USING BRAND AS AN EFFECTIVE WEAPON TO COMPETE IN THE MARKET: A CASE STUDY OF NHAT LINH COMPANY

I wish to express my profound gratitude and great appreciation to my advisor Dr. Truong Quang for his valuable guidance, advice and encouragement throughout the research study

USING BRAND AS AN EFFECTIVE WEAPON TO COMPETE IN THE MARKET:

A CASE STUDY OF NHAT LINH COMPANY

by

Duong Manh Cuong

A research study submitted in partial fulfillment of the requirements for the degree of Master ofBusiness Administration

Examination Committee Dr Truong Quang (Chairman)

Dr Hans Stoessel

Dr Clemens Bechter

Previous Degree: Bachelor of Engineering

Hanoi University of Transport & CommunicationsHanoi, Vietnam

Scholarship Donor The Government of Switzerland/Swiss Development

Cooperation (SAV)

Asian Institute of TechnologySchool of ManagementBangkok, ThailandApril 2001

Deep appreciation and thanks are also extended to Mr Nguyen Van Dong Assistant Manager,

Mr Nguyen Van Bien, Deputy Manager, and Ms Nguyen Thu Phuong of Nhat Linh Co Ltd forproviding me the needed information and data to complete this research study

Last but not least, I would like to thank the government of Switzerland for providing me a fullscholarship to study at SAV in HCMC, Vietnam and at School of Management in Bangkok,Thailand

In a market economy, the success or failure of the companies depends on how they fulfillconsumers’ needs and wants In a fierce competition environment, companies must compete witheach other in terms of price, quality, services, technology, innovation, and brand name, etc Todifferentiate their products from other competitors’, companies often create brand names for theirproducts or their corporate Therefore, branding has become an essential means for companies tosurvive and develop in the long term

In case of wide product portfolio, “branding” even replaces “marketing” activities Manycompanies recognize that branding is the most effective weapon to win consumers’ purchasingdecision Indeed, attracting consumers becomes a very difficult task for any company in a highlycompetitive market

Although a company gets many benefits from its brand name, it is not easy to manage a strongbrand To understand more how a company builds and manages its brand to get the full benefitfrom it, a study into the case of the LiOA brand at Nhat Linh Co., Ltd., an auto voltage stabilizer(AVS) manufacturer, is undertaken

The case study will focus on analyzing the external market environment, the company internalsituation and its brand development and management basing on interviews with the Companymanagers and its employees At the same time, a customer survey is carried out to evaluate whatconsumers know about LiOA’s brand name and products From the analysis of the survey results,some recommendations for LiOA branding management and communication program will bemade to help the Company manage its brand better and to strengthen its LiOA brand name in theAVS market

TABLE OF CONTENTS

Chapter 1: INTRODUCTION -1

1.1 Rationale of the Research -1

1.2 Problem Statement -1

1.3 Objectives of the Research -1

1.4 Research Methodology -2

1.5 Scope and Limitations of the Research -3

1.6 Structure of the Research Report -3

Chapter 2: LITERATURE REVIEW -4

2.1 Introduction -4

2.2 What is a Brand? -4

2.3 The Importance of Brand Name -5

2.3.1 The main contribution of brands -5

2.3.2 A brand is more than a product -6

2.4 The Brand Equity -7

2.5 Brand Identity -7

2.5.1 Definition -7

2.5.2 The brand position trap -8

2.5.3 Four brand identity perspectives -8

2.5.4 The identity structure -9

2.6 Value Proposition -9

2.7 Strategic Brand Management -10

2.8 Brand position -12

2.9 Communication Program -13

2.10 Brand Leverage -13

2.11 Important Factors For Building Strong Brands -14

Chapter 3: ANALYSIS OF THE COMPANY CURRENT SITUATION -15

3.1 External Environment Analysis -15

3.1.1 Macro Environment -15

3.1.2 The Industry Environment -18

3.2 Internal Analysis -20

3.2.1 Company Overview -20

3.2.2 Company Performance -21

3.2.3 Strategic intent -23

3.2.4 Company Structure -24

3.2.5 Company resources and core competencies -24

3.3 SWOT Analysis -30

Chapter 4: COMPANY’S BRAND MANAGEMENT -31

4.1 LiOA’s Positioning -31

4.1.1 The AVSs Market -31

4.2 Brand Analysis -32

4.2.1 The origin of the name -32

4.2.2 LiOA symbol -32

4.2.3 Trade mark protection -33

4.2.3 Advertising activities -33

4.3 Brand Management -34

4.4 Brand Leverage And Extension -34

4.4 The Company’s Brand Intention -35

4.4 Conclusion -35

Chapter 5: FINDINGS OF THE CUSTOMER SURVEY -36

5.1 Overview of the Sample’s Characteristics -36

5.2 Consumers’ Brand Awareness and their Behavior -36

5.2.1 Brand awareness -36

5.2.2 Brand choice -37

5.2.3 Factors Affecting Consumers Choices of AVS Brand -38

5.3 Questions Relating To LiOA Products -39

5.3.1 LiOA name -39

5.3.2 Country of origin -40

5.3.3 LiOA knowledge information sources -40

5.3.4 LiOA usage -41

5.3.5 Consumers’ evaluation of LiOA AVS -41

5.3.6 Price of LiOA AVSs -42

5.3.7 LiOA shops convenience -42

5.3.8 LiOA advertisement contents -42

5.3.9 LiOA promotion program -43

5.4 Conclusion -43

Chapter 6: DEVELOPING A BRANDING STRATEGY FOR LIOA -45

6.1 Developing LiOA Brand Identity -45

6.1.1 The brand as a product -45

6.1.2 The Brand-as-organization -46

6.1.3 The Brand-as-person: Brand personality -46

6.1.4 Band as a symbol -46

6.2 Brand Value Proposition -46

6.2.1 Functional benefits -46

6.2.2 Emotional benefits -47

6.2.3 Self-expressive benefits -47

6.3 Brand Anatomy of LiOA -47

6.4 LiOA Brand Position -48

6.5 Branding activities in line with its intention strategies -48

6.5.1 Consolidate LiOA brand name in the North -48

6.5.2 Expand its market share and brand awareness in the South -50

6.5.3 LiOA expansion to other foreign markets -51

6.5.4 LiOA CABLE branding -51

Chapter 7: CONCLUSION AND RECOMMENDATIONS -52

7.1 Conclusions -52

7.2 Recommendations -53

REFERENCES -55 APPENDIX -A-1

LIST OF TABLES

Table 2.1 The Brand Position Trap -8

Table 3.1: Vietnam’s Economic Indicators -15

Table 3.2: Summary of the Business Opportunities and Threats -20

Table 3.3: LiOA AVS Current Product Line -21

Table 3.4: Sales Performance of Nhat Linh Co Ltd., 1996-2000 -22

Table 3.5: Summary of the Company’s Strengths and Weaknesses -29

Table 3.6: SWOT Analysis Summary -30

Table 5.1: Factors Affecting Consumers Choices of AVS Brand -38

Table 5.2: Respondent’s Evaluation of LiOA AVSs -41

Table 5.3: Respondents’ Evaluation of LiOA Advertisement Contents -43

LIST OF FIGURES Figure 1.1: Research Framework 2

Figure 2.1 A Brand Is More Than a Product 6

Figure 2.2: The Brand Management Process 11

Figure 2.3 : A Variety of Ways of Leveraging Brand 13

Figure 3.1: Changes in Foreign Direct Investment 16

Figure 3.2: Nhat Linh Company’ s Organizational Chart 24

Figure 4.1 LiOA Logo 33

Figure 5.1: Respondent’s Awareness about AVS Brands 37

Figure 5.2: Brand Selection of Respondents 37

Figure 5.3: Information Source for Knowing LiOA 40

Figure: 6.1 LiOA Brand Anatomy 48

Figure 7.1 The Proposed Model for Strategic Brand Management Process 54

Chapter 1 INTRODUCTION 1.1 Rationale of the Research

In a market economy, the success or failure of the companies depends largely on howcompanies fulfill consumers’ needs and wants If the products or services meet theconsumers’ needs (physical and emotional), consumers will be satisfied Once they aresatisfied with the products, they will continue to buy or refer to other consumers by means of

“word-of-mouth” As a result, the companies will enjoy a long-term profitability andcustomer’s loyalty

In a fierce competition environment, companies must compete with each other in terms ofprice, quality, services, technology, innovation, and brand name, etc To differentiate theirproducts from other competitors, companies often create brand names for their products ortheir corporate Consumers are made aware of the products by their brand names with unique,distinctive and particular characteristics In this case, the choice of a customer for a product,then, is a result of brand recognition for quality or uniqueness of the company’s offer

Therefore, branding has become an essential means for companies to compete with othercompetitors In case of wide product portfolio, “branding” even replaces “marketing”activities Many companies recognize that branding is the most effective weapon to winconsumers’ purchasing decision Indeed, attracting consumers becomes a very difficult taskfor any company in a highly competitive market

Although a company gets many benefits from its brand name, it is not easy to create andmaintain a strong brand To understand more how a company builds and manages its brand toget the full benefit from that, a study into the case of LiOA brand at Nhat Linh Co Ltd., anauto voltage stabilizer (AVS)manufacturer is carried out

1.2 Problem Statement

To compete with other competitors in automatic voltage stabilizer market, Nhat LinhCompany has to build its own brand name and manage it well This study will see how theCompany manages its brand as an effective weapon to compete with other competitors

1.3 Objectives of the Research

This study focuses on analyzing brand management of the Company Its specific objectivesare:

 To analyze the external market environment of the auto voltage stabilizer industry and theCompany situation

 To analyze the current Company branding management process

 To survey customer’ attitudes towards the Company’s brand/products

 To recommend a brand strategy and marketing communication program for the Company

1.4 Research Methodology

The conceptual framework of the study can be illustrated by the Figure 1.1

Figure 1.1: Research Framework Data collection: Data for the study were collected from two sources:

 Primary data: The primary data were gathered through direct in-depth interviews with the

Company’s Board of Directors, Marketing Managers, and other key staff members of theCompany In addition, a survey by questionnaire was conducted to evaluate theconsumers’ attitudes toward the Company’s brand/products The number ofquestionnaires sent out was 200 Both buyers and non-buyers of the Company’s productsare respondents of the survey

 Secondary data: relevant data on the current market and possible target market of the

Company and competition were collected from public media, the Ministry of Planning andInvestment, Vietnam Chamber of Commerce and Industry, from the Internet, and othersources

Data analysis:

Qualitative analysis was done for secondary data and primary data collected from interviews.Quantitative analysis was done for primary data collected from the questionnaire survey inorder to evaluate consumer’s brand awareness, factors affecting their purchase decision, and

their attitudes towards LiOA’s AVS products The software SPSS 10.0 was used to process

1.5 Scope and Limitations of the Research

Though the Company’s products are available throughout the country, the customer surveywas done in Hanoi and its vicinity only, as Hanoi represents one of the two main markets ofthe AVS products

The research have some limitations due to following reasons: (i) Relevant data collected fromdifferent sources may be inconsistent (ii) It is difficult to get some sensitive information fromthe Company’s managers (iii) It is difficult to get an overall picture of the attitude ofconsumers throughout the country towards the Company products when the customer survey

is only conducted in Hanoi

1.6 Structure of the Research Report

The research report will be organized as follows:

Chapter 1: A general introduction, comprising rationale, identification of the problem,objectives, methodology of the research study and its scope and limitations

Chapter 2: Literature review

Chapter 3: Analysis of the external environment and the Company’s strengths andweaknesses

Chapter 4: The Company’s current branding situation

Chapter 5: Findings of the survey on customer’s attitude towards the Company’s product.Chapter 6: Developing a branding strategy for the Company

Chapter 7: Conclusion and recommendations

Chapter 2 LITERATURE REVIEW 2.1 Introduction

An increasing number of the world’s most influential companies have recognized the

enormous value of their brands Well-developed bands have become an effective strategic

weapon to win consumer’s heart and mind This applies for all companies, big and smallalike

Branding has become much more important recently because of the proliferation of choicethat is made available to consumers To have competitive advantage within the wholeindustry, the successful corporation should have not only good quality of products, servicesabove other competitors but also good image in the consumers' mind That is brand name

Brand name makes the company’s product distinctive from those of competitors.

This chapter will review the literature involving building and maintaining brand The chapterwill also highlight the importance of branding in the marketplace

2.2 What is a Brand?

There are many definitions of “brand” Following are some of them:

Kotler (2000) defines a brand as “a name, term, sign, symbol, or design, or a combination

of them, intended to identity the goods or services of one seller or group of sellers and todifferentiate them from those of competitors.”

According to Hankinson and Cowking (1996), a brand is a simply a product or servicewhich can be distinguished from its competitors The distinctiveness reflects a brand’spositioning relative to the competition and by its personality Successful brands are thosewhich meet the needs and aspirations of a defined target market

Kapferer (1992) makes a clear distinction in writing that, “products are what the companymakes; what the customer buys is a brand.” Therefore brand can be understandable as theproduct in the customer viewpoint A brand is landmark Buyers are actually purchasing aposition in the minds of potential customers be in the stalls or in the royal circle

Arnold (1992) comments that brand is the personality or identity of a product, range ofproducts or an organization, derived from consumer perception of both tangible andintangible attributes Brands are recognized and understood on an emotional level, in away that most of their founders would find astonishing

Tennant (1994) also has a similar definition of a brand as a sign of identification, the labelthat differentiates your product from those of your competitor A brand also can act as atype of shorthand encapsulating the key features of the product such as its image, use andprice in an easily recognized and remembered form

In short, all these authors agree that a brand identifies the seller or maker Like identification

cards, it is a way of differentiating the company’s product from those of another company.This becomes the increasingly important issue in fiercer competition nowadays, whereconsumers always have a greater choice of offers

2.3 The Importance of Brand Name

2.3.1 The main contribution of brands

As stated earlier, many companies have recognized brands as a powerful strategic weapon.Power brands can provide their owners with considerable rewards if handled correctly andmanaged sensibly They can ensure a growth in market share and corporate profitability.Stobart (1994) points out three reasons why brands play an important role to their owners:

 To serve as a focus for consumer loyalty Thus, they can be developed into assets that

generate steady and reliable streams of cash flow They help to guard against competitiveencroachment

 To capture the promotional investment put into it Enormously valuable brands like Coca,

Kodak, Pepsi and Marlboro are still benefiting massively from the past huge advertising.This ability to capture promotional investment is in direct contrast to what happens withgeneric goods or commodities, which have no brand name or image

 To be of critical strategic importance to their owners In fact, brands enable

manufacturers to communicate directly with consumers regardless of the actions of themiddleman This communication gives their producers power toward retailers

Temporal (2000) indicates the benefits of power brands towards companies and consumers asbellows:

The market power of brands: Here are some ways in which strong brands can transform

ordinary businesses into elite ones

 Survival in adverse condition

 Longevity

 Transportability across national cultures

 Greater distribution power

 Crossing market boundaries

 Staff motivation, recruitment and loyalty

 Moving away from commodity status

The financial rewards of brands: Powerful brands provide long-term security and growth,

higher sustainable profits, and increased asset value because they achieve:

 Competitive differentiation

 Premium prices

 Higher sales volumes

 Economies of scale and reduced costs

 Greater security of demand

For consumers, they buy branded products because of the following reasons:

 Brands generate choice

 Brands simplify decisions

 Brands offer quality assurance and reduce risks

 Brands help self-expression

 Brands offer friendship and pleasure

2.3.2 A brand is more than a product

Brand is more than a product Branding is about the way people perceive, not about theproducts in isolation (Aaker, 1996)

A brand represents a pact between brand owner and consumer Brand allows consumers toshop with confidence in what is an increasingly complex world The brand offers theconsumer a guarantee of quality, value and product satisfaction

Products cannot speak for themselves The brand is what gives them meaning and speaks forthem Figure 2.1 describes all possible attributes of a brand

The most important attribute of a successful brand is, of course, the product itself Creating abrand image for a product, which does not match the consumers’ expectation, is a formula for

a certain failure (Tennant, 1994)

However, non-tangible factors have come to play an increasingly important role Recently, theway in which branded products or services have been distinguished from one another hasincreasingly concerned non-tangible factors rather than tangible factors Therefore, brandinghas become a highly skilled and specialized discipline It concerns with managing andmaintaining a mix of factors, both tangible and intangible to attract consumer loyalty (Stobart,1994)

Figure 2.1 A Brand Is More Than a Product

Source: Aaker (1996)

2.4 The Brand Equity

Upshaw (1995) defines “the brand equity is the total accumulated value or worth of a brand;the tangible and intangible assets that the brand contributes to its corporate parent bothfinancially and in terms of selling leverage.”

PRODUCTScope Attributes Quality Uses

Brand Personality

Organizational Associations

Country of Origin

Self-Expressive Benefit Emotional benefit

Brand-Customer Relationships

Symbol

User Imagery

BRAND

Brand equity can be defined as the added value provided to a product or company by its brandidentity It is the set of associations and behaviors that increase or decrease the value of thebrand compared to its financial value alone (Pettis, 1995).

It is pointed out that brand equity does not just happen; it is a combination of quality product,

advertising, marketing programs, point-of-sale programs - a bundle of consumer experiencesthat create the ultimate brand image It requires a long sophisticated process of the brandbuilding and maintaining

According to Kotler (2000), a brand can convey up to six levels of meaning There areattributes, benefits, values, culture, personality and users The challenge in branding is todevelop a deep set of meaning for a brand, it is called as a deep brand; otherwise it is ashallow brand For instance, Mercedes is a deep brand because we understand its meaningalong all six dimensions

This author also suggests five measurements of brand equity Brands vary in the amount ofpower and value they have in the marketplace:

 Brand unawareness: most buyers in the marketplace do not know that brand.

 Brand awareness: brands for which buyers have fairly known (measured either by brand

recall or recognition)

 Brand acceptability: most consumers would not resist buying these brands.

 Brand preference: brands that are enjoy a high degree of brand preference Consumers

would select those brands over the others

 Brand loyalty: brands command high degree of brand loyalty The loyal consumer will

walk out of the store to buy it elsewhere in case of stock-out of his favorite brand

It is noted that brands have become tradable assets There have been many big mergers andacquisitions over last decades In most cases, the price of the acquired company highlyexceeds its tangible assets (example the cases of Nestle and Rowntree) It is reasonable tothink that the extra value comes from the company’s brand

 Brand identity should help establish a relationship between the brand and the customer bygenerating a value proposition involving functional, emotional or self-expressive benefits

 Brand identity consists of twelve dimensions organized around four perspectives - thebrand-as-product, brand-as-organization, brand-as-person, and brand-as-symbol

 Brand identity structure includes a core, extended and proposition identity A brandidentity is to brand strategy what “strategic intent” is to a business strategy Strategy intentinvolves an obsession with winning real innovation, stretching the current strategy and aforward-locking dynamic perspective

2.5.2 The brand position trap

A brand position has been defined as “the part of the brand identity and value proposition that

is to be actively communicated to the target audience and that demonstrates an advantage overcompeting brands”

Thus, the brand position guides the current communication programs and is distinct from themore general brand identity construct There is a distinction between three related constructs

as illustrated in the Table 2.1

The brand position trap occurs when the research for a brand identity becomes a search for abrand position, stimulated by a practical need to provide objectives to those developing thecommunication programs The goal becomes an advertising tag line rather than a brandidentity

Table 2.1 The Brand Position Trap

How the brand is

now received How strategists want the brand to be perceived The part of the brand identity and value proposition to be actively

communicated to a target audience

Source: Aaker (1996)

2.5.3 Four brand identity perspectives

Aaker (1996) classifies brand identity into 4 categories:

(1) The brand-as-product

Although strategists should avoid the product-related associations, they remain to be animportant part of a brand identity as they are directly linked to brand choice decisions and theuse experience Product-related associations may comprise product-scope, product attributes,quality/value, uses, users and country of origin

(2) The brand-as-organization

The brand-as-organization perspective focuses on attributes of the organization rather thanthose of the product or service Such organizational attributes as innovation, a drive forquality, and the concern for the environment are created by the people, culture, values, andprograms of the company Organizational attributes are more enduring and more resistant tocompetitive claims than are product attributes It is difficult to duplicate an organization withunique people, values, and programs These attributes may apply to a set of product classes

(3) The brands-as-person: brand personality

The brand-as-person perspective suggests a brand identity that is richer and more interestingthan one based on product attributes Like a person, a brand can be perceived as beingupscale, competent, impressive, trustworthy, fun, active, humorous, casual, formal, youthful,

or intellectual A brand personality can create a stronger brand in several ways First, it canhelp create a self-expressive benefit that becomes a vehicle for the customer to express his orher own personality Second, brand personality can be the basis of a relationship between the

customer and the brand Third, a brand personality may help communicate a product attributeand thus contribute to a functional benefit.

(4) The brand-as-symbol

A strong symbol can provide cohesion and structure to an identity and make it much easier togain recognition and recall Its presence can be a key ingredient of brand development and itsabsence can be substantial handicap Symbols involving visual imagery can be memorableand powerful A strong symbol can be the cornerstone of a brand strategy

2.5.4 The identity structure

Brand identity consists of a core identity and an extended identity In addition, the identityelements are organized into enduring patterns of meaning, often around the core identityelements (Aaker, 1996)

(1) Core identity

The core identity represents the timeless essence of the brand, which contains the associationsthat are most likely to remain constant as the brand enters to new markets and productsclasses In addition, the core identity for a strong brand should be more resistant to changethan elements of the extended identity Ultimately, the core identity follows from the answers

to some tough, introspective questions, such as:

 What is the soul of the brand?

 What are the fundamental beliefs and values that drive the brand?

 What are the competencies of the organization behind the brand?

 What does the organization behind the brand stand for?

(2) Extended Identity

The extended brand identity includes elements that provide texture and completeness It fills

in the picture, adding details that help portray what the brand stands for Important elements

of the brand’s marketing program that have become or should become visible associations can

be included A brand personality does not often become a part of the core identity However,

it can be exactly the right vehicle to add needed texture and completeness by being part of theextended identity (Aaker, 1996)

The extended brand identity may include product scope, retail experience, slogan, logo,personality, and relationship

 Functional benefit: The benefit based on a product attribute that provides functional utility

to the consumer Such a benefit will usually relate directly to the functions performed by

the product or service for the customer The functional benefits have limitation of failure

to differentiate, easy to copy Other benefits attributes can overcome those limitations

 Emotional benefit: When the purchase or use of a particular brand gives the customer a

positive feeling, that brand is providing an emotional benefit It adds richness and depth tothe experience of owning and using the brand

 Self-expressive benefit: A brand can provide a self-expressive benefit by providing a way

for a person to communicate his or her self-image

For each individual, the people will have an associated self-concept and a need to express thatself-concept The purchase and use of brands is one way to fulfill this need for self-expression For example, using a positioned brand name products/ service with strongpersonality associated with a visible athlete generates self-expression (Aaker, 1996)

2.7 Strategic Brand Management

Brand management is above all about balancing variety of inputs Balances have to be struckbetween the external market and internal capabilities of the company; between the company’sinputs into the product and the influences on the consumer perception; between the short-termneed to maximize profit and the long-term need to invest and develop (Arnold, 1992)

This author also suggests a model for the brand management process containing five steps asillustrated in Figure 2.2

This model describes the brand management process as an incremental one, which stands atthe junction of company and consumer Brand management encompasses all steps of thisprocess

Step 1: Market analysis

Basic market analysis is above all the tracking of trends Information must be gatheredcontinuously, like military intelligence A company must understand the following aspects ofits territory:

 The size and scope of the market;

 The segment in the market;

 The players in the market and their positions;

 The trends in all these areas

Figure 2.2: The Brand Management Process

Source: Arnold (1992)

Step 2: Brand situation analysis

Brand situation analysis should produce:

 An in-depth understanding of the brand personality and values;

 A picture of the brand anatomy, and how its attributes are contributing to its overallposition;

 The same information for competitors brands

Step 3: Targeting future position

The strategy formulation phase should produce:

 A view on the future character of the market;

 A strategy outlining the future targeted brand position;

Market Analysis

Market definitionMarket segmentationCompetitor positionsTrends

Testing New Offers

Individual elements of mixTest markets (total offer)

Testing New Offers

Individual elements of mixTest markets (total offer)

Planning & Evaluating Performance

Level of expenditureType of support activityMeasurement against objectives

Planning & Evaluating Performance

Level of expenditureType of support activityMeasurement against objectives

Step 4: Testing new offers

The practice of advance testing is designed to do the following:

 Gain understanding of contribution of individual brand attributes to the overall position;

 Assess how changes to any element of the brand will influence its position;

 Test the total brand proposition when attacking new markets or after fundamental change

Step 5: Planning and evaluating performance

Planning and tracking activities are designed to provide the following:

 A clear plan for timing and objectives (in consumer terms) of marketing activity;

 A basis for judging the level of activity and in particular the level of expenditurenecessary to achieve those objectives;

 A program of evaluation mechanisms to monitor progress;

 A basis for continuing market analysis

2.8 Brand position

Brand position is the part of the brand identity and value proposition that is actively communicated to the target audience and that demonstrates an advantage over competing brands.

The four salient characteristics of a brand position as reflected by the phrases “part,” “targetaudience,” “actively communicated,” and “demonstrates advantage.”

(1) A part of the identity/value proposition

When a brand position exists, the brand identity and value proposition can be developed fully,with texture and depth They do not have to be concise statements of what is to becommunicated, because the brand position takes on that role

Brand position can be changed without changing the identity or value proposition of which it

is a subset The brand position includes the core identity, points of leverage within the identitystructure, and the value proposition (benefits that drive relationships)

(2) The target audience

The brand position should also target a specific audience, which may be a subset of thebrand’s target segment There can also be a primary and secondary target audience

(3) Active communication

That implies that there will be specific communication objectives focused on changing orstrengthening the brand image or brand-customer relationship These objectives, if feasible,should be accompanied by measurement

Brand image reflects current perceptions of a brand Like brand identity, brand position ismore aspirational, reflecting perceptions that strategists want to have associated with thebrand

Comparison of the identity with image will usually result in one of three different

communication tasks being reflected in brand position statement: augmenting an image, reinforcing an image or diffusing an image.

(4) Demonstrate an advantage

Finally, brand position should demonstrate an advantage over competitors The bottom line isthat the position should specify a point of superiority that is a part of the value proposition.The point of advantage should resonate with customers and be differentiating-that is,represent something different from what competitors provide

2.9 Communication Program

The communication program consists of the following activities (Kotler, 2000)

1 Identifying the target audience

2 Determining the communication objectives

3 Design the message

4 Select communication channels

5 Establish the total marketing communications budget

6 Decide on the communication mix

7 Measure the communications’ results

8 Manage the integrated marketing communication process

2.10 Brand Leverage

One recipe for strategic success is to create and leverage assets With its awareness, perceivedquality, associations and customers loyalty, a brand is usually the most powerful asset that afirm owns A strategic question, then, is how that brand can be leveraged to create larger andstronger business entities

Figure 2.3 : A Variety of Ways of Leveraging Brand

Source: Aaker (1996)

LEVERAGING THE BRAND

LEVERAGING THE BRAND

Stretching the Brand Vertically

in existing Product Class

Stretching the Brand Vertically

in existing Product Class

Brand Extensions

in different Product Class

Brand Extensions

in different Product Class

Extensions

Ad Hoc Brand

Extensions

Creating a Range Brand

Creating a Range Brand

Stretching Up

Stretching Up

Stretching Down Stretching Down

2.11 Important Factors For Building Strong Brands

To make brands strong, the following guidelines in order should be implemented (Aaker,1996)

Chapter 3 ANALYSIS OF THE COMPANY CURRENT SITUATION 3.1 External Environment Analysis

A company’s external environment consists of the industry environment in which theCompany competes and the country in which it is located In this chapter, factors influencingAVS industry will be considered

3.1.1 Macro Environment

Economic Environment

In an effort to overcome the currently stagnant trend and try to boost the economic growth ofthe country, the Vietnamese government has implemented the open-door and reform policysince 1986 As a result, the country has achieved considerable economic development sincethen

From its low level of GDP growth of 4% in 1987, the annual growth rate increased to 8-9%since the early 1990s, averaging 7.3 percent annually for the past decade Due to the Asianfinancial crisis, however, the GDP growth fell to 5.8 and 4.7 percent in 1998 and 1999,respectively In 2000, the GDP increased to 6.75%, signaling the beginning of a recoveryperiod (Vietnam Statistics Office, 2000)

Table 3.1: Vietnam’s Economic Indicators Economic indicators 1993 1994 1995 1996 1997 1998 1999 2000*

Exchange rate (VND/US$) 10,800 11,000 11,200 11,100 13,000 14,000 14,040 14.560

Source: General Statistic Office, (2000) and (*) Vietnam Venture Group, (2001)

For many years, the inflation rates have been kept under control From 800% in 1987, theinflation rate was brought down to a reasonable level (Table 3.1) In 1999, the inflation rate

was further decreased to 0.1% and -0.5% in 2000 That was caused by low purchasing power

of Vietnamese people

After a booming period from 1988 to 1996, foreign direct investment (FDI) has decreasedsince 1997 (Figure 3.1) This downturn has affected the economic growth and development inrecent years

Figure 3.1: Changes in Foreign Direct Investment

Source: Data of 1988 to 1997: MPI, 1998; Data of 1998-2000: Nguyen, 2001.

In deed, the Asian financial crisis forced a number of foreign investors in Vietnam towithdraw or restructure their business In addition to numerous high risks associated with theVietnamese market (e.g poor infrastructure and a lack of transparency in the legislativesystem), foreign investors are generally becoming more prudent in direct investment The

slowdown in FDI activities is negatively affecting the demand for industrial AVSs, as foreign

investors used to buy a large amount of AVSs for their investment projects

Another important event is that Vietnam is expected to join AFTA in 2003, i.e the tariffs formany import and export products will be removed or reduced On the one hand, it will bemuch easier for companies to import materials with lower prices and expand its market toother neighboring countries The competition will be stronger as foreign competitors will also

extend their market to other countries Therefore, private enterprises can favorably expand its market internationally They, however, have to prepare for coping with future foreign

competitors

Demographic and Social Environment

With the population of around 80 million at present (General Statistics Office, 2000), Vietnam

is among the most populous countries in the world Its urban population is 23.5% in 1999(19.4% in 1989 census), and the urbanization rate is still on the rise due to the currentindustrialization drive of the country

The educational levels of the Vietnamese people have been increased together with theirincome per capita also increases, especially in large cities such as Hanoi and Ho Chi MinhCities In addition, the number of personal computers has been increased rapidly, whichheighten the demand for AVS and UPS

0 1000 2000 3000 4000 5000 6000 7000 8000 9000

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

Number of projects Registered capital (million US$)

The analysis of the economic environment has shown that Vietnam’s economy has slowed down since 1997 This results in a slow growth of some industries like construction, and of the purchasing power of Vietnamese consumers Therefore, this may in turn cause low demand for electric home appliances as well as AVSs From 2003 on, private enterprises will be able to expand their market to other countries, as a result of Vietnam joining AFTA but to do so they also have to cope with fierce competition from foreign producers

The economic development in recent years has brought about the emergence of a middle,which is estimated at 5 to 6% of the population (http://tradeport.org/mark0067.shtml).

Therefor, the demand for durable products will increase and thereby open a potential market for AVS producers.

However, there is a big gap between living standards of the urban areas and the countryside.Differences in annual income and purchasing power can be seen between the North and theSouth of the country A report jointly prepared by the WB, UNDP and ADB points out thatVietnam remains a poor country: 37% of the population still lives under the poverty line and

60% of the labor force, 25 million people, are underemployed or unemployed Thus, the market for AVS products at present is mainly concentrated in big cities.

In addition, the consumers have become more sophisticated by getting acquainted with newmethods of marketing in a consumption market According to a research on Vietnameseconsumers’ behaviors conducted by ACNielsen Co., Vietnamese consumers began to payattention to brand name more than ever before (Saigon Times Weekly, October 14, 1999)

Therefore, producers with well-known brands will benefit from this trend

Technological Environment

Most of the equipment and production processes being used in the country are out-of-date,even in foreign/JV companies Vietnam has many sources of raw materials but it still has toimport some semi and final products For example, due to a lack of state-of –the-arttechnologies to process its raw materials, some AVS producers have to import silica metal barand bronze wires in order to ensure high quality of their products

Political and Legal Environment

The Enterprise Law, which was issued in January 1, 2000, is widely regarded as a verypositive addition to the Vietnam’s legal framework for private sector development In effect,

it abolishes several redundant of previous legislation by introduce a one-step registrationsystem It also allows companies to engage in all activities unless officially prohibited

The Enterprise Law was seen as a big push for local businesses and if implementedconsistently; it will certainly improve the business environment greatly In practice, thisattempt to develop the SME’s sector has been thwarted by the following shortcomings:

 Complicated administrative procedures in implementing the Law

 Interference of the government in the market forces, which prevent fair competition

 Still lacking appropriate policies and incentives regarding bank credit

Though the legal framework for the operation of SMEs has yet to complete, SMEs haveenjoyed increasing attention from international donors, such as UNDP, WB, ADB, MPDF.Supports of these international donors are in the forms of soft loans, technical assistance, etc.,aiming at enhancing the competitiveness of Vietnam's economy

3.1.2 The Industry Environment

The Porter’s five-force model (Porter, 1985) is used to analyze competitive situation in theAVS industry in order to identify the opportunities and the threats of the Company

The macro environment signals both opportunities and threats for private enterprises, in general, and for AVS producers, in particular Opportunities include simpler application/licensing procedures, easier access to soft loans provided by international donors, and customer’s increasing attention to brand, etc However, there are still many obstacles on the way to their full development, such as incomplete legal framework for their operation and high competition from several sources, both local and foreign

The risk of new entry by potential competitors

So far, only domestic companies compete in the AVS industry in Vietnam Foreigncompanies have not yet entered the AVS market because of various reasons, such as highimport tax and high transportation fee, etc Furthermore, they do not think that this is a bigmarket for them to enter in a long run, as the need for using AVS arises, only when theelectric current is unstable Using AVS to keep the power current stable is just a situationalsolution When the country provides enough power and has a good power distribution system,

it is not necessary to use AVS

Following are discussions of forces affecting the risk of new entry by potential competitors:

 Capital requirement

At present, it is easy for a local company to enter into this industry The AVS business usuallydoes not require much money to run Everyone can set up a business with VND 2 billion upfront capital Even some small workshops can also produce the products

 Product differentiation

There is not much difference in AVS products Production technology in use is almost similar

in various companies Therefore, new companies can compete with established ones easily interms of technology However, the product durability depends mainly on the quality of thesilica metal bars covered by bronze wires And high quality silica metal bars can only beimported New domestic companies with small investment are facing difficulties in buyingthese high quality materials Big companies get the advantages thanks to their economies ofscale

 Easy access to technology

In the AVS industry, companies can easily access to technology Different companies canhave the same technology Furthermore, there is no disruptive technology in this industry atpresent However, it takes time and efforts for small companies to buy the technology sincethe technology for producing AVS must be imported

 Economies of scale

Among companies in this industry, only a few have higher market share and dominate themarket These big companies may have the economies of scale and the ability to import highquality materials This will be a barrier for new entry and a disadvantage for existing smallproducers in the industry

 Established brand in customers

As mentioned in Section 3.1.1, customers are increasingly paying attention to brands Brandidentity and awareness are also major obstacles for new companies to compete in the market.Consumers often seek for products offered by long established and well-known companies inthe industry Thus, it is difficult for new companies, even with big investment capital, tocompete in the market

 Current situation of industry

The AVS industry already has a very high competitive structure and reached a mature phase

industry At present, there are about 40 domestic companies serving the AVS market Most of

them are located in Ho Chi Minh City Nhat Linh Co is the only big AVS company located in Hanoi Therefore, it is not easy for producers in Ho Chi Minh City to expand their markets to Hanoi and not easy for new entrants to enter into the AVS market in Hanoi.

Rivalry among competitors

 Slow growth of industry

The slow growth of the AVS market at this moment has forced companies to compete fiercely

in order to take over the market shares of others The demand for the product is slowing down

in big cities such as Hanoi and Ho Chi Minh City, but increasing in other provinces(Company report, 2000) To overcome this challenge, companies have to expand theirbusiness to other provinces This will create a strong competition among exiting companies inthe industry all over the country

 Brand identity

As consumers are beginning to pay attention to brand name when they want to buy AVSproducts, the five biggest local AVS producers have spent a lot in advertising, sponsorshipand public relations programs to create consumers’ awareness towards their brand names.Producers with well-known brand name have gained competitive advantage, while other smallcompanies are actually left with fragmented and small shares in the AVS market

 Barrier to exit

Although doing business in this industry need not much money (1 to 2 billion VND could besufficient to run a business), companies have disadvantages to exit It is difficult to use themachine for other purposes It is even more difficult for big companies to exit than smallones This tends to intensify competition among existing companies

Bargaining power of buyers

The number of buyers is very large However, their buying quantity is small, especially forindividual customers, who usually buy one or two products throughout their lives BuyingAVS products requires high involvement Customers usually want high quality and well-known products The price does not affect their buying decision much Furthermore, there areonly few big companies offering the same products dominating the whole market Therefore,the bargaining power of buyers is low

Bargaining power of suppliers

In the AVS industry, although domestic suppliers can provide many materials, they cannotsupply the main materials with high quality That is the reason why companies have to rely onforeign suppliers like Thailand companies for high quality materials Thus, the bargainingpower of foreign suppliers is high However, there are no problems in switching suppliers, asthe switching cost is rather low

Availability of substitutes

As mentioned earlier, consumers will not buy or use the product as and when the powersystem provides stable power current However, it will certainly take a long time beforeVietnam can overcome the current power problem At present, there is only one substitute

product; the voltage adapter However, this product is not superior to AVS Thus, AVSproducts can retain its strong position in the market for some time to go.

From the external factor analysis, the following key opportunities and threats are identified(Table 3.2)

Table 3.2: Summary of the Business Opportunities and Threats

s  There will be more markets to serve (because of the urbanization and the

increasing living standards of urban population in major cities)

 Vietnamese consumers become more brand conscious

 AVS producers can expand its market internationally

 AVS producers have opportunities in mobilizing capitals from financial

 Entrance of potential local competitors into the market

 Producers with imported materials suffer from the devaluation of Vietnamese currency

 Producers with imported materials depend to much on foreign suppliers

 Fierce competition among big existing companies as different competitors can produce AVSs with the same quality by importing high quality materials

3.2 Internal Analysis

3.2.1 Company Overview

Nhat Linh Co., Ltd was established on August 9th, 1994 under the license No.1360/GP-UB,issued by the Hanoi People’s Committee

 Address: 226 Tay Son Street, Dong Da District, Hanoi

 Tel: 84 4 644 0701, Fax: 84 4 644 0700, Email: LiOA.co@hn.vnn.vn

 Registered capital: VND 5 billion

 Current number of staff: 180 people

The Company originally was a small electrical workshop producing one-phase voltageadapters and power measurement equipment Since then the founder of the Company, and theCompany director today – Mr Linh, with his electricity knowledge, has spent time to studyimported Auto Voltage Stabilizers (AVS) and then single-handedly produced AVS productssuccessfully by himself

After that, Mr Linh used high quality materials to improve the products His family, friendsand relatives were the first users to test the products The AVS quality was accepted It isdeemed comparable to imported products from Russia (former Soviet Union) and fromTaiwan and Japan However, the price is 2 to 4 times cheaper than those imported products.That is why his product has been recommended and widely consumed

With the development of his business over time, Mr Linh decided to establish his owncompany The new establishment gave him the legal identity to import materials to produce

To differentiate his AVS product from that produced by other electricity equipmentworkshops, the founder has put a simple name “ LiOA” on his products without registering it

as trademark The letters Li are the initial letters of the founder, Mr Linh O and A are the

initial letters of “On Ap”, the Vietnamese translation for auto voltage stabilizer Since then thename has been used and recognized widely by the consumers He then realized the necessity

of registering his AVS product name and applied for a license on July 7th, 1994

3.2.2 Company Performance

After its foundation, the Company has continuously improved and expanded its AVS rangesand other products For its one-phase servomotor AVS used for households, the productsrange from 0.35KVA to 50 KVA It has started producing 3-phase servomotor AVSs since

1994, which are used in factories and companies or big institutions The capacity range of thiskind of product is from 3 KVA to 500KVA (Table 3.3)

Table 3.3: LiOA AVS Current Product Line

Source: Company data, 2000

The Company also has other electric and electronic products They are automatic fuse sockets,emergency lamps, voltage adapters, high quality amplifiers, and recently UPS and electriccables

Over the past 10 years, Nhat Linh company has gained a strong foothold in the market Its

market share in the Hanoi is about 90% and in Ho Chi Minh City is around 60% (Company

report, 2000) It has also expanded its distribution network throughout the country At present,

there are around 1000 retailers selling LiOA AVS A part from its main territory in Hanoi and

neighboring provinces in the North, the Company has also set up its branch offices in Da

Nang and Ho Chi Minh Cities The Company uses these two branches as a springboard toexpand its distribution network to other provinces in the Central and the South of Vietnam.This product development and distribution network strategy has yielded considerable results.Sales performance of the Company in the past few years is illustrated in Table 3.4.

Table 3.4: Sales Performance of Nhat Linh Co Ltd., 1996-2000

Source: Company report, 2000

Until now, LiOA has been recognized as one of the most popular brands in Vietnam It has

been perceived as the symbol of high quality product in the eyes of many Vietnamese TheCompany also has been awarded 31 gold medals at several Vietnam’s International IndustrialProduct Fairs for its outstanding AVS products One gold medal is awarded for its UPS TheUPS product is evaluated to be even better than many imported ones

In the 1998-2000 period, the Company’s products were selected by Vietnamese consumers asthe Vietnam’s High Quality Product (it was ranked 19th out of 200 selected businesses and inthe Top-5 list of Electrics and Electronics Companies) The AVS product of the Company hasbeen selected as the Number One among all existing automatic voltage stabilizers available sofar in the domestic market

At present, the Company is on its way to carry out a project on setting up an electric wire andcable factory This project aims at meeting the increasing demands of electric industry and thedevelopment of national power infrastructure The Company considers this product as one ofits core products in the future, because of following reasons:

 AVSs only help households and companies sustain the hazardous voltage power current.They, however, cannot solve the problem completely Low voltage current is due to poorpower transmission system and shortage of power capacity of Vietnam at present

 The Vietnamese government has paid attention to and encouraged the development of theelectric wire and cable producers

 There is a high demand for these products

 Most of high quality electric wires and cables used in Vietnam are imported A large sum

of hard currency has to be used for these imported products

 Producing these products domestically could benefit the country and the society at large,(i.e., bringing benefits to companies and creating jobs for Vietnamese people, etc.)

In order to achieve the above mission, the Company has the following objectives:

 To continue improving the management system, physical conditions, product quality andits competitiveness in its AVS business

 To focus on product innovation and development and use its 10-year accumulatedresources to develop new products

 To construct electric wires and cables factory and put it into operation as soon as possible

Strategies

The Company develops and implements its strategy at three levels:

Corporate strategy: The Company uses growth strategy for its core businesses In particular,

it plans to construct a new factory in Hung Yen province to catch up with the increasingdemand in electric wires and cables

Business strategy: The Company uses differentiation strategy to compete with key players in

the industry by differentiating its product line However, the Company has also paid attention

to reducing costs by taking advantage of the economies of scale

Functional strategy:

 Production: mass-production, using new and modern technology with improvedmanagement skills

 Marketing: extensive communication and intensive distribution network through retailers

Policies and management principles:

 High quality assurance

 Focus on innovation

 Encouraging workers to improve their skills

From the above strategies, together with its top-down management culture the Company hasthe following strengths and weaknesses:

 The Company can use its core resources to its best ability (differentiation with economies

of scales and scope) to compete with other competitors in the AVS and electric wires andcables markets

 The Company also has a highly centralized decision-making structure Most decisions aremade by the director of the Company This is understandable, considering the history ofthe Company and the personality of the director (also founder) This type of organizationhelps create a more discipline environment in which all the employees know exactly theaims and objectives of the Company, thus being much easier to be mobilized towardachieving the common goals

 The Company culture emphasizes on high quality through quality checks As part of its

determination, the Company has also registered for ISO 9002 standards for its electricwires and cables

Figure 3.2: Nhat Linh Company’ s Organizational Chart

Source: Company’s report, 2000

3.2.5 Company resources and core competencies

(1) Marketing

The Company offers high-quality products which are well positioned in the AVS market Ituses both push and pull strategies (brand and retail oriented), aiming at expanding itsdistribution network The sales activities are supported by intensive advertising on nationaland local TV channels and newspapers and other sponsorship activities It has set up

Director

Director AssistantVice DirectorVice Director

Purchasing(5 prs.)

Purchasing(5 prs.) (58 prs.)(58 prs.)Sales Sales Accounting(4 prs.)

Accounting(4 prs.) Admin’(4 prs.)Admin’(4 prs.)

showrooms at some strategic locations to attract consumers’ attention to its high qualityproducts

Following are detailed analyses of each component of the Company’s marketing mix:

 Product:

LiOA AVSs’ quality is perceived to be superior to that of competitors LiOA AVS consumesless power when other electric appliances do not operate Moreover, its response time is short(from 0.5 to 0.8 second depending on AVS’s capacity) so that the current outputs are alwaysstable even when inputs are not stable

The Company has produced wide variety of products (both household and industrial AVS) tomeet customers’ choice It has also improved its AVS products over time For its householdAVS with capacity smaller than 4KVA, it puts sockets in front of the AVS for consumers’convenient use Fuse and voltage gauge are installed for those household AVS with capacityunder 1.5KVA, and so it adds a strap in top of the AVSs Therefore, it is easy to move theproducts from one place to others For AVSs with higher capacity, additional ample gauge isinstalled

It also has hung-AVS products of 3 to 5 KVA capacity Consumers can put these twoproducts on the wall to reduce their home space taken by the AVS For AVSs with capacitymore than 5 KVA fewer in-front sockets are installed Since high capacity AVSs are used forseveral family electric appliances, the outputs of AVSs is directly connected with electriclines The Company also puts wheels on AVSs with capacity above 15 KVA for convenientmovement Product capacity, company’s logo, and model are all printed on the AVS

For its packaging, the Company puts its LiOA logo, technical specification, company’s name,instruction for delivery and use, production place and product series number There are twobig logos put opposite at 2 different sites of the carton box

 Distribution:

The Company has set up showrooms at convenient locations in Hanoi, Da Nang and Ho ChiMinh Cities to introduce its products to consumers If customers buy its products atshowroom, free delivery and installation are offered For big retailers’ shop, the Companyinstalls signboard and other marketing support facilities Small retailers have to put upsignboard by their own Company’s distribution network is now available at most provinces

in Vietnam However, the LiOA logo is inconsistent at retailers’ signboards

 Price:

The Company’s AVS products are sold at a premium price based on its superior quality TheCompany is a price leader in the market, i.e other competitors often set the prices for theirproducts on the basis of the Company’s price

 Promotion:

In terms of marketing communication activities, the Company advertised a lot on TV byintervals during films and football programs It also sponsored other cultural activities such asGala 2000, and “Music Letter” programs In addition, the Company has frequentlyparticipated in trade fairs and exhibitions It also spends money on building billboards andlighted panos at selected high traffic junctions in Hanoi and Ho Chi Minh City However, the

Company does not promote its products consistently and in a well coordinated manner, just onspecial occasions such as company foundation celebration and important events.

From the above mentioned analysis, the company’s main strengths and weaknesses inmarketing can be summarized as follows:

Strengths

 Brand awareness and recognition have been created through its advertising activities and

its superior AVSs in a short period of time, well ahead of its competitors

 High quality products together with its marketing support activities have differentiated

LiOA AVS from that of other competitors This also creates a perceived added value inthe mind of consumers

 By not using distributors, the Company can actively communicate with retailers to

understand more about the market and reduce financial risks and other logistics problems,which may occur when using distributors as a sales agent

 The Company’s well implemented after-sales services and supporting services make

customers more confident when using the Company products

(2) R & D

The Company has paid due attention to R&D It has been improving its core AVS severaltimes such as design, size and colors, noise-free feature and easy-to-use operation The R&Dactivities result in product development and product range expansion as illustrated in themarketing part Hence, its AVS name is well-known in the market

The Company also produces industrial AVSs These products are accepted by manyorganizations Its new UPS also improves the Company reputation further

Strengths

 Innovative culture led by the director of the Company helps the Company continuously

improving and introducing many high quality products

 The number of skilled workers in the Company is high.