobile phones, fax, mails and even by Internet. Therefore, MPPL has to perfect and improve its technology in order to stand on solid foundations to compete with those other brands that existed for a long-term.
Recently, MPPL has not planned to build up production line in Vietnam, but as the business become stable, it is just a problem of time. Therefore, it is not a waste of time to take a look on environmental impact on businesses. As operating in food and beverage inductry, the requirements on the production quality is higher and higher due to the significant impact on the environments. The case of Vedan is a typical example, though it is not in the same industry with MPPL. Talking about environment, there are a lot more issues to considered, but as the company has not come to this development stage in Vietnam, an overview from the polution perspective is sufficient. For future consideration, the attention can be paid for how the climate affects milk quality and the production line, which sources of material could be available and how to protect them, etc.
Moving to micro environment scanning, Five-forces model or Five competitive forces model by M. Porter (1980) should be applied to achieve a comprehensive view. The models is illustrated as following:
Figure 7. Five Forces model
As talking about customers, it is about the source of revenue for the company. There are different types of customer markets including consumer markets, business markets, government markets, international markets, and reseller markets. The segments of Vietnam market that important to MPPL are Consumer and Reseller. In the past, consumers of this product in Vietnam might tend to be more price sensitive, but now with the fast growth of economy, they are paying more attention at the quality of products. The population of Vietnam recorded is 86.2 millions in 2009 (GSO, 2009), and condensed milk itself is a mass product, therefore, the number of customers or potential customers in Vietnam is considerably high.
Obviously, milk consumers are price elastic, which means the lower the price, the higher chance that customers will buy more (of the company's product). It has been discussed that people are now care more about quality other than price, but putting in the case that the quality of condensed milk products in the market is relatively the same, buyers would probably choose the lower-priced one. Considering the introduction price that MPPL offered, the retailed price is 65 to 70 sen per tin, i.e. 3,300 -3500 dong. With that level of price, it can be assumed that the product offered in the mini size for instant uses. Thus, it is relatively more expensive than the one presented in Vietnam which costs about 2,200 - 2,500 dong, which results in a worse situation for MPPL.
The product lines is still in the early stage of introduction, that is why they are not expected to be a well-identified brands. This would be a disadvantage for the products when people tend to choose the ones that are familiar, and thus, it push the customer's power to a higher level. However, once customers have already used the products, the switching costs for them is considerable as compared with food and beverage industry since the price offered is higher than average.
All the consideration above certainly shows that the bargaining power of customers in the dairy market as well as beverage market in general is quite high. Thus, the company must put more effort on creating customer's awareness, in order to generate its competitive advantage.
The second force to be considered is suppliers. For this period, MPPL only plans to import its product from Malaysia into Vietnam. Therefore, the suppliers' analysis could not be so important for now. However, the company could spend time on knowing the impact of this competitive force. Almost every milk producers in Vietnam buy material from the farmers, some of them may provide technology for productivity improvement, but in general, the suppliers, i.e. Vietnamese farmers, do not have much power in hand. Firstly, As coming to any highland areas in Vietnam, it is quite easy to find suppliers for milky products. They are mostly farmers with small-scaled raising activities. Their revenue normally depends very much on the milky processors like Dutch Lady or Vinamilk. And also the milk quality is probably not much different from one farm to the other. That is why people said they do not have high power in the industry. However, the switching cost for them to change from such big processors to MPPL would probably quite high. It is because they would lose the technology suppliers and might criticize on the ability of the company to ensure for their stable revenue. Thus, as considering to open a processing factory in Vietnam, MPPL needs also to think about how to persuade farmers that they could get a higher benefit as working with the company. Obviously, it must be put in the consideration of the company's benefit.
Moving to the impact of substitute products, it can be referred to products that generate the same level satisfaction for the customers. The very basic influence of such products is that they reduce the demand towards the company's products. There are certain types of substitute product that the company needs to think of. Product for product substitution is the first category. It is simply about the other kind of beverage or food that can replace the condensed milk in the same situation such as powdered milk, fresh milk. The other one is substitution of need. The need of using condensed milk of customers can be replaced by making their own drinks with easy-found ingredients like fruit, or simply buy some other ready-made ones like ice-cream, coffee, fruit juice, etc. And lastly, the generic substitution occurs when customers tend to use the money on other purposes other than buy condensed milk for drinking/ cooking purposes. For instant, customers can buy toys for their children or simply just keep the money for saving. This seems to be out of control when the range of substitute is so wide. The company can review the threat from substitute products by looking at its performances, cost of switching from one product to another and customers' willingness to switch to alternatives. MPPL can only improve the situation by building up customer loyalty and generating sense of need among potential products users.
MPPL itself is a new entrant to the dairy industry, but it still faces threat from the other new entrant since it is the time when foreign companies are eager to exploit a new market with a lot of chances. As coming to the industry, the important thing is to taking market share. The Vietnamese dairy market has come to the maturity stage where customers are saturate with all kind of milk and condensed milk in the market. Thus, the company should be prepared for an aggressive fight for market share. It depends very much on the level of attractiveness of the industry to know whether there are many new entrants in the future. That level of attractiveness can only be evaluate from a sum of different factors such as economy of scale (the more amount produced, the more profit generated), capital requirement for entry, suppliers and distribution channels, experiences, etc. Basically, MPPL is a new but strong entrant since they got a lot of experience as well as resources obtained from the last 40 years operation. But still the company has to investigate the market via research and development activities to take the advanced position over the other entrants. The discussion on this has been conducted on the introduction of this report.
Finally, as coming to the industry, considering the rivalry among existing competitors are very necessary. The marketing concept states that to be successful, a company must provide greater customer value and satisfaction than its competitors do. Thus, the competitors are treated as a benchmark to take over. In recent years, the demand of using condensed milk at catering services such as coffee and teahouses is increasing. There are certain brand names such as Ong Tho, SouthernStar (products of VinaMilk), and Dutch Lady. Since there are not many condensed milk companies in Vietnam, customers are used to some products they often buy while their choice over this type of product was limited. Therefore, it is easier for customer to change their reference when a new product is presented. MPPL can take this advantage, for its variety of products and flavors. However, it can not be denied that those existing competitors have already confirmed their prestige in the market by consistent quality ad wide range of products that fit customers' requirements. As talking about particular condensed milk products, there are not many differences identified among them, apart from some struggle to renew the product as Vinamilk did before but not so successful (they introduced condensed chocolate-milk). As a result, it is really difficult for a new company as MPPL to take over the market if they are not going to differentiate themselves from the others.
In short, MPPL is to put a lot of effort in order to be identified in the market. That is the first objective to be achieve in the short term. Due to the company's ability and experience, MPPL can obviously affirm its product quality, but still based on a very deep analysis on the market.
In addition to the five forces analysis above, there are some other partied that can also influence the activities of the company. They are publics and marketing intermediaries. Marketing intermediaries refers to resellers, physical distribution firms, marketing services agencies, and financial intermediaries. These are the people that help the company promote, sell, and distribute its products to final buyers. This is another important factor affecting marketing decisions. The final aspect of the microenvironment is publics, which is any group that has an interest in or impact on the organization's ability to meet its goals. Media publics include newspapers and magazines that can publish articles of interest regarding the company and editorials that may influence customers' opinions. Public media in Vietnam has great impact on people's perception and behaviors. Electronic newspaper, magazine, advertisements ... all are very popular in Vietnam.
In order to have a comprehensive view of macro and micro environment that influences the organization directly, in combination with the internal environment of the company, so people use SWOT as a tool.. SWOT stands for: Strengths, Weaknesses, obviously coming from the company itself, Opportunities and Threats coming from external environment.
Strength: MPPL has had a history of five year's pioneer status to manufacture sweetened condensed full-cream milk under license from Dutch company with diversified products line. MPPL also issued four million ordinary shares at $1.00 per share and obtained listing on the Stock Exchange of Singapore. In other word, MPPL is a quite successful company in Singapore market. These results proved MPPL's products are high quality. Finally, the price of this product in Vietnamese market is not expensive so this can direct toward more object-customer.
Weakness: All products of MPPL are new in Vietnamese market so not much people know about it. In addition, MPPL is as a stranger enters a new place with many manners and customs, which is different from its own place. This is a challenge to Marketing Manager to study and approaches the market then build up marketing strategy to bring its products to Vietnamese market to achieve company's objective.
Opportunities: Vietnam is a country that has not been affected much by global economic crisis nowadays. Vietnam is also known as the peaceful country. Therefore, doing business in Vietnam has more advantage than doing business in other countries in Asian. In addition, Vietnamese government is trying to make helpful policies to encourage foreign investors. Moreover, the workforce of Vietnam is plentiful and cheap. This will become a very good opportunity as if MPPL intend to construct a milk factory in Vietnam.
Threats: MPPL has to compete with some other popular brand to wrest the market share from other brands such as Vinamilk or Dutch Lady which have being existed in Vietnamese market for a long time. On the other hand, because of the certain advantages in Vietnamese market, other milk brands want to penetrate this market so MPPL may have more competitors.
Entering a market may not require lots of resources and effort, but in order to survive and affirm itself in that market, it is important than ever to know where the company are, and how it would achieve its objectives in the future. It could be done based on the completely view of all the external and internal environment, and via the process of identifying opportunities and threats up coming.
2.2. Segmentation methods with benefits and limitations.
Obviously, any company can understand that their products can not satisfy all of customers. They are too many, allocated in too large areas, and they have different needs, different wants and different behaviour. Therefore, it is more efficient to serve some stated objects or stated parts of market. Each company has to identify attractive market which they have ability to serve best. The different parts of the market is called market segments. MPPL company is not an exception. We can understand market segmentation is dividing a market into distinct groups with distinct needs, characteristics and the customers in each segmentation have common behaviour and different from another group.
Thus, there are many ways to segment market. We can segment market based on age, habits, location, and many other ways. With three kinds of products (FreshMilk, DresMilk and CreamyMilk and Filled Milk), the market can be segmented by business and by benefits for product users.
Considering the target customers of the product lines, it is recommended to divide the market by business, or types of customers that the company is dealing with.
In business to business market, the customers are organisations. They can use product direct or use it as raw materials. We have two kinds of business. The business use product directly, for instance, supermarket, shop, franchise or merchant system. These objects buy MPPL's product to sell to customers. Another one is coffee and tea house which use condensed milk to make coffee, make yoghurt, etc. MPPL has 2 brands ("DresMilk and CreamyMilk" and "Filled Milk") which aim to serve coffee and teahouse. Anyway, the business always buy product with big amount, in stable time and they are usually loyal customers. They also care about profit so beside product's quality, they want favorable price, good service, they can pay money late and other demands relate to their interest.
On the other hand, in business to customer market, the customers are personal clients or household. It is different from business, they buy condensed milk to only use for their needs so they usually buy not many. Moreover, they rarely loyal with only brands and their choice sometimes change. It will be very difficult to keep their feet for a long time unless we have efficient strategy marketing plan. If business care about profit, customer focus on product quality, acceptable price, contents, original products and products' nutritious values. It can be expected that FresMilk which is still regarded as one of the finest brands by Singaporean households can have position in Vietnamese market.
This segmentation methods can help company determine their potential market, since then strategic plan and find suitable way to satisfy each segmentation's demand . However, in customer to customer market, there are many different customer group with many different aspects and the company can not satisfy all of them. Therefore, if MPPL want to serve them better, marketers can classify customers into smaller groups. depend on different customers' features and different requirements, which will be presented in the following paragraphs.
As applying segmentation method based on user's benefits, it is depending very much on the purpose of customers to classify the products, the criteria can be about using habit, product quality, price, etc As we know, there are remarkable unequal aspects between urban areas and rural areas so it can be rely on these features to segment market, since then have basic suitable plan for product development. First of all, urban areas' density of population and income are higher than rural areas and it can be predicted that the demand of using milk product also higher. Moreover, people in city and people in village use condensed milk for different aims. Urban people usually use condensed milk to make coffee or make yoghurt, eat with bread in the morning while rural people often use condensed milk to drink directly and to offer as a gift. In addition, the urban areas' life level are higher too far than rural areas' so the people in city concern about product's quality, brand and it is good for their health or not but rural people care more about price. Hence, Filled Milk in which palm oil is used instead of butterfat for the fat component with cheap price must be occupy market and satisfy both segmentation. Furthermore, DresMilk and CreamyMilk also aim to households within the lower income groups. This brand can suitable for rural people and urban people with low income. Depend on these factors, it is in need of concern about sale system. It can be sure that urban areas will consume more so we have to research market to allocate suitable amount of product to each segmentation.
If we segment market based on urban areas and rural areas, we can know people with different lifestyle will have different buyer behaviour and they use the same product for different purpose. We must know that to allocate product and have marketing plan for each segmentation. However, almost methods have limitation and this method is also because these estimate is not accurate 100% for all objective. In each segmentation, it also exist exception but the most important thing is we choose method which we think it is the most suitable way to segment market and it will help company have best perspective to have clearly plan to serve each segmentation.
To sum up, these segmentation above are two among many methods to segment market but we believe that according to two basic segmentation methods, we can have suitable target plan to approach and occupy Vietnamese condensed milk market.
2.3. Factors influencing choices of targeting strategies.
The choice of targeting strategy is depended on three factors: the homogeneity of the product and the market, the company's resources and the product life's cycle. (Edexcel, (2004), p164, 165)
The term "homogeneity" can be referred to the quality of product or market that are all of the same type or characteristic. As talking about the product, in Vietnam, condensed milk is a mass product, which means it does not aim to a particular market segment but can be used everywhere. Almost of the Vietnamese customer is familiar with some brands like Vinamilk, Dutch Lady or Northern Star. These companies basically focus on 2 kinds of milky product which are: condensed milk and fresh milk. MPPL also intends to bring to the Vietnamese market these kinds of milky product. It does not mention anything different about the three product lines (DresMilk, CreamyMilk, FresMilk). Therefore, theoretically, that allows the company to apply mass marketing over all Vietnamese market. On the other hand, MPPL has a new product - the Filled Milk which is a new kind of condensed milk, which is expected to make the difference by special ingredient (palm oil). However, this particular product can still be applied all over the market, thus mass marketing is also applicable in addition with introducing the new feature of the product.
Concerning the market, due to the difference in life condition, the using purposes or habit of people in the urban and rural area are different. All of the activities such as: marketing, R&D, etc must be suitable with the country peoples and their custom, because of the customer's behavior, the custom, the density of media access, approach, and etc. Beside, condensed milk are purchased differently in both amount and category by individual and industrial customers. This issue has already been discussed on the choice of market segment previously. As a result, it reduces the market homogeneity. It requires marketers to generate different approach to each market segments for an effective marketing plan.
MPPL is a new brand in the Vietnamese market but it has been operation for 40 years. In general, the abilities of MPPL are very considerable in terms of both finance and human resources. Therefore, MPPL has many advantages in making marketing strategies. The technology is also a strong point of MPPL. With many years developing, MPPL has a lot of experiences in making milky products. Milky products from MPPL are made by the most modern technologies and machines. Although MPPL is not familiar with the Vietnamese customers now, but in the future it will become a big player in the competitor with other milky brand in Vietnamese's market.
However, it is also important for the company to consider which market segments should be more involved and which objectives should be more prioritized. This will be the basis for resource allocation to be effective and efficient.
The product's life cycle (PLC) is based on the biological life cycle. After a period of development, a product will be introduced in the market. There are more and more customers using this product until it become mature. After that, this product is overtaken by the other companies in the market, it will go into decline.
A product's life cycle can be divided into several stages characterized by the revenue generated by the product: development, growth, maturity, and decline.
Figure 8. Product/ Market life cycle
The development part begins when the company has idea to produce a new product. At this time, the need for immediate profit is not a pressure, the company need to focus on the investment. The product is promoted to create awareness.
The second stage is a period of rapid revenue growth. The product sales increase as more customers become aware of the product. At this time, the marketers should focus on building awareness and interest in the mass market. They may also expand the distribution. When the competitors enter the market, the competition will be growing. The company should have some promotional campaigns to take advantage of consumer demand.
On the maturity stage, the product sales continue to increase. The brand awareness is strong, advertising expenditures will be reduced. To get the high profit at this time, the company has to diversify brand and model. The competition is continue to growing so the price should be set to beat and sales promotions may be offered.
At the time of declining, there will be a downturn in the market. The product will become obsolete because the consumer tastes have changed. To improve the profit, the company should cut down the price. The distribution needs to become more selective. Focusing on the loyalists.
At this time, Vietnamese market is at the maturity stage in the product life cycle but the product is still at the introduction stage. It is difficult for MPPL to gain the market share at present. The product is still at the introduction stage so that MPPL should focus on the quality of milky product and it will make the customer realize the difference between MPPL's product and others. In this time, MPPL should have suitable targeting strategies with the market which MPPL has segmented, to the extent of customer approach, media use, etc. For example, before selling milk, MPPL can give the trial product for customer. It will make the product become more familiar with the customer. In general, if MPPL do everything correctly, they will get the success in Vietnamese market.
2.4. The influences of buyer behaviour on marketing activities.
"Without customer, you don't have a business" - this clause shows a fact that satisfying customer should be the key of any company in order to become success. However it is pretty complicated and difficult to understand the customer, for instance, with each product company need to know who will buy, how much they are willing to pay, when they buy and where they buy. Having clearly understanding about customer will help marketers work well with not only customer buyers but also business buyers. We will explain how customer buyer behavior and business buyer behavior for the products can affect MPPL marketing activities.
Firstly, about the influence of customer buyer behavior, it is understood that there is a huge number of outside elements can influence on consumer behavior; nevertheless, marketers cannot affect all the factors so they have to analyze customer behavior in group with suitable products. According to Philip Kotler, we can divide consumer behavior into four types:
Figure 9. Four types of Buying Behavior (Kotler, 1999, p.251)
Begin with Variety - seeking buying behavior, there is considerable branding difference with relatively low involvement such as confectionary or clothing. Take an example, when teenagers purchase jeans, some of they believe that CK Jeans can make them fashionable and decide to buy, however when they see the advertisement of Levi's with cooler models, they might choose it for the next time even though they are satisfied with CK. Brand changing appears most of the time because of variety rather than dissatisfaction. In this type, the one who can offer lower prices, up-to-date product and emphasize in advertising will be the winner.
There are still big differences between brands in complex buying behavior but here consumers are highly involved in a purchase due to the product is luxury such as a car, a house or an especially designer dress. In this type of purchase people have to pass through a learning process in order to make final choice so the sellers need to provide necessary information about the product and somehow try to persuade the customers.
Sometime there is high involvement with the purchase but little perceived difference between brands. Electronics and furniture are typical examples for this type. Dissonance - reducing buying behavior requires good relationships with customer both before and after purchase. Consumers might suffer dissatisfaction when they see some disadvantages of the product they buy or know favorable thing about the product they give up. Making customers feel good about their choices will bring more loyal customers.
Habitual buying behavior occurs under condition of low differentiation between brands and little sense of personal involvement. Example of this type is food or spice, something people simply go to the store and pick up. When customers keep buying the same brand, it will become their habit and it will be not easy to change. Consumers usually do not search information or take too much to choose the brand. They can receive information from television, magazine or when they talk with friends and family members. "Words of mouth" also plays an important role in habitual buying behavior. The major portion of companies provides products in this type have typical brand name and logo make customer remember easily. From our point of view, sweetened condensed milk from MPPL belongs to this group. MMPL want to expand into Vietnam so it is necessary to know about other competitors. In Vietnam now there are only two brands of condensed milk and both come from Vinamilk (Vietnam Dairy Products Joint Stock Company), they are Longevity Condensed Milk and Southern Star Sweetened Creamer.
In 2004, Vinamilk was placed among the top 10 advertisers in the country (http://vietnamnews.vnagency.com.vn) and nowadays everywhere in Vietnam, from big cities to the countryside, the symbol of Vinamilk can be seen easily. They have extremely strong public image based on all the advertisement on television, newspaper, posters, placards and so on. Vinamilk is also the core sponsor for a fund, raising money to provide milk for poor children. It will be difficult for MPPL to expand into Vietnam if they only display some posters and placards at major supermarkets like in Singapore. Television is usually more effective than print media as it hits customer by both sound and image therefore people will remember more easily. When they go to the shop, the product they have in their mind will attract them more than others. For MPPL, they should use the discounts, product trial as well as improve the promotional activities to impress Vietnamese.
When marketers understand clearly about group of buying behaviour, they move on studying the buying decision process. In general, there are five stages which customer will pass to make final decision however in some buying situations, consumer can skip or reverse some of them.
Figure 10. Response hierarchy model (Edexcel, 2004, p148)
The process starts when customer recognizes a problem or need. It can be normal needs of people like when they are hungry, thirsty or the need for clothing, accommodation. Those need come from inner stimuli and when they raise highly enough to become drive, people will automatically find the objects may satisfy themselves. However need recognition can be affected by outside factors. For example, when a child sees an advertisement with many children in the same age drinking milk happily, he will ask his parents to buy exactly this kind of product. This is the time the company starts to gain attention from their (potential) customers since as having explained above, people sometimes cannot find out their own need. The attention can be called by an eye-catching advertisement, or simply by product exhibition on supermarket.
Sometime, when the consumer's drive is strong and a satisfying product is near, the consumer is likely to buy it right away. If not, consumers may simply store the need in memory or undertake an information search related to the need. Information can be obtained from some sources such as personal (from family, friends and neighbours), commercial (advertising, displays), public and experiential source. Commercial source is often provided by the sellers but the most effective source tends to be personal source. A mother can find a lot of information about milky products for her child on her own but may focus on evaluation of her friend, who did use this kind of product. At this stage, the company is recommended to call out interest from customers. It is normally assumed that the interest would automatically follow the interest once it had successfully come to consumers' mind (Yeshin, 2004). Thus, there is not many thing for marketers to do in this stage.
Customer uses information to get final decision. This is illustrated by the stage of evaluation of alternatives and purchase decision. Among plenty of alternative products, how can they choose one? For instance, the alternative choices for sweetened condensed milk in Vietnam are two brands from Vinamilk and four brands from MPPL. When customers decide which brand they should buy, they can rely on certain benefit they get from the product like nutrition facts, origin and even the design. After evaluating buyer will come to purchase decision with the most prefer brand. That is why marketers need to emphasise that MPPL's condensed milk is the solutions for their need. The advertisements can then be designed in the form of problem-solution process. In order to support for the final decision, the advertising should add on some detail of promotions such as giving discounts or gift.
The marketer's job does not end when the product is bought. Post purchase behaviour is important for the seller and producers. Whether the customer is satisfied or not will affect the consumption after all. It is important because of two basic groups of customer - new customer and loyal customer. Usually attracting new customers will cost more than keeping current customer. A satisfied customer buys a product again, talks favourably to others about the product, pays less attention to competing brands, advertising and buys other products from the company. Moreover dissatisfied customers behave strongly differently. They can never come back to buy the product and tell other people how they disappointed and it will definitely ruin the company image. Therefore company should make product's performance meet or exceed customer's expectations so that they are satisfied.
Understanding the consumer's needs and buying process is the principle of successful marketing. By understanding how buyers go through problem recognition, information search, evaluation of alternatives, purchase decision and post purchase behaviour, the marketer can pick up many clues to know how to meet the buyer's needs and develop an effective program to support an attractive offer to the target market.
Secondly, about the influence of business buyer behavior, it is clearly understood that even the biggest companies almost cannot sell their products directly to the customers. They must first sell to other businesses and this creates business market. For instance, when MMPL joins in Vietnam market, they have to sell goods to wholesaler and retailers in order to supply consumer so understanding business buyer behavior also plays an important role. Business buyers are also consumers but they are affected at work so business buying situation is divided only into three types. They are straight re-buy, modified re-buy and new task.
A company expanding into a new market like MMPL will face new task situation with business buyer. Because it is the first time other companies buy product from MMPL, there are both risks and opportunities for MMPL. They will pay much attention to price, quality, attitude, service and also expect the highest value when they purchase with MMPL. One of the opportunities is that if MMPL can satisfy the business buyer at first, they will become loyal customer and bring much more benefit by purchasing other products of MMPL and introducing MMPL to other firms. However it is difficult to understand what new consumers need and want so in our opinion, MMPL should both provide clearly information with help and examine carefully about partner requirement.
After the first time working with MMPL, business buyer may behave in two different ways. If they are completely satisfied with MMPL, they will use straight re-buy, which means that the buyer simply buy the products in the same way as he did last time and no more demand. This type of buying situation brings advantages for both buyer and seller. They can save a lot of time and money. Therefore MMPL should try to make business consumer use this type and after straight re-buying MMPL also should offer discount or promotional activities to attract buyer using straight re-buy for the next times. However the truth is there are always some mistakes such as problem about quality, quantity or poor service. This leads to the last type of buying situation, modified re-buy. When modified re-buy occurs, the buyer wants to modify product such as price, term or delivery, then the supplier should try to change reasonably to persuade the buyer using straight re-buy.
The differences between consumer buying behavior and business buying behavior create different buying processes. Normally business buyers go through 8 steps to make buying decisions.
The process begins with problem recognition. In this case with MMPL, when a supermarket realize that they do not have enough condensed milk or the brand they used to use no longer meets their customer demand, the supermarket will find out that they have to buy that kind of product. The second step is general need description. In this step, after recognizing the need; buyer starts preparing basic characteristics and quantity of the product so supplier can help buyer define the need and provide information. In the next step - product specification - more specific description about product is created and normally is supported by other departments in the company. Somehow this step can be skipped when the product is necessary goods, but it is not the case of condensed milk anyway.
Supplier search is the step when buyer begins finding suitable supplier and this step is the greatest opportunity for sellers. The suppliers' task is making sure that their firms are considered. For instance, MMPL can suggest the buyers that if they buy a huge quantity, they will get extra discount with free delivery. In the proposal solicitation stage, the buyer invites qualified suppliers to submit proposals and suppliers will send a catalogue or a salesperson to convince business consumer buy their products. In this stage suppliers should give more details about their products to prove that they are qualified. In sixth step, business buyer will make final decision about which supplier they choose based on the quality, price, service of the product as well as the relationship between supplier and consumer. The two last final steps are about agreement between supplier and buyer and end with performance review. After reviewing supplier performance, buyer will give feedback to the suppliers then they will decide to continue, modify or drop the buying.
Understanding both buying behavior is a vital factor for every company to achieve goal and satisfy the consumers. It will bring company loyal customers and long-term relationship with other companies. For MMPL, to be successful in Vietnam - a new market - they should investigate clearly about how Vietnamese consumer and business buyer want to be able to create a good image.
.5. Conclusion.
Coming to any particular market is not only bringing products to sell. It is about a process of long-term investigation and building relationships.
The company is not alone in the market, it affects and is affected by various factors inside and outside the business environment. Accordingly, the company is to adapt and to change in order to fit the new environment. Within the market, it is not the same in every aspect but diversify into different group of customers with different needs, wants and demand. On that basis, marketer will recommend methods of market segmentation, in the most suitable combination with company's goals and objectives. And as going more deeply to know customers, the study of buyer behaviour is necessary than ever.
The content of this report is still in a very fundamental level. A further more detailed research is expected to be achieved in future with more available resources.
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