Developing away from home sales in New Toyo Pulppy (Vietnam) Co.

This study relates to the development of the marketing strategies including market segmentation, market targeting, product strategy, positioning strategy and marketing mix for products,

MMVCFB 6

VIETNAM – BELGIUM MASTER IN MANAGEMENT PROGRAM

DO NGOC HOA

DEVELOPING AWAY FROM HOME SALES

MASTER IN MANAGEMENT THESIS

HO CHI MINH CITY

2007

MASTER IN MANAGEMENT THESIS

THESIS ADVISOR : DR LE NGUYEN HAU

HO CHI MINH CITY

2007

BACKGROUND 1

1.1 PROBLEM STATEMENT 1

1.2 THESIS OBJECTIVES 2

1.3 SCOPE AND LIMITATION OF THE STUDY 3

1.4 ORGANIZATION OF THE STUDY 3

CHAPTER 2 – THEORETICAL BACKGROUND 5

BUSINESS MARKET AND BUSINESS BUYING BEHAVIOR 5

2.1 SEVERAL CHARACTERISTICS OF BUSINESS MARKET 5

2.2 CLOSE SUPPLIER – CUSTOMER RELATIONSHIP 6

2.3 MAJOR TYPES OF BUYING SITUATIONS 6

2.4 WHO PARTICIPATES IN THE BUSINESS BUYING PROCESS? 7

2.5 CONCEPT OF MARKETING STRATEGY 8

2.6 LINK BETWEEN MARKETING STRATEGY AND CORPORATE STRATEGY 9

2.7 STRATEGIC MARKETING PLANNING PROCESS 10

2.7.1 MARKETING SITUATION ANALYSIS 10

2.7.2 MARKETING STRATEGY DESIGN 13

2.7.3 MARKETING PROGRAM DEVELOPMENT 17

2.7.4 IMPLEMENTING AND MANAGING MARKETING STRATEGY 25

CHAPTER 3 – RESEARCH METHOD 28

3.1 ANALYTICAL FRAMEWORK 28

3.2 INFORMATION NEEDED 31

3.3 DATA SOURCES 32

3.4 DATA COLLECTION METHOD 32

CHAPTER 4 – EXTERNAL ANALYSIS 34

AN OVERVIEW OF THE VIETNAMESE ECONOMY 34

4.1 SOME ECONOMIC ACHIEVEMENTS OF HCMC AND BINH DUONG PROVINCE 36

4.2 VIETNAMESE PAPER MARKET 37

4.2.1 PRODUCTION 37

4.4 COMPETITION ON THE VIETNAMESE TISSUE PAPER MARKET 41

CHAPTER 5 – ANALYSIS OF MAIN COMPETITORS OF NPV 42

MAIN COMPETITORS 42

5.1 PROFILE OF SAIGON PAPER CORPORATION 42

5.2 ASIA PULP AND PAPER (APP) 46

5.3 VIDON PAPER JOINT STOCK COMPANY (VIDON) 48

5.4 SUBSTITUTES 50

5.5 SUMMARY OF OPPORTUNITIES AND THREATS OF NPV 51

5.5.1 OPPORTUNITIES 51

5.5.2 THREATS 53

CHAPTER 6 – INTERNAL ANALYSIS 54

PROFILE OF NPV 54

6.1 MISSION OF NPV 54

6.2 MARKETING OBJECTIVE OF NPV 55

6.3 PRODUCTION AND BUSINESS RESULTS 55

6.4 PRODUCTION CAPACITY 55

6.5 VALUE SHARE AND SALES VOLUME OF AFH 56

6.6 ANALYSIS OF MARKETING ACTIVITIES 57

6.6.1 PRODUCT 57

6.6.2 NPV’S PRODUCT LINE SALES 62

6.6.3 PACK TYPES 63

6.7 PRICE 63

6.7.1 PRICING OBJECTIVES 63

6.7.2 PRICING LIST 64

6.7.3 PRICING STRUCTURE 64

6.8 DISTRIBUTION CHANNELS SYSTEM 64

6.8.1 DISTRIBUTION OBJECTIVE 64

6.8.2 PROMOTION ACTIVITIES 65

6.9 RESULTS AND DISCUSSION OF CONSUMER SURVEY 67

6.10 HOW CONSUMERS CHOOSE TO BUY A TISSUE PAPER PRODUCTS 68

6.11 ATTRIBUTES OF TISSUE BRANDS 68

SWOT MATRIX 72

6.14 DEVELOPING THE MARKETING STRATEGIES FOR NPV 73

6.14.1 MARKET SEGMENTATION 73

6.14.2 NPV MARKET TARGETING 74

6.14.3 POSITIONING STRATEGY 74

6.15 DEVELOPING MARKETING MIX STRATEGY FOR AFH 75

6.15.1 PRODUCT STRATEGY 76

6.15.2 PRICE STRATEGY 77

6.15.3 DISTRIBUTION STRATEGY 78

6.15.4 PROMOTION STRATEGY 79

CHAPTER 7 – CONCLUSIONS AND RECOMMENDATIONS 81

CONCLUSIONS 81

RECOMMENDATIONS FOR FURTHER RESEARCH 83

COMMITMENT DECLARATION

I commit that this is my own study All figures and results stated in this thesis are true

DO NGOC HOA

NPV New Toyo Pulppy (Vietnam) Co Ltd

CS Consumer Sales

AFH Away From Home Sales

tpy tons per year

tpd tons per day

APP Asia Pulp and Paper

VP virgin pulp

DIP de-inked pulp

SOE State-owned-enterprise

Investment (Hong Kong) and is one of the largest and modern factories in Vietnam The company produces well-known tissue paper brands such as Pulppy, May, AnAn and SSS Together economic development, the Vietnamese tissue paper industry has developed and the Vietnamese tissue paper market becomes fiercely competitive NPV

is facing the question of how to protect its leading position in the market, as well as to increase sales

This study deals with the development of marketing strategies for NPV Thus, it is necessary to analyze external factors including production and consumption, competition to identify opportunities and threats in environment in which the company operates Moreover, the analysis and assessment of production and business of NPV need to discuss to find out its strengths and weaknesses Following the analysis the opportunities threats, as well as strengths and weaknesses, the marketing strategies also are recommended to achieve the marketing objective of the company

Figure 2: Selecting a marketing strategy 16

Figure 3: Price determination process 21

Figure 4: Analytical framework 30

Figure 5: GDP growth rate in Vietnam during 1995-2006 35

Figure 6: Production, consumption 1996-2005 40

Figure 7: The current production capacity of Saigon Paper 43

Figure 8: Value shares of Saigon brands in 2005 44

Figure 9: Product and Price of Saigon Paper 44

Figure 10: Value shares of Paseo brands in 2005 47

Figure 11: Product and Price of APP 47

Figure 12: Product and Price of Vidon 50

Figure 13 : Contribution of segments in AFH sales in 2006 55

Figure 14: Contribution of territory of AFH market 56

Figure 15: NPV’s monthly sales volume 2003-2006 57

Figure 16: Unaided brand awareness_Toilet rolls 59

Figure 17: Aided brand awareness_Toilet rolls 60

Figure 18: Unaided brand awareness _ Napkins 61

Figure 19: Products analysis (2006) 63

Figure 20: Distribution channels of NPV 65

Figure 21: Profile of sampling size 68

Figure 22: Comparison the attributes of selected brands 69

Figure 23: SWOT analysis 72

Chapter 1 INTRODUCTION

Background

Transition from a centrally planned economy to market-economic structure, the Vietnamese market becomes more dynamic All business and production activities are encouraged to contribute into economic growth and stabilization of the nation Like other light industries, investment in tissue paper is welcomed and facilitated The Vietnamese tissue paper industry has rapidly developed Together with the raising living standard, the demand for tissue paper quickly increases and high quality brands are much preferred

More and more foreign tissue paper producers and worldwide distributors enter into the Vietnamese market At present, all players are facing the fierce competition between local and foreign brands There are more than 55 local producers who produce more than 80 tissue paper brands including Pulppy, Kleenex, Paseo, Kissme, Vidon, Vinh Hue, Alice, etc

The tissue products being sold in the market can be divided into categories:

towels, toilet roll, napkins, facial, medical paper and products used in industry

By Some local producers such as NPV, Saigon Paper, Vien Dong, Vinh Co etc having both Consumer sales (CS) and Away-from-home (AFH) sales However, AFH sales is underdeveloped properly because it is quite new in Vietnam market

1.1 Problem statement

Vietnam tissue paper market is underdeveloped and is very attractive to all tissue paper manufacturers in domestic or overseas According to the Vietnam Paper Association, demand on tissue paper consumption in Vietnam in the next 10-15 years

is very huge Currently, the average paper consumption of Vietnam is about 10-15kg

per person per year compared to 32 kg/person/year in Asia and 50-60kg/person/year in Europe

New Toyo Pulppy (Vietnam) Co Ltd., (NPV) is one of the largest and modern factories in Vietnam Since 2000, its brands such as Pulppy, May, AnAn and SSS are accepted by domestic consumers as high quality products with reasonable price NPV has three sales divisions in which two are Domestic sales and one is Export sales The Domestic sales consist of two divisions CS and AFH

NPV has set up a distribution network nationwide for the Consumer sales Its products are delivered from its tissue mill in Binh Duong province The AFH is present in Ho Chi Minh City and Binh Duong province

The competition in tissue paper market became fierce in recent years with new investments of tissue manufacturers in Vietnam In addition, some foreign companies

in Thailand and Indonesia started operation in Vietnam made the market competition become intensified

In this high growth and high competition market situation, how can NPV develop effective marketing strategies for getting more success in its target market? How does it survive in the intensified competition of local companies and international companies in the future? To answer these questions, NPV needs to develop a proper marketing strategy to quickly develop potential market to gain shares

This study aims at developing AFH sales in New Toyo Pulppy (VN) Co Ltd in

order to increase the market share and protect its leading position in the tissue paper market

1.2 Thesis objectives

The objectives of this study cover the following issues:

Ü To analyze the potentiality of the AFH market in Ho Chi Minh city and Binh Duong province

Ü To analyze the competitors capacity and their potential development in the AFH market

Ü To develop new products, based on existing products and brands, suitable to each segment in order to develop AFH and create competitive advantages

1.3 Scope and Limitation of the Study

This study is conducted at NPV in Ho Chi Minh city, Vietnam The study has been undertaken purely from a view-point of marketing relating to develop the market penetration strategies for NPV in Ho Chi Minh city and Binh Duong province Products using in this penetration strategies are NPV existing products and brands

This study relates to the development of the marketing strategies including market segmentation, market targeting, product strategy, positioning strategy and marketing mix for products, price, distribution, and promotion

In the area of distribution, the physical distribution channels such as inventory, logistic, warehouse, and transportation are not included

Primary data are collected in Ho Chi Minh City and Binh Duong province where the NPV believes that these areas are good for Away-from-home (AFH) market

1.4 Organization of the Study

This study is organized in 7 chapters, as follows:

Ü Chapter 1 provides an introduction including background, problem statement, objectives, scope and limitation of the study

Ü Chapter 2 presents the theoretical background of the study It relates to the fundamental ideas on designing marketing strategies including marketing situation

analysis, marketing strategy design, marketing program development for products, price, distribution and promotion and implementing and managing marketing strategy It also presents the characteristics of business market and implications to NPV

Ü Chapter 3 discusses research method including the analytical framework, information needed, methodology of data collection, sampling size and data analysis It specifies two types of information: know-how and know-what to develop the marketing strategy for NPV

Ü Chapter 4 analyzes external factors covering the tissue paper market situation to find out size, growth and possibility of AFH market The outcomes of this analyzes show the opportunities, threats and buying behavior

Ü Chapter 5 presents the internal analysis regarding to capacity, brand, product, price, promotion and distribution of NPV

Ü Chapter 6 analyzes and assesses the current position of NPV through SWOT analysis to present the strategic development and selection

Ü Chapter 7 presents conclusion and recommendations

Chapter 2 THEORETICAL BACKGROUND

This chapter discusses the general concepts which relate to the fundamental ideas on business markets and business buying behavior, characteristics of business market, designing marketing strategies including marketing situation analysis, marketing strategy design, marketing program development for products, price, distribution and promotion, and implementing and managing marketing strategy General concepts of business-to-business are also presented

Business markets and business buying behavior

Several considerations not normally found in consumer marketing (Kotler, 1994):

• Organizations buy goods and services to satisfy a variety of goals: making profits, reducing costs, meeting employee needs, and satisfying legal obligations

• More persons typically participate in organizational buying decisions than in consumer buying decisions, especially in procuring major items The decision participants usually represent different departments and apply different criteria to the purchase decision

• The buyers must heed the formal purchasing policies, constraints, and requirements established by their organizations

• The buying instruments, such as requests for quotations, proposals and purchase contracts, add another dimension not typically found in consumer buying

2.1 Several characteristics of business market (Kotler, 1994)

- Fewer buyers

- Larger buyers

- Close supplier customer relationship

- Geographically concentrated buyers

- Derived demand

- Inelastic demand

- Fluctuating demand

- Professional purchasing

- Several buying influences

- Miscellaneous characteristic: reciprocity

2.2 Close supplier-customer relationship

Because of the smaller customer base and the importance and power of the larger customers, we observe relationships between customers and suppliers in business markets Suppliers are frequently expected to customize their offerings to individual business customer needs (Kotler, 1994)

2.3 Major types of buying situations

Straight rebuy: the straight rebuy describes a buying situation where the purchasing department reorders on a routine basis The buyer chooses from suppliers

on its “approved list”, giving weight to its past buying satisfaction with the various suppliers The “in-suppliers” make an effort to maintain product and service quality They often propose automatic reordering systems so that the purchasing agent will save reordering time The “out-suppliers” attempt to offer something new or to exploit dissatisfaction so that the business buyer will consider buying some amount from them Out-suppliers try to get a small order and then enlarge their “purchase share” over time

Modified rebuy: the modified rebuy describes a situation where the buyer wants

to modify product specifications, prices, delivery requirements, or other terms The modified rebuy usually involves additional decision participants on both the buyer and seller sides The in-suppliers become nervous and have to protect the account The out-suppliers see an opportunity to propose a “better offer” to gain some business

New task: The new task describes a purchaser buying a product or service for the first time New task buying passes through several stages Ozanne and Churchill

(1992) identified the stages as awareness, interest, evaluation, trial and adoption

They found that communication tools varied in effectiveness at each stage Mass media were most important during the initial awareness stage; salespeople had their greatest impact at the interest stage; technical sources were the most important during the evaluation stage Marketers needed to employ different tools at each stage of the new task buying process

2.4 Who participates in the business buying process?

Purchasing agents are influential in straight-rebuy and modified-rebuy situations, whereas other department personnel are more influential in new-buy situations Engineering personnel usually have major influence in selecting product components, and purchasing agents dominate in selecting suppliers (Kotler, 1994)

Webster and Wind call the decision making unit of a buying organization the buying center, defines as “all those individuals and groups who participate in the purchasing decision making process, who share some common goals and the risks arising from the decisions” (Kotler, 1994) The buying center includes all members of the organization who play any of six roles in the purchase decision process (Kotler, 1994):

Users: Users are those who will use the product or service In many cases, the users initiate the buying proposal and help define the product specifications

Influencers: influencers are persons who influence the buying decision They often help define specifications and also provide information for evaluating alternatives Technical personnel are particularly important as influencers

Deciders: Deciders are persons who decide on product requirements and/or on suppliers

Approvers: Approvers are persons who authorize the proposed actions of deciders or buyers

Buyers: Buyers are persons who have formal authority to select the supplier and arrange the purchase terms Buyers may help shape product specifications, but they play their major role in selecting vendors and negotiating In more complex purchases, the buyers might include high-level managers participating in the negotiations

Gatekeepers: Gatekeepers are persons who have the power to prevent sellers or information from reaching members of the buying center For example, purchasing agents, receptionists and telephone operators may prevent salespersons from contacting users or deciders

2.5 Concept of Marketing Strategy

Nowadays, most of companies are increasingly embracing targeting marketing Target marketing helps sellers or suppliers identify marketing opportunities better The sellers can develop the right offer for each target market They can adjust their prices, distribution channels, and advertising to reach the target market effectively Therefore, designing the marketing strategy is very important for success The marketing strategy

is always a determinant constituent of effective competitive strategy Cravens (1994) defined that marketing strategy is the analysis, strategy development, and implementation activities in selecting market target strategies for the product-markets

in each business unit, setting market objectives, and developing, implementing, and

managing the marketing program positioning strategies designed to meet the needs of the customers in each market target

Strategic marketing is a market-driven process of strategy development, taking account a constantly changing business environment and the need to achieve high levels of customer satisfaction Thus, marketing strategy builds competitive advantage

by combining the customer influencing strategies of the business into integrated array

of market-focused actions Strategic marketing links the organization with the environment and views marketing as a responsibility of the entire business rather than a specialized function

Because of marketing’s boundary orientation between the organization and its customers, channels members, and competition, it is central to the business strategy planning process Strategic marketing provides the expertise for environmental monitoring, for deciding what customer groups to serve, for setting product specifications and for selecting which competitors to position against

2.6 Link Between Marketing Strategy and Corporate Strategy

Corporate strategic planning involves the activities such as developing a clear sense of the company’s mission, identifying the company’s strategic business units, allocating resources to the various strategic business units, and expanding present business and developing new ones to fill the strategic-planning gap The corporate strategy is concerned with what types of business the company as a whole should be in and is therefore concerned with the scope Marketing strategy, on the other hand is part

of functional strategy that emerges in each strategic business unit as part of corporate strategy

According to Guiltiwan and Paul (1991), corporate strategy is type of plan which outlines how a firm should use its resources to produce and market a specific array of products and services in order to achieve overall corporate objectives In

essence, the corporate strategy provided a general statement It defined the products in which the organization would be involved but left open the details of how each product

or product line would be marketed

While the corporate strategy presents a plan developed by top management to guide the total organization, a marketing strategy is usually developed by a middle manager to guide a firm’s activities for a product or a line of related products More specially, a marketing strategy is a plan that indicates how a manager deploys marketing resources on an individual product or product line in order to achieve a specified product objective (such as market-share growth or maximizing cash flow)

2.7 Strategic Marketing Planning Process

Various steps in designing strategic marketing planning within an industry can

be found in literature and basically there principles are all similar An approach for strategic marketing process consist of marketing situation analysis, designing marketing strategy, marketing program development, and implementing and managing marketing strategy (Craven, 1994) It is shown in Figure 1 So there is a need to discuss this in more detail

2.7.1 Marketing Situation Analysis

The marketing situation analysis is the first step in the design of new strategy or examining an existing strategy It comprises the external and internal environment analysis These analyses guide the choice of marketing strategies

The marketing environment is a place where the company must start its search for opportunities and possible threats It consists of all the actors and forces that affect the company’s ability to transact effectively with its target market The external environment can be divided into macro environment and micro environment

The macro environment includes more general forces that often do influence the long run activities of the company It consists of economic, socio-cultural, technological, political, legal forces in relation to the firm's total environment Thus, the achievements, difficulties and challenges of Vietnamese economy and governmental policies will influence the development of the tissue paper industry

The micro environment includes the actors in the company’s immediate environment that affect its ability to serve its markets especially, the company itself, suppliers, market intermediaries, consumers, competitors and public One key aspect of external analysis is evaluation of competitors' strategies, strengths and weaknesses Competitor analysis includes defining competitive arena, analyzing the strategic group and describing and evaluating each key competitor in terms of strengths and weaknesses At present, the Vietnamese tissue paper market becomes fiercely competitive So the analysis of production, consumption and competition are necessary

to identify opportunities and threats for the company

Figure 1: Strategic marketing process

Source: Cravens, 1994

Designing Marketing Strategy

Market targeting Positioning strategy Marketing strategies for selected situations Planning for new products

Marketing Program Development

Product portfolio strategy Pricing strategy

Distribution strategy Promotion strategy

Market Situation Analysis

Analyzing markets Market segmentation Analyzing competition Marketing information systems and research

The internal environment analysis is to help the company recognizing itself in terms of strengths and weaknesses The internal analysis includes the corporation's structure, resources, production and business and marketing activities Corporation resources are the assets that include people, managerial skills, financial circumstances, facilities, information technology and the skills and abilities within functional areas

In general, the situation analysis identifies opportunities and threats in the business environment and the organization’s strengths and weaknesses This information helps companies deciding how, when and where to compete in a given environment

2.7.2 Marketing Strategy Design

Designing marketing strategy includes market segmentation and targeting, positioning strategy and the marketing strategy choice

Market segmentation and targeting

Market segmentation is the act of dividing a market into distinct groups of buyers who might merit separate products and/or marketing mixes The marketer tries different variables to see which reveal the best segmentation opportunities For each segment, a customer-segment profile is developed

After evaluating market segmentation, the companies have to target the best market segment(s) Market targeting selects the people or organizations that company wishes to serve in the product-market To do this, it must first evaluate profit potential

of each segment, which is a function of segment size and growth, segment structural attractiveness, and company objectives and resources Then, company must decide how many segments to cover It can ignore segment differences (undifferentiated marketing), develop different market offers for several segments (Differentiated marketing) or go after one or a few market segment (concentrated marketing)

Thus, once the company’s product-markets are identified and their relative importance to the firm determined, it selects the targeting strategy This decision is the focal point of marketing strategy, since targeting guides the setting of objectives and developing a positioning strategy

Positioning strategy should take into account:

- The criteria or benefits the buyer considers when purchasing a product, including the relative importance of the criteria

- How the firm is differentiated from its competition

- The limitations of competing products regarding important buyer needs and wants

The positioning strategy indicates how the firm or its brands would like to be perceived in the eyes and minds of the market target customers Therefore, decisions about products, distribution channels, price, and promotion should create a cohesive marketing program aimed at meeting the needs and wants of consumers in the firm’s target market The marketing program combines the firm’s marketing capabilities into

a package of actions intended to position the firm against its competitors

Marketing strategy selection

Selecting a marketing strategy takes into account the factors such as the rate of growth of product-market, the diversity in the needs and wants of buyers, the structure

of competition, the organization’s competitive advantage in which an organization encounters Strategy selection may involve the developing a new marketing strategy or changing an existing strategy

As argued by Guiltiwan and Paul (1991) to choose the best marketing strategy, a manager must consider several kinds of information, as follows (Figure 2)

- Product objectives to help company determine the necessary basic type of strategy

- Nature and size of the market opportunity should be clearly established based on the market analysis and market measurements

- Managers must have a sense of the success requirements in terms of the kinds of competitive advantages necessary and the level of marketing expenditures that will

be necessary to meet profitability goals

Craven (1990) proposed the comprehensive possibility of marketing strategy alternatives that can be used to achieve marketing objectives They consist of (1) new product strategy, (2) market targeting strategy, (3) market program positioning strategy, (4) productivity improvement strategy, (5) organizational design, (6) exploiting special advantage, (7) acquisition/ merger/ strategic alliance and (8) exit from market

Figure 2: Selecting a marketing strategy Source: Guiltiwan and Paul, 1991

Corporate Marketing Planning

Product Objectives

Marketing Strategy

Size of Market Opportunity

Marketing Budgets Required

Needs of

Target

Markets

Market Opportunity

Market

Analysis

Market Measurement

Competitive Analysis

Competitive Advantages

Market Success Requirements

Profitability and Productivity Analysis

Another selection of marketing strategy includes entry strategy into new market, strategies for growth, mature and declining markets and global strategies

Concerning with this study, NPV needs to develop a marketing strategy to protect its leading position in the tissue paper market in HoChiMinh city and Binh Duong province A marketing strategy for market leader faces three challenges: expanding the total market, protecting the market share and expanding market share The market leader is interested in expanding total market because it is the main beneficiary of any increased sale To expend the market size, the leader will have to look for new users, new uses or more usage To protect its existing market share, the market leader has several defense methods: position defense, flanking defense, preemptive defense, counteroffensive defense, mobile defense or contraction defense The most sophisticated leaders cover themselves by doing everything right, leaving no openings for competitive attack Leaders can also try to increase their market share This makes sense if profitability increases at higher market share levels and the company’s tactics do not invite antitrust action

2.7.3 Marketing Program Development

Market targeting and program positioning strategies for new and existing products guide designing strategies for each part of the marketing mix Developing marketing mix strategies for products, distribution, price and promotion is to implement the positioning strategy selected and in order to achieve a coordinated combination of its components that will accomplish the market target objectives in a cost-effective manner

Product strategy

Product is the first and most important element of the marketing mix The product strategy calls for making coordinated decisions on product mixes, product lines, brands, packaging and labeling

• A product mix (also called product assortment) is the set of all product lines and items that a particular seller offers for sale to buyers (Kotler, 1994) The product mix can be describes as having a certain range (how many different product lines the company carries), length (total number of items in its product mix), depth (how many variants are offered of each product in the line) and consistency (how closely related the various product lines are in end use, production requirements, distribution channels or some other way)

• A product line is a group of products that are closely related because they perform a similar function are sold to the same customer groups, are marketed through the same channels or make up a particular price range Each product line is usually managed by a different executive

• Developing brand policies for individual product items in line

• Packing and labeling decisions to protect, economy, convenience and promotion

To select a product strategy, the company needs the following information on current and anticipated performance of the products in the business unit:

• Consumer evaluation of the company’s products, particularly their strengths and weaknesses vis-à-vis competition (that is, positioning by market segment information)

• “Objective” information on actual and anticipated product performance on relevant criteria such as sales, profits and market share

This information helps management formulate strategies for each product in the mix or line The product strategy includes:

• Developing plans for new products, this process consists of eight stages: idea generation, idea screening, concept development and testing, marketing strategy

development, business analysis, product development, market testing and commercialization

• Managing programs for successful products, and

• Selecting strategies for problem products (e.g., to reduce cost or improve the product)

Price strategy

Price is the only element in marketing mix that produces revenue, other elements produce cost Pricing is a problem when a firm has to set a price for the first time This happens when the firm develops or acquires a new product, when it introduces its regular product into a new distribution channel or geographical area and when it enters bids on new contract work Thus, before setting a price, a firm must identify the role that price will play in the product’s overall marketing strategy There are three generic pricing strategies that a firm might adopt: skim pricing, penetration pricing and neutral pricing (Nagle and Holden, 1995) Each strategy is defined by the role pricing plays in the product’s marketing strategy

Skim pricing (or skimming) is designed to capture high margins at the expense

of high sales volume

Penetration pricing involves setting a price far enough below economic value

to attract and hold a large base of customers It is a strategy designed to generate sale volume even at the expense of high margins and, like skim pricing, is favored by a particular environment Penetration prices are not necessarily cheap, but are low relative to value

Neutral pricing involves a strategic decision not to use price to gain market

share, while not allowing price alone to restrict Neutral pricing minimizes the role of price as a marketing tool in favor of other tools that management believes are more

powerful or cost-effective for a product’s market A firm generally adopts a neutral pricing strategy by default, because the conditions are not sufficient to support either a skim or penetration strategy Neutral pricing is especially common in industries where customers are quite value-sensitive, precluding skimming, but competitors are quite volume-sensitive, precluding penetration

According to Kotler (1994), when a firm sets price strategy, it has to consider the following factors in setting its pricing policy:

• Selecting the price objectives such as survival, maximum current profit, maximum current revenue, maximum sales growth, maximum market skimming and product-quality leadership

• Determining demand schedule, which shows the probable quantity purchased per period at alternative price level Because each price that company might charge will lead to a different level of demand and will therefore have a different impact on its marketing objectives The more inelastic the demand, the higher the company can set its price

• Estimating cost: demand largely set a ceiling to the price that the company can charge for its product, and company costs set the floor The company wants to charge a price that covers its cost of producing, distributing, and selling the product, including a fair return for its effort and risk The firm therefore, estimates how its costs vary at different output levels and with different levels of accumulated production experience

• Analyzing competitor’s prices: the firm needs to learn the price and quality of each competitor’s offer and use them as a basis for positioning its own price

• Selecting one of the following price methods: markup price, target-return price, perceived-value pricing, going-rate pricing and sealed-bid pricing

• Selecting the final price: the firm select its final price, expressing it in the most effective psychological way, coordinating it with the other marketing mix elements, checking that it conforms to company policies and making sure it will find acceptance with distributors and dealers, company sales force, competitors, suppliers and government

The point of views of Stanton et al (1994), the price determination process consists of selecting price objective, selecting method of determining the base price and designing appropriate strategies Figure 3 illustrates this process

Figure 3: Price determination process

Source: Stanton et al., 1994

SELECT PRICING OBJECTIVE

SELECT METHOD OF DETERMINING THE BASE PRICE

Cost-plus Price base on Price set in pricing balance between relation only to

supply and demand market price

DESIGN APPROPRIATE STRATEGIES

Discounts and allowances One price vs flexible price Leader pricing

Freight payments Unit pricing Psychological pricing

Skimming vs penetration Resale price maintenance Price vs nonprice

competition

number of each type of distributor

Channel design objectives derive from strategic market and financial goals Such objectives as sales volume, market share, profitability and return on investment must be supported by the distribution channel To operate, market coverage and market control objectives must be developed to guide channel design Market coverage objectives concern customers’ expectations and degree of product-availability intensity Market control objectives are to ensure product quality, selling effort by channel partners, demand stimulation by promotional activities and the quality of after-sales-support offered to consumers Decisions regarding market control and intensity objectives may be interrelated

Channel strategy consists of decisions regarding channel organization, definition

of channel structures, development of criteria for evaluating channel structures and the selection of an appropriate structure

Channel structures differ based on the number and types of intermediaries involved and their specified roles The basic choice is between direct and indirect structures Kotler (1994) proposed an approach for using consumer marketing channels It consists of four levels of channel of different lengths: zero-level, one-level, two-level and three-level channel

Selecting Channel of Distribution, most of the authors agree that there are

basically five factors for consideration in choosing distribution channels: market

products, producers, competition, availability of intermediaries and consumers characteristics, as follows (Boone and Kurtz, 1993):

• Market factors emphasize the need and geographic location of the firm’s market, for example, whether the product is intended for the consumer or industrial market

• Product factors also play a role in determining optimal distribution channels In general, the more standardized the product, the longer channel Another generalization about distribution channels is that the lower the product’s unit values, the longer the channel

• Producer factors concern adequate financial, managerial and marketing resources The producer’s need of control over product also influences channel section For example, if aggressive promotion is desired at the retail level, the producer often chooses the shortest available channel

• Competitive factors are important when some firm is forced to develop unique distribution channels because of inadequate promotion of its products by independent marketing intermediaries Intermediaries may not always be available, regardless of how desirable they are from the manufacturers’ point of view

• Wholesalers and retailers independently owned businesses and both have their own objectives to satisfy They availability of intermediaries is therefore important to consider Consumer characteristic, i.e where, when and how consumers choose to buy the goods is also the indispensable factor to be studied carefully

Promotion strategy

Promotion mix strategy consists of four major tools: advertising, sales promotion, personal selling and public relation in which all help the organization to communicate with its consumers, cooperating organizations, public and the other target audiences Promotion strategies perform essential roles in positioning products in the

eyes and minds of consumers Promotion informs, reminds and persuades buyers and others who influence the purchasing process Concerning with consumer goods, especially tissue paper, the company needs to emphasize on designing the promotion strategy to convince the consumers to buy its products

According to Kotler (1994), to develop the promotion program, the companies have to consider the following steps:

• Identifying the target audience and its characteristics, including the image that audience has of product The audience could be potential buyers of the company’s products, current users, deciders, or influencers They could be individuals, groups, particular publics or general public The target audience will critically influence the communicator’s decisions on what, how, when, where and whom to say it

• Defining the communication objectives, whether it is to create awareness, knowledge, linking, preference, conviction or purchase

• Designing the message, ideally, the message should gain attention, hold interest, arouse desire, and elicit attention (AIDA model) Formulating the message will require solving four problems: what to say (message content), how to say it logically (message structure), how to say it symbolically (message format) and who should say it (message source)

• Selecting the communication channels: personal and nonpersonal to carry the

message

• Establishing the total promotion budget

• Deciding on the promotion mix, most of companies face the task of distributing the total promotion budget over the four promotion tools of advertising, sales promotion, personal selling, and public relations Companies are always searching for ways to gain efficiency by substituting one promotional tool for another as its

economics become more favorable When deciding on the promotion mix, companies should consider factors involved such as type of product market, push versus pull strategy and product-life-cycle stage

• Monitoring to see how much of the market becomes aware of the product tries it and is satisfied in the process

• Managing and coordinating the marketing communication process

2.7.4 Implementing and Managing Marketing Strategy

Implementing and managing marketing strategy focus on evaluating and improving organizational effectiveness and marketing strategy implementation and control

Designing the Marketing Organization

An effective organization design selects people and assigns them work responsibilities in a way that is best for accomplishing the firm’s marketing strategy Deciding how to assemble people into organizational units and assigning responsibility

to the various elements that make up marketing strategy impact strategy performance Organizational structures and process must be matched to the different types of business and marketing strategies that are developed and implemented The marketing organization has to be flexible to respond to changing conditions and strategy needs Organizational design needs to be evaluated on a regular basis to assess its adequacy and to identify necessary changes

Implementation and Control

Marketing strategy implementation and control are vital links in a series of strategic marketing activities These actions emphasize the continuing process of planning, implementing, evaluating and adjusting marketing strategies They include three important management activities, as follows:

Marketing plan and budget

The marketing plan typically includes a situation analysis summary; a market target description and strategic evaluation; overall objectives and specific objectives for each market target; a marketing program positioning strategy; specific strategies for product, price, distribution, and promotion; marketing research; coordination with other business functions; forecasts and budgets and contingency plans

Implementation strategy

The marketing plan should specifically include action guidelines concerning the activities to be implemented, who does what the dates and location of implementation, and how implementation will be accomplished Several factors contribute to implementation effectiveness, including the implementation skills of people involved, organizational design, incentives and the effectiveness of communication within the organization and externally

Evaluation of marketing performance

Marketing strategy is a continuing process of making decisions, implementing them and monitoring their effectiveness over time Evaluation and control are concerned with tracking performance and, when necessary, altering plans to keep performance on track Strategic evaluation also includes looking for new opportunities and potential threats in the future It is the connecting link in the strategic marketing planning process, therefore, strategic evaluation assures that strategy is an ongoing activity

In general, marketing strategy is the analysis, planning, implementation and control process designed to satisfy customer needs and wants It starts with an understanding of the corporate mission and objectives and the strategy of each strategic business unit The strategic marketing planning process consists of market analysis,

deciding marketing strategies, developing marketing mix strategies and implementing and managing marketing strategy

Regarding with the case of NPV, to formulate marketing strategy, it is necessary

to analyze the Vietnamese tissue paper market and assess strengths and weaknesses of the company in order to expand market

Chapter 3 RESEARCH METHOD

3.1 Analytical Framework

This study is presented in the form of a case study exposing the complexities of

a real business environment in the Vietnamese tissue paper market The purpose of this study is to develop marketing strategies for NPV Thus, it is necessary to the analyze market situation of NPV in order to formulate the marketing strategy

A framework enables to understand the various linkages and interactions between the variables and to develop the marketing strategy in order to achieve the marketing objectives of the company Figure 4 illustrates this analytical framework

To solve the current problem based on the theoretical background described in Chapter 2 It is necessary to specify know-how and know-what information regarding

to Vietnamese tissue paper market and the company

The company mission sets out the reason why the company exits and what it should be doing and the company’s marketing objectives give a guideline of what it wants to gain and become This will serve as a guide for the process of diagnosing both external and internal factors affected the AFH business of NPV

The objective of external analysis is to identify opportunities and threats in the business environment in which NPV has to face Two interrelated environments should

be examined at this stage: the macro environment of the Vietnamese market and the micro environment referred to the industry in which NPV operates The analysis of the macro environment focuses on examining the key achievements and limitation of the Vietnamese economy, HCMC and Binh Duong economy and political factors and government policies on the tissue paper industry, which strongly affect the tissue paper

industrial evolution The analysis of the micro environment involves an assessment of industrial growth, production, consumption pattern and the competition between existing tissue paper manufacturers in HCMC in which the analysis the main competitors of NPV is examined in the terms of strengths and weaknesses about their products and marketing activities (if any)

The internal analysis is devoted to pinpoint the strengths and weaknesses of NPV Therefore, it is necessary to assess the production and business of the company

in the terms of production capacity, market share, sales volume, finance and marketing mix activities

After having analyzed the internal and external factors, size and possibility of AFH market, size and capacity of AFH competitors are reviewed These will help select the best solution to develop AFH products for each sub-segment Because of time constraint, this study cannot cover the implementing and managing the marketing strategies Once the marketing strategies are implemented, their outcomes are constantly revealed by the company performance that should be monitored So feedback is necessary to adjust a part or the whole strategic management process

Method

By nature, this is a process of managerial problem solving To develop an understanding on the strategy management issues and growth strategy concepts, different books, articles and magazines on these topics have been reviewed These help provide a broader view of how a tissue paper company develops the growth of a new market segment

External Analysis Internal Analysis

Possibility of AFH market

Size and capacity of AFH competitors

Product development strategy for each sub-segment

Conclusion and recommendation Opportunities and threats Strengths and weaknesses

2 Data and collection method

What is the impact of external business environment on NPV business? What are opportunities and threats to NPV? What are NPV current strengths and weaknesses? What are the strategic choices for NPV to grow in the new market? These can be answered by external and internal analysis The secondary and primary data were used to conduct this analysis

External: available from internet, reports, journals, magazines… Such

information was used to define external driving forces (i.e political, economic, social and technology impact) and identify opportunities and threats to NPV

Internal: available from company’s sales database, financial report These were

used to identify the internal driving forces, which resulted in the strengths and the weaknesses of NPV

Primary data were collected through the questionnaires survey with customers This helps identify customer’s needs, buying behaviors and so on The primary data covered the information gap that the secondary data could not provide, providing justification for strategy choices