Marketing strategy of petrolimex gas JSC for bottled liquefied petrolium gas in Ho Chi Minh city 2012 to 2015

Research the of relevant marketing concept, marketing strategies and find out the characteristic of the market, customer purchasing habit, main factors affect to purchasing decision, cus

`DECLARATION

I declare that this final project contains no material that has been submitted to any other program in other institutes, colleges and universities This work was done by author except where due reference is made in the text

`

Signature: DANG TRAN HANH THONG

Date: Nov.12th , 2012 _

ACKNOWLEDGEMENTS

First of all, I would like to acknowledge all professors and coordinators who provided

me valuable knowledge and support at Solvay Business School and Ho Chi Minh City Open University

I would like to acknowledge my tutor, Dr Hoang Thi Phuong Thao, for her great assistance, her value feedbacks help me to find out the way to complete this final project

I would like to express my huge thanks to my wife who support me and encourage me

to complete this research

I would like to acknowledge Board of Director and Sale Department of Petrolimex Gas Company who help me to collect relevant information and database

And, I would like to send my thanks to all respondents

ABSTRACT

Purpose: Thanks for the continued growth economic and people’s living standard in

past years and many years are coming, bottled LPG business in HCMC to be a potential industry and attracting many suppliers into the market Consequence, bottled LPG business industry to be a strong competitive industry, it requests players in the market have to have the relevant marketing strategies for meeting customer satisfaction and achieving enterprise goals

Being one of the most well-known brands in the market, Petrolimex Gas ought to become a leader in market However, due to lack of efficiency marketing strategies, Petrolimex Gas could not achieve market share as expectation and investment Research the of relevant marketing concept, marketing strategies and find out the characteristic of the market, customer purchasing habit, main factors affect to purchasing decision, customer awareness, then the proposal an efficiency marketing strategy of Petrolimex Gas for resident household segment is the aim of this study

Methodology: To achieving the aim of study, the three main theories comprising

Swots, Marketing Strategy and Marketing Mix are applied in this thesis Moreover, secondary data are taken from desk research to get competitor in formation, identified market share and analysis internal information Primary data are taken from expert interview for learn more the models of bottled LPG industry and mail survey to understand the customer behavior and perception of customer toward to current marketing strategy of Petrolimex Gas

Conclusion & Recommendation:

Through the findings of research, author understands what are the main factors influencing and playing the most important for both keeping customer loyalty and acquiring new customers Besides, author also understands the customer awareness of

Petrolimex Gas brand name vs other competitor brand names; purchasing habit, and the perception of customer toward to current marketing strategy of Petrolimex Gas

After understanding the actual situation of Petrolimex Gas marketing strategy and market situation, a proposed marketing strategy will be recommended for orienting marketing activities to Petrolimex Gas JSC in period (2012-2015)

TABLE OF CONTENTS

Declaration and Confidentiality i

Acknowledgment ii

Comments of Guidance Counselor iii

Abstract iv

Table of contents vi

Abbreviation x

List of Tables xi

List of Figures xii

List of Charts xiii

CHAPTER 1 INTRODUCTION 1.1 Project background 1

1.2 Rationale of project and Problem statement 3

1.3 Objective of Project & Scope of Project 5

1.4 Research methodologies 5

1.5 Structure of project 10

CHAPTER 2 LITERATURE REVIEW 2.1 What is the S.W.O.T 11

2.2 Marketing strategy 13

2.2.1 What is marketing strategy 13

2.2.2 Marketing mix strategy 13

2.3 Strategic marketing plan 16

2.3.1 Offensive Strategy 16

2.3.2 Defensive Strategy 18

2.3.3 Market Grow Matrix Strategy 19

2.4 Conclusion 21

CHAPTER 3 COMPANY & MARKET OVERVIEW 3.1 Macro-economic factors 22

3.1.1 Population 22

3.1.2 GDP, GDP/Capita 23

3.2 Bottled LPG market analysis 25

3.2.1 Bottled LPG in household in HCM 26

3.2.2 Current market size & market share 27

3.3 Petrolimex Gas Joint Stock Corporation introduction 29

3.3.1 Vision, Mission, Core value 29

3.3.2 PGC sales performance 29

3.3.3 Current Marketing Strategy of PGC 31

3.4 Competitor analysis 37

3.4.1 Competitor overview 37

3.4.2 Competitive advantage analysis 41

CHAPTER 4 MARKET RESEARCH FINDING

4.1 Respondents Profile 45

4.2 Brand awareness 46

4.3 Brand usage 47

4.4 Purchasing habit and reason for using bottled LPG 48

4.5 Factor influencing to purchase decision 49

4.6 Reason for switching brand 50

4.7 Customer perception toward to PGC marketing plan 51

4.8 SWOT Analysis 55

CHAPTER 5 PROPOSE MARKETING STRATEGY 5.1 Marketing Objective 57

5.2 Target market 57

5.3 Brand Identity strategy 58

5.4Strategic marketing plan 58

5.5 Marketing mix strategy 59

5.5.1 Product – Customer solution 59

5.5.2 Price – Customer Cost 60

5.5.3 Place – Convenience 61

5.5.4 Promotion – Communication 62

5.6 Developing a revenue plan & marketing budget 63

5.7 Detailed of action plan for one year 64

5.8 Conclusion 65 References I Appendix I II Appendix II IV Appendix III IX Appendix IV X

GLOSSARY OF TERMS AND ABBREVIATIONS

PGC Petrolimex Gas Joint Stock Corporation

Petrolimex Vietnam National Petroleum Corporation

LIST OF TABLES

-

Table 1.1: Numbers of chosen customers in HCMC 9

Table 3.1: HCMC population 22

Table 3.2: HCMC GDP & GDP per Capital 24

Table 3.3: Sale volume of PGC in HCM in period (2007-2011) 29

Table 3.4: Quantity of Agents in distribution network of PGC in HCM 32

Table 3.5: Allocation margin cost of 12kg-bottled LPG for customer 35

Table 3.6: Comparison of competitor marketing strategy in general 41

Table 3.7: Price comparison 42

Table 3.8: Product comparison 42

Table 3.9: Summarized Competitor Analysis 43

LIST OF FIGURES

-

Figure 1.1: Market Research Process 6

Figure 2.1: The 4Ps component of marketing mix 15

Figure 2.2: Offensive strategy 17

Figure 2.3: Factors limiting full market development 18

Figure 2.4: Defensive strategy 19

Figure 2.5: Product – Market Growth Matrix 20

Figure 2.6: Strategic Planning Process 21

Figure 3.1: HCMC condominium Supply 23

Figure 3.2: LPG products demand in Vietnam & HCMC 26

Figure 3.3: Distribution network 32

Figure 4.1: Brand Awareness 46

Figure 4.2: Frequency for using a bottled LPG 48

Figure 4.3: Reason for using bottled LPG 49

Figure 4.4: Factors influencing to purchase decision 49

Figure 4.5: Reason for switching brand 51

Figure 4.6: Perception of product 52

Figure 4.7: Perception of Service 52

Figure 4.8: Perception of Price 53

Figure 4.9: Perception of Place 54

Figure 4.10: Perception of Promotion 54

LIST OF CHARTS

-

Chart 3.1: Bottled LPG market share in 2010 28

Chart 3.2: Proportion of Sale volume 30

Chart 3.3: Typical Route to Market of PGC’s bottled LPG 31

Chart 3.4: Portion of sale volume in channel 33

Chart 4.1: Demography of respondents 45

Chart 4.2: Factors affect for purchasing decision 50

CHAPTER 1

INTRODUCTION

1.1 PROJECT BACKGROUND

LPG product:

Liquefied Petroleum Gas (LPG) is a flammable mixture of propane & butane used

as a fuel in heating appliances from heavy industries: metallurgic, shipbuilding… to light industries: ceramic, crystal factory… and also in household application such as: heating, cooking Besides LPG is used to fuel internal combustion engines, it is often referred to as autogas

Nowadays, LPG is used popularly in around the world LPG is replacing other traditional fuel in some domains such as: cooking, heating, automobile fuel Emission if using LPG is cleaner than other sources as diesel, gasoline Compared

with using electricity and fossil fuel, LPG is also cheaper in some applications

.In Vietnam, LPG in cylinder or bottled LPG is used almost in resident domain and LPG in tank is used in industrial fields There are three kinds of LPG product in bottle: Mini size bottled LPG; medium size 10-13kg bottled LPG and large size 45-48kg bottled LPG Depending on the level of consumption of customers, they chose the suitable item for their own purpose In general, Mini size bottled LPG mainly used for portable travel burner, Medium size bottle is used for residential house hold and big size cylinder is used for restaurant and sometimes for heating in light industries The application of big size one in light industry is depended on technical requirement, design, location of factory and economic condition of customers

LPG market:

In Vietnam, LPG appeared in South of Vietnam in 1957 with small volume At that time, the demand consumption was around 400 tons annually Until 1975s it was

17,000tons LPG per year and was distributed by Esso and Shell Because of limited technology; economics and political factors, LPG was temporarily stopped using in Viet Nam

LPG was used again in 1990s in household appliance as the luxury fuel with small quantity In period 1994-1995, together with economics development; GDP

increased at 8-9%, the living standard has been increasing significantly Moreover,

Vietnam Government has encouraged using clean fuel boosted the consumption of

LPG in household & industrial appliance To take these great opportunities, many

corporations took part in this market such as Petrolimex Gas, PV Gas, Saigon Petro, Shell Gas, Total Gas, Elf Gas… Since then, a new era of this kind of fuel was begun According the annual report of Petrolimex Corporation 2010, the total demand has been increased from 400ton to 250,000tons in period (1991-2000) and continuously increased up to about 1.2 million tons in 2011 LPG obviously

becomes a popular fuel for heating appliance

At present, total demand of LPG estimates at 1.2 million tons whilst domestics LPG manufacturers could produce only 570,000 tons per annual The shortage is filled by imported sources from China, Malaysia, Singapore

In Vietnam, LPG is mainly contained in under pressurized steel tank with big volume and steel bottle with small volume LPG firms, who are mostly importers, they supply LPG products to their customers through their distribution network

Together with the developing economics and population, real estate in general and resident apartment is also developing quickly in the big cities to match with housing requirement of Vietnam It pushes the demand of bottled LPG increase 10% annually

As yet, there are about 80 firms who are importers and 1st class distributor; a hundreds of general agents and thousands of agents trading LPG in Vietnam LPG

firms distribute LPG to their agents and industry customers as the end users Meanwhile, Agents almost supply LPG in cylinder to resident house unit

1.2 RATIONALE OF PROJECT AND PROBLEM STATEMENT

Petrolimex Gas Joint Stock Corporation (PGC) Gas company belonging to Vietnam National Petroleum Corporation (Petrolimex) is a state company established by Decision No 1653 – 1988/QD/BTM in December 25th 1998 by the Ministry of Trade, having registered capital of over 250 Vietnamese billion dongs Its function

is to import and export liquefied petroleum gas (LPG), distribute LPG in cylinder in the nationwide, LPG equipments, all services related to technological LPG in civil

& industries Fields

In Vietnam, PGC have been known as the most famous company in LPG industry with Petrolimex Gas brand name PGC is offering to the market both LPG in cylinders with medium and large size and LPG in tank Meanwhile, proportion of LPG in tank takes into account up to 51.27% of total quantity LPG delivered out market; medium bottled LPG type takes 36.78% and the large size takes 11.95% (Petrolimex Gas Report in 2011)

In general, PGC is one of the leading bottled LPG companies of which distribution network is reached to all of Vietnam provinces and takes nearby 17% market share

in Vietnam

PGC import one a half of total quantity LPG for company and the balance quantity

is bought from local producers Dinh Co and Dung Quat Processing Plant through Petro- Vietnam

As the continuous economic high growth rate and the increase on living standard in some previous years which is expected to be continued in the future, the government has encouraged using clean fuel to protect the environment LPG is seemed as an integral energy for heating

The above advantage is the foundation for the boom of LPG suppliers with many brands in Vietnam It also creates the highly competition in the market Customers could easily choose the best supplier who can offer them best price, quality and services

Although having strong infrastructure as 7,200 tons capacity LPG storage; known brand name Petrolimex Gas and strong distribution network The current marketing strategy of PGC is not really effectively The sale volume of bottled LPG products of PGC increased 1% compared with average 10% of growth in 2011 Especially, Ho Chi Minh City, the most potential market, consumes 20% total demand nationwide with 240,000MT LPG In which, 140,000MT was consumed by resident households who use medium bottled LPG The industrial households using large bottled and LPG in bulk bought 100,000MT However, the PGC‟s sale volume (in tons) of medium bottled LPG has been unchanged and even being down 5% in period 2006-2011 This effect leads to the decline of market share from 20%

well-to 4.7% in the period 2001-2011 At present, PGC market share of resident household segmentation is rather lower than other competitors such as Saigon Petro (24%); PV Gas ( 8.6%) ) in Ho Chi Minh city market, PGC‟s market share is also lower than new emerging brands with lower investment Anpha petrol (7%, Gia Dinh Gas brand name (Petrolimex Gas Report, 2011)

There should be significant changes if PGC aims to maintain its market share of resident household segment and survive in tiff competition After analyzing business operation of PGC, the author suggests to build a new marketing strategy for resident household segment to adapt with present situation

It is obviously that an appropriate marketing strategy can be a foundation for sustainable growth and create competitive advantages for the firms As we have known, an efficiency marketing strategy also creates a differentiation with others and become an invisible barrier against to other competitors Therefore, the problem

statement can be stated as “What should be an efficiency marketing strategy for bottled LPG of PGC?”

1.3 OBJECTIVE OF PROJECT AND SCOPE OF PROJECT

This study focus on marketing issue only, not mention to other subjects such as technology, financial, human resource and so on

1.4 RESEARCH METHODOLOGY

This project is designed under theories of SWOT, Strategic marketing plan, marketing and Marketing Mix Strategy of which data is collected from primary and secondary resource The research uses multi-methods to collect data such as mail interview for quantitative research and expert interview for qualitative research Secondary data were collected from published documents and internet

Figure1-1: Market Research Process

IDENTIFY PROBLEM

LITERATURE REVIEW

PROPOSED MARKETING STRATEGY

PRIMARY DATA

- Expert interview

- Mail survey

- Drop-off survey

Qualitative research interview:

Qualitative research conducted by interviews to experts and sales persons in bottled LPG business The purpose of these interviews is to understand the direct competitor and customer behavior as well as LPG market in general This information will be used to create the questionnaire for quantitative research

Quantitative Research:

A Questionnaire related to many issues was sent to users - residential household for finding and identify brand awareness; customer knowledge of products, customer purchasing habits; perception about current marketing strategy of PGC and customer demographics and so on

The purpose of the quantitative study is to statistically confirm the relationship between the purchase of LPG and the factors identified through the qualitative study

In order to minimize researcher‟s error, a pilot research was carried out as the beginning The pilot questionnaire was handled by ten sale man of LPG agent at ten districts in Ho Chi Minh City Sale man will interview minimum one end-user based on questionnaire After that he will feed back the result to Sale Department of PGC in Ho Chi Minh Through the pilot research, the researcher will learn more about the real situation and adjust questionnaire accordingly

The next step, the revised questionnaire will be sent by email to 3,000 customers who are using bottled LPG in Ho Chi Minh area

Secondary data:

Market research of Petrolimex Gas Corporation, Petrolimex Gas Report from (2007-2011); World Liquefied Gas Magazine (2010) and Vietnam Gas Association Report (2010); are used to synthesize and describe the general LPG market comprising supplier and its segmentation, total demand and forecasted demand in

Vietnam Secondary data related to macroeconomic data is collected from published documents and internet

1.4.1 Research question and objectives

For more understanding about customer, the key objectives of market research are

to find out the answer of below question

 How about brand awareness of PGC and competitors in LPG bottled market?

 What are the main factors and habits influence to household residents & agents purchasing behavior?

 How do household residents perceive the current marketing program of PGC?

 How about the customer‟s demography?

Research objects design: The objects of market research are persons who

have characteristics below

 Males/Females

 Using LPG bottled at home

 People who are the main decision purchase in household and LPG agent

 Living in Ho chi minh

Questionnaire design:

 Questionnaire for household resident (Appendix 2)

Purpose: Finding the brand awareness; reason for using LPG at home; and factors affecting to purchasing decision, affecting to switching brand and perceiving of customer toward to current marketing strategy of PGC

 Interview form for expert interview (Appendix 1)

Purpose: Finding the key factors affecting to industry success and factors affect to customer behaviors

Sample design:

 Total sample for household resident segment:

e: acceptable sample error (3.5%)

This research used cluster sampling technique with fraction of 10,000 Total population of Ho Chi Minh is about 8million, so the sample size for this segment should be equal or larger than 800 which are allocated geographically in Ho Chi Minh City The questionnaire will be sent by email

to 3,000 people who living in Ho Chi Minh After that, the number of respondents will be filtered for equal to the numbers of sample size as below

Table 1.1: Number of chosen customers in HCMC

No District Population Sample

Chapter2 Literature review

This chapter presents some literatures and theory of marketing concepts and marketing strategies the model to growth business and strategic marketing plan

Chapter3 Industry back ground – PGC Background – Bottled LPG market opportunities

This chapter provides a general introduction of related macro-economic factors and medium bottled LPG industry This chapter also provides PGC background comprising of organization, business operation, and current marketing program of PGC as well as business performance Besides, this chapter provides the competitor analyzed information market opportunities, market trend to develop middle size bottled LPG in Vietnam

Chapter 4 Research Methodology and Research Result

This chapter presents the objective of market research, research question, the way to design market research It also provides how to collect and analyze data And finally it provide the empirical finding of market research

Chapter5 Conclusions and recommendations

This chapter presents the summary of market research Based on the conclusion the objectives should be addressed and some recommend, propose an effective marketing strategy for PGC in Ho Chi Minh

CHAPTER II

LITERATURE REVIEW

Generally, the main purpose of literature review is to give readers easy access to research on a particular topic by selecting high quality articles or studies that are relevant, meaningful, important and valid and summarizing them into one complete report

It provides an excellent starting point for researchers beginning to do research in a new area by forcing them to summarize, evaluate, and compare original research in that specific area It ensures that researchers do not duplicate work that has already been done

It can provide clues as to where future research is heading or recommend areas on which to focus It identifies inconsistencies, gaps and contradictions in the literature

It provides a constructive analysis of the methodologies and approaches of other researchers

For the objective and scope of this thesis, which be defined in problem statement, I just focus on review the literature of marketing field which related and suited to service business of PGC

attention (Kotler et al 2005, p.58)

External Environment Analysis

The external environment analysis comprises of opportunity and threat analysis The company needs to identify the main threats and opportunities that their company faces The purpose of the analysis is to make the developments that can have an impact on the firm The opportunities and threats can consider from the economic climate, demographic changes, market, technology, competitive activity, channel pressure, politics etc (Kotler et al 2005)

Not all threats call for the same attention or concern – the manager should assess the likelihood of each threat and the potential damage each could cause The manager should then focus on the most probable and harmful threats and prepare plans in advance to meet them (Kotler et al 2005)

Opportunities occur when an environmental trend plays to a company‟s strength Each opportunity should be accessed according to its potential attractiveness and the company‟s probability of success Companies can rarely find ideal opportunities that exactly fit their objective and resources The development of opportunities involves risks When evaluating opportunities, the manager must decides whether the expected return justify these risks A trend or development can be a threat or an opportunity, depending on a company‟s strengths (Kotler et al 2005)

Internal Environment Analysis

The strengths and weakness in the SWOT analysis do not list all features of a company, but only those relating to critical success factors It is nice to be good at something, but it can be a weakness if the competition is stronger (Kotler et al 2005)

2.2 MARKETING STRATEGY

2.2.1 What is a marketing strategy?

Any organization wants to exchange its products or services in the marketplace successfully should have a marketing strategy to guide the allocation resource

Generally, “A Marketing strategy is the means by which a marketing goal is to be achieved, usually characterized by a specified target market and a marketing program to reach it” (Roger A.Kerin; Steven W Hartley; William Rudelius et al 2007)

In the other words, marketing strategy is a process that can allow an organization to concentrate its limited resource on the greatest opportunities to increase sale and achieve a sustainable competitive advantage A marketing strategy should be centered on the key concept that customer satisfaction is the main goal

After studying these theories, author withdraws some conclusion to apply in this project as follow:

 Marketing strategy related to Marketing mix: product; promotion, distribution, pricing, people

 Marketing strategy related to competitive advantages of firms such as brand name; infrastructure; technology; people

 Marketing strategy related to marketing plan as a method and process to allocate limited company‟s resource to achieve customer satisfaction, market share, sales goal and competitive advantage in the particular timeframe

2.2.2 Marketing mix strategies

There are several marketing strategies being applied in firms today, however, author found that marketing mix is the most suitable tool for this project

Marketing mix is the set of marketing tools that firms use it to pursue the marketing object in the target market Mc Cathy classified into four board group that he called the four Ps of marketing: Product, Price, Place, and Promotion

 Product: A tangible object or an intangible service that is mass produced or manufactured on a large scale with a specific volume of units Intangible products and often service based

 Price: The price is amount customer pays for the product It is determined by

a number of factors including market share, competition, material cost, product identity and the customer‟s perceived value of the product The business may increase or decrease the price of product if other stores have the same product

 Place: place represents the location where a product can be purchased It is referred to as the distribution channel It can include a physical store as well

as virtual stores on the internet

 Promotion: Represents all of communications that a marketer may use in the marketplace Promotion has four distinct elements – advertising; public relations, world of mouth and point of sale A certain amount of crossover occurs when promotion uses the four principle elements together Advertisement covers any communication that is paid for, Public relation are where communication is not directly paid for and includes press releases, sponsorship deals, exhibitions, conference Word of mouth is any apparently informal communication about the product by ordinary individuals, satisfied customers or people specifically engaged to create word of mouth momentum Sale staff often plays an important role in word of mouth and public relations

Figure 2.1: The 4Ps component of marketing mix strategies

Source: Philip Kotler, 2000, Marketing Management Millennium Edition

Robert F Lauterborn proposed a four Cs classification in 1993 to replace 4p‟s model of Mc Cathy It is comprised of “Customer Solution; Customer Cost; Convenience and Communication, meanwhile The Product part of the Four Ps model is replaced by Consumer Solution, shifting the focus to satisfying the consumer needs Price is replaced by Customer Cost, reflecting the total cost of ownership As the point of view of buyer, the cost is not only for physical product but also for both of product and service which they could expect from seller Placement is replaced by Convenience Convenience takes into account the ease of buying the product, finding the product, finding information about the product, and several other factors Finally, the Promotions feature is replaced

by Communication which represents a broader focus than simply Promotions Communications can include advertising, public relations, personal selling, viral advertising, and any form of communication between the firm and the consumer

Four Ps Four Cs

Source: Philip Kotler, 2000, Marketing Management Millennium Edition

The four C's reflect a more customer oriented marketing philosophy They remind that the firm need to focus entirely on the customer when deciding why, what, when and how to offer a service So, in author‟s point of view 4Cs model is rather suitable for bottled LPG industry

2.3 STRATEGIC MARKETING PLAN

To make the best use and maximize output of limited resources, a business needs a strategic marketing plan that carefully maps out the business‟s future growth and future profit performance Every strategic market plan a business develops will in some way affect to both its short and long run performance in each of three areas identified

Depending on the situation of the market and environment, some strategic marketing plans will be offensive plans and some will be defensive

2.3.1 Offensive strategies

The offensive strategic market plans are usually growth oriented and more appreciate for the growth stage of product life cycle The offensive strategic market plans are fundamentally geared for growth and inherently involve in strategies for penetrating or growing existing markets or entering or developing new market as description below

Figure 2.2 Offensive strategies

(Source: Roger J Best, 2009 Market Based Management, 5 th Edition)

One of important amount offensive strategic market plans is expanding market demand because at any point of time, the number of customer in the given market is limited, to strategies to enlarge customer include a focus on wining over competitor‟s customers but they can focus on growing market demand by drawing new customers into the market It means the market has many potential customers who for various reasons have not entered it The reasons obstruct customer entered the market had been described as below

Grow in existing market

 Grow market share

 Grow revenue per

Strategy Objective

Improve margins

 Improve customer loyalty & retention

 Improve differentiation advantage

 Low cost/ improve marketing

productivity

 Build marketing advantage

Figure 2.3: Factors limiting full market development

(Source: Roger J Best, 2009, Market Based Management, 5 th Edition)

2.3.2 Defensive Strategy

The key main goals of defensive strategic market plans are to protect profitability and key share positions that are worth to investment Another goal of a defensive strategy is to manage the profitability of the business that are moving beyond the potential for high growth or profitability

Current market

Potential customers can’t afford the product at the current price

Service couldn’t meet customer need

Product incompatible with lifestyle or use situation and afraid of quality of product Service couldn’t meet customer need

Customer awareness means not only product awareness, but also a compete comprehension product’s benefit

Figure 2.4 Defensive strategies

(Source: Roger J Best, 2009, Market Based Management, 5 th Edition,)

2.3.3 Product – market growth matrix strategy

The Ansoff Product-Market Growth Matrix is a marketing tool created by Igor Ansoff and it was first published in his article “Strategies for Diversification” in the Harvard Business review (1957) The matrix allows marketers to consider ways to grow the business through existing and/or new products, in the existing and/or new market This matrix help organization decides what type of action should be taken and given current performance

 Reduce market focus

Core Strategy 3

Monetize, harvest, divest

Figure 2.5 Product – Market Growth Matrix

 Market penetration (existing markets, existing products): Market

penetration occurs when a company enters or penetrates a market with current products The best way to achieve it by gaining competitor‟s customer (part of their market share) Other ways include attracting non-users of our product or convincing current clients to use more of your product and/or service with advertising or their promotions Market penetration is the least risky way for a company to grow

 Product development (existing market, new products): A firm with a

market for its current products might embark on a strategy of development other products catering to the same market although these new products need not be new to the market; the point is that the product is new to the company) Frequently, when a firm creates new products, it can gain new customers for these products, thus new product development can be a crucial business development strategy for firms to stay competitive

 Market development (New market, existing product): An established

product in the marketplace can be tweaked or targeted to a different customer

PRODUCT DEVELOPMENT

MARKET DEVELOPMENT

MARKET DIVERSIFICATION

segment, as a strategy to earn more revenue for the firm This is a good example of developing a new market for an existing product Again, the market need not be new in itself, the point is that the market is new to the company

 Diversification (New market, new products): Company develop new

product for adapting to new market, this resulted in the company entering new market where it had no this product presence before

(Source: Gareme Drummond, 2008, Strategic marketing 3 rd Edition)

2.4 CONCLUSION

All theories mentioned as above are using throughout this project and is presented

in each sections of Business strategic planning process

Figure 2.6 Strategic Planning Process

(Source: Philip Kotler, 2000, Marketing Management Millennium Edition)

CHAPTER 3 COMPANY AND MARKET OVERVIEW

This chapter provides general information of related macro-economic factors and medium size bottled LPG industry This chapter provides Petrolimex Gas Joint Stock Corporation (PGC) background included the company‟s history, organization and its business operation Besides, it provides information of main competitors of PGC and market trend It also provides the current marketing strategies of PGC as well as SWOT analysis about PGC‟s bottled LPG business

3.1 MACRO ECONOMIC FACTORS

Ho Chi Minh is located in a most important geography position of Vietnam, as a motive force of economic development of Vietnam as well as a most strategic area

on the South and in Vietnam in general Ho Chi Minh is a prosperous trade center and a gate to deal with foreign organization Dynamically and creatively, Ho Chi Minh is a safest and a fast growing city in South East Asia Countries With a rising economy, a well-educated population and modern facilities, Ho Chi Minh seems as economic, cultural, scientific and technological hub of Vietnam

3.1.1 Population

Population is one of the most important criteria when researching, studying about the economics fields It not only helps researcher forecast market size but also define the segmentation which organization will concentrate on

Table 3.1 Ho Chi Minh City Population

In Ho Chi Minh, the majority of population about 85% is living at Urban Residents are mostly centralized at District 3,4, 10, 11; Binh Tan, Tan Binh District with density up to 80,000 people/km2, meanwhile, with high rising population rate about 2.5% as the moment, total Ho Chi Minh City population will be exceed 10millions

in recent coming years Besides, according to Vietnam General Statistics Office, the household in Ho Chi Minh City was 1,824,822 in 2010 In connection with high rate of young people who is going to separating from their families in Ho Chi Minh, the number of household is forecasted to reach at 2millions in 2015 (Source HOREA – Ho Chi Minh Real estate Association)

Just only for apartment segmentation, HCMC there is around 80,000 unit of household in 2010 and be forecasted to reach 120,000 units in 2011 It figures out the strong LPG demand in HCM in the near future

Figure 3.1 HCMC CONDOMINIUM SUPPLY

Source: CB Richard Ellis Vietnam, 2010

3.1.2 GDP, GDP/Capita

A second important criterion is GDP & GDP/Capita As mentioned as about, Ho Chi Minh is the most economically dynamic city and the largest economic hub in Vietnam HCMC has always gets the high level of economic activity, stably leading

in terms of economic growth Gross domestic product (GDP) of HCMC accounts for nearly one fourth of Vietnam‟s

As a center of Southern Focal Economic Zone (SFEZ) and the heart of southern region, HCM makes up 66.1% of SFEZ„s GDP and 30% of Southern region‟s GDP per Capita of HCMC is the highest city of nationwide

(Source: Ho Chi Minh City Statistical Office, 2010)

Table 3.2 HCM GDP & GDP per Capital

All above figures, this once again demonstrates that HCMC is a leading city about aspect of economy in Vietnam It is a brilliant market for any organization wants to invest in this city

3.2 BOTTLED LPG MARKET ANALYSIS

In Vietnam, the LPG demand is increasing rapidly There are about 1.27 million tons LPG consumed in 2011 in Vietnam According to the forecast of Jaccar, Vietnam‟s LPG consumption would hit 1.5 million tons in 2015 and will be reached

at 2.0 million tons at 2020

There are some energies used for cooking & heating in household such as: Electricity; Fossil Fuels: Coal; kerosene; Wood; Gas (LPG) Among of them, fossil fuels are not popular in urban anymore due to not only its convenience but also pollution is

Based on technical calculation, the energy of 1kg LPG is equivalent to 13KW electricity Comparison between LPG price and electricity price in 2011, LPG not takes much advantage by cost However, with some advantages of LPG comprised

of easy to order, habit using LPG burners, being easier cooking than electronic burner All given that LPG is most popular fuels for household appliance inHCMC

In the other hands, connection with youth people who want to make a separate home, the demand to buy their own house or apartment So LPG demand for cooking will be risen day by day

Figure 3.2 LPG products demand in Vietnam & HCMC

Source: (Vietnam Gas Association Magazine 2011)

The above diagram is shown that there are about 270,000MT LPG products sold out

to HCMC market of which around 161,000 tons bottled LPG accounted for household in HCMC in 2011 The estimated Bottled LPG demand will be 167,000MT and will be 175,000MT in 2013

3.2.1 Bottled LPG in household in HCMC

Spending almost 20 years in Vietnam, LPG – a kind of energy has been had an important role in industrial domains so, many industrial firms invested by their own the infrastructure such as LPG/LNG storage system to serve their production It seems that the LPG industrial segmentation is not attracted by small LPG firms due

to finance and investment limitation Besides, in household resident segmentation, the LPG suppliers are easier to collect their debt as well as be higher inventory

517,554 612,198 732,031

783,706

809,640

970,589 1,186,030

1,270,912 1,281,021 1,370,000

103,511

169,273 221,078

269,024 272,106 300,000

return than industrial segmentation Hence, the small firms concentrate on resident segmentation to distribute bottled LPG with medium size

Differentiation with developed countries which is installed City Gas pipeline system cover all cities Vietnam in general and HCMC in particular, mostly use bottled LPG for cooking, heating…According research of Rinnai – Burner manufacturer in Vietnam 2010, the burner with bottled LPG being used, is at high rate, about 95 %

in total households of urban and 78% of suburban in HCM

Among of bottled LPG type which is used in HCMC, the medium size of bottled LPG (10kg-13kg bottled LPG) is the most popular for household appliance due to neatly and mobility features

3.2.2 Current market size & market share

The demand of LPG for household section is about 165,000 tons in HCM (source: Vietnam LP Gas Association report in 2010) Meanwhile, there are around 160,000MT bottled LPG and 5,000MT LPG in bulk supplied by piping systems Therefore, the rate of using bottled LPG will be accounted at 96% of total LPG using for burning in HCM

In fact, there are over 80 LPG suppliers and thousands distributors and agents existed in Ho Chi Minh It creates a highly competitive environment With a broaden sale networks, not only households in the urban area anyone could buy bottled LPG easily in suburban area of HCMC also

Because there are a mass of LPG suppliers joined in HCMC market, the market share for this segmentation is split up

Chart 3.1 Bottled LPG market share in 2010

(Source: Vietnam Gas Organization Magazine, 2010)

Due to very soon established and only focusing in Ho Chi Minh, Saigon Petro with 15.9% of market share is the leading company in this domain The follower is Petro Gas with 8.63% PV Gas not only has a large infrastructure of LPG storage but also own two LPG plans therefore they take a second position of LPG distributor ranking in Ho Chi Minh area Giadinh Gas with 6.96% of market share owns a flexible distribution network in Ho Chi Minh

Although PGC take 19% of total market share in Vietnam, but for resident household in HCM segment, they only take around 4.7% because there are many competitors with fierce competition each other