Đề tài Marketing strategies of Ferroli Viet Nam

INTRODUCTION Nowadays, marketing is obviously a more and more vital in the successes of every enterprise. However, not many of the companies in Vietnam have paid adequate attention to marketing activities, especially when both domestic and global competition is getting fiercer and fiercer. Being one of the companies specializing in selling air conditioners in Vietnam, Ferroli Viet Nam has achieved certain success in this field. Its sales of air conditioners have increased over the years since its establishment. However, the company sales growth of air conditioners has been modest in comparison with other competitiors’. The reason for this partly lies in its marketing. After taking a close look at Ferroli Viet Nam’s performance, I decide to choose “Marketing strategies of Ferroli Viet Nam” as the topic for my field study report with a view to examiming Ferroli Viet Nam’s marketing strategy and making some recommendations to improve it. Ferroli Viet Nam has a lot of business activities, but because of limited time, this report focuses only on the company’s marketing activities for one line of its business, that is air conditioners, on the market in Vietnam. Apart from the introduction and conclusion, the report is divided into 3 chapters as follows: Chapter 1: Theoretical Framework Chapter 2: The marketing Strategy of Ferroli Viet Nam Chapter 3: Some Recommendations to Improve Ferroli Viet Nam’s Marketing Strategy. Chapter 1: Theoretical Framework The concept of marketing The definition of marketing Today’s central problem facing business is not a shortage of goods but a shortage of customers. Most of the world’s industries can product far more goods than the world’s consumers can buy. Overcapacity results from individual competitors projecting a greater market share growth than is posible. If each company projects a 10 percent growth in its sales and the total market is growing by only 3 percent, the result is excess capacity. This in turn leads to hyper competition. Competitors, desperate to attract customers, lower their prices and add give aways. These strategies ultimately mean lower margins, lower profits, some failing companies, and more mergers and acquisitions. Marketing is the answer to how to compete on bases other than price. Because of over capacity, marketing has become more important than over. If forced to define marketing, most people, including some business managers, say that marketing means “selling” or “advertising”. It’s true that these are parts of marketing. But marketing is much more than selling and advertising. Today, marketing must be understood not in the old sense of marketing a sale-“telling and selling”-but in the new sense of satisfying customer needs. Selling occurs only after a product is produced. By contrast, marketing stsrts long before a company has a product. “Marketing is the homework that managers undertake to assess needs, measure their extent and intensity and determine whether a prifitable opportunity exists. Marketing continues throughout the product’s life, trying to find new customers and keep current customers by improving product appeal and performance, learning from product sales results and managing repeat performance”1. So that does the term “marketing” means? Actually, there is no single and universally agreed definition of marketing. The American Marketing Association defined 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 organizational goals”2. The writer of the book “The Silk Road to International Marketing” had another definition as follow: “Marketing is the process by which decisions are made in a totally interrelated changing business invironment on all the activitied that facilitate exchange in order that the targeted group of customers is satified and the defined objectives accomplished ”3.Though there are many definitions, a certral part of any dfinitions of marketing is the exchange process – the process of giving something of value in return for something of value. Or in other words, it’s the process of tranferring between two or more parties of tangible or intangible items of value(see figure 1.1). Cash, debt, time, votes, behavior, etc Health, safety, comfort, transportation, beauty, productivity, etc. Figure 1.1: the exchange process. Source: Courtland L. Bovee, Jonh V. Thill , “Marketing”, 2nd edition, p.6. For marketing to occur, at least four factors are required: (1) two or more parties with unmet needs, (2) a desire and ability to satisfy them, (3) communication between the _______________________ 1 Amber, T.and Styles, C.(2000), The Silk Road to International Marketing, Harlow: FT Prentice Hall 2 Arch G. Woodside(1990), Outdoor advertising as experiments, Journal of the Academy of Marketing science. 3 Berkkowitz, Kerin, Hartley, Rudelius, (1990), Marketing, 2nd edition, Irwin McGrawHill. parties, and (4) something to exchange4. Here’s what Berkowitz stated in his book “Marketing”. As marketing is a kind if exchange, certain conditions must exist before the exchange can occur. The goals of marketing. “Today’s successful companies at all levels have one thing in common; their success is founded upon a strong customer focus and heavy commitment to marketing”5. They motivate everyone in the organization to deliver high quality and superior value for their customers, leading to high levels of customer satisfaction. These organizations know that if they take care of their customers, market share and profits will follow. Creating customer values and satisfaction is at the very heart of modern marketing thinking and practice. The goal of marketing is to attract new customers by promising superior values, and to keep current customers by delivering satisfaction. When a company succeeds in creating more values for customers than its competitors can do, that company is said to enjoy competitive advantage in an in dustry. Competitive Analysis It is the increasingly emerging markets that have create favorable conditions for the rapid development of world trade and investment, which is well – manifested in the sophisticated growth of a number of global companies. To compete in one or more foreign markets, companies not only need to broaden relentlessly their sources of competitive position. One particularly useful techniqui in analyzing a firm’s compatitive position relative to its competitors is SWOT(strengths. Weaknesses, opportunities, and threats) analysis aims to isolate the key issues that will be important to the future of the firm and that will be addressed by subsequent marketing strategy. A SWOT analysis divides the in formation into two main categories (internal factors and external factors) _________________________ 4 Courtland L. Bovee, Jonh V. Thill, (2000), “Marketing”, 2nd edition 5 Crag, C.S and Douglas, S.P. (2000), International Marketing Research, Chichester: Wiley and then further into positive aspects (strengths and opportunities) and negative aspects (weaknesses and threats). The internal factors could be viewed as strengths or weaknesses, depending upon their impact on the firm’s positions; i.e., they may represent strength for one firm but a weaness, in relative terms, for another. They include all of the marketing mix (product, price, promotion and place strategy) as well as personnel and finance. The external factors, which again may pose a threat to one firm but create opportunities to another, include technological changesm legilation, socio-cultural differences, and change in the market place or competitive position. Global Marketing Strategy Interms of globalization, worldwide businesses use global marketing when they take the same or similer approach or content fro one or more elements of the marketing mix, that is, the same ore similar brand names, advertising. And so on in diffent countries. Although most of the multinational companies using global marketing mix-product, pricing, promotion and place – are standardized. Business can make some elements of marketing more global and others less so. Accordingly, possible adaptations that firms might apply to their product, promotion, price, and place when they enter through the foreign markets will be provided in this part. Product There are five international product and promotion strategies for a company to extend its market base into other geographic markets(See table 1.1). Straight extension means marketing the product in the foreign without any adaptation. Top manager asks its marketing people to “find customers for the product as it is”. As a result, it is seen as easiest product marketing strategy and may be the most profitable one as well. However, the company should first determine whether foreign consumers use that product or not. Straight extension has been successful with cameras consumer electronics, and many machine tools. This strategy is tempting because it involves no additional product development cost, manufacturing changes, or promotional modification. But it can be costly in the long run if products fail to satify foreign consumers. Table 1.1: Five international product and promotion strategies.  Product   Promotion   Do not change product  Adapt product  Develop new product    Do not change promotion  Straight extension  Product adaptation  Product invention    Adapt promotion  Communication adaptation  Dual adaptation    Source: Subhash C.Jain (1995), international marketing management Product adaptation involves changing the product to meet local conditions or prefernces. There are several levels of adapdation. A company can produce a regional version, a country version, a city version or even promotion retailer versions of its products. Although, products are frequently adapted to local tastes, in some instances they must be adapted to local superstitions or beliefs, too. Product invention consists of creasing something new the foreign market. It can be divided into two forms. The first is backward invention, which means reintroducing earlier products forms that happen to be well adapted to the needs of a given country. And forward invention is to create a new product to meet a need in another country.6 Promotion Companies can either adopt the same promotion strategy they used in home market or change it to suit for each local market. Although some global companies use a standardized promotion campaign changes might be needed to comply with local regulations and references. There are four different levels of adapting promotion stratefy. _______________________ 6 Subhash C.Jain (1995), Intenational Marketing Management Firstly, companies can use one message everywhere, varying only the language, name, and colors. That is because colors might be changed to avoid taboos in some countries. Also, names and slogan may havet to be modified in some countries. Secondly, companies may use the same them globally but adapt the copy to each local market. Thirdly, companies can develop a global pool of advertising from which each country selects the most appropriate one. Finally, some companies allow managers to create a specific advertising – within guidelines, of course. Other companies follow a strategy of communication adapting their advertising messages without any product changing. Although it retains the scale economics on the manufacturing side the firm sacrifies protencial saving on the communication way . another strategy is dual adaptation. It is changing both the product and the communication to face local differences. Price Global companies face several problems in setting their international prices. Those problems must deal with price escalation, tranfer prices, dumping charhes, and black markets. Price escalation problem occurs when companies sell their goods abroad.the foreign prices probably will be higher than their domestic ones because it must add the cost of transportation, tarriffs, importer margin, wholesaler margin, and retailer margin. Depending on these added costs, the product may have to sell for two to five times as much as in another country to generate the same profit. Since cost escalation varies from country, companies have three price setting approaches in different countries. Setting a uniform price everywhere: charging the same price everywhere in the would. By this method, companies would earn quite different price in different countries because of varying escalation costs. Also, this strategy would result in too high price in poor countries and not high enough in rich countries. Setting a market-based price in each country: charging what each country could affort. But this strategy ignores differnces in the actual costs from country to country. In addition, it could lead to a situation in which intermediaries in low-price countries reship to high-price countries. Setting a cost-based price in each country: using a standard markup of its costs everywhere. But this strategy might price out of the market in countries where it costs are high. Another problem arises when a company sets a tranfer price(i.e, the price that it charges to another unit in the company) for goods that it ships to its foreign subsidiaties. If company charges too high a price to a subsidiary, it may and up paying higher tariff duties, even while paying loewer income taxas in that country. If company charges its subsidiary too little, it can be charged with dumping. Dumping occurs when a company charges either less tan it costs or less than it charges in its home market, in order to enter or win a market.7 Various governments are watching for abuses and often force companies to chargse the arm’s-length price – that is, the price charged by other competitors for the same or a similar product. Global companies also face the black-market problem. A black market means the same product is sold at different price geografically. Dealers in the lower-price country find ways to sell some of their products in higher-price counrtries, thus earning more.8 Very often a company finds some distributors buying nore than they can sell in their own country and reshipping goods to another country to take advantage if price differences. Multinationals try to prevent black market by policing the distributors, by raising their prices to lower-cost distributors, or by altering the product characteristics or sevice warranties for different countries. Moreover, one challenge o global pricing in recent years is that countries with overcapacity, cheap currencies, and the need to export aggressively have pushed prices down and devalued their currencies. For multinational firms this poses great difficulties. Sluggish demand and reluctance to pay higher proce make selling in these emerging markets harder. Instead of lowering prices, and taking a loss, some multinationals have found more lucratice and creative means to deal with this problem. _____________________________ 7 Keegan, Warren J.(1995), Multinational Marketing Management 8 Kotler, Philip(2000), Marketing Management. Place(Distribution channels) Global companies must take a whole-channel view of the problem of distributing products to final consumers. Figure 1.2 show the three major links between the seller and the ultimate user. In the first link, seller’s international maketing hearquarters the export department or international division makes decisions on channels and other maketing-mix element.9 The second link, channels between nations, moces the products to the boders of the foreign nations.10 The decisions made in this link include the types on intermediaries (agents, tradeing companies) that will be used, the type of tranportation (air, sea), and the financing and risk arrangements. The third link, channels within foreign nations, moves the products from their foreign entry point to final consumers.11 Channels of distribution within countries vary greatly from nation to nation first, there are large differences in the numbers and types of intermediaries serving each foreign market. Long channels of distribution means that the consumer’s price ends up double or triple the importer’s price. Another difference lies in the size and character of retail units abroad. Breaking bulk remains an important function of intermediaries and helps perpetuate the long channels of distribution, which is a major abstacle to the expansion of large-scale retailing in developoping countries. The marketing mix strategies Philip Kotler, in his book “Principles of Marketing”; defines marketing mix as “the set of controllable tactical marketing tools – product, price, place and promotion – that the firm blends to produce the response it wants in the target market”12. These ingredients must be manipulated in a manner which ensures targeted customers are satisfied, marketing strategies are implemented and desired brand positioning is achieved. _______________________ 9,10,11 Charlers Hill(1997), International Business 12 Philip Kotler, Gery Armstrong, John Saunders, Veronica Wong, principles of Marketing, 2nd edition,p.97 Figure 1.2: whole-channel concept for international marketing. Source: Chatles Hill(1997), international Business Chapter 2 The Marketing Strategy of Ferroli Viet Nam Ltd An InTroduction to Ferroli Viet Nam. 2.1.1 Company development Ferroli Viet Nam was founded on 12th August 2002. Ferroli Viet Nam’s headquarters was located at 193 Hoang Quoc Viet Ha Noi. It has 4 branches and plants nationwide in Ha Noi, Hai Phong, Bac Giang and Lai Chau, and a network of distributiors around the country. Since its establishment, Ferroli Viet Nam has operated in various fields: air conditioners, electronics, medical equipment, technical machinery and equipment, etc. After two years of operation, Ferroli Viet Nam expanded into other areas such as information services, supplying and assembling lifts and other equipment. Early 2007, Ferroli Viet Nam opened a new factory in Hai Phong for producing and selling construction materials. It also opened a new sales representative office for selling Viglacera’s products. Company’s products Ferroli Viet Nam specializes in selling the following: Air conditioners of famous companies such as Toshiba(Japanese), Misubishi(Japanese), Trane(American) and Sanyo(Japanese). Medical and technical equipment and machinery, mainly imported from the USA, Italy, Germany and Japan. Lifts manufactured by Nippon (Japanese), Thysen (German), Volbin (Swiss) and Don Yang (Korean). Construction materials and equipment of its own and Viglacera’s, and other electronic products. Besides, Ferroli Viet Nam also provide other sevices such as maintenance for medical and technical equipment, computer installing and programming. Company’s Organization
 Board of Directors Ferroli Viet Nam’s Board of Directors includes a Director General and 2 Deputy Directors General. Director General: Leading the company’s board of management is the Director General who is responsible for managing the use of capital, human and other resources. Two Deputy Directors General: These pepole provide assistance to the Director General. They would sometimes act on behalf of the Director General in his absence. One of them is responsible for the trading, planning, financiak and accouting matters and the other is in charge of technical and research anddevelopment aspects in the company. The departments There are five departments, each of which is responsible for a certain part of the company’s activities. Trading department: this department helps the Board of Directors with trading activities. These include organizing both domestic and international bussiness. The trading department is also