Factors influencing customers behavior of butter oil substitute (bos) in ho chi minh city

However, the project also has certain limitations, such as only on HCM scale, small samples size … Student tries his best to conduct the thesis and has a lot of efforts to gather informa

TRƯỜNG ĐẠI HỌC MỞ TP.HCM

HO CHI MINH CITY OPEN UNIVERSITY

UNIVERSITÉ LIBRE DE BRUXELLES SOLVAY BRUSSELS SCHOOL

MBMM4 Tran Anh Tuan

Factors Influencing Customer Behavior of Butter Oil Substitute

In Ho Chi Minh City

MASTER PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT

Tutor’s name: Dr Ha Nam Khanh Giao

Ho Chi Minh City (2010)

Tai Lieu Chat Luong

ASSURANCE

This thesis contains no material that has been accepted for the award of any other degree of diploma in any university or other institution and to the best of my knowledge contains no material previously published or written by another person, except where due reference is made in the text of this thesis

In this study, professional interviewers, observed by an independent quality controller and the author of this thesis, conduct the survey Thus, it has high level of trust, confidence and agreement

This information of this thesis use for limited purposes and not allow to be spread out excepting for the jury of Solvay Business School and some marketing professionals

including the MBMM tutor

ACKNOWNLEDGEMENT

I am grateful to Dr Ha Nam Khanh Giao for having read several chapters in my thesis and giving me invaluable comments and suggestions Besides, without his intellectual support and his continuous guidance, full of patience and enthusiasm, my thesis would not have been materialized

I also wish to thank my study group in MBMM4 class, who gave me endless experienced and mental support

Finally, my thanks go to the Professors of Solvay Business School for wonderful program and intellectual support during my MBA program

Ho Chi Minh City, Dec 14th, 2010

-

Signature of the student

Tran Anh Tuan

Master of Marketing & Business Management

TUTOR’S COMMENTS

The thesis on the topic customer behavior of Butter oil substitute in HCM is high practical significance Research objectives are properly identified Student has used the appropriate methodology Results obtained with the new creation with scientific content as well In particular, the author highlights the factors that influence customer behavior in coffee industry The results and conclusions of the thesis with applicable recommendations are useful information for the organizational who want to enter the specialty fats business in Viet Nam However, the project also has certain limitations, such as only on HCM scale, small samples size …

Student tries his best to conduct the thesis and has a lot of efforts to gather information as well as to conduct a research to understand the purchase decision of customers in coffee roasting industry

The thesis meets requirements of MBA thesis I suggest the committee should allow the author to present it to your kind perusal and consideration

Ho Chi Minh City, Dec 14 th , 2010

Dr Ha Nam Khanh Giao

CONTENT

ASSURANCE i

ACKNOWNLEDGEMENT ii

TUTOR’S COMMENTS iii

CONTENT iv

LIST OF FIGURES vi

LIST OF TABLES vii

1 EXECUTIVE SUMMARY 1

2 CHAPTER 1: INTRODUCTION 2

2.1 Background introduction 2

2.2 Problem statement 2

2.3 Specialty Fats market 3

2.4 Research objectives 5

2.5 Research method 5

2.6 Scope of the project 5

2.7 Research structure 6

2.8 Framework of Research 6

3 CHAPTER 2: LITERATURE REVIEW 7

3.1 Chapter overview 7

3.2 Industrial Buying Behavior 7

3.3 Buying Process 8

3.4 Factors Affecting Buying Process & Buying Center 9

3.5 The buying Center 10

3.6 Choice Criteria 10

3.7 Long-term relationships in industrial markets 12

3.8 Scale using in theoretical framework 14

3.9 Research model 15

4 CHAPTER 3: RESEARCH DESIGN 16

4.1 Chapter Overview 16

4.2 Qualitative research 16

4.2.1 Sampling 16

4.2.2 Data collection 17

4.2.3 Data analysis 17

4.2.4 Interview results 17

4.3 Quantitative research 18

4.3.1 Questionnaire design 18

4.3.2 Survey process 18

4.4 Data Analysis 19

5 CHAPTER 4: DATA ANALYSIS 21

5.1 Chapter Overview 21

5.2 Frequency analysis 21

5.3 Descriptive analysis 23

5.4 Reliability analysis 24

5.5 Factor Analysis 25

5.6 Multiple regression 27

6 CHAPTER 5: FINDINGS, RECOMMENDATIONS AND CONCLUSIONS 30

6.1 Findings 30

6.2 Recommendations 31

6.3 Conclusions 34

6.4 Limitations of the study and future research 35

REFERENCES 37

APPENDIX 1 - Survey questionnaire 39

APPENDIX 2 – Descriptive Analysis 43

APPENDIX 3 – Reliability Analysis 44

APPENDIX 4 – Factor Analysis 46

APPENDIX 5 – Regression Analysis 48

LIST OF FIGURES

Figure 2.1: BOS and its application 2

Figure 2.2: Specialty fats market 3

Figure 2.3: Calofic sales 4

Figure 2.4: Imported products 4

Figure 3.1: Areas of industrial buying behavior Adapted from Baptista and Forsberg (1997), p 22 8

Figure 3.2: The conceptual model of selection BOS supplier 15

Figure 5.1: Position of respondents 21

Figure 5.2: BOS volume per month 22

Figure 5.3: Experience of respondents with BOS in coffee roasting 22

LIST OF TABLES

Table 3.1: The importance of different classical decision criteria 11

Table 3.2: List of common choice criteria in prior studies 12

Table 3.3: Scale using for independence variable 14

Table 5.1: Descriptive analysis of factors influencing customer behavior 24

Table 5.2: Reliability statistic of five independence factors and one dependence factor 24

Table 5.3: Factor analysis with Promax method 26

Table 5.4: The list of new factors 26

Table 5.5: Anova test 27

Table 5.6: Liner analysis 28

Table 5.7: Model Summary 29

1 EXECUTIVE SUMMARY

The study was aimed at determining the impacts of factors that influence the customer behavior of Butter Oil Substitute (BOS) in coffee roasting industry The study was carried out in Ho Chi Minh City on 88 customers using face to face interview and structured questionnaire as the instruments for data collection Questions were designed to find out how consumers behave in relation to BOS for coffee roasting

The study showed that the purchase of BOS in coffee roasting industry is influenced mostly by the customer’s price consciousness, relationship between buyer and seller, and customer service

Implications of the study used as references for the planning of marketing strategies and as the basis for future researches in the customer behavior with regard to bakery customers (another application of BOS) and specialty fats in general

2 CHAPTER 1: INTRODUCTION

2.1 Background introduction

Vietnamese coffee is roasted differently from coffee in other regions of the world, a unique process, involving butter oil and techniques that bring out the highest development of flavor without over-roasting or burning the coffee Coffee beans are generally roasted in what is referred to as butter oil substitute (BOS) Butter oil substitute is a replacement for butter oil BOS is processed from vegetable oil instead of milk therefore it has economic BOS is widely used in the coffee roasting industry to replace the expensive dairy-based butter oil The functionality of BOS is similar to that of butter, which is to smoothly, fatty beans The unique characteristics of the BOS product are its strong butter flavor and a deep yellow color BOS has being hot in recent years in Vietnam due to low price & convenience for coffee roasting industry

Figure 2.1: BOS and its application

There are about 300 coffee roasters in Vietnam All most all of coffee roasters are using BOS to add in roasting process Dosage is about 3% - 5% According to the association’s date, BOS’s volume from import statistic estimates about 7,000mt per year, almost from Malaysia, Indonesia

2.2 Problem statement

Wilmar International Limited is Asia’s leading agribusiness group, and their operations are located in more than 20 countries Wilmar’s business activities include oil palm cultivation, oilseeds crushing, edible oils refining, consumer pack edible oils processing,

specialty fats, oleo chemicals, biodiesel manufacturing, and grains processing In Viet Nam, Cai Lan Oil & Fats Industries (Calofic) is a market leader in cooking oils industry of Viet Nam, through famous cooking oils brands such as Neptune, Simply, Meizan, Cai Lan, Kiddy and Olivera Besides, with support from Mother Company, they plan to expand business activities in specialty fats segment Specialty fats include BOS (butter oil substitute), shortening, Margarine, and Hydrogenated oil BOS extensively used for top grade cake, cookie making and coffee roasting

In order to exploit the existing distribution network, it is necessary for Calofic to study the factors influencing the customer behaviors of BOS, especially for coffee roasting in Ho Chi Minh City

2.3 Specialty Fats market

The sales volume for the specialty fats segment in Viet Nam has reached $49 million for a volume of 35,000Mt in 2010 Calofic’s volume has shown a steady growth since 2008: an increase of 10.5% (Figure 3), and 5% in 2010 Imported companies are the current market leader with 47% of the market shares in 2010 Calofic is second with 38%, the others belong to local manufactures

Figure 2.3: Specialty fats market

Figure 2.3: Calofic sales

The imported volume was estimated to account for 47% of the specialty fats market The table below determines the attractiveness of a market, both now and in the future

Figure 2.3 Imported products

2008 2009 2010

According to imported statistic, BOS is a fast growing market with an annual growth of approximately 15% The BOS market in Vietnam is highly competitive and fragmented due

to the presence of many trading companies, exclusively distribution of multinational producers There is no dominating company in the market Customers have many choices among imported products In this situation, Calofic have been actively engaged in BOS segment for coffee roasting industry in order to catch the growing demand, and also to increase the sales in other markets where product offerings are quickly maturing

2.6 Scope of the project

This study focuses on coffee roasting customers in Ho Chi Minh City, who buy BOS for coffee roasting process BOS application in bakery and confectionery are not covered by this research Customers from other provinces are not chosen to be the subjects of this study because of limit of time

2.7 Research structure

The research paper is arranged into five chapters Chapter 1 introduces the research background, objectives and rationale as well as the scope of the study Literature review is presented in chapter 2 Chapter 3 describes the methodology applied in the study Data analysis is presented in chapter 4 Chapter 5 summarizes the research results, provides recommendations to company and future research

2.8 Framework of Research

This thesis will be followed below stages:

Figure 2.5: Research framework

Theoretical framework

Research design

Objectives of the Research

Data analysis

Findings, Recommendations and Conclusions

3 CHAPTER 2: LITERATURE REVIEW

3.1 Chapter overview

The previous chapter has briefly discussed the general research background, the overview

of Vietnam specialty fats market and the key research objectives This chapter contains an overview of literature on industrial buying behavior The theories regarding the buying process, buying center, and affecting factors are all divided and presented in smaller parts Furthermore the concept of decision making units within industries will be discussed and is followed by a brief discussion regarding choice criteria in industrial buying

3.2 Industrial Buying Behavior

Buying behavior in this study will focus on the industrial buying behavior (hereafter IBB) IBB is a complex process over time that involves interaction between several persons, both within and outside an organization (Webster & Wind, 1996) Many authors have researched this issue and there is a general agreement that the major components of industrial buying behavior are: the buying process; the buying center; and factors affecting the buying process and the buying center (Bapista, 2001)

Wind and Thomas (1980) have suggested that industrial buying behavior can be divided into three different areas: buying process, buying center, and affecting factors Each of these areas consists of several parts, which can be seen in figure 5

Figure 3.2: Areas of industrial buying behavior Adapted from Baptista and Forsberg (1997), p 22

3.3 Buying Process

Wind and Thomas (1980, p 242) have described the industrial buying process in the following way: “From the time at which a need arises for a product or service, to the purchase decision and its subsequent evaluation, a complex myriad of activities can take place” The elements in the buying process are, as mentioned in figure 3.1, overall buying process, identification of needs, identification of alternatives, set purchase and usage criteria, evaluate alternative buying actions, purchase decisions, and post-purchase evaluation

Buying process

Identification of Needs

Identification of Alternatives

Identification of Alternatives

Set Purchase and Usage Criteria

Evaluate Alternative Buying

Purchase Decisions

Post purchase evaluation

Buying center

Roles in the BC

Influence in the BC

Factors affect BP &

BC

EnvironmentalInter-organizationalOrganizationalInterpersonal Individual

Buying situation

Overall Buying Process

The goal with this model is to provide a useful technique of analysis for researchers interested in the theory of decision making as well as for business executives who may wish to review the decision making procedure of their own companies

Identification of Needs

The identification of needs is the initiator of the buying process, and can be originated from various sources, within or external to the buying organization (Baptista & Forsberg, 1997)

Identification of Alternatives

This particular aspect concerns the quotation selection process or rather the identification

of alternative suppliers that are selected to submit their bidding, or alternative internal solutions It also concerns the determination of attribute importance, which influences this process All these factors combined affect the buying decision

Set Purchase and Usage Criteria

Once a set of potential suppliers is selected and the various offers/biddings are presented this phase takes place “Set purchase and usage criteria” focuses mainly on the assessment

of the relative importance of different purchase criteria (Baptista & Forsberg, 1997)

3.4 Factors Affecting Buying Process & Buying Center

The major determinants of industrial buying behavior can be divided into four groups of factors The groups of factors mentioned by the authors are:

• Environmental factors (environmental determinants of buying behavior which include physical, technological, economical, political, legal, and cultural influences)

• Organizational factors (organizational determinants of buying behavior that include technology, structure, tasks, and people)

• Interpersonal factors (interpersonal relationships among the members in the buying center, that is, interpersonal determinants of buying behavior that include different roles played by the participants, how they influence each other, and their relationships)

• Individual factors (individual characteristics of the member, including motivation, cognitive structure, personality, learning processes, and perceived roles

3.5 The buying Center

The buying situation has long been recognized as vital in IBB (Webster and Wind, 1972a), they defined the buying center as "The individuals who are related directly to the purchasing process, whether users, buying influencers, decision makers, or actual purchasers” Webster and Wind (1972a) came to the conclusion that only a subset of the organizational actors is involved in a buying situation Further, they proposed five roles performed by buying center members:

 Users are those in the organization who use the purchased product

 Buyers are those with formal responsibility and authority for contracting with suppliers

 Influencers symbolize those who influence the decision process by providing information and criteria for evaluating alternative buying actions

 Deciders refer to those with authority who choose among alternative buying actions

 Gatekeepers designate those who control the flow of information into buying center

The members in the buying center interact, but they are likely to have different interests and perceptions of reality and therefore conflicts might exist Individuals have different personalities, experience of their role, motivation, cognition of the problem, and expectations The individuals’ predispositions, preferences, and methods of making decisions will affect the final outcome

3.6 Choice Criteria

In order to make the best choice and succeed in business, organizations should base their choice of supplier upon critical evaluation criteria Four classical criteria are quality, delivery, price and service, seemingly the importance between these have changed during the years (table 3.6.1) (Lehmann and O’Shaughnessy, 1974; Matthyssens & Faes1985)

Study Rank order of decision criteria

Lehman & O’Shaughnessy (1974) Delivery Price Quality Service

Lehman & O’Shaughnessy (1982) Quality Price Service Delivery

Table 3.6.1: The importance of different classical decision criteria

Lehman & O’Shaughnessy (1974) examined in their study the importance of different choice criteria (attributes) Their study was conducted on the base of 17 attributes (included in table 3.6.2) that are a breakdown of the four classical choice criteria, and thus somewhat interrelated

The authors found that the relevance of the attributes is mainly dependent on product type, the buying situation at hand and the perception of the buyers These findings were also supported by prior work from Kelly & Coaker (1976) where five of seven investigated choice criteria differed depending on organization as well as Dempsey’s (1978) study of the importance of different attributes in industrial vendor selection (21 attributes where examined and are included in table 3.6.2) Some researchers have found that generally the purely economical factors (including delivery, capability, quality, price, repair service, technical capability and past performance) were the most significant factors (Dempsey, 1978; Kelly & Coaker, 1976; Lehman and O’Shaughnessy, 1974)

• Adjustment to company’s needs • Production facilities

• Attitude toward buyer • Data on reliability of product

• Performance history • Technical specifications

• Confidence in the salesman • Ease of operation or use

• Convenience of placing order • Quality

• Control systems • Ability to fill emergency orders

• Reliability of delivery date promised • Delivery capability

• Suppliers accuracy in billing • Price

• Suppliers accuracy in order handling • Financial position

Deng and Wortzel (1995) conducted a study of the supplier selection criteria used by US importers in three merchandise categories In all categories, the most important criteria were price and product quality, followed by on time delivery The geographical location of the seller and the brand name was of little importance in the supplier selection decision

3.7 Long-term relationships in industrial markets

There are fewer industrial buyers than consumer market customers, but the size of individual orders can be much larger in industrial markets For this reason individual industrial market customers can be more important to marketers than individual consumer market customers (these have little or no power of leverage over marketers)

The importance of industrial customers can mean that they are able to negotiate on price, terms and specifications (The length of the negotiating period may be longer in industrial markets.) The above two factors mean that it is both important and possible for sellers to form close, long term relationships with buyers There are other reasons too for the importance of long term relationships between customers and suppliers

This literature review suggests that five variables constitute the main explicative factors of regular and stable industrial buying behaviors First, it is generally admitted that trust, commitment to the exchange relationship and satisfactory performance, are the important characteristics of a good buyer - seller relationship Parallel to these variables, the effect of cooperation and non shared dependence (i.e unilateral dependence of a customer to his supplier) on the length of the relationship have been, too, extensively studied in the literature (Han, et al 1993)

Satisfaction appears in the vast majority of the studies on regular and stable buying behavior It is, very often, considered as the determinant variable of influence on the willingness to continue the relationship (Anderson, et al, 1990) Although some recent studies underline that being satisfied is not enough for a customer to develop regular and stable buying behavior (Henning-Thurau and Klee, 1997, Reicheld, 1996), satisfaction can

be considered as a necessary but not sufficient condition for the development of regular and stable buying behavior

Many researches also show that trust is determining in the continuity of industrial relationships The customer feeling confident won’t have any real reason to switch from his supplier and, in this stable relationship; he will easily become a regular consumer More, as the length of the relationship increases, the feeling of confidence grows (Anderson and Weitz, 1992) Trust seems, then, to exist for all the long-term relationship

The situation is quite different for commitment As a desire to develop and maintain the relationship, commitment is a determinant of customer’s behavior only for loyal customers the concept can be defined as the willingness of the customer to develop and maintain his relationship with a particular supplier (Anderson and Weitz, 1992)

In conclusion, when the observed behavior is linked to positive attitudes (satisfaction, trust, commitment), and only in that case, it reflects customer loyalty (Jarvis, Wilcox 1977)

3.8 Scale using in theoretical framework

For this study, scale includes items of independence variable and items of dependence variable The table below explains the factors using in this study and their components:

texture Smoothly texture of product affect to customer choice

flavor Unique flavor of product affect to customer choice

packing Packing of product (tin, carton, pail) affect to customer choice design Design easy to use affect to customer choice

Table 3.3: Scale using for independence variable

4 CHAPTER 3: RESEARCH DESIGN

This research methodology gave us guidelines for how we should gather needed information for our research and how to process it This increased the possibility to receive appropriate answers to our research questions and also to make valuable conclusions The

starting point of any research process is the identification of the research objectives The next

step is to establish plans of how the objectives are met and how information is to be obtained The research design in this study was based on the research objectives, the availability of secondary data and the available resources

Both qualitative and quantitative methods were used According to Trong & Ngoc (2008) there are three ways of conducting exploratory research: (1) search for literature; (2) talking

to experts; and (3) conducting focus group interviews Face to face interview and focus group was intended for exploratory purpose which provided qualitative information The explored information was then used to construct the questionnaire for descriptive purpose These are to be answered with a method representing a measuring quantitative data The approach to this study led to that the gathered information was expressed through words with standardized data and was analyzed using SPSS

4.2 Qualitative research

The purpose of the qualitative study is to explore potential factors that may have an impact

on the buying decision of customers in relation to coffee roasting industry The method used is face to face interview and focus group

4.2.1 Sampling

In order to provide content validity, author arrange interviews with managers at Calofic, sales & marketing staffs, R&D staffs and distributors to get their advice about questionnaire to make it more consistent with the purpose of this research One group of six distributors was recruited for focus group discussion Focus interview by face to face applied for managers, staff of sales & R&D in Calofic

4.2.4 Interview results

Data were drawn from the results of face to face discussions In general, respondents

‘opinions and attitudes were very diverse Factors that may influence the customer buying behavior include those belong to product characteristics such as texture, flavor, packing, design For pricing factor, promotion, rebate, low initial price also have significant affect Customer characteristics that may have an impact on the purchasing behavior are position, experience, knowledge about the product, age, and their volume Other influencers are relationship, service, and channeling

Focus interviews with expert and staffs of Calofic indicated that:

 Most of the participants are quality-conscious rather than price-conscious

 Relationship between buyer and seller play an important role in the consumer’s decision making The relationship includes trust between two parties, commitment of supplier for their products and services, and satisfaction performance during transaction

 Customer service, channeling are used by customers as indicators for perceived quality

 In general, customers have limited knowledge about BOS products and show a relatively low involvement in the buying decision process

Discussions among six distributors in focus group revealed similar customer behaviors:

 Customers tend to rely on sales personnel for their purchase decision

 Customers are likely to judge product quality based on price and customer service

 Customers always bargain for price

 The relationship and personal sales are considered important to customer buying decision

4.3 Quantitative research

In main research, we design a questionnaire and make face to face interview

4.3.1 Questionnaire design

The questionnaire consists two parts:

• Part one is general information of customers The answers of this part are for references purpose and also have an important role in finding effective recommendations and solutions of this research

• Part two covers the factors influencing of customer behavior measuring 16 items of customer behavior and also covering five factors These items were developed from the study model and from the interview outcomes A five-point Likert scale representing a range from “strongly disagree” (1) to “strongly agree” (5), was used to rate attitudes for each variable

The questionnaire was translated into Vietnamese and pre-tested on five respondents to ensure the correct understanding and the ease of answering The tested questionnaires were personally distributed to 88 customers in Ho Chi Minh City

4.3.2 Survey process

Sample size

As Trong & Ngoc (2008) in data analysis with SPSS, the required sample is at least four or five times of variables, and the sample size of this survey is 88 customers (5x16 variables) The survey is conducted with face to face interview Two main reasons explain why this method is used Firstly, as the refusal rate is high in telephone interview and mail surveys

in Vietnam, the face to face interview approach provides a higher chance of approaching the retailer and reducing the refusal rate Secondly, as customers are usually reluctant to provide information about their business and its performance in written formats, interviews

in person are more successful

The first step is contacting prospective participants by phone to seek their willingness to participate and to make an appointment, interviewers visited customer to conduct the interview in person at the agreed time Each interview took approximately 15 min to complete The interviews were conducted in from Sep to Oct 2010, over a 4 week period

Sampling methodology

In this study, to get an overall picture of each company’s buying behavior, we interviewed with buying decision makers and these people come at different levels: owner, production management, technical and purchaser There would be a list of roasting coffee customers from associate data which should be chosen randomly as samples for this research Each customer has the same probability of being chosen for samples Therefore, Simple Random Sampling method was used in this study and interviewers were chosen randomly from sampling frame of current customers (Trong, and Ngoc, 2008)

Total current coffee roasting customers in Viet Nam is over 320 and 110 customers in Ho Chi Minh city And 88 customers from this group list were chosen randomly by Excel for samples of this research

4.4 Data Analysis

Answers from the respondents were reviewed for completion and usefulness Accepted questionnaires were coded and the raw data input in the SPSS package version 11.5 The reliability of measurement scales was evaluated using Cronbach alpha’s value based on internal consistency between variables in an overall questionnaire A scale is reliable if the alpha value is higher than 0.6 Descriptive analysis is used to describe the variables in term

of frequency Due to the small sample size, subgroup analysis is not meaningful Analysis

of variance (ANOVA) or cross tabulation results therefore were not used

To reduce the number of variables and to identify the underlying common dimensions, factor analysis was applied Factors scores were then analyzed using multiple regressions, through which linear relationships between a dependent variable and various independent variables (predictors) were determined

The results of multiple regression analysis indicate the determinants and their significance

to the customer’s buying decision of BOS in coffee roasting industry The quantitative results are presented in the next chapter