Internship Report - Market research of lotte center hanoi

In traditional marketing, the final target of doing business is to sell as many products and gain as high profit as possible. At first, the business philosophy of marketing is just to improve production and distribution efficiency in order to make products and services available and affordable to customers. However, as customers’ demand and taste changed, this philosophy turned out to be ineffective and companies had to meliorate their product quality and features. When revenue and profit of the companies decreased even when they had provided products and services of good quality, they reckoned that it was necessary to invest in aggressive selling teams and promotion efforts, in order to compete in the market which seemed to be saturated. All these marketing orientations have just focused on companies themselves and products and services they provide, and companies’ benefits are put at the top.

I Introduction 3

1 History and organizational structure of Lotte Center Hanoi 3

(Human Resource and Admininistration Department – Lotte Center Hanoi) 4

2 Business activities and business results 4

3 Developing plans of the company 5

II Analysis of the demand for Business Centers in Vietnam 7

1 Overview of Vietnamese market 7

2 The role of Business Center for Vietnamese economic growth 8

3 The role of market research for the development of Lotte Center Hanoi 9

III Opportunities and threats for the development for Lotte Center Hanoi 11

1 Opportunities 11

2 Threats 12

IV Analysis and assess the present and future for clothing market in Hanoi 13

1 Customers 13

1.1 Description 13

1.2 Result analysis 13

1.1.1 Medium income – young women from 20 – 35 years old 13

1.1.2 High income customers 15

2 Competitors 16

2.1 Display 16

2.2 Policies 18

2.3 Location 18

V Conclusion and recommendation 20

1 Assessing the demand for clothes in Hanoi 20

2 How to address the demand 21

VI Internship experience 24

REFERENCE 26

APPENDIX

In traditional marketing, the final target of doing business is to sell as many productsand gain as high profit as possible At first, the business philosophy of marketing isjust to improve production and distribution efficiency in order to make products andservices available and affordable to customers However, as customers’ demand andtaste changed, this philosophy turned out to be ineffective and companies had tomeliorate their product quality and features When revenue and profit of thecompanies decreased even when they had provided products and services of goodquality, they reckoned that it was necessary to invest in aggressive selling teams andpromotion efforts, in order to compete in the market which seemed to be saturated Allthese marketing orientations have just focused on companies themselves and productsand services they provide, and companies’ benefits are put at the top

On the contrary, modern marketing concept says that companies should understandcustomers and gain profits through customer satisfaction, delivering desiredsatisfactions more effectively and efficiently than competitors do Furthermore, theyshould be interested in maintaining and improving consumers’ and society’s well-being

Today, companies have grasped the preeminence of the modern marketing conceptand also understand more and more about the important role, and heavy impacts ofmarketing tools in achieving their marketing objectives; therefore, they have paidmuch attention to market research

Coralis Vietnam, a company acquired by Lotte Group, also understand this and hasconducted many market researches to complete the design and construction of theLotte Center Hanoi, and fully exploit this business center in the near future

Due to the limitation of this report, I just focus on the market research on the futuredemand and trend for clothes which could be available in stores of Lotte Center Hanoi

by the year 2013 The first chapter will provide you with a brief introduction of thecompany The next chapters will deal with the process and results of the market

I would like to express my sincere thanks to Lotte Center Hanoi for their supportingmaterials, helpful suggestions, and good learning environment during my internship.Particularly, with the close instruction of my lecturer – Ms Pham Thu Huong, I had abig chance to improve my knowledge in Marketing, and to sharpen my researching,analyzing and reporting skills

I Introduction

1 History and organizational structure of Lotte Center Hanoi

In 2005, Coralis Vietnam Co Ltd was in charge of managing the capital from CoralisS.A of Luxembourg for the project of the Hanoi City Complex However, facing upwith some difficulties in gathering capital, the project was delayed for over 4 years.Finally, Coralis was acquired by Lotte Group in September 2009

Being interested in the construction area, from September 2009, Lotte Groupreinvested in the project of Hanoi City Complex with the total capital of over $400million1, and the building was given another name Lotte Center Hanoi

As mentioned above, Lotte Group has just taken over this project for over 9 months(from the November 2009), and it is still in progress, so the company has a simpleorganizational structure composed of five departments: Human Resource and Admin;Marketing; Accounting; Information Technology, and Project Management

The Human Resource Department is charge of managing and evaluating weekly andquarterly performance, working progress of both local and foreign staffs

The IT Department of the company just contains one employee who is responsible formaking and trying software for the company Besides, he also has to create aninformation sharing system for both internal and external users to access when findingdata and information

The Project Management Department is the most hard-working division in thecompany They have to deal with many documents, drafts and directly work withLotte CM and Lotte E&C, the parent company in South Korea as well as localauthorities This department is under the direct supervision of the General Director

Studying and helping the company to have the clear understanding about the trend anddemand of customers, exact forecasts of all the markets, and effective and efficientstrategic plans is the main works of Marketing Department.

Accounting Department is the most important division of the company Most of thecompany’s operation depends much on it All departments, from HR, IT to PM, have aclose relationship with this department

The company is under the surveillance of the highest senior manager – the GeneralDirector Each employee is supervised by his/her manager, and report directly to him/her, and their work progress must be presented to the whole company on the Mondaymorning every week The best performer of the week will be awarded with a smallgift, praised before the whole company’s presence

Figure 1: Company structure of Lotte Center Hanoi

(Human Resource and Admininistration Department – Lotte Center Hanoi)

2 Business activities and business results

Lotte Group has become a familiar name in Vietnam with eight sub-companiesrunning different businesses, i.e Lotteria Vietnam, Lotte Vietnam, Lotte Vietnamshopping, Lotte sea logistic, Lotte Vina International, Lotte Cinema Vietnam, LotteE&C, and Lotte Center Hanoi2 Lotte Center Hanoi is responsible for Managing &

GENERAL DIRECTOR

STRUCTURE OF LOTTE CENTER HANOI

Exploiting future Business Center, which was under the control of Coralis VietnamCo., Ltd more than 4 years ago.

Lotte is one of the market leaders in confectionery and foods; however, construction isalso one of their priorities Obviously, Lotte is not a property investor; therefore, they

do not fund capital to build this Business Center for sale Because of the lack ofcapital of Daewoo Group, after being delayed over 4 years, Hanoi City Complexproject was restarted in October 2009, and renamed Lotte Center Hanoi This businesscenter is now commenced by Construction Management and Lotte E&C– two of thelower levels in the organizational hierarchy of Lotte Group both in Korea andVietnam

3 Developing plans of the company

The initial total capital of this project was just $115 million; however, during theconstruction, they have to supplement more finance to reinvest more work items;therefore, the estimated capital now has increased over $400 million Particularly, up

to June 2010 Lotte Group had transferred $30 million to Lotte Center Hanoi

The company has tried to finish the project before the end of 2012; however, due tosome obstacles when applying licenses, the project can only be finished and go intooperation until the middle of 20133 Besides, Lotte Group can make arrangement fortheir own capital, so the company just sells a small quantity, and the remaining will beoffered for their own business activities, in fact they use this building for their long-term purpose – expand their distribution network in Vietnam, and set up business bythemselves Moreover, instead of having the external consultants or partners tomanage or promote their goods or services, Lotte will directly operate and exploit thisbuilding

Established in 1965, Lotte is running its business in many countries like Russia,China, India, and Vietnam is one of the most important markets Lotte aims to enterthe top ten economic group of Asia by 20184

3 http://www.skyscrapercity.com/showthread.php?t=985146

4 http://www.skyscrapercity.com/showthread.php?t=985146

II Analysis of the demand for Business Centers in Vietnam

1 Overview of Vietnamese market

Due to the fast speed of urbanization and higher income level in Vietnam, there is atrend of demolishing traditional markets, and constructing large business centers onthe old ground to take full commercial advantage of these places

Vietnamese retail market is an active and potential destination for investors withaverage growth rate of 20% per year, young demographic, middle class and theaverage income has quickly increased in recent years

Besides, traditional retail trade accounts for the major proportion of the total retailrevenue; therefore, it is still an open-end market for high-grade retail channels,especially in big cities like Hanoi, Ho Chi Minh City, Haiphong, etc

Moreover, a positive sign is that the government is planning to reduce lending rate to

12 – 13%5 in accordance with Decree 23/Resolution-Government6, which is expected

to ease financing for condominium purchase, and consequently increases residentialdemand

Furthermore, strong demand from local companies and/or from long term leases willcontinue to be the most significant trend in the office market Office demand isexpected to be string over upcoming quarters, though supply continues to outpacedemand

According to CBRE, strong demand for serviced apartments has remained stable inthe next few years because of the stably strong consumer’s budgets allocated foraccommodation

In Vietnam overall, tourism has fuelled strong demand as the nation saw an increase

in the number of international arrivals by 32.6%7 in the first six months of the year, to2.58 million participations Besides, the anticipation of the Thang Long – Hanoimillennium anniversary as well as other promotional packages supported by VietnamTourism Administration taking place during the third and fourth quarters of 2010 areexpected to bring an upswing in the number of tourist arrivals and the hotel marketcan expect improvements in occupancy rates and RevPARs

Resulting from these aspects, it is clear that Vietnam is a potential market for foreigninvestors as well as local ones

2 The role of Business Center for Vietnamese economic growth

With increasing number of licensed projects coming to Vietnam, an influx offoreigners working for multi-national corporations will enter the market as prospectivebuyers and tenants, and demand high-quality accommodations

When business centers want to avoid legal issues in the host country, they can acquire

a domestic company, and this activity can help host country in many aspects Forexample, if they want to do business in Vietnam, they have to sell not only famousforeign brands but they also have to pay much attention to domestic brands andcompanies Under the pressure of quality competition, local brands have to try theirbest to improve their products and services to compete with strong ones, and theconsumed volume of local residents will accordingly increase if they highly appreciatelocal brands The final target is to improve the competitive ability for domesticbrands, and provide customers with the best products and services

Competition is expected to be more intense in the future, forcing developers todifferentiate projects by offering design and construction of better quality at the sameprice, a commitment to development progress In the upcoming years, competitionamong developers will create more choices for prospective buyers

7 Second Quarter 2010 Hanoi Property Market Review - CBRE

8 Second Quarter 2010 Hanoi Property Market Review - CBRE

Moreover, the more goods and service customers are provided, the higher thepossibility of their spending; the more money invested in production, and the moretaxes Government can impose on business centers Hence, when foreigners come towork and live in Vietnam, they will demand and consume a significant quantity ofgoods and services, this will help to surge the economic growth of both local area andnationwide

Continued spending on construction and infrastructure projects that are expected to becompleted before the October deadline of Hanoi’s Thang Long Festival will supportfurther GDP growth

3 The role of market research for the development of Lotte Center Hanoi

Tourism promotion and increased flight traffic will support the growth in the tourismsector The additional flights on the Hanoi – Ho Chi Minh City, and Hanoi – Danangroutes will increase the volume of domestic travelers to Hanoi Besides, internationalarrivals to Hanoi reached 302,000 participations in the second quarter of 2010 –increased 31.87%9 year over year This positive information would be helpful for thecompany to speed up their Business Center project to meet the potential huge demandfor hotel and department stores in the future

Retail sales revenue soared considerably in the first six month of 2010, grew by28.2%10 year over year, showing the strength of consumer demand Increasing salesand numbers of retail outlets indicate the steady growth of Hanoi’s retail sector in thecoming quarters

In recent years, when more European expatriates had entered the market, and thecompetition from the abundant supply of villas and terraced housing became harsher,serviced apartment units with more than three bedrooms had accounted for 70%11 oftotal vacant units Hence, it is easily understandable to realize that truly difficultcompetitions come from substitute markets (villas, standard apartments), and the

9 Second Quarter 2010 Hanoi Property Market Review - CBRE

increase in supply from major future projects This source of competition will stabilize

or even reduce lucrative rent of many projects, especially those with limited services.Therefore, Lotte should consider and update more information about this issue to have

a suitable and modern design for Lotte Center Hanoi business center

Furthermore, the company should also care for their two major rivals, i.e VincomCity Tower and Parkson They are the two biggest and closest competitors of LotteCenter Hanoi in terms of a complex of luxury office, department stores, and 5-starhotel Both these centers are famous for prestigious and fashionable brands which play

an important role in attracting the high number of visitors These two centers;however, are established and exploited in Vietnam longer than Lotte; therefore, Lottehas to plan carefully to win customers when their building is completed in 2013

III Opportunities and threats for the development for Lotte Center Hanoi

1 Opportunities

During the first half of 2010, on the secondary market, asking price for condominiumfor sale increased in all segments, i.e rising 3% in the mid-end, high-end, and luxurysegment, and 9% in the low-end segment Furthermore, the new Decree 23/2010/Resolution-Government regulates the lending rate drop to 12 – 13%12 (current rate: 15– 17%13) to ease financing and boost residential demand The sooner the companyfinishes the building, the larger number of potential visitors they can win from themarket and their rivals

Recently, the majority of enquiries were from European expatriates showing theinterest in serviced apartments units with more than three bedrooms accounted for70%14 of total vacant units gives a good opportunity to gain large profit whenexploiting Lotte Center Hanoi in the near future

Domestic tourist arrivals numbered 14.8 millions participations in the first six months

2010 represents a 10%15 increase year over year Resulting from this strongperformance, Hanoi’s tourism posted positive growth rates of 12 and 13.5%16 in thenumber of foreign and domestic arrivals, respectively In the next time, it is expected

to upswing in the number of tourist arrivals, and the hotel market can expectimprovements in occupancy rates and RevPARs

More real shopping centers in the non-center business district opening over the nextthree years may make the more saturated supply market in this area Available stockmay create harsh competition among new projects being built For example, a newcenters – Grand Plaza – will be opened in the 17th July 2010 with the luxurydepartment store, grade A offices, large plane of 16,000m2 17 , and good infrastructure,located at the convenient place, is actual a considerable contender for the company.Increasing trend of combination of wet market and modern retail space (Hang Da andCua Nam markets) will create a safer and more hygienic environment as well as a newshopping experience for consumers Besides, Vietnamese people are still familiar withtraditional markets; therefore, that may be an observable competitor of the company interms of winning customers to visit stores in Lotte Center Hanoi.

It is unsafe to guarantee the strong demand or stable consumer’s budget for servicedapartment or accommodation in a long time, because there are new projects expectedthis year include the Keangnam Hanoi Landmark Tower which comes on stream inthe near future, makes the building market more saturated

In recent years, there has been more international hoteliers invest and pursue bigconstruction projects in Hanoi like Accor, InterContinental, Marriott which will makethe business in luxury hotel more intense

17 id14902/

http://muabannhadat.com.vn/tin_tuc_bat_dong_san/Tin-thi-truong/Grand-Plaza-vua-duoc-khai-truong-IV Analysis and assess the present and future for clothing market in Hanoi

or stable income resource from their family As a result, the increasing demand forhigh quality clothes from famous brands is easily understandable

Being sensitive with this lucrative trend, Lotte Center Hanoi had concentrated onstudying Hanoi clothing market After researching a small group of customers andgetting data, there are 2 outstanding groups of customers that the company can payattention to in the future business

1.1.1 Medium income – young women from 20 – 35 years old

In general, the female in this aged group both in Hanoi and nationwide usually havemedium income ranged from VND 6 million to VND 8 million per month Theirbudget spent for shopping may be restricted for daily living, savings, and a smallbudget for clothing Under the restraint of remaining limited budget, they have toconsider how much they can put on purchasing some suits for themselves, and theappropriateness between their limited fund and need There are 65.4%19 of asked