MINISTRY OF FINANCE UNIVERSITY OF FINANCE — MARKETING FACULTY OF MARKETING COURSE CODE: 2431702072011 MAJOR: DIGITAL MARKETING DEVELOPING A MARKET ENTRY STRATEGY FOR AMAZON GROUP IN V
Question 1 1
The opportunity cost of producing 1 software = The number of clothes to forgo = 10 clothes / 30 software = 0.33 clothes
The opportunity cost of producing 1 clothing = The number of software to forgo = 30 software / 10 clothes = 3 software
The opportunity cost of producing 1 software = The number of clothes to forgo = 5 clothes / 10 software = 0.5 clothes
The opportunity cost of producing 1 clothing = The number of software to forgo = 10 software / 5 clothes = 2 software
Country A has a comparative advantage in producing software because the opportunity cost (0.33 clothes) is lower than Country B (0.5 clothes)
Country B has a comparative advantage in producing clothing because the opportunity cost (2 software) is lower than Country A (3 software)
Step 3: Output in the Case of Specialization
Concentrate all 15 workers on software production
Clothing output = 0 clothing (due to lack of specialization)
Concentrate all 15 workers on software production
Step 4: Total Output Before and After Specialization
Before Specialization ¢ Total software output= 30 + 10 @ ô - Total clothing output = 10 + 5 = 15
After Specialization ¢ Total software output = 30 + 0 = 30 ô ‘Total clothing output =0+ 15 = 15
After specialization, countries can trade goods to meet their needs ¢ Country A: Has 20 software units left and receives 10 clothing items ¢ Country B: Has 5 clothing items left and receives 10 software units
After countries specialize and engage in trade, the key results are as follows:
Countries enhance resource efficiency by concentrating their labor and capital on the production of goods where they possess a comparative advantage This strategic allocation of resources ensures optimal utilization, avoiding the dilution of efforts in less efficient sectors.
Specialization in production allows both countries to achieve higher or equivalent total output of goods, such as software and clothing, compared to when they produced everything independently This enhanced efficiency not only boosts overall production but also better satisfies the needs of each country through increased trade opportunities.
Trade enables countries to meet their unique needs by exchanging goods they either do not produce or cannot produce efficiently For instance, Country A, which excels in software production, trades its software for clothing from Country B, while Country B, specializing in clothing manufacturing, acquires software from Country A in return This mutual exchange enhances the economic efficiency and resource allocation of both nations.
Trade enhances consumption for both countries, allowing them to access a greater variety of goods than if they were solely reliant on their own production Initially, both Country A and Country B faced limitations in total output when producing independently However, after embracing specialization and engaging in trade, each nation significantly increases its consumption through the benefits of exchange.
Specialization and trade enhance cooperation among nations by facilitating the exchange of goods and services, which boosts economic connectivity and interdependence This interlinked relationship not only fosters global economic stability but also drives growth, ultimately leading to an increase in the production of goods for each country.
Specialization Based on Comparative Advantage: ¢ Country A focuses on software production (lower opportunity cost) ¢ Country B focuses on clothing production (lower opportunity cost) ô This optimizes production and improves efficiency
Trade of Goods Between Two Countries: After specialization, the two countries exchange products to satisfy their needs
For example, in Step 5: ¢ Country A exchanges 10 software units for 10 clothing items from Country B ¢ Country B exchanges 10 clothing items for 10 software units from Country A Increased Consumption Capacity:
Before Specialization: ¢ Country A consumes 30 software units and 10 clothing items ¢ Country B consumes 10 software units and 5 clothing items
After Trade: ¢ Country A consumes 20 software units and 10 clothing items (produced and exchanged) ¢ Country B consumes 10 software units and 10 clothing items
Final Result: Both countries consume more goods than when they were self-sufficient, thanks to trade
Trade enhances the consumption of goods in each country by enabling specialization in production based on comparative advantage This exchange of goods allows countries to utilize their resources more efficiently, leading to increased consumption levels compared to a scenario without trade.
Question 2 3
Company Demand Âô Company Demand = Company Sales = 5 millions
Penetration Rate ¢ Penetration Rate = Market Demand/Market Potential x 100 = 25/100 x 100 = 25% From there, we can calculate the company's market share. ¢ Company Market Share = Company Demand/Penetration Rate x 100 = 5/25 x 100 = 20%
The company demand reflects the portion of the total market potential captured by the company This is determined by the company’s sales
To effectively evaluate their competitive position, businesses can calculate market share based on company demand This understanding of company demand within the broader market facilitates the development of strategic growth plans, which may include product optimization, service enhancements, and customer base expansion.
Market penetration is a measure of how much a product or service is being used by customers compared to the total estimated market for that product or service
Market penetration is a valuable metric for assessing the size of a potential market, indicating the opportunity for new entrants to capture market share A large total market suggests that companies can increase their revenue by reaching a percentage of the total potential customers Essentially, market penetration provides insight into the overall industry landscape, helping businesses evaluate their potential for growth and sales expansion.
The market penetration rate is crucial for businesses as it enables them to assess their current position, historical performance, future goals, and competitive standing.
Evaluating market entry strategies relies heavily on the market penetration rate and company demand The market penetration rate reveals how much of the market potential has been utilized, helping businesses pinpoint expansion opportunities and refine customer outreach In contrast, company demand indicates how well market opportunities translate into actual sales, serving as a foundation for assessing competitive positioning and crafting sustainable growth strategies Together, these factors enable businesses to optimize resources, enhance market share, and solidify their market presence.
Amazon is strategically entering the booming Vietnamese e-commerce market, capitalizing on its global strengths while adapting to local demands With robust government support for digital economies and increasing consumer demand, Vietnam's competitive landscape offers both opportunities and challenges for Amazon as it aims to establish and grow its market presence.
Amazon's mission in Vietnam is to establish itself as a trusted e-commerce platform by providing a wide range of high-quality products and an exceptional shopping experience To accomplish this, the company has set strategic goals focused on revenue growth, expanding market share, enhancing brand recognition, and developing its customer base Over the next three years, Amazon aims to achieve significant milestones, including reaching a revenue target of 30 trillion VND, capturing 20% of the market share, and elevating customer satisfaction to 90%.
In the initial phase of its strategy for 2025, Amazon aims to enhance market penetration and brand recognition by establishing a robust logistics network through partnerships with local entities By 2026, the company plans to diversify its product offerings to include local goods and premium international brands, while refining its pricing strategy and introducing expedited delivery services in major cities By 2027, Amazon intends to solidify its market leadership by personalizing the customer experience, expanding its local product range, and enhancing services like Amazon Prime, all while leveraging AI and automation to optimize logistics for faster nationwide delivery.
Amazon’s approach will include a strategic alliance with local partners, emphasizing localized marketing, customer service excellence, and technological innovation to foster long-term growth in the competitive Vietnamese e-commerce market.
CHAPTER 2: OVERVIEW OF AMAZON AND THE VIETNAM MARKET
Amazon aims to be the world's most customer-focused company, providing a platform where customers can easily find and discover any product they wish to purchase online, all while striving to offer the most competitive prices available.
Mission: "We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience”
Amazon operates under four key principles: prioritizing customer obsession over competitor focus, fostering a passion for innovation, committing to operational excellence, and embracing long-term thinking The company's mission is to become the most customer-centric organization globally, the best employer, and the safest workplace.
Vietnam's initiatives to enhance the digital economy and e-commerce, particularly through Decree No 85/2021/ND-CP, have established a supportive environment for businesses The Department of E-commerce and Digital Economy highlights key aspects of this policy, including the enhancement of the legal framework, provision of financial support, encouragement of investment, development of digital infrastructure, safeguarding of data and cybersecurity, and promotion of cross-border e-commerce alongside research in new technologies.
The rapid growth of e-commerce highlights the government's vital role in managing infrastructure and fostering sustainable development Effective collaboration among businesses, consumers, and regulatory bodies is essential for progress The government has introduced the National Strategy for the Development of the Digital Economy and Digital Society, aiming for significant contributions from the digital economy—20% of GDP by 2025 and 30% by 2030—with e-commerce as a central element of this vision.
Despite macroeconomic challenges, e-commerce in Southeast Asia, particularly in Vietnam, is experiencing robust growth A report from OpenGov Asia indicates that Vietnam has emerged as the fastest-growing e-commerce market in the region, now ranking as the third-largest in Southeast Asia, ahead of the Philippines The global economic outlook for 2024 shows promise, with GDP growth projected between 3.1% and 3.2%, and inflation expected to decline to 5.8% to 5.9% Over the past 15 years, Vietnam's e-commerce sector has maintained an impressive average growth rate of 20% annually, positioning it among the top 10 globally and creating momentum for consumers and opportunities for local businesses to expand internationally For foreign investors, tapping into Vietnam's e-commerce market presents significant potential, albeit with the necessity of a thorough understanding of the local economy and market dynamics.
Vietnam's economic growth has significantly enhanced living standards and transformed consumer shopping behaviors In 2024, NielsenIQ Vietnam reports a remarkable rise in online shopping, with each Vietnamese individual making nearly four online purchases monthly and dedicating over eight hours weekly to online shopping—double the time spent in supermarkets Consumers are utilizing an average of 3.2 shopping platforms, with a striking 94% of transactions conducted through mobile devices.
The rise of online grocery shopping marks a significant shift in consumer behavior, as food and essential goods are now commonly purchased alongside non-essential items Motivations for this change extend beyond price, emphasizing convenience; with 25% of shoppers buying to stock up and 21% shopping for immediate meal preparation.
E-commerce in Vietnam is witnessing significant growth, with the top five platforms generating a total revenue of 85 trillion VND in Q2 2024, marking a 78% increase from the previous year Projections indicate that by 2025, e-commerce revenue will soar to 39 billion USD, representing 70% of the country's digital economy To keep pace with this rapid expansion, e-commerce platforms must enhance user experience and broaden their product offerings, especially in essential daily goods.
OVERVIEW OF AMAZON AND THE VIETNAM MARKET
Overview of Amazon 6
Amazon aims to be the most customer-centric company on Earth, providing a platform where customers can easily find and discover anything they wish to purchase online, all while striving to offer the lowest prices possible.
Mission: "We strive to offer our customers the lowest possible prices, the best available selection, and the utmost convenience”
Amazon operates under four core principles: prioritizing customer obsession over competitor focus, fostering a passion for innovation, ensuring operational excellence, and embracing long-term thinking The company's mission is to become the most customer-centric organization globally, the best employer, and the safest workplace on Earth.
Vietnam Market 6
Vietnam's Decree No 85/2021/ND-CP has established a supportive framework for the growth of the digital economy and e-commerce, enhancing conditions for businesses The Department of E-commerce and Digital Economy highlights that this policy focuses on improving the legal framework, providing financial support, encouraging investment, advancing digital infrastructure, ensuring data protection and cybersecurity, and fostering cross-border e-commerce along with new technology research.
The rapid growth of e-commerce underscores the government's vital role in managing infrastructure and fostering sustainable development Effective collaboration among businesses, consumers, and regulatory bodies is essential for progress The government has established the National Strategy for the Development of the Digital Economy and Digital Society, aiming for significant contributions to GDP—20% by 2025 and 30% by 2030—with e-commerce as a central element of this vision.
Despite macroeconomic challenges, e-commerce in Southeast Asia, especially in Vietnam, is experiencing robust growth According to a report from OpenGov Asia, Vietnam has become the fastest-growing e-commerce market in the region, now ranking as the third-largest in Southeast Asia, ahead of the Philippines With a projected GDP growth of 3.1-3.2% and inflation expected to decline to 5.8-5.9% in 2024, Vietnam's e-commerce sector has maintained an impressive average growth rate of 20% per year over the past 15 years, placing it among the global top 10 This growth creates significant consumer momentum and opportunities for Vietnamese businesses to expand internationally For foreign investors, entering Vietnam's e-commerce market offers substantial potential, but it necessitates a comprehensive understanding of the local economy and market dynamics.
Vietnam's economic growth has significantly enhanced living standards and transformed consumer shopping behaviors As reported by NielsenIQ Vietnam, 2024 has witnessed a remarkable rise in online shopping, with Vietnamese individuals making nearly four online purchases each month and dedicating over eight hours weekly to this activity—twice the time spent in supermarkets Additionally, consumers utilize an average of 3.2 shopping platforms, with a staggering 94% of transactions conducted through mobile devices.
The rise of online grocery shopping marks a significant shift in consumer behavior, with food and essential goods now being commonly purchased alongside non-essential items This change is driven by motivations beyond just price, as convenience plays a crucial role; 25% of shoppers are looking to stock up, while 21% seek immediate meal preparation solutions.
E-commerce is experiencing robust growth, with total revenue from the top five platforms reaching 85,000 billion VND in Q2 2024, an increase of 78% compared to the previous year It is forecasted that by 2025, e-commerce revenue will reach 39 billion USD, accounting for 70% of Vietnam's digital economy This development requires e-commerce platforms to optimize the user experience, expand product portfolios, particularly essential daily goods
Technology is significantly advancing e-commerce in Vietnam, especially in the realm of online payments In early 2024, cashless payment methods, including e-wallets, QR codes, and POS systems, saw a remarkable increase of 59.6% in transaction volume and 32.73% in value compared to the previous year The convenience and security offered by these online payment options are anticipated to fuel further growth, enhancing consumer finance and spending through digital platforms.
Artificial Intelligence (AI) and Big Data play a crucial role in personalizing user experiences on e-commerce platforms by analyzing customer behavior and offering tailored shopping recommendations These technologies also enhance operational efficiency through improved demand forecasting and supply chain management, ultimately reducing costs and boosting competitiveness Additionally, government initiatives are fostering digital transformation, enabling businesses to grow, although substantial investments in cybersecurity are essential to safeguard customer data and secure online transactions.
Vietnam, a developing nation rich in natural resources, faces challenges due to unsustainable exploitation of these assets Rapid urban development has resulted in serious environmental pollution, particularly in major cities like Ho Chi Minh City and Hanoi Additionally, the country has been impacted by several natural disasters, including storms and floods, which have caused considerable harm to both its citizens and the government.
Vietnam is embracing the production and consumption of green, eco-friendly products, with businesses prioritizing Corporate Social Responsibility (CSR) to attract consumers For Amazon to successfully enter the Vietnamese market, it must align its strategies with these environmentally conscious trends and develop products that resonate with this growing demand.
Vietnam is actively encouraging foreign investment and participation in the global economy, emphasizing the importance of intellectual property over physical assets for businesses To enhance e-commerce and the digital economy, the National Assembly has enacted the E-Transactions Law, which introduces essential policies Additionally, the Ministry of Information and Communications is developing a draft decree focused on electronic signatures, trusted services, and e-transactions within government agencies.
Current regulations regarding model contracts in e-commerce and notarization remain inadequate, leaving significant gaps Furthermore, challenges such as counterfeit products, piracy, and violations of intellectual property rights persist, creating obstacles for major corporations like Amazon.
Overview of the Vietnamese E-commerce Marketplace 9
2.3.1 Overview of the E-commerce Marketplace
Vietnam's e-commerce industry is experiencing rapid growth, with an estimated market size of 22 billion USD in 2024, making it the third largest in Southeast Asia, following Indonesia and Thailand In 2023, the sector saw an 18% increase, ranking it third in the region, behind the Philippines and Thailand Projections indicate that by 2030, Vietnam's e-commerce market will expand to 63 billion USD, surpassing Thailand and securing the second position in Southeast Asia after Indonesia.
E-commerce accounts for over 60% of Vietnam's digital economy, along with online tourism, being one of the two main growth drivers Domestic platforms such as Shopee, TikTok Shop, Lazada, Tiki, and Sendo, as well as cross-border platforms like Temu and Shein, are fiercely competing on price, technology, and entertainment value The trend of combining shopping with entertainment through short videos, livestreams, and artificial intelligence (AI) is significantly influencing consumer behavior, with 88% of surveyed people in Southeast Asia making purchase decisions based on AI recommendations
The size of the e-commerce market of countries
Indonesia Malaysia Philippines Thailand Singapore Viet Nam
Figure 2.1: Estimated E-commerce Market Size in 2024 and Forecast for 2030 by Country
The rapid growth of online shopping in Vietnam is primarily driven by the demand for convenience and time-saving solutions Consumers increasingly prefer user-friendly online platforms that offer fast payment options and home delivery services Additionally, the wide variety of products available on e-commerce sites, ranging from everyday essentials to luxury goods at competitive prices, caters to diverse customer needs and budgets Regular promotions and discounts further incentivize shopping, attracting consumers while enabling businesses to boost revenue and expand their market presence.
The evolution of shopping habits significantly contributes to the rise of online shopping Previously, consumers primarily turned to online platforms for non-essential purchases like electronics and fashion Today, however, there is a notable shift, with essential items such as food and daily necessities gaining popularity, highlighting changing consumer needs and preferences.
The competitive landscape of Amazon in the Vietnamese market is analyzed in detail in Appendix 1,
Amazon, a global leader in e-commerce, is celebrated for its credibility and reliability In Vietnam, where the young population favors international brands, Amazon has the potential to swiftly establish trust and attract customers as it enters the market.
Amazon utilizes advanced technologies like artificial intelligence and big data to tailor product recommendations and enhance user experiences, aligning perfectly with the preferences of Vietnamese consumers who prioritize smart solutions.
Comprehensive logistics network: Amazon's robust logistics system, including fast delivery services like Amazon Prime, effectively meets the demand for quick and accurate deliveries This
11 capability provides a significant advantage in a market where delivery speed is highly prioritized, like Vietnam
Amazon boasts a vast array of millions of products spanning multiple categories, from everyday essentials to rare discoveries, effectively meeting the varied shopping preferences of consumers This extensive selection positions Amazon as a formidable competitor in Vietnam's e-commerce landscape.
Vietnamese consumers tend to prioritize low prices and appealing promotions, creating a challenge for Amazon, which focuses on high-quality products and premium services This difference in consumer preferences highlights Amazon's limited understanding of the local market, making it difficult for the company to compete effectively with domestic platforms that possess a deeper insight into consumer behavior.
High costs: Amazon's product prices and shipping fees are generally higher than those of local platforms, which reduces its appeal to Vietnamese consumers, who are highly price-sensitive
Amazon struggles to meet the diverse payment preferences of users in Vietnam, primarily relying on international payment methods like VISA and Mastercard In contrast, local competitors such as Shopee and Lazada provide a wider range of payment options, which may lead to inconvenience for customers who lack international credit cards.
E-commerce Growth: Between 2022 and 2024, the e-commerce market in Vietnam continues to grow rapidly, supported by the increased use of smartphones and e-wallets In 2022, the retail e- commerce market reached $20.5 billion, marking a 25% increase compared to 2021 The market continued its growth in 2023, achieving the same revenue of $20.5 billion In 2024, the growth rate is expected to reach 18-20%, in line with the government's targets These figures highlight the strong development of e-commerce in Vietnam, along with the increasing adoption of smartphones and digital wallets, which creates favorable conditions for companies like Amazon when entering the Vietnamese market
The Vietnamese government is actively promoting the growth of the e-commerce market by providing support for export-import activities through various initiatives from the Ministry of Industry and Trade and other relevant agencies This supportive policy framework creates a positive outlook for foreign businesses, including major players like Amazon, to thrive in the Vietnamese market.
Amazon enjoys strong brand recognition among Vietnamese consumers, especially within the Gen Z demographic This established familiarity facilitates market entry and helps the company attract local customers who inherently trust the brand.
Vietnamese consumers are increasingly inclined towards discretionary spending, providing Amazon with a unique opportunity to cater to this market Their desire for individuality, along with a preference for high-quality and premium products, aligns perfectly with Amazon's offerings Furthermore, the growing curiosity for foreign brands presents a strategic advantage for Amazon to effectively target and engage this segment of discerning consumers.
The Vietnamese e-commerce market is experiencing intense competition, primarily led by established giants like Shopee, Lazada, and Tiki, alongside rising platforms such as TikTok Shop As of Q1 2024, Shopee holds a commanding 67.9% market share, while TikTok Shop has rapidly captured 23.2% These platforms benefit from their longstanding presence and a thorough understanding of Vietnamese consumer preferences, creating a challenging landscape for Amazon as it strives to attract consumers and regain market share from these formidable rivals.
Vietnamese consumers prioritize safety and reliability in online shopping, often preferring well-known platforms with established reputations This poses a challenge for Amazon as it seeks to enter the market, requiring significant time and effort to build trust and change purchasing habits Key concerns such as personal data security, product quality, and after-sales services are crucial for Amazon to address in order to foster consumer confidence.
Types of Strategic Alliances 13
3.2.1 Strategic Alliance through Equity Ownership
A strategic alliance involves partnering entities that hold a percentage of shares in each other's businesses, enabling them to pool resources and capabilities This collaboration fosters a competitive advantage and provides mutual benefits for all parties involved.
3.2.2 Strategic Alliance without Equity Ownership
A cooperative alliance involves parties forming relationships through agreements to share unique resources, with the goal of gaining a competitive edge Unlike joint ventures, these alliances do not create a new economic entity or involve equity stakes However, their informal nature and lower commitment levels make them less suitable for complex business initiatives.
Why Amazon Should Choose a Strategic Alliance? 14
Amazon has expanded its global logistics services, including the launch of the "Seller Export and Delivery" (Amazon SEND) program in Vietnam This initiative offers an integrated logistics solution, enabling Vietnamese sellers to access international markets, such as the U.S., with optimized costs and time By leveraging Amazon's advanced logistics system, this program presents significant opportunities for Vietnamese partners to grow their businesses on a global scale.
In the context of the rapidly growing and highly competitive e-commerce market in Vietnam, a strategic alliance is the most suitable method for Amazon to successfully penetrate the market
Partnering with local businesses like banks, logistics providers, and distributors allows Amazon to tap into regional insights on culture and consumer behavior This collaboration helps the company develop targeted marketing strategies and tailored services, especially in a market increasingly driven by mobile shopping.
Collaborating with local partners enables Amazon to leverage established infrastructure and distribution networks, effectively addressing logistics challenges in rural regions This resource-sharing approach not only lowers operational costs and mitigates financial risks but also offers a competitive advantage in a market largely led by Shopee and Lazada.
A strategic alliance enables Amazon to adhere to legal regulations, tax requirements, and customer data protection, thereby building consumer trust By merging its global technology and experience with local market insights, Amazon gains a competitive edge This approach allows the company to offer services such as rapid delivery, incorporate local payment options like MoMo and ZaloPay, and execute marketing campaigns that resonate with traditional festivals, enhancing brand relatability.
In conclusion, a strategic alliance is a feasible and sustainable solution that will help Amazon quickly adapt to the business environment, optimize resources, and build a long-term development foundation in Vietnam