INTRODUCTIONS TO THE TWO SECTORS: JVS AND SOES

• Hard since they have to frequently deal with new people, namely customers, who are tough and demanding. And they only start selling when customers say “No”.

SALES FORCE MOTIVATION IN THE CONSUMER GOODS MARKET IN VIETNAM: A

CASE STUDY OF THE TOILETRIES AND BEVERAGES INDUSTRIES.

Previous Degree(s) Bachelor of Economics

Hanoi National Economics University Hanoi, Vietnam

Scholarship Donor Government of Switzerland

Asian Institute of Technology School of Management Bangkok, Thailand April 1999

There is no doubt that motivation to the sales force is very important in sales management,

especially in Vietnamese today’s conditions, where selling as a career is in its infancy stage The conditions impose difficulties for sales management to determine what motivates salespeople and how to motivate them effectively Thus, this paper aims to make clear these issues in two sectors: joint ventures (JVs) and state owned enterprises (SOEs)

With in-depth interviews with nine representative companies of the two sectors, the research finds that, though in the same macro-economic conditions, salespeople in JVs place more value on high order rewards such as training, recognition, promotion Meanwhile their SOEs counterparts show more interest in low order rewards such as salary/commissions, fringe benefits, job security and stability This is mainly because sales and sales force management in JVs are more

professional, systematic than in SOEs

To improve, JVs need to fine tune current practices while SOEs need fundamental changes Specifically, the research suggests that, JVs should employ a multi-ladder sales system and SOEs should replace their centrally-planned minded sales managers by market-oriented ones

For the completion of this research, I would like to express my deepest gratitude to Dr Mark Speece – Chairman of the Examination Committee – for his continuous guidance and

encouragement throughout the research period

I also would like to express my profound gratitude to Dr Lalit Johri and Dr Clemens Bechter –Committee Members of the Examination Committee – for their continuous comments and advice during the conduct of this research

Great thanks to my friends, the sales people and the companies that have helped to collect valuable information which is essential for the completion of this research

I also wish to express my thanks to the Switzerland Government for providing the scholarship in AIT Sincere thanks to all of my friends at SAV and AIT, who have been sharing with me the studying and living during the program

I am extremely grateful to my beloved brothers and sister for their understanding, supporting and inspiration through my life And, no word could possibly express my gratitude to my parents Their loving encouragement and many sacrifices could never be forgotten

Table of Content

Abstract ii

Acknowledgement iii

Table of Content iv

List of Tables vi

List of Figures vii

CHAPTER 1 1

INTRODUCTION 1

2.1RATIONALE OF THE RESEARCH 1

2.0 Role of motivation to the sales force 1

2.1 Selling as a new career in Vietnam 1

2.1PROBLEM STATEMENT 1

2.1RESEARCH OBJECTIVES 2

2.1INFORMATION NEEDS 2

2.0 From the sales reps 2

2.1 From sales managers 3

CHAPTER 2 4

LITERATURE REVIEW 4

2.1MODEL OF SALESPERSON MOTIVATION 4

2.1PREVIOUS FINDINGS ON MOTIVATION OF THE SALES FORCE 5

2.0 Expectancy estimates 5

2.1 Instrumentality estimates 6

2.2 Valence estimates 6

2.3 Fairness 7

CHAPTER 3 8

RESEARCH METHODOLOGY 8

2.1DATA COLLECTION 8

2.0 Companies investigated 8

2.1 In-depth interviews 9

2.2 Interviewing and data processing 10

2.1SCOPE OF THE RESEARCH 10

2.1RESEARCH FRAMEWORK 12

CHAPTER 4 13

FINDINGS 13 4.1INTRODUCTIONS TO THE TWO SECTORS: JVS AND SOES 13

4.1.1 State owned enterprises (SOEs) 13

4.1.2 Joint ventures (JVs) 13

4.2 BACKGROUND FINDINGS 14

4.2.1 Channels 14

4.2.2 Recruiting 15

4.2.2.1 Recruiting at JVs 15

4.2.2.2 Recruiting at SOEs 16

4.2.3 Orientation 17

4.2.3.1 At JVs 17

4.2.3.2 At SOEs 18

4.2.4 A typical sales rep’s profile 18

4.3MOTIVATIONAL PERCEPTIONS 20

4.3.1 Effort – Performance Relationship 20

4.3.1.1 At JVs 20

4.3.1.2 At SOEs 21

4.3.2 Performance – Rewards relationship and Fairness 22

4.3.2.1 At JVs 22

4.3.2.2 At SOEs 22

4.3.3 Valence of rewards 22

4.3.3.1 Basic financial compensation: Salaries, Commissions, Fringe benefits 22

4.3.3.2 Work supports .24

4.3.3.3 Prizes 24

4.3.3.4 Training 25

4.3.3.5 Job achievement 26

4.3.3.6 Recognition of management 27

4.3.3.7 Advancement opportunities 27

4.3.3.8 Job responsibility 28

4.3.3.9 Job security and stability 29

4.3.3.10 Freedom and supervision 29

4.4MOTIVATIONAL PRACTICES 31

4.4.1 Setting up motivational policies, incentive packages, or/and campaigns, programs 31

4.4.2 Communicating these program to sales reps 32

4.4.2.1 At JVs 32

4.4.2.2 At SOEs 32

4.4.3 Monitoring and facilitating implementation 32

4.4.4 Evaluating, reinforcing and improving the programs 33

4.5LIMITATIONS AND DIRECTIONS FOR FUTURE STUDIES 33

CHAPTER 5 34

RECOMMENDATIONS 34

5.TO JOINT VENTURES: CREATING A PARALLEL MULTI-LADDER SALES SYSTEM 34

REFERENCE 40

APPENDIX 1: GUIDELINE QUESTIONS FOR INTERVIEWS 42

APPENDIX 2: RANKING OF THE IMPORTANCE OF REWARDS 43

List of Tables

TABLE 1: SAMPLE OF COMPANIES INVESTIGATED 8

TABLE 2: SAMPLE OF INTERVIEWEES 9

TABLE 3: A TYPICAL SALES REP’S PROFILE 20

TABLE 4: PERCEPTIONS ON MOTIVATIONAL FACTORS 30

List of Figures

FIGURE 1: A MODEL OF SALESPERSON MOTIVATION 5

FIGURE 2: TYPICAL STRUCTURE AT JVS AND SOES 10

FIGURE 3: THE RESEARCH FRAMEWORK 12

FIGURE 4: SALES FORCE AND DISTRIBUTION ARRANGEMENTS 15

FIGURE 5: AN EXAMPLE OF A PARALLEL MULTI-LADDER SALES SYSTEM 35

FIGURE 6: VICIOUS CIRCLES AT SOES 37

Chapter 1 Introduction

2.1 Rationale of the Research

2.0 Role of motivation to the sales force

According to Douglas and William (1998), by nature, salespeople handle such type of a job that is

• Hard since they have to frequently deal with new people, namely customers, who are tough and demanding And they only start selling when customers say “No”

• Flexible and self-controlled because salespeople spend majority of their time out of office

• Ambiguous in terms of roles perception since they have little supervision and under pressure from dual masters: their customers and their companies

Thus, managing sales force requires more motivational methods rather than controlling ones Quite many researches, studies have been working on the issue of how to motivate salespeople

to achieve their most productivity However, almost all of these studies were carried out in

developed countries, far fewer studies were carried in developing countries So the first issue this paper aims to address is whether motivational techniques that work in developed countries can also applied developing countries like Vietnam?

2.1 Selling as a new career in Vietnam

Vietnam has recently emerged as a new developing country Vietnam was a closed and highly centrally planed economy until 1986 Under this economy, there was no real selling since selling

to whom, at what price, at what quantity, etc are determined from the government As a result, there are no real salespeople

To shift to a market economy, Vietnamese government has been undertaking “doi moi” program (meaning economic renovation program) to open the economy since 1986 The move forces companies to do real selling tasks, and some employees become salespeople The “doi moi” program has also brought in several foreign firms, who are helping to build a professional sales career in Vietnam However, selling as a career in Vietnam is characterised with no systematic education, very fragmented (because each company develops its sales force differently), and no clear way to develop In this situation, at the infant of selling as a career, the question of how to motivate salespeople becomes more blurred to sales managers in Vietnam Thus, this paper would like to contribute to make clear motivational issues of the sales forces in Vietnam

2.1 Problem statement

Thus, this research aims to address these issues of what motivates salespeople in specific conditions of Vietnamese economy at the time being? And how can management utilize these factors to increase their sales forces’ productivity

2.1 Research objectives

Specifically, the research’s objectives are as follows:

• To find out what factors field salespeople in Vietnam perceive as motivators to them and what factors sales managers perceive as motivators to their subordinates?

⇒ Money: salary, bonus, fringe benefits, commissions

⇒ Management’s recognition: medals, certificates, titles

⇒ Prizes: physical valuables like mobile phones, motorbikes, watches, etc

⇒ Work supports: tools that facilitate doing a job

⇒ Advancement opportunities

⇒ Job security and stability

⇒ Freedom and supervision

• To compare Joint Ventures’ (JVs) motivational practices to salespeople and that of

Vietnamese State Owned Enterprises (SOEs) in:

⇒ Setting up a motivational policies, incentives packages or programs,

⇒ Selling (communicating) these programs to salespeople,

⇒ Monitoring and facilitating implementation of such programs, and

⇒ Evaluating, reinforcing and improving the programs

• To try to recommend applicable models for sales management in Vietnam to motivate their subordinates

⇒ To joint ventures

⇒ To state owned enterprises

2.1 Information needs

To achieve the above objectives, following information is needed

2.0 From the sales reps

• What factors do they value most in term of motivating them: salaries, fringe benefits, prises, recognition, work supports, advancement opportunities, training, responsibility, job security and stability, autonomy, and supervision

• What are salespeople’s opinions about effort and performance relationship?

• What are salespeople’s opinions about performance and rewards relationship?

• How do salespeople value the rewards? Are rewards worth their effort?

• Do sales managers understand their salespeople’s motivational factors?

• How are quotas set?

• What are criteria to evaluate salespeople’s performance?

• How are rewards given? What are the most frequently used rewards?

• How do sales managers design, implement an incentive program, and evaluate its

effectiveness?

• What are compensation and promotion policies?

• What is a typical sales rep’s profile?

Chapter 2

Literature review

2.1 Model of salesperson motivation

In general, a person is motivated to do a task when he himself desires to put effort into the task, continues to put forth or expend his effort over a period of time to fulfil the task (Douglas and William, 1998, p 483) There is a lot of literature on how a person gets motivated The most influential theories include Maslow’s (1970) hierarchy of needs, Vroom’s (1964) expectancy theory, Herzberg’s (1987) hygiene-motivation theory, and equity theory (Adams, 1976)

According to Maslow (1970), one has five levels of needs and the lower level must be satisfied before the next higher level is sought The five levels are as stated in terms of sales management

by Douglas and William (1998, p 520) as follows:

(1) Basic needs like cash wages and bonuses,

(2) Safety and Security needs such as job security and fringe benefits,

(3) Belongingness and Social needs such as President club for more than $1 million salespeople, (4) Esteem needs like recognition, and

(5) Self-actualization like challenging tasks calling for creativity

In his hygiene-motivation theory, Herzberg (1987) classified factors into two types: hygiene factors are those make workers feel dissatisfied if these factors are not sufficiently available but they do not make workers feel satisfied if there are more than enough of them These factors usually are company policy and administration, supervision, salary, work conditions Only

motivation factors make workers feel satisfied with their presence These factors usually are achievement, recognition, work itself, responsibility, and advancement opportunities

Vroom’s (1964) expectancy theory and Adams’s (1976) equity theory are the two main theories that explained the process of human being motivation These theories provide the basic ideas for the model of motivation of the sales forced described in following paragraphs

Walker et al (1977, 1979), Douglas & William (1998), and Futrell (1991) combined and

developed these theories specifically into the field of sales force motivation According to these authors, motivation of a salesperson is a function of (1) expectancy, (2) instrumentality, (3)

valence, and (4) fairness This is shown in Figure 1

Expectancy refers to a salesperson’s question “if I try harder, will my performance improve?” In essence, it is the salesperson’s perception on effort – performance linkage The stronger the belief that the answer is “Yes”, the more likely the person spends more effort on the task

Instrumentality refers to the salesperson’s question “if my performance improve, will I get

rewarded for that?” In other words, it is the salesperson’s perception on performance – rewards relationship Again, the stronger the belief that the answer is “Yes”, the more the person wants to improve his performance

Valence refers to the person’s question “Are the rewards worth trying for?” This means how

valuable rewards are perceived to the recipient Obviously, the more important the reward is to the person, the harder he will try to achieve those rewards

Fairness refers to how his rewards are compared with others’ rewards in relative terms, i.e by value of a ratio between each person’s rewards over that person’s contribution If a salesperson thinks his ratio is somehow similar to his peers’ ratios, he will feel fair If he feels fair, he will exert more effort

Figure 1: A model of salesperson motivation

The above model works this way: If the salesperson believes that his additional effort will lead to improvement of performance AND he will be rewarded for that performance improvement AND rewards are valuable to him AND rewards are fairly given among reps, the salesperson will

probably feel satisfied, thus he will put more effort into the job The multiple sign reflects the

relationship among the four factors: All the factors must be present if motivation is to be achieved Managers’ task is to assure a strong “Yes” answer to each and all of the above questions

2.1 Previous findings on motivation of the sales force

How to assure a strong “Yes” answer to each of the above questions has long been managers’ tough challenge Now we will see what has been done to get the desired answer in each element

of the model

Since no research has been done on the issue in Vietnam, the present research uses some

findings in studies carried out in the US, China, Hong Kong, and South Korea as benchmarking ideas

2.0 Expectancy estimates

Obviously, how much effort to put on a specific task is within each salesperson’s control

Therefore the person’s perception on this relationship depends on what it means by performance and improvement of performance Previous researches show that these concepts, in turn, depend

on job descriptions, systematic evaluation (Yoo and Lee, 1987), specific organizational

procedures and practices (Chung and Lee, 1989) and feedback or communication in an

organization (Alan et al 1994) These help sales personnel have a clear picture of what is

expected from them so they could direct their effort into right areas or “working smarter” (Barton

Belief that more effort will lead to greater performance

Belief that greater performance will be rewarded

Perceived value of rewards

Perceived fairness of giving rewards among reps

et al 1986) Benson and Stephen (1980) also found that clear task is the most important

determinant of salespeople’s motivation Feedback and communication are critical in informing salespeople about how they are performing and how much improvement they have made This helps them realize the linkage between effort and performance (Alan et al 1994)

Cron et al (1986) found that salespeople in different career stages have different expectancy estimates since they have different experience and knowledge The more experience a

salesperson acquires, the better the person can guess his performance That means salespeople

in later career stages have higher expectancy estimates

2.1 Instrumentality estimates

Clearly, this relationship depends on how rewards systems are designed For example, if it is a straight salary, sales reps will not see why they have to try harder and still get the same amount with less effort But, if it is a commission salary, “salespeople know how much they will be paid for each sale and that their incomes will increase as a result of more sales” (Douglas and William, 1998) Thus, rewards systems should be designed in a way that effort is rewarded properly However, “pay-for-performance” is not an easy task since one cannot always clarify any task (Benson & Stephen, 1980)

Feedback and communication also play an important role in making salespeople have clear instrumentality estimates since feedback and communication confirm, enforce, and reinforce salespeople’s belief that better performance will be rewarded (Alan et al 1994)

Instrumentality estimates also vary with career stages due to two reasons One, role perception becomes clearer when a salesperson proceeds into later stages Two, the person becomes more committed with the organisation Therefore, salespeople in each successive stage (with the exception of disengagement stage) have higher instrumentality estimates (Cron et al 1986)

2.2 Valence estimates

Finding what really motivates salespeople has long been manager’s most difficult area This is probably the richest documented area on motivation Maslow’s (1970) hierarchy of needs theory and Herzberg’s (1987) hygiene-motivation theory fall in this area The common assumption is that people seek things to satisfy their needs, and the things they seek are motivators to them

In sales settings, Futrell (1991, p 373) classifies these factors into seven categories as a

motivation mix as follows:

(1) Sales climate: ceremonies and rites, stories, symbols, and language

(2) Basic compensation: salary, commissions, and fringe benefits

(3) Special financial incentives: bonuses, contests, and trips

(4) Non-financial rewards: opportunities for promotion, challenging work assignments, and

recognition

(5) Sales training: initial, ongoing, and sales meetings

(6) Leadership: style and personal contacts, and

(7) Performance evaluation: method, performance activity and publicity

Douglas and William (1998) and Cron et al (1986) argue that a salesperson’s needs vary in accordance with career stages Walker et al (1985) confirmed this by stating that young

salespeople have higher attraction to higher order rewards such as promotion, personal growth opportunities while older salespeople place relatively more on money

Stephen and Benson (1980) found in the US context that the most important determinants of motivation to a salesperson are (1) a clear task, (2) need for achievement, and (3) type of

compensation plan Some of the factors found in the US are applicable to Asian salespeople while some are not For example, Keun and Anil (1997) found that overall model of relationship among organizational formalization, role stress, organizational commitment and propensity to leave developed in the US can be applied in South Korea While Alan et al (1994) found that US salespeople have higher valence for pay increase, job security, promotion, formal recognition, personal growth and development, and worthwhile accomplishment than their Japanese and Korean counterparts Even though within China, salespeople in Hong Kong have different set of motivators to their Mainland salespeople (Sandra, 1998)

Equity theory (Adams 1976) states that a worker’s perception on fair rewarding depends on the ratio of inputs into the job over rewards received by that person If one’s ratio is similar to his peers, it is perceived fair The implication to sales management is developed by Futrell (1991, p 379) that sales managers when evaluating a salesperson’s performance and when devising a rewards system must make them appear fair to salespeople The problem is that fair or unfair notion are completely are subject to each salesperson’s judgement Thus, one way to get rid of this is to thoroughly discuss with salespeople and get them agree on the methods It also requires transparency during implementation process of the program

Chapter 3 Research methodology

2.1 Data collection

Since there are no previous study on the issues in Vietnam, this paper just aims to make an exploratory research Therefore, qualitative approach is used with in-depth interviews are the only way of collecting data

2.0 Companies investigated

In total, nine companies are investigated for the research Of which five companies are joint ventures (JV) and four are state owned enterprises (SOE) Specifically, they are:

Table 1: Sample of companies investigated

Toiletries • Procter & Gamble VN (Hochiminh)

• Colgate Palmolive VN (Hochiminh)

• KAO VN (Hochiminh)

• Hanoi Soap Company (Hanoi)

• Vietnam Beverage Company (Hochiminh)

• Hanoi Beer Company (Hanoi)

• Vietha Beer Company (Hanoi)

• Thanglong Wine Company (Hanoi)All of these companies are considered big in Vietnam with nationwide sales network However, their sales forces vary substantially in size from 6 people of Thanglong Wine Company to 50 people of P&G VN to 400 people of Coca-Cola VN The difference results from each company’s selling method and way to organise its sales force, which will be discussed in details in later parts Of these companies, five are based in Hanoi and the other four in Hochiminh City (as shown in blankets in Table 1)

All investigated companies are quite representative both for the industries they are in as well as for each group, i.e JVs and SOEs All of them are leading companies in their industries

However, JVs often claim much more market share due to several reasons One of the reasons is that JVs always have bigger, stronger, and more skillful sales forces (This will be explained in more details later in this paper) The investigated SOEs are those companies that are strong enough to compete directly with these JVs

Getting these companies into the research’s sample is mostly based on the author’s personal relationship with managers, employees working there or through recommendations of the

author’s friends, relatives This is because getting data form SOEs companies are very difficult due to their naive belief that any information released would harm their business And there is no existing system for collecting data otherwise

2.1 In-depth interviews

In total, I had 17 interviews with 27 people as follows:

Table 2: Sample of interviewees

All the interviews, except two, are individual between the interviewee and the author The two exceptional interviews are one group interview with four sales reps from JVs and one interview with Hanoi Soap Company’s GM & SM at the same time The group interview was conducted in a quite informal manner since all of them are the author’s friends All other interviews last about one

to one and half-hours

Two General Managers (GMs) and one Vice General Manager (VGM) could be interviewed, all from SOEs thanks to the author’s close relationship with them GMs and VGMs at JVs were also sought to be interviewed However, they all declined quoting time limitation and the topic of the research is not directly in their concerned areas Thus, JVs’ GMs and VGMs just referred the author to sales managers for interviewing Six National Sales Managers (SMs), equally 3 from each sector, are interviewed These people are those who directly take care of sales in their whole companies Area or Unit Sales Managers (ASMs) are those who take care of sales in a certain area (normally 2 to 4 provinces) and they have some sales teams to manage SOEs have

no such position, therefore interviewees classified as ASMs appeared in JVs group only In

SOEs, directly under SMs are some salespeople whose area of charge is as large as ASM in JVs but they don’t have any subordinates to manage Thus, these SOEs salespeople are classified as sales reps, the lowest ranked salespeople in a company, even though they are in charge of quite large geographical areas (These are depicted in the following graphs of typical structure)

In addition, three human resource officers were interviewed, all come from JVs As hindsight from the research, it is realised that human resources managers (HRM) play a very important role in recruiting and providing new reps to SOEs However, no HRM in SOEs was interviewed since difficult access to them Fortunately, the two SOEs’ GMs and one VGM, in those SOEs that the author could get access to, had provided some important insights that could replace the role of human resource managers since these GMs and VGM are in charge of all sales issues relating to Sales Department

It is important to examine managers’ and human resource officers’ perception on salespeople’ motivation since (1) these people are close to salespeople in any companies and (2) these

people are those who devise and implement policies about the sales forces Thus, their

perception on salespeople’ motivation will surely have large impact on motivational policies and practices at companies This is to detect the incompatibilities between their perception and that of sales people so that management could devise better policies and practices to motivate

salespeople to increase their productivity

Figure 2: Typical structure at JVs and SOEs

- At JVs:

- At SOEs:

2.2 Interviewing and data processing

The contexts are different among interviews Normally, interviews with managers, human

resource officers, and SOE salespeople were conducted in meeting rooms These interviews were recorded both by taking notes and by recording tapes Meanwhile, almost all interviews with

JV salespeople were conducted while they were on road Thus, not all these interviews were tape-recorded Mostly, especially in later interviews, their answers were recorded by taking notes.Basing on the guidelines for interviews (see Appendix), questions were developed In interviews with sales managers or human resource officers, the issues are asked in a quite direct manner Broad issues were brought out first, then elaborating questions were asked to get details of the issues In interviews with sales reps, the questions were asked indirectly For example, in order to ask sales reps’ valuation of different rewards, the question “what makes you work longer among the following things (i.e the rewards listed in the Appendix)” was asked This is based on the assumption that if a salesperson is motivated, the person will spend more time on the job that those who are not Then the interviews were asked to rank these rewards as the level of

importance of each reward vis-à-vis the others

In processing, all the data collected was reviewed as whole once Then, common perceptions about the four main components of the sales person motivation mentioned earlier were grouped together Then, these opinions were further analyzed into subgroups or levels of how strong the opinion about each component

2.1 Scope of the research

As mentioned earlier, the research focuses on two industries, i.e toiletries and beverage, for the sake of comparability Actually, the investigated companies use similar distribution system and selling method: distributorship with direct sales force for JVs and only distributorship for SOEs (These distribution systems will be mentioned in more details about in later parts) Moreover, these two industries are those that normally have quite big sales force since they often have to use direct selling method to approach customers Thus these industries are good representatives

of consumer goods markets

General

Manager

Vice General Manager

National Sales Manager

Area Sales Manager

Sales Reps

General

Manager

Vice General Manager

National Sales Manager

Sales Reps

Only big and nationwide-operating companies are taken into the research’s sample since they probably have better established, more professional, sales systems So that better in formation could be obtained since these companies probably have more sound understanding about the concepts of the topics In fact, there are no difficulties in discussing with JVs but with SOEs Even though the SOEs are big, nationwide operating but there management have little ideas

specifically to motivation of the salespeople Therefore, instead of asking focusingly on motivation

of the sales forces, the questions are expanded to include some other sales management issues such as sales system arrangement, territory management Thus, the initial scope of the research, which was on motivational aspects only, is now broadened to other sales management fields, which will be mentioned in details in finding parts

The research was carried out solely in Hanoi and Hochiminh cities since these cities are the two biggest business centers in Vietnam and all big companies are based in one place or the other Thus, with the research’s objectives, these cities are the two best places to go for

2.1 Research Framework

Figure 3: The research framework

Comparative Analysis

evaluating incentive programs

Sales reps’ perspectives on:

State owned enterprises’ practices in motivating their salespeople.

Individual

Analysis

Chapter 4 Findings

4.1 Introductions to the two sectors: JVs and SOEs

4.1.1 State owned enterprises (SOEs)

There are around 6,200 state owned enterprises in Vietnam now They are still the backbone of Vietnamese economy, which account for 39% of GDP as of July 1st, 1997 (except agriculture - Statistical Yearbook (SY) 1998, p 27) The interviewed companies are quite big among other SOEs in the same industry Unfortunately, they just claim a small market share in comparison with international competitors Only Thanglong Wine Company can claim major part of wine markets since there is no international competitors producing similar products with it

The old way of selling at an SOE is not really one of its own functions because there was some government body that determined the SOE’s customers and prices At beginning of a year, SOEs were given quotas to produce And regardless of how good quality of their products were, all of the produced products were bought and consumed by someone Therefore, selling was just a formal procedure to fulfil their quotas Majority of sales activities was just processing paperwork Thus, sales were given little attention from management

At present, SOEs are not assured of consuming outputs anymore They have to learn how to improve and sell their products to market However, affected by old thinking in command

economy, managers in SOEs, who virtually all had worked in command economy for a quite long time, do not consider selling as important as it should be That is changing now but little progress has been made For example, SOEs do not really have a sales network throughout the country even though their products are sold nation-wide Motivation to salespeople is worse

Management lacks of a general understanding about the concepts, not only how to do it

effectively

4.1.2 Joint ventures (JVs)

Vietnam has had its investment law since 1977 However little foreign investments from Western countries were made until 1987, when Vietnam introduced a new version of the laws and started its “doi moi” program to open its economy to Western countries Then, JVs and other types of foreign invested companies were booming up Now they account for 7.5% of GDP as of July 1st,

1997 (except agriculture – SY 1998, p 31) This sector has been becoming more and more important to the economy with its highest growth rate of 14.7% annually while that of state owned sector was 10% only in 1997 (SY 1998, p 33)

In JVs, selling is considered one of the most important functions Many companies have been spending a lot of money in attracting, training and setting up their sales forces At the moment, JVs’ sales forces are models for SOEs to imitate JVs have aggressively built a nation-wide and strong sales network, which helps them claim majority of market share In terms of motivation, JVs’ managers, who are mostly Western-styled trained, have been applying current theories such

as Maslow’s (1970) hierarchy of needs, Vroom’s (1964) expectancy theory, Herzberg’s (1968) hygiene-motivation theory Foreign partners are introducing the models and ways how to make them work effectively to Vietnamese business community

4.2 Background findings

4.2.1 Channels

The common point between investigated JVs and SOEs is that almost all of them use an

exclusive distributor network for distribution of their products (Except KAO VN, who uses its own branches, not through distributors) The different point is how far their salespeople can reach At all JVs, their sales reps can reach down to retailers and cover all provinces with almost all

districts in Vietnam At SOEs, sales reps just reach to distributors, who are exclusive dealers for a quite large area, from 2 to 4 provinces

Normally a JV sells its product this way: It divides Vietnam into units with one Unit Sales Manager (USM) to be in charge of sales in his/her correspondent unit Number of units varies from 3

(Coca-Cola VN) to 8 (P&G VN) In each unit, for a certain geographical area (normally one

province), it assigns a dealer as its exclusive agent (“Dai ly doc quyen” in Vietnamese)

Transactions with the company from the area are made solely through this agent At the agent, the company sends one (sometimes two for agents at big and important cities) Area Sales

Manager (ASM) with a sales team to exclusively sell the company’s products The ASM and the team have to set up a map of all outlets in the area, then group them into routes of about 25 to 30 outlets each Then each sales rep is assigned a sub-area of 6 routes for 6 days a week On each day, the rep will have to go through that day’s route to visit all the outlets of the route That means the rep has to cover all of his assigned area in one week with the frequency of one visit for each outlet Key accounts, those outlets with large turnover, are grouped separately and assigned to more skilful reps to assure better service, response to these more important outlets Besides, JVs also employ a wholesale network to cover those remote mountainous or far rural areas that reps cannot reach Coke, Colgate and Vietnam Beverage use this way P&G VN applies the same model but its sales reps are employed by the agents themselves However, P&G pays these salespeople salary It also has one sales manager to stay at the agent and manage the sales team in P&G’s established way That’s why P&G, on paper, has only 50 salespeople employed

by the company while Coke has more than 400 people Actually its sales force is as big as

Coke’s In short, JVs sales forces are quite active and systematically organised to cover the whole market

An SOE also sets up an exclusive agent for a certain area, which is usually much larger than that

of an agent of a JV (2-4 provinces compared with 1-2 provinces respectively) However, unlike JVs, it has just one sales rep to deal with the agent The rep does not stay at the agent and there are not any more reps at the agent at all to exclusively sell the company’s products Occasionally, the rep comes to take orders and collect money from the agents; otherwise the rep just

telephones to get orders Then it is up to the distributors to sell the products whatever way they like Thus, SOEs’ sales network is more like a wholesale network rather than a distributor

network That is essentially different from a JV As described, a JV has its ASMs and sales teams stay at agents actively involves in managing inventory, placing orders, and help the agents sell its products Whereas, SOEs’ reps do nothing except wait and urges his agents to place orders Even “our salespeople just stay in the office and process customers’ orders We concentrate more on expanding production” – said Mr Ngan, General Manager of Thanglong Wine Company This is because, at the time being, demand for its Thanglong wine is higher than supply and it has

no international companies competing in its markets

As a result of this passive way of selling, reps in SOEs have not much work to do Thus, one rep

in an SOE can be responsible for sales of 3 such agents with a geographical area of about 6 provinces, as large as a JV’s Unit Sales Manager’s assigned area (Therefore, hereafter, two comparisons could be made regarding practices to reps of SOEs and JVs One is between the lowest ranked salespeople; i.e reps The other is based on the basis of similar area of charge,

i.e a sales rep in an SOE is compared with a Unit Sales Manager of a JV) The above selling method also explains why, of all SOEs, Hanoi Beer Company has the biggest sales force of 27 people, Vietha Beer Co ranks second with 22 then Hanoi Soap Co with 10 and finally Thanglong Wine Company with only 6 people In short, SOEs have quite small, weak and passive sales forces.

Typically, channels of the investigated companies can be depicted as follows:

Figure 4: Sales force and Distribution arrangements

4.2.2 Recruiting

4.2.2.1 Recruiting at JVs

Recruiting at JVs has three distinct characteristics:

1 Decisively based on sales department’s choice: The role of Human Resource Department (HRD) is just to make sure that candidates are qualified with company common policies and recruiting process is aligned with laws Sales managers are those who have final voice on which candidates to recruit

2 Head of sales department is always a foreign expatriate Normally, those expatriates are very good salespeople elsewhere; therefore they understand what is needed to be a good sales man

3 Sales network is built from scratch since the old way of selling is simply not acceptable and there are no established systems to refer to

Thus, when a JV was set up, the sales department head himself recruited some reps, trained them, made them experienced with foreign partner’s selling method These initial reps then become core personnel of the JV’s sales force when it expands business These core

salespeople usually come from:

Flows of goods and services

Sales reps’ reach/coverage

• Old salespeople of the Vietnamese partner: There are very few salespeople belonging to this type since few are qualified with foreign partner’s standards Sometimes, this is more

politically motivated than rationally motivated

• Public recruitment (mainly through newspaper ads) aimed at two sources: old salespeople of other SOEs and new college graduates

Since JVs normally offer much higher compensation packages, they can attract more talented salespeople from other SOEs These people, who dare to give up lifetime employment and other benefits of government employment, are risk taking and learning oriented They are really good salespeople But there are few such people

New graduates contributes most of JV’s sales forces then and now Since JVs recruit sales rep basing on candidates’ potential and personality, not on relationship as in SOEs, they can select from new graduates quite good salespeople These people are well educated,

somewhat Western-styled trained, young and eager to learn new skills

Currently, when looking for new reps, besides the above sources, JVs can also look for potential sales reps from other sources like:

• Employment agencies: Headhunting industry is itself in its infancy in Vietnam now, therefore quite limited numbers of reps are recruited from this channel Most often, JVs use this source

as a complementary source to other ones at the time being However, those candidates who come from this source normally have quite good quality since they are already pre-screened

• Employee referral: this source is quite popular since salespeople working in one JV often have friends working as salespeople in other JVs or SOEs Moreover, they know well about the company and the job, and they know what type of person to recommend Therefore, JVs often find good reps with less cost in comparison with other sources

• Internal employees: JVs seldom recruit sales reps from its internal staff of other departments The reason is that they believe salespeople need distinct traits and knowledge that other departments’ staffs do not have For example: “In our company, only salespeople are

promoted to higher level in other departments There is no other way around Because

salespeople understand the market, the customers, they can do other jobs like marketing, customer service, human resource, training, etc But it is very hard for other departments’ staff to be a good salesperson since they have little sales knowledge.” – said Mr Prasana, Coca-Cola Ngochoi Sales Manager

4.2.2.2 Recruiting at SOEs

Recruiting at SOEs is done solely through Human Resource Department (HRD) If sales

department needs some new reps, they have to inform HRD Then HRD recruits and transfers the newly recruited people or old employees from other departments to sales department The problem with this is that HRD personnel do not always understand what is needed to be a good sales rep, therefore, they provide sales department with wrong type of people

Recruiting at SOEs mainly bases on the personal relationship of candidates with those who have power in the company This is because:

(1) Employment at SOEs is often granted Landing a job at an SOE means lifetime employment with various social welfare Even though the welfare is not much, so is employees’ effort as

an adage reads: “They pretend to pay and we pretend to work”

(2) Being a rep at an SOE does not require much skillfulness thus almost everybody can do the job Therefore, there are always many people who want to apply for the job.

Normally, pretty much like the situation in China (Wu and Speece, 1998), a rep at an SOE comes from:

• Old salespeople recruited under the command economy: This is still the major portion of sales forces at SOEs These reps have been working for an SOE for quite long time and they still follow the old way of selling In some SOEs, some managers understand that these people are not so qualified to be sales reps in today’s market, but it is very hard to dismiss these people since they have done nothing wrong

• In-house labour pool: Like the situation elsewhere, sales personnel in SOEs still earn

relatively more than their peers in other departments (REWARD, 1997) Therefore, many employees in other departments in the company want to be reps HRD’s most frequent

practice is to transfer someone of other departments to sales For example, “in our company, about 70% of new reps are old employees transferred from other departments” – said Mrs Dinh Thi Lanh, Hanoi Beer’s Vice General Manager The problem with this is that employees

in other departments normally do not have necessary traits and skills to be a good

salesperson as stated by Mr Prasana above However, this problem is vague at SOEs due to the passive way of selling

• Employee referral: This is probably the second most frequently used source at SOEs Who recommends depends on disseminating of information about openings Usually, those at HRD

or managers have priority in recommending their acquaintances since they have priority to access to the information Once enough number of candidates is recommended, the process stops And almost all the time, all of these candidates are recruited This situation happens because, at SOEs, rarely can anyone hurt if others perform poorly If an SOE is losing money,

it is government’s responsibility to inject more capital Therefore, quality of recruitment does not matter much in selecting candidates

• University graduates: In the command economy time, university graduates were assured of employment by some central body They just waited until they were assigned a position in some SOE Now that mechanism is replaced by a new one, which is very much similar to employee referral mechanism The difference is that graduates must actively look for a job and they must have some acquaintances working at managerial levels in SOEs If a graduate has strong relationship with some big boss in an SOE, the person will surely be recruited even though there is no opening at that time

• Other sources: Rarely do SOEs use other sources Until recently, some SOEs, which have intensive contact with foreign firms or JVs, start learning how to use public recruitment

However, almost all the time, this is just a formal procedure That means, again, the decisive factor is how good the candidate’s relationship with powerful people in the SOE is And

usually, the matter is decided before the process of recruiting starts Virtually, no SOE use employment agencies as a source of recruits

4.2.3 Orientation

4.2.3.1 At JVs

After recruitment, JVs do have orientation section to new sales reps All of them have formal sales manuals, which are mostly just copied from the company’s another JV somewhere in

neighbouring countries In the manual, things like the company’s mission, values, procedures, selling methods and techniques, job descriptions, etc are clearly stated and explained In

addition, explaining the manual is always the main part of initial training in these companies to new reps Even some JVs (like Coke, P&G) practise realistic job preview, i.e let the new reps go with a senior salesperson for one day for him to see the job in real life

Both Human Resource and Sales personnel conduct the orientation HR officers provide new reps about the organisational policies, values in general while sales managers talk about sales task, techniques, sales teams, etc This is to provide new reps with precise and realistic

information about the company and the job that they will be doing

The above activities help new reps have clear role perception and expectations, which are critical issues in motivating them later on the job (Stephen et al 1980&1983 – Alan et al 1994 – and Keun et al 1997)

4.2.3.2 At SOEs

At SOEs, there is an activity similar to orientation but not actually The activity is that new reps are called on HRD to, mainly, sign their papers with the SOEs Then the HR officers also have some words about the SOE However, since there is no manuals in SOEs, HR officers can

provide new reps with very general information only Usually, new reps know all of the information already when they apply to the company Then new reps are sent to sales department If any new rep wants to know further, the person must find the information himself by asking his

acquaintances or seniors But these people can only tell him, basing on their own experience, how things are conventionally, not officially, done

One reason for this poor orientation is that there are no job descriptions, manuals in SOEs Only some procedures are documented But normally, these procedures follow a common

government’s format to all SOEs Thus new reps have a very vague idea about the company as well as their tasks, expectations Again, they have to rely on relationship to do their job and develop knowledge about the company, the job Another reason is that most of new reps are old employees, thus SOEs managers assume that there is no need to make an orientation For example, “ They (new reps) have been working for this company for years, they surely know everything about the company already What is the point of repeating such information to them each time they move from one department to another?” – explained Mrs Dinh Thi Lanh

4.2.4 A typical sales rep’s profile

In general, in sales career, male reps are preferred than female ones, especially in beer

companies, where reps have to drink a lot sometimes This is probably due to the hardship of being a rep Even some companies just look for male reps For example, “I have been applying for a position in sales in several companies But they all declined to take me even though I got an MSc They said they preferred an MBA but I think the main reason is that I am a girl They do not like to have female reps” – said Ms Le Tuyet Mai, who currently works for Hanoi National

Economics University but wants to be a part-time salesperson in a JV Most female staff are doing supporting and office work Few are selling in the field However, there are relatively more female reps in SOEs than in JVs The reasons for this would be:

1 workload of a rep in SOEs is much less than that of a rep in JVs,

2 relationship-based recruitment at SOEs, and