Marketing Strategy for a Business Service Firm

Services are purchased because of the benefits they offer, and a first step in either creating a service or evaluating and existing one is to define the customer-benefit concept- that is, evaluate the core benefit that the customer will derive from the service

Chapter 1 Introduction

Vietnam is changing and developing rapidly The most decisive phase of reform in theeconomy was initiated in 1989 The new economic policies seek to mobilize the potential of allsectors of the economy The private sector and foreign investment are being actively encouraged.Vietnamese market becomes attractive for foreign investors Recently, there are a lot of foreigninvestors come to Vietnam to investigate, explore new market Up to 1993, there are 105 foreigninvestment projects getting the investment licenses from SCCI (State Committee on Co-operationand Investment) Total foreign investment capital is 972 millions USD (See Appendix 1)

The first place foreign investors come to seek the useful advice is Vietnamese Firms Consulting Foreign Investors (VFCFI) To meet the high demand a lot of Vietnamese Consulting

Firms have been established lately However, consultancy is a fresh field and the newly-establishedfirms are facing abundant difficulties such as lack of experiences, do not understand marketeconomy system, cross-cultural problems, etc Among them, marketing is a strange but hot issue

"How to set up the marketing strategies?" is a really serious question to every VFCFI

1.1 Statement of the problem

The number of VFCFI has been increased quickly accordingly to the supply-demandeconomics law Actually, it is a promising market for the consulting firms Yet, customer satisfactionremains as a complicated problem What kind of services should be offered in which specificindustry? And how to provide excellent services to meet the needs of customers? These are currentquestions facing by every VFCFI Clearly, an approach to the effective marketing strategies is veryimportant for any VFCFI

1.2 Objectives of the Study

In order to improve business activities, especially marketing activities in the VFCFIs, thefollowings are the fundamental objectives of the study:

1 To identify the present marketing activities in the VFCFIs

2 To analyze business environment of consultant firms in Vietnam

3 To arrange an approach to the effective marketing strategies for a

VFCFI

4 To recommend the effective marketing strategies to VFCFIs

1.3 Scope of the study

In order to point out the really effectual marketing strategies, the external analysis will benarrowed into two industries only Tourism and Construction have selected Tourism is a fast-developing industry in Vietnam Tourism activities are visible in major cities where some large hotelsare being built Therefore number of tourists as well as number of foreign investors in tourismindustry in Vietnam is growing fast While tourism is developing, construction industry has also to beimproved The reason is construction providing hotels, roads, entertainment centers, parks, etc totourism industry Moreover, Vietnamese infrastructure is very poor and damaged seriously after thewar, construction therefore is essential to rebuild and improve physical infrastructure significantly Itmeans, there are a lot of construction projects are available in Vietnam need foreign investors toinvest At present, number of foreign investors in tourism and construction is occupied a largepercentage of total number foreign investors in Vietnam They are the major and potentialcustomers of VFCFIs Hence, to find out an effective marketing strategy toward these targetcustomers in construction and tourism industry is very important to every VFCFI

Limitation in timing and geography causes direct interviews were conducted in consultingfirms in Hanoi and Bangkok Three consulting companies in Hanoi were selected to discuss in theresearch based on their organization structure size (VIETCOCHAMBER-big size, INVESTIP-medium size and B & H-small size) Questionnaires covering the marketing activities in the VFCFIs,especially services for foreign investors in tourism and construction industry were also mailed toother VFCFIs in HoChiMinh City

1.4 Methodology

1.4.1 Introduction

1.4.2 Literature review

1.4.3 Design conceptual framework

1.4.4 Design questionnaires discussing marketing activities in the VFCFIs

1.4.5 Conduct direct interviews and mail questionnaires

1.4.6 Analyze data and analyze environment

1.4.7 Formulate the marketing strategies for a VFCFI

1.4.8 Recommendations

Figure 1.1 shows the organization chart of the study report Chapter 1 is introduction,statement of the problem Chapter 2 is literature review, will provide the VFCFIs' managers withfundamental concept on strategy, marketing service strategy Chapter 3 will design a conceptualframework to help VFCFIs in planning marketing strategies Chapter 4 is going to analyze currentsituation in the selected VFCFIs Chapter 5 will point out an approach to effective marketingstrategies for VFCFIs Chapter 6 will summarize some empirical lessons from foreign consultingfirms in Hanoi and Bangkok Chapter 7 will make recommendations at macro and micro level andconclusions

Figure 1.1: Organiztion Chart of the Report

Chapter 2 Literature Review

Literature review will provide to managers at VFCFIs with fundamental knowledgeabout strategy, marketing service strategy and the concept of effective marketing strategy.This chapter aims to change the attitude of Vietnamese managers in the VFCFIs towardmarketing, shows them the importance and effectiveness of marketing strategy, makes themthink that marketing strategy should be considered as an essential component of theorganization

2.1 Strategy and Strategic Management

According to Steiner and Miner (1986), strategy derives from the Greek strageos,which means "general" The word strategy, therefore, literally meant "the art of the general"

It refers to that which is of major concern to top management of organizations Specifically,strategy is forging of company mission, setting objectives for the organization in light ofexternal and internal forces, formulating specific policies and strategies to achieveobjectives, and assuring their proper implementation so that the basic purposes andobjectives of the organization will be achieved

Steiner and Miner, (1986) also classified strategies in some groups as the following:

· First, is classification based on scope Master strategies, program strategies, detailedstrategies or substrategies

· Second, strategies may be classified in term of organization level Top managementstrategies, divisional strategies

· Third, strategies may be classified as to purpose and/or function Competitivestrategies, product-market strategies, financial strategies

Hofer and Schendel (1978) demonstrated a successful strategy is usually not asingle decision but a web of interrelated strategies, substrategies, sub-substrategies,policies and tactics

Ginter and White (1982) noted that strategy is the central and unique core ofstrategic management Strategic management is the phrase currently in use to identify topcorporate policy/strategy formulation and its implementation in organizations The process

of implementation involves the entire process of management, including operationalmanagement

One other aspect is worthy of note Strategic management emphasizes strategicthinking but at the same time links it with operations at all levels and across functional lines

of authority in an organization (Gluck, Kaufman, and Walleck, 1980)

A number of writers have described the development of the concept of strategicmanagement (e.g., Ansoff, 1984; Bracker, 1980; and Ansoff, Declerck, and Hayes, 1976).The concept is still evolving and will continue to undergo change These theories can beembraced as appropriate within the concept of strategic management The concept ofstrategic management is simply a way to give needed emphasis to a major function ofmanagement of organization

Strategy and strategic management concepts help managers in the VFCFIsunderstand the important role of strategy in an organization Strategy guides the futuredirection for company in order to gain both long-term and short-term objectives Marketingstrategy is one part of the general strategy of a company as a functional strategy Next partwill discuss about marketing strategy in a business service firm since VFCFIs are operating

in consulting field and they are involving in service industry

2.2 Marketing Strategy for a Business Service Firm

Kerin and Peterson, (1993) reckoned that marketing has become recognized as abasic motivating force in most organization Firms participating the marketing concept strive

to satisfy customer's needs and wants while, at the same time, achieving their organizationalobjectives Marketing planning and strategy development, therefore is one of the majorresponsibilities of business marketing managers Determining target markets and thendeveloping and implementing marketing mix to address those markets is the essence ofmarketing management

Mahin, (1991) noted, to meet the need of customer effectively, an integratedmarketing strategy is required for an business service firm First, target segments must beselected, and then a marketing mix (including service packages, promotion, pricing, deliverystrategies) must be tailored to the expectation of each segment A Vietnamese consultingfirm is also a business service firm, hence theory of marketing strategy in a service firm ishelpful for it to design its own marketing strategy including segmentation and marketing mix

2.2.1 Market Segmentation

Dickson, (1993) demonstrated, segmentation is one of the core concepts ofmarketing In essence, it suggests that a firm's marketing efficiency can be improved bytargeting marketing activity at discrete groups of customers who behave differently in someways toward the firm

Certo and Peter, (1990) explained, the logic of market segmentation is quite simple:

it is based on the idea that a single product or service does not usually appeal to allcustomers Customers' purchasing goals, service knowledge and purchase behavior vary.For this reason, marketing strategists typically focus their marketing effort on specific groups

of customers than on the whole population

According to Webster, (1987) a market can be segmented on a variety ofdimensions, or bases such as industry, customer's expertise, customer's location, etc

Davidow and Utal, (1993) suggested that customer service segments differ fromusual market segments in significant ways Service segments are often narrower thissituation reflects the fact that many service customers expect services to be customized.Expectations may not be met if the service received is standardized and routine Secondly,service segmentation focuses on what the business customers expect as opposed to whatthey need The assessment of customer expectations will play a very large role in selecting

a target market and developing the appropriate service package This assessment is criticalbecause so many studies have shown large differences between the ways that customersdefine and rank different service activities and the ways suppliers define and rank them

Mahin, (1991) concluded that segmentation is the key to the development ofdifferentiated marketing programs by segment Hence segmentation serves as the

"locomotive" that pulls all subsequent marketing planning steps including design marketingmix strategies

2.2.2 Marketing Mix Strategies

Lovelock, (1992) stated that the key elements of the service marketing mix includethe development of service packages, pricing, promotion and distribution The followingssummarize major activities of marketing mix for a business service firm:

Service Packages

Customer-Benefit Concept: Services are purchased because of the benefits they

offer, and a first step in either creating a service or evaluating and existing one is to definethe customer-benefit concept- that is, evaluate the core benefit that the customer will derivefrom the service An understanding of the customer-benefit concept will focus the businessmarketer's attention on those attributes-functional, effectual, and psychological-that must benot only offered but also tightly monitored from a quality-control standpoint

Service Concept: Once the customer-benefit concept is understood, the next step is

to articulate the service concept, which defines the general benefits the service company

will provide in terms of the bundle of services to sold to the customer The service concepttakes the customer-benefit concept and translates it into the range of benefits the servicemarketer will provide

Service Offer: Intimately linked with service concept is the service offer, which spells

out in more detail those services to be provided, when they will be provided, how they will beoffered, where they will be offered, and to whom The service elements that make up thetotal service package, including both tangibles and intangibles, must be determined

Service Delivery System: The final dimensions of the service product is the service

delivery system-how the service is provided to the customer The delivery system includescarefully conceived jobs for people; personnel with capabilities and attitudes necessary forsuccessful performance; equipment, facilities, and layouts for effective customer work flow;and carefully developed procedures aimed at a common set of objectives Thus, the servicedelivery system should provide a carefully designed blueprint which describes how theservice is rendered for the customer

Service Personnel: A first step in creating an effective service package is to ensure

that the customer-benefit concept is known, understood, and accepted by all personnel AsDonald Cowell states: "So important are people and their quality to organization and .services that 'internal marketing' is considered to be an important management role toensure that all staff are customer conscious" In short, the attitudes, skills, knowledge, andbehavior of service personnel have a critical impact on the levels of satisfaction that the userderives from the service

Pricing Business Services

Perishability and Managing Demand/Capacity: The demand for services is rarely

steady or predictable enough to avoid service perishability An extremely difficult decision forthe business service marketer is to determine the capacity (inventory) of the system-should

it meet peak demand, average demand, or somewhere in between? Pricing can be used tomanage the timing of demand and align it with capacity levels

Service Bundling: Many business services include a core service (perhaps several)

as well as peripheral services How should the services be priced-as an entity, as a service

bundly, or individually? Bundling is the practice of marketing two or more services in a

package for a special process A key decision for the service provider is whether to providepure or mixed bundling In pure bundling, the services are only available in bundled form-they can not be purchased separately In mixed bundling, the customer can purchase one ormore services individually or purchase the bundle

Attracting New Business: Various bundling strategies can be used to expand sales

by cross-selling - selling a new service to customers who buy an existing service - or by

attracting entirely new customers Clearly, the services, how the services are combined, andhow the bundle is priced have critical effects on the service firm's success Manyopportunities are available in the business service sector to improve the pricing of services.Service firms need to adopt pricing strategies that account for the unique aspects ofservices and define a specific role for the price variable

Services Promotion

The promotional strategies for services follow many of the same prescriptions as dothose for products However, the unique characteristics of business services pose specialchallenges for the business marketer

Communication with Employees: Personnel are vital to many people-based service

businesses, and they can have a profound effect on the customer's satisfaction with theservice Internal advertising to employees accomplishes the following:

1 Promotes an understanding of the firm's mission and customer service benefit

2 Influences them on how the services is to be provided

3 Motivates them to perform

4 Defines management's expectations of them

Word-of-Mouth: Service purchases are frequently considered to be riskier than

product purchases because it is more difficult for customers to evaluate quality and value

As a result, customers are more apt to be influenced by colleagues, peers and otherprofessionals who have had experience in purchasing and using the service Promotionmust concentrate on the dominant role of personal influence in the buying process andbuild on word-of-mouth communication Donald Cowell suggests that this can be done by:

1 Persuading satisfied customers to inform others of their satisfaction

2 Developing materials that customers can pass on to noncustomers

3 Targeting opinion leaders in ad campaigns

4 Encouraging potential customers to talk to existing customers

Service marketers can capitalize on the satisfaction of current customers and of-mouth promotion by featuring customers (and their comments) in nonpersonaladvertising The promotional brochures for many management development seminarsfeature pictures of customers and statements of satisfaction by these prior attendees

Expectations: Service marketing managers should recognize that many services

can be enhanced through efforts to condition customer expectations about the nature of theservice encounter and the results it might produce It is often better to promise less than thefirm can deliver in order to establish proper customer expectations Advertising, if overlyzealous in its claims, can sometimes establish customer expectations that can not be met

Developing Tangible Clues: Service marketers must concentrate either on featuring

the physical evidence elements of their service or on making the intangible elements moretangible Attempts should be made to translate the image of intangible attributes of a serviceinto something more concrete

Operating Personnel as Salespeople: Marketing and operations are generally

inseparable in the service business This means that service personnel also play key sellingand marketing roles The operating personnel must be equipped and ready to dealeffectively with the customer; they must also be motivated to do so Many successfulbusiness service companies put considerable effort into ensuring that their operatingpersonnel communicate effectively with the customer

Services Distribution

Distribution decisions in the service industry are focused on how to make the servicepackage available and accessible to the user Speed is often a competitive advantage whenbuilding a service network

How does a service firm manager choose among all the possible distributionstrategies? The short answer is: It all depends It depends on the internal resources of hisfirm and the external constraints imposed on it Some channel strategies may require

substantial capital investments, others like many of the multimarketing strategies will requirespecific management skills.

Other channel strategies may capitalize on changing customer needs No channelcan succeed unless the service firm add the right kinds of value to create an appropriatelypriced service that meets the needs of a viable number of customers

2.3 The Concept of Effective Marketing Strategy

Webster, (1987) stated that marketing strategy begins with an analysis of thechanging environment, especially the part of the environment consisting of potentialcustomers and competitors Selection of customers to be dealt with and markets to beserved is the most important decision made by any business firm or other economicorganization and is a major determinant of the nature of the business

He also emphasized that the central calculus in the development of marketingstrategy is an assessment of the organization's strengths and weaknesses and a matching

of those strengths with unsatisfied customer needs in the market place Effective marketingstrategy, therefore, depends upon both an honest assessment of strengths and weaknessesand good information about customer needs and wants and the extent to which they arebeing served by current suppliers

Dahringer, (1991) demonstrated, an effective service marketing strategy consists ofsubstrategies for service, price, promotion, and distribution that are consistent with one

another and have synergy-that is, the impact of the whole is greater than the sum of the

parts For example, pricing policy and strategy are consistent with the firm's service qualityand image, providing margins adequate to cover the necessary costs Promotional strategyshould reflect the true level of service quality and should be consistent with the capabilities

of the organization Each element of the marketing strategy depends for its effectiveness onthe coordination and support of all other elements of marketing strategy

Haas, (1986) wrote, firms are successful because they manage the difficult aspects

of their business better than their competitors To be successful, service firms should lookfor ways to manage the particular consequences of being a service firm better thancompetitors The success strategies which we define here are based on this principle

Successful service firms know exactly what they sell and how everybody andeverything in the service system contributes to it They also transfer this knowledge to bothemployees and customers In other words, the first success strategy refers to the need for aprecise definition of the service concept It is only logical that customer needs constitute thepoint of departure That is to say, not only his substantive, but also his peripheral needs Asecond success strategy involves segmentation and focusing To what customer group dothe firms direct themselves and are the needs of that group sufficiently homogeneous? Whatservice package do the firms offer? These are the main questions in consideringsegmentation and focusing Communication is also essential to sustain the focus It isassumed that personnel behave in more or less the same way in similar situations, and that

they also understand why this is necessary In the best service firms, personnel sense thesituation state of mind and needs of the customer perfectly

Dickson, (1993) the ultimate test of service marketing strategy is whether it leads to avaluable differentiation for the service marketer, whether it leads to a unique competitiveadvantage giving potential customers a solid reason for dealing with the service marketerrather than with its competitors That uniqueness can come from any of the individualelements of marketing strategy-market segmentation, service policy and strategy, pricingpolicy and strategy, or promotion Market segmentation is usually a key element of thestrategy of differentiation Without a true uniqueness in some area, a true "reason for being",the service marketer is not likely to realize major success in the competitive marketplace

2.4 Consultancy Industry

Mahin, (1991) noted, services in the business-to-business market can be categorized

in two distinct groups: product supported by services and pure services Consultancy isbelonging to the pure services group, those that are marketed in their own right withoutnecessarily being associated with a physical product

Schein, (1987) wrote, process consultation is defined as a set of activities on the part

of the consultant that help the client to perceive, understand, and act upon the processevents that occur in the client's environment

Consultancy industry consists of many kinds of consultant companies such asaccountant, management consultant, foreign investment consultant, lawyers, etc In theparticular situation of Vietnam, the most popular types of consultant is foreign investmentconsultant and lawyers

2.5 Tourism and Construction Industries

2.5.1 Tourism

Jefferson and Lickorish, (1991) stated, tourism demand is met by the concentratedmarketing effort of a wide range of tourist services Together these services form the world'slargest and fastest growing industry Because some of these services are crucial to thegeneration and satisfaction of tourists' needs, while others play only a peripheral orsupportive role, it is not easy to determine what constitutes the 'tourism industry'.Furthermore, some services, such as catering and transport, provide for the needs of othersbesides tourists Some simplification is necessary, and Figure 2.1 provides a framework forthe analysis of the industry based on a central chain of distribution supported by specificpublic and commercial sector services

PUBLIC SECTOR SUPPORT SERVICES

PRIVATE SECTOR

SUPPORT SERVICES PRODUCERS

* Guiding Services

* Travel Insurance and finance service

* Travel trade press

* Marketing support services

* Guide and timetable publication

* Air transport

* Sea trnasport

* Rail transport

* Road transport (coach, car hire)

* National tourist organizations

* Regional tourist organizations

* Resort publicity offices

* Visa and passport offices

2.5.2 Construction

The construction industry plays a major and vital role in a whole economic system ofany country in the world The construction involves the utilization of human, economic andnatural resources It is a sector of the economy which plans, designs, constructs, maintains,repairs and eventually demolishes building of all kinds, including civil engineering works,mechanical and engineering structures and other similar works For a developing countrylike Vietnam with very poor infrastructure, reform construction is a prerequisite condition fordevelopment

The construction industry in Vietnam is of a specific situation after long time inisolation from the international construction market, and now it is in a booming state due tothe economy reform policy of the Government In 1990, the government issued theregulation No 385-HDBT to promote construction industry At present, there are manyforeign investors in construction industry entering Vietnam These foreigners need the helpand support from VFCFIs Oftenly, they want information about construction industry andthey expect the assistance of VFCFIs from the beginning to the end of their constructionproject including getting investment license, bidding project, technical consulting services,etc

Chapter 2 provides basic concepts of strategy and marketing strategy in a servicefirm It also shows the linkages connecting investors in tourism and construction industrieswith consultants These links are helpful in designing marketing strategy for a VFCFI whosemarket target is investors in tourism and construction industries Chapter 3 is going todevelop a conceptual framework aiming to design marketing strategy for the VFCFIs

Chapter 3 Conceptual framwork

Chapter 3 will base on the marketing strategies issues for a service firm discussed inChapter 2 and secondary data regarding to Vietnamese market to design ConceptualFramework facilitating VFCFIs in formulating and implementing marketing strategies

Certo and Peter, (1990) showed that the basic steps of the strategic managementprocess including (1) performing an environmental analysis, (2) establish organizationaldirection (vision, mission, and objectives), (3) formulating organizational strategy, (4)implementing organizational strategy, and (5) exerting strategic control (See Figure 3.1)

Step 2 Establishing Organizational Direction

Step 3 Strategy Formulation

Step 5 Strategic Control

Step4 Strategy Implementation

Step 1

Environmental

Analysis

FEED BACK

Figure 3.1: Major steps of the Strategic Management

Source: 1990, Strategic Management, Samuel C Certo and J.Paul Peter.

Following the above basic steps, the conceptual framework to design the MarketingStrategies for a Vietnamese Firm Consulting to Foreign Investors has been outlined in theFigure 3.2 Conceptual Framework

3.1 Environmental Analysis

Certo and Peter, (1990) noted that environmental analysis is the process ofmonitoring the organizational environment to identify both present and future threats andopportunities that may influence the firm's ability to reach its goals The organizationalenvironment is the set of all factors both outside and inside the organization that can affectits progress toward attaining those goals Properly used environmental analysis can helpensure organizational success

Therefore, to design the marketing strategies, VFCFIs should start at environmentalanalysis

VIETNAMESE FIRM CONSULTING TO FOREIGN INVESTORS (VFCFI)

CUSTOMERS :

* Foreign Investors

*Vietnamese companies

CURRENT MARKETING ACTIVITIES IN VFCFIs

MARKETINGMIX STRATEGIES

COMPETITIVE STRATEGIES

ORGANIZATION STRATEGIES

IMPLEMENTING & CONTROLLING THE MARKETING STRATEGIES

FEEDBACK

CONCEPTUAL FRAMEWORK

Figure 3.2: Conceptual Framework

3.1.1 External Analysis

The external environment of an organization is generally divided into two distinctlevels: the general environment and the operating environment

The general environment

According to Certo and Peter, (1990) the general environment made up ofcomponents that are normally broad in scope and have little immediate application formanaging an organization They are economic, social, political, legal components

Consequently, for a VFCFI, its general environment is the situation of economic,social, political, legal and technological components in Vietnam

· The economic component of the general environment indicates how resources are

distributed and used within the environment Examples of factors within theeconomic component are gross national product, corporate profits, inflation rate,productivity, employment rates, balance of payments, interest rates, tax rates, etc.Vietnamese economy now is growing at around 9% Inflation rate is less than 14%

In general, the economy is developing well, creating a favorable businessenvironment for VFCFIs

· The social component of the general environment describes characteristics of the

society in which the organization exists Vietnam has a large and young population(its population is more than 70 million) It is a really big market and attracts manyforeign investors However, Vietnamese labor is unskilled that constraint makesforeign investors hesitate as plan to invest in Vietnam For VFCFI, it is hard to find asenior consultant as well as qualified staff

· The political component of the general environment comprises those elements that

are related to governmental affairs The most well-known policy of Vietnamesegovernment is open door policy This policy welcome all foreigners and overseasVietnamese invest in Vietnam The increasing number of foreign investors leads tothe number of VFCFIs also is growing since foreign investors are major customers ofVFCFIs

· The legal component of the general environment consists of legislation that has

been passed This components prescribes rules or law s that all members of societymust follow Foreign investment laws had passed in 1987 encourages all foreigncompanies to invest in Vietnam Besides, there are a lot of regulations under lawsregarding to foreign investment These regulations are changing quickly makeforeign investors difficult to keep up Even for VFCFIs those are specializing incollecting information, to keep up with Vietnamese regulations is not easy

Operating environment

Certo and Peter, (1990) defined the operating environment is the level of theorganization's external environment made up of components that normally have relativelyspecific and more immediate implications for managing the organization The majorcomponents of the operating environment are customers, competition, labor and suppliers.

For a VFCFI, the operating environment consists of its customers, its competitors inconsulting field, its substitute staff and suppliers The follows summarize major components

of a VFCFI's operating environment

· Customer component of the operating environment reflects the characteristics and

behavior of those who buy goods and services provided by the organization.Customers of VFCFIs are foreign investors and some Vietnamese companies

· Competition component of the operating environment consists of those whom an

organization must "do battle" in order to obtain resources Hamel, (1993) wrote thatunderstanding competitors is a key factor in developing effective strategiesanalyzing the competitive environment is a fundamental challenge to management.Major competitors of a VFCFI are Vietnamese Consulting Firms and ForeignConsulting Firm operating in Vietnam as well as other Foreign Consulting Firmsdealing with foreign investors in Vietnam from abroad especially in Bangkok,Hongkong and Singapore While the economy has been developing rapidly andforeign investment increasing, the number of consulting firms in Vietnam will soarcauses tough competition

· The labor component of the operating environment is made up of factors that

influence the supply of workers available to perform needed organizational tasks Asmention in the general environment, Vietnamese labor is unskilled and lack ofexperiences in market economy, therefore it is very difficult for any VFCFIs to recruitqualified staff

· The supplier component of the operating environment includes all variables related

to those who provide resources for the organization Suppliers to a VFCFI can bemany different organization providing from inevitable goods and services to the firm.They vary from government offices, state planning committee, state committee oncooperation and investment, ministries to airline agents, tour agents, banks, etc The external environment analysis aims to identify both present and futureopportunities and threats for a VFCFI that are basic factors to design marketing strategies

3.1.2 Internal Analysis

Certo and Peter, (1990) defined the internal environment is the level of anorganization and normally has immediate and specific implication for managing theorganization Table 3.1 lists a number of factors that are considered important components

of the internal environment of a service firm

Table 3.1: Several Important Aspects of an Organization's Internal Environment

Business service diversification

FINANCE

Profit InvestmentActivity

Source: 1990, Strategic Management: A focus on process, Samuel C Certo andJ.Paul Peter

A VFCFI must analyze its internal environment accordingly to the above principalaspects in order to identify the strengths and weaknesses of a VFCFI

3.2 Vision, Mission and Objectives

Johnson and Scholes, (1988) demonstrated that vision refers to a clear, measurableand challenging description of a desired future goal which when achieved will give theorganization a significant advantage over its competitors Without a clearly articulated vision

of its competitive future an organization is effectively setting out on a journey withoutknowing its destination This 'mystery tour' approach risks producing strategies and behaviorthat are determined largely as a reaction to the firm's past and present circumstances than

by where it would ideally like to be

Davies, (1993) defined mission is used as a broad, inclusive concept Itencompasses a statement of purpose, a specific performance related vision, a set of

strategic guidelines about how and where the firm will compete and set of corporate values.The mission statement will address questions such as :

Ü What business are we in ?

Ü What is the service and market scope of our business ?

Ü What is the essence of our business ?

Ü What growth direction are we pursuing ?

In his research study in 1993, Davies concluded that best practiced firms weredistinguished by the process they adopted in generating the vision or mission, as well as bywhat they expressed and the way they chose to express it Their visions were measurable,memorable and expressed in language that was meaningful to all levels of the organization

Johnson and Scholes, (1988) noted, the organizational vision and missionestablishes the general direction of the firm, and organizational objectives narrow the focus

to more specific targets An organizational objectives is a target toward which theorganization directs its efforts Objectives provide the foundation for planning, organizing,motivating, and controlling Without objectives and their effective communication, behavior

in organizations can stray in almost any direction There are two different types ofobjectives, short-run objectives are targets that the organization is attempting to reachwithin one or two years and long-run objectives are targets that the organization is trying toreach within about three to five years

The following is the proposed basic model for a VFCFI to develop its vision, mission

and objectives

1 Vision

The vision can be expressed in very specific and concrete terms such as:

· Our business is service

· To strive for the greatest possible reliability and quality in our services

· To be recognized as a company of dedication, honesty, integrity and service

In principle, vision should describe in short the future goals of the company in order

to be easily and clearly understood firstly by managers and staff, then by customers Theabove suggested visions try to cover core business of a VFCFI in a particular term

2 Mission

· Services: Investment consultancy, marketing research, information service, legal

service, assist to establish representative offices, joint ventures, tour agents andarrange business trips in Vietnam, etc These are popular services in any VFCFIcurrently

· Market: Foreign investors in Vietnam mostly in the tourism and construction

industries and other Vietnamese companies as the partners of foreign investors.They are main customers of VFCFIs

· Ability and Skills: Consulting skills, negotiate skills, etc VFCFIs need professional

consultants who are good at consulting as well as negotiating, therefore consulting,communicating, negotiating skills are required to their staff

· Company philosophy: Sustain a strong spirit of teamwork through mutual

commitment and loyalty within employees and employers Teamwork spirit should beimportant component in a consulting firm because consultants usually co-operatewith each other in one project, they can not work separately and independently.Hence, the good co-operation within consultants in a VFCFI guarantees not onlygood working atmosphere but also high quality of consulting services

Mission of a VFCFI has to clarify major tasks and cover all main aspects of thecompany in terms of services, market, ability and skills, company philosophy Therefore, theabove proposed mission strives to define tasks in each aspect of a VFCFI

3 Objectives

Objectives are precise targets that a VFCFI aims to achieve in both short-term andlong-term There are three aspects, a VFCFI should consider as designing its objectives.They are customer service, community service and employee-management obligation.Naturally, customer service is the most important aspect of every company since it decidesthe existence of a company Only if a VFCFI provides suitable services, gets customers andprofits, it will be survive and develop, if not it will not be able to exist in the market Beside,there is no company can operate outside its community, as a result, it must have obligationswith the community, e.g in the social and or environmental issues For a VFCFI, itsactivities can assist to promote foreign investment and provide more available jobs toVietnamese citizens At the same time, it can introduce Vietnamese traditional culture toforeigners Finally, the relationship between employee and managers also affects to allactivities of a VFCFI and it is expecting to create a sound relationship between employeesand managers The objectives in three major aspects of a VFCFI are described below:

· Monitor and strive to improve the quality of management and supervision.

· Promote a high degree of professionalism throughout the company

· Develop, update, and monitor both long-term and short-term plans in a formalizedmanner

· Attract, develop, and retain able and loyal employees

· Provide equal employment opportunities and a high degree of training along withmodern, professional tools

· Strive to provide employees with compensation levels at or above industry norm Vision, mission and objectives all are fundamental factors to design marketingstrategies In other words, marketing strategies should be designed and implemented inorder that achieve the VFCFI's vision, mission and objective

3.3 Formulating Marketing Strategies

From the environmental analysis and set of mission and objectives, the marketingstrategies is going to be formulated Marketing strategies here comprise marketsegmentation, marketing mix and other strategies supplementing and assisting toimplement and improve marketing activities such as competitive strategy, strategic client-consultant partnership and organization strategy The methodology to design marketingstrategies for a VFCFI will be discussed hereafter

3.3.1 Market Segmentation

For a VFCFI, market segmentation can based on the following factors:

· Industry: Foreign investors and Vietnamese businessmen in the tourism,

construction, food processing, oil and gas, telecommunication, etc The group ofrelative industries could be a base of the segmentation For example, group ofinvestors in the agriculture, aquaculture and food processing; or in the tourism andhotel can be one single segment

· Continent: European, Asian, American, African, Australian Some similar countries in

term of business environment can be grouped in one segment, e.g EuropeanUnion, AFTA, ASEAN, etc

· Size of the customer's company or project: Big companies such as international

corporation like Coca-Cola, Pepsi, P & G, Sony, Toyota etc and medium, smallones Big or small project will be defined on the investment capital

The logic of these proposed factors is foreign investors or Vietnamese businessmen

in the same industry, similar industries, or same continent, size of the company may havehomogeneous characteristics After segment the market, a VFCFI must answer thefollowing questions: What consulting services?, With what distinguishing characteristics? Towhat target market segments?

It means marketing mix should be tailored to market segmentation

3.3.2 Marketing Mix Strategies

Marketing mix for a business service firm as indicated in Chapter 2 includes service,price, promotion and distribution strategies The followings are some guidelines for formingmarketing mix in a VFCFI

Services Strategy

· Create new consulting service offering to be able to adapt consumer needs A new services can quickly be copied by competitors, but begin the first to introduce such new services conveys a genuine concern for consumer service creates an image that is not easily copied

· Developing the service-system to expand and upgrade tailored service offering

· Using information power strategically to enhance and extend operations Consulting service businesses are very sensitive to information and communication strategies

A more basic and strategic use of information in consulting service is emerging

Pricing Strategy

· How much to charge in order to support the service positioning strategy, achieve thefinancial goals and fit the realities of the market place environment

· Prices should base on costs, competition and market willingness to pay

· What billing and payment procedures to employ? Who, when should collect

payment?

Promotional Strategy

· What target audience(s) are most easily convinced that the consulting service offers a competitive advantage on attributes that are important to them?

· What messages and which communication channels?

· Direct marketing to customers (advertising, customers' conference, etc.)

· Internal marketing

Distribution Strategy

· To offer the consulting services in which fields?

· When to make the consulting services available?

Marketing mix is the center of marketing strategies However, only marketing mix isinsufficient to run business successfully There should be a competitive strategy help toimprove the position of a VFCFI in the market

3.3.3 Competitive Strategy

Gary Hamel, (1993) stated that companies compete in three ways - building corecompetencies that give product and services unique functionality; building a worldwidedistribution and brand infrastructure; and innovating product or service Hamel exploredcore competence further, pointing out that it provides logic for the firm The strategy shouldfocus on competition for competence Core competencies are skills that give a companyaccess to a range of markets and opportunities, they are the basis for inter-corporatecompetition

Core competence is embedded in people This is very important for a VFCFI, itmeans the firm has to recruit good people, train them well, mentor them and so on So theirpeople are better than the others The core competencies in this case are selection,training, supervision, etc and it makes a VFCFI more competitive in the consulting industry

Consequently, the competitive strategy must focus on determining and developingcore competencies of a VFCFI

3.3.4 Strategic Client-Consultant partnership

In case of a VFCFI, institutional relationship between two companies heavilydepends on the personal relationship within a particular client and a consultant involvingdirectly to the business affair Therefore, a VFCFI should create and maintain soundrelationships by joint problem definition and solving between client and consultant, keepgood working relation during the assignment

3.3.5 Organization Strategy

In general, the organization strategy is concerned with re-structuring organization,attracting, assessing, motivating, and retaining the number and types of employeesrequired to run business effectively Taken collectively, the set of decisions concerningthese issues is the organization strategy Organization strategy in a VFCFI helps it to recruitqualified staff and motivate present staff to operate consulting services more effectively

In order for a VFCFI to achieve its objectives, it must not only formulate but alsoimplement its strategies effectively If either of these tasks is poorly done, the result is likely

to be failure of the overall strategy

3.5 Implementing and Controlling Strategies

The manager's task at this stage is to determine an appropriate approach toimplementing the strategy An implementation approach has been selected that does thebest job of capitalizing on the firm's strengths and overcomes, circumvents, or minimizesproblems within the organization The tasks now is to execute the strategy and evaluate theresults

3.5.1 Implementing strategies

To implement marketing strategies, there should be some marketing programs toplan implementing steps in details These programs may serve for one or more marketingstrategies For example, marketing program to introduce a new consulting service shouldconsist of designing new service, positioning it, advertising, promoting for it, etc.Accompanying with marketing programs, marketing skills are required to accomplishmarketing strategies

Bonoma, (1985) suggested that successful implementation of strategies requiresfour basic types of execution skills These are shown in Figure 3.3 and are discussedbelow

Figure 3.3: Four Key Implementation Skills (Bonoma)

· Interacting skills are expressed in managing one's own and others' behavior to

achieve objectives Depending on the level of strategic change required toimplement a strategy, managers may need to influence others both within andoutside of the organization

· Allocating skills are brought to bear in managers' abilities to schedule tasks and

budget time, money, and other resources efficiently

· Monitoring skills involve the efficient use of information to correct any problems that

arise in the process of implementation

· Organizing skills are exhibited in the ability to create a new informal organization or

network to match each problem that occurs

For a VFCFI, marketing skills, especially skills in behavioral and negotiating area arevery important The followings list the major skills are necessary to a VFCFI's consultant:

· Professional etiquette and courtesy

· Stability of behavior and action

· Self-confidence

· Intellectual competence

· Strong analytical or problem solving ability

· Skill in interpersonal relationships

· Ability to communicate and persuade

3.5.2 Controlling Strategies

Certo and Peter, (1990) noted that strategic control is a special type oforganizational control that focuses on monitoring and evaluating the strategic managementprocess in order to make sure it is functioning properly The most fundamental purpose ofstrategic control is to help top management achieve organizational goals through monitoringand evaluating the strategic management process

To control and evaluate marketing strategies, three distinct but related steps must

be taken to carry out the strategic control process within a VFCFI

1 Measure its Performance

2 Compare its Performance to Goals and Standards

3 Take Necessary Corrective Action

Chapter 3 suggests a conceptual framework for any VFCFI to design its marketingstrategies Chapter 4 will report marketing activities in the VFCFIs and reveal the need ofeffective marketing strategies in these firms.

Chapter 4 Marketing activities

The first firm consulting to foreign investors was established in Vietnam in 1989, twoyears after the Foreign Investment Law had been accepted At that time, a consulting firmhad to be a state-owned firm or a joint venture between a state-owned organization and a

foreign partner The regulation No 146/HTDT of the SCCI (State Committee on

Co-operation and Investment) dated 19 August 1989 states that "private companies are notallowed to operate consulting service, foreigners can offer only some types of consultingservices except legal consultancy" (See Appendix 2) And according to the Regulations onInvestment Consulting Services Organization, the service field was limited to the followingareas:

· Consulting services to investors in the economical, technological, legal matters andproviding information regarding to the business partners (legal status, financialcapacity, area of industry, management, market), and

· Services relating to administrative procedures: applying for the necessary licenses(open representative, branch offices, joint venture etc.)

· The provision of services in relation to common matters such as meals,accommodation, and travel shall not be subjects to these Regulations

Up to now, there is significant change in the consulting field The Consulting Firmsboth Vietnamese (private and state-owned) and foreign are booming in the Vietnamesemarket and they are providing various types of services In December 1994, only elevenVietnamese Firms got licenses to operating investment consulting services from SCCI Yet,

in fact around hundreds firms are running investment consulting services without licenses(See Appendix 3) It makes competition tougher, however at the same time the quality ofconsulting service is not high since any company can offer any kind of services As a result,the marketing activities in those quickly-established firms are extremely poor

4.1 Marketing Activities in the VFCFIs

The direct and in-depth interviews were conducted in three selected firms andquestionnaires were also sent to some consulting firms in Hanoi and HoChiMinh City Datacollection from the interviews and mailing questionnaires reflect the current marketingactivities in the VFCFIs

4.1.1 Marketing Activities in the Selected Firms

Three firms have been chosen in the sample based on their organization andstructure They are VIETCOCHAMBER (The Chamber of Commerce and Industry ofVietnam) - a rather large company, INVESTIP (Consultant operating under the control ofthe Ministry of Science, Technology and Environment) - a rather medium company and

B&H (Private Company) - a rather small sized company The size of the companies havebeen estimated based on the number of customers, market position, revenue, etc.

Table 4.1 summarizes major marketing activities of the three above companiesregarding service, promotion and price aspects Unfortunately, there is no plan and strategy

to divide the total market into segments in any of the three companies - that means a lack ofmarket segmentation

Table 4.1: Selling Activities in the Sample Consulting Firms

VIETCOCHAMBER

· Promote and offerassistance intrade, investment

· Conduct regularconsultation withbusiness

enterprises,investors

· ProvideVietnamese andforeign businessentities withinformation on

economicdevelopment

· Patent Agent

· Advertising

· Fair

· Annual clientconferenceand

membershipconference

· Pressmeeting

· Setaccording

cost, andtax

· Based onthe stateregulation

INVESTIP

· Legal services

· ProjectManagementConsultant

· Recruit staff forforeign offices

· Industrial andIntellectual

PropertyProtection

· Ad on itsown

magazines(BusinessVietnam &

Tia Sang)

· Clientconference

· Set pricein

comparewith theother firms

B & H

· Patent Agent

· ForeignInvestmentconnsultancy

· Tradingconsultancy

· Nopromotion

· Costorientation

1 VIETCOCHAMBER

VIETCOCHAMBER was established in the early 1980s as a state-ownedorganization belonging to Ministry of Foreign Trade Because of VIETCOCHAMBERsuccess as well as the transition process of Vietnamese economy, the Governmentdecided to change the company into an independent, non governmental organization on 27April 1993 (See Appendix 4) VIETCOCHAMBER general provision was to accelerate socio-economic development to the country and to promote commercial, economic andtechnological relations between Vietnam and the rest of the world

Consulting services are one but important part of VIETCOCHAMBER tasks There is

a Consulting Department in the company (See Appendix 6) It is a functional department ofVIETCOCHAMBER This department advises Vietnamese and foreign companies onmatters relating to the economic activity and business environment in Vietnam, providesinformation about trade, laws, economical and technological development in Vietnam andinternational markets, acts as agent for patents and registration of trade and service marksand for protection industrial and intellectual property

VIETCOCHAMBER is a very big organization with more than one thousandmembers (All organizations and individuals agreeing to the statutes of VIETCOCHAMBER,whether voluntarily applying for membership and accepted by Executive Committee ofVIETCOCHAMBER, may become members of VIETCOCHAMBER) (See Appendix 4 formore details) Hence, its operating activities are popular and well-known in the Vietnamesemarket Its ads have been exhibiting in most of the important business newspapers andmagazine in Vietnam such as Vietnam Investment Review, Vietnam Economic Times,Business Vietnam, Vietnam News, Foreign Investment Review, etc VIETCOCHAMBER ismost famous with its trade fairs and exhibitions Through the fairs, many foreign investorshave become clients of VIETCOCHAMBER Consulting Department as well asVIETCOCHAMBER members Annually, VIETCOCHAMBER organizes client conferencesand membership conferences in order to summarize the business result of one workingyear and exchange views, information for the coming years Press meeting has beenconducted sometimes, especially in the large fairs or for particular occasions For example,VIETCOCHAMBER co-operated with the Prime Minister's Office to organize a press named

"INVESTMENT OPPORTUNITIES IN VIETNAM" in 1993

The consulting services fee in VIETCOCHAMBER was set based on the expenses,tax and other government regulations related to consulting services The list of consultingservice fee of VIETCOCHAMBER is always the basis for other consulting firms to set theirindividually decided fee

2 INVESTIP

INVESTIP was established in 1989 as a state-owned company belonging to Ministry

of Science, Technology and Environment Even though, it has not offered technical servicesrelating to science and technology, it is offering consulting services for foreign investors andoperates as a patent agent Two aspects of its services are supporting each other very well.Before to invest directly to Vietnam, many foreign investors have to register their trade orservice marks in Vietnam in order to protect their intellectual property and avoidcounterfeits They are the clients of the INVESTIP's Industrial Property and IntellectualProperty Protection Department first Then when they are starting to invest to Vietnam, theybecome clients of its Foreign Investment Promotion Department afterward They seek theassistance in providing information on legal, foreign investment issues, introducingVietnamese partners INVESTIP also provides service to help to recruit staff and organizetraining of office skills for foreign companies in Hanoi and HoChiMinh City INVESTIP hasrecruited Vietnamese staff in various position from clerk to manger for SGS (Swiss GeneralSupervision Company), Deutsche Bank, Fujita, Trust Bank, etc

INVESTIP has issued two magazines monthly; the Business Vietnam magazine inEnglish and Tia Sang biweekly newspaper in Vietnamese since 1990 Those magazinesprovide information on the hot issues of foreign investment in Vietnam Naturally,INVESTIP's consulting services have been advertised in its magazines Besides, INVESTIPorganized clients meeting in Singapore, Taiwan in 1991 where almost all of its clients work

The price of INVESTIP's services has been set basically in comparison with differentconsulting firms And INVESTIP often set price for the assignment depends on thecharacteristics and values of the assignment For example, price of conducting marketresearch on brewery market in Hanoi for British Distiller Company was based on the scope

of the research and expenses INVESTIP paid

3 B&H

B&H Trading and Investment Consultancy Company Ltd was established onDecember 29, 1993 accordingly to the Regulation No 00370/GP-UB of the People'sCommittee of Hanoi City It is a private and quite small company B&H offers services inforeign investment and trading (providing information on investment opportunities, potentiallocal partners, necessary information to make a feasibility study), and operates as a patentagency

Even B&H has just been established nearly 2 years ago, it seems that the companydoes care too much about promotion activities Clients come to B&H mostly by introduction

of the B&H staff and their friends It means, clients rent B & H services since their personalrelationship with B & H staff As they get along with Vietnamese market or they find anotherpotential consulting company they may leave B & H

The prices for B&H services has been set up in the cost orientation only Actually,B&H services fee is much more cheaper than other VFCFIs because its expenses for salaryand administrative expenses are lower In the one hand, this is a comparative advantage of

B & H, in the other hand it is difficult to develop, promote company's activities when itsservices bring back just a little profit at low price

4.1.2 Services for Foreign Investors in Tourism and Construction in the Selected Firms.

As mentioned in Chapter 1, Tourism and Construction are the two industries chosenthat often attract plural foreign investors

The performance of three sample firms focuses on foreign investors in the tourismand construction industry and is described in table 4.2 below:

Table 4.2: Performance focuses on Foreign Investors in the Tourism and

· Some Vietnamese andForeign Tour Agents areits members

· Project ManagementConsultant

services from its ownmembers operating inconstruction

INVESTIP

· Co-operation with anAmerican Tour Agent

· Hire tourism expertswork part time for thecompany

· Project ManagementConsultant

1 VIETCOCHAMBER

VIETCOCHAMBER co-operates with the General Department of Tourism in offeringservices to foreign investors in the tourism field The General Department of Tourism is thegovernment office to manage tourism activities in the country, it is also acting as a businessentity The General Department of Tourism manages all Vietnamese Tourist Companiessuch as Vietnam Tourism Corporation, Saigon Tourist Company, Hanoi Toserco, etc.Therefore, co-operation with General Department of Tourism is a favorable condition forVIETCOCHAMBER VIETCOCHAMBER can easily introduces to foreign investors in thetourism industry to those Vietnamese Tourist Companies as the most potential partners incomparison with other Vietnamese private and small tourist agents

Non-System disk or disk error

Replace and press any key when ready

31IO SYSMSDOS SYS3131Uªurism

B CONSTRUCTION

A lot of foreign investment projects in Vietnam are construction projects They varyfrom extremely big projects such as EPZONEs (Export-Import Processing Zone), CementEnterprises, Business Centers in Hanoi and HoChiMinh City to smaller projects such ashousing project, representative office for a company, etc Foreign investors in theconstruction field need consulting services in bidding the construction projects, finding theVietnamese Construction Company to conduct their projects, providing technical consultingservices like architects, supervisor of the project, supplier of equipment, etc

1 VIETCOCHAMBER

VIETCOCHAMBER provides Project Management Services only,

VIETCOCHAMBER rents technical services from its own members operating in

construction

2 INVESTIP

INVESTIP can provide services in project management and architecture Technicalservices are rented from other consulting firms specializing in construction such asVietconsult International Corporation, Construction Technical Company, Asia PacificEngineering Construction, etc

INVESTIP is planning to focus its activities on Project Management consultancy,especially in construction One Architecture Office has been opened since 1993 TheProject Department has also been established recently

3 B&H

Once again B&H does not offer any specific services for foreign investors in the construction field

4.2.3 Marketing Activities in other Consulting Firms.

Data collection from mailing questionnaires reflects the present activities in someother Consulting Firms doing business in Hanoi and HoChiMinh City (See Table 4.3)

1 CESAIS

CESAIS (Center for Economic Studies and Application) was primarily formed as aresearch center of National University of Economics in HoChiMinh City It specializes inmarketing research with a number of "marketing experts" as they are called The activitieshave now expanded to include foreign investment consultantcy Foreign investors can seekadvice on the investment opportunities and also to search for potential partners

According to a manager in CESAIS, price of their services was set based on thecost oriented

2 PTC

PTC is a center of Vietnam National Institute of Sciences Its major services istechnical services and assisting to technology transfer in Vietnam Besides, it also providesservices in the trading field, but relating to technology such as buy modern machines andequipment PTC is a small company and its operation has not been promoted widely

Table 4.3: Marketing Activities in Some Consulting Firms.

· Promotion foreigninvestment

· Advertisingin

magazines

· Setaccording

· Tradingconsultant

· Market research

· ForeignInvestmentConsultant

· Ads in theTradeNewspaper

· Based oneachassignment

INVESTCONSULT

(HANOI)

· ForeignInvestmentConsultant

· Liaison Office for

companies

· Firm'sPresentatio

n Abroad

· Based onthe value

newspapers

· Based onthe

expenses

3 FISC

FISC is a Ministry of Trade base consulting company Consequently, its main service

is trading consultancy The information on the consumer market, statistic data of each kind

of consumer goods (demand, supply, price of consumer goods such as beer, cigarette, rice,sugar, etc.), what are potential Vietnamese Trading Companies are usually available atFISC office Foreign businessmen can rent market research at FISC

Its services are well-known to both foreign and Vietnamese traders Its ads are inthe trade newspaper and some other business magazines

4 INVESTCONSULT

INVESTCONSULT is known as a large and effective consulting firm in Hanoi Thefirm co-operates with an Australian consulting company It provides consulting services inforeign investment field and acts as liaison offices for some foreign companies such as IBM

INVESTCONSULT has organized for presentations in Singapore, Hongkong and theUSA After these presentation, a lot of foreign companies have becomeINVESTCONSULT's clients

The uniqueness of INVESTCONSULT is the quality of its services Therefore, it cancharge a higher price than other consultants Mr Nguyen Tran Bat, director ofINVESTCONSULT says, "We are cheaper than foreign firms, but more expensive than localfirm We do not sell cheap services because we think we are worth the fees we charge".Many Australian companies are permanent clients of INVESTCONSULT, like ANZ Bank

5 FORINCONS

FORINCOS is a consulting firm belonging to Ministry of Heavy Industry Itscustomers are foreign investors in the heavy industry It has close relationship with andexperience in the heavy industry network, thus its consulting reputation in this field is veryhigh Normally, any foreign investor wants to invest in heavy industry in Vietnam will contactFORINCOS

Analysis of the current marketing activities conducted by VFCFIs aim to point out thenecessity of effective marketing strategies

4.2 The Need of Effective Marketing Strategies in the VFCFIs

Vietnam has been in significant changes since 1989, however, the change in thepolicy does not mean the immediate impact on the economy in general and in the marketinginfrastructure The marketing concept will remain new and strange to every central andplanned economy for a long time, like in Vietnam Consequently, current marketing activities

in Vietnamese firms as well as in the consulting firms are poor as pointed out in the part 4.2

of this Chapter The major reasons are:

· Vietnamese lack of knowledge and experience about the market economy

· The communication channel in the planned economy was complicated, ineffectiveand overlap The market economy requires a quick and effective communicationchannel, information should be provided in time

· Foreign language is well-known in the planned economy was Russian It is useless

in the market economy because the official business language is English

The activities in every Vietnamese consulting firms show their poor marketingknowledge The followings summarize major failures or missing parts in their marketingactivities

Segmentation

There is no segmentation, marketing planning and in particular strategic planning inany Vietnamese consulting firms There is no distinction if you are European or American,you rent services for long term or short term, or you can co-operate with the company in

the future, you will be charged the exactly same consulting fee And it is rarely to find

specific services offering for specific customers In the other words, market segmentationhas never happened in Vietnamese consulting firms

Service

The services in the Vietnamese consulting firms are so simple Customers can buysecondary data very easily from any firm, but primary data like market research will beavailable in only some consulting firms Most of all Vietnamese consulting firms stop atmarket research or even field work (customers provide questionnaires and consulting firmsorganize field work, give data back to customers without processing it)

There is no service package in the VFCFIs The consulting services for aconstruction project for example, will be divided in many stages (bidding, signingconstruction contracts, buying materials, supervising the projects, etc.) and in each stagecustomers may buy different services from different firms (administrative services fromVFCFI and technical services form construction firms) And the consulting fee will becollected after every stage, the VFCFI can not offer a package fee

If the VFCFIs do not renew and provide package service, it will not be able tocompete with foreign consulting firms coming to Vietnam

Promotion

Promotion of a VFCFI simply is advertising sometime in a few local businessnewspapers Even their major customers are foreign investors, it is hardly to find ads of aVFCFI in the popular foreign journals or newspapers like Newsweek, Asianweek whichmany foreign investors in Asia usually read The client conferences have been organized insome firms such as VIETCOCHAMBER, INVESTIP, INVESTCONSULT, however, they arenot as frequently as clients expected

The other aspects of promotion like public relation, operating personnel, mouth, communication with employees are neglected in the VFCFIs

Table 4.4: Failures in the VFCFIs and the Relevance of Marketing

1 No segmentation Marketing provides the means of

segmenting the market and choosingthe target group of customers

2 Simple consulting services No

package services

Marketing helps to create and providenecessary consulting services to righttarget market

3 Poor consideration of the

consequences of promotion

Marketing encourages and plans topromote consulting activities of theVFCFIs

4 No pricing policy accept cost

orientation

Marketing designs flexible pricing policy

in order to improve and elevate theconsulting services

5 Lack of marketing skills (negotiation,

bidding, etc.)

Marketing programs train consultantsand improve their marketing skills

Marketing is an useful tool to run business successfully that the VFCFIs are missing.This means the failures in the VFCFIs can be eliminated by effective marketing strategies,programs and techniques Moreover, effective marketing strategies is prerequisite for thedevelopment of the VFCFIs Chapter 5 is going to design such marketing strategies.

Chapter 5

An approach to effective marketing strategies

The scheme to develop marketing strategies has been described in Chapter 3 (SeeFigure 3.2) Following this scheme, Chapter 5 is going to analyze business environment,internal environment and missions of the VFCFIs, then arrange the marketing strategiesalong with marketing programs, techniques and skills for INVESTIP, company at themedium size of the sample The justification of the marketing strategies for big size andsmall size consulting firms will also be discussed at the end of this chapter

Vietnam can offer the following advantages:

· Abundant mineral and natural resources

· Active government encouragement of foreign investment

· Cheap labor and a literate workforce

· Potential for tourism (long beach, many landscapes, etc.)

· Potentially important market with more than 70 million consumers

· Once an adequate legal and infrastructural framework has been created, Vietnammay well have similar growth to that enjoyed by interalia Thailand and China overrecent years

· The country's location in the fast-growing Asia-Pacific region

Potential investors need to be aware of the following difficulties:

· A shortage of hard currency

· A weak local currency and high inflation, although both of these were comparativelystable in 1992 and continue to be stable in 1993

· Poor infrastructure There are severe problems with roads and the railway system,port facilities, bridges, water and electricity supply, sewage and drainage Officialstatistics are not always consistent Communications and the banking system alsoneed development, but some progress has been made in these areas

· Bureaucracy and corruption

· A lack of experience in business, accounting and taxation concepts Contracts arenot always treated with respect and are difficult to enforce

· Legal uncertainties due to the lack of a system to resolve civil and contractualdisputes and the authorities' occasional unfamiliar with laws

· Obtaining third-party finance for projects is extremely difficult The prime reason forthis is the difficulty in getting security for loans in the absence of a land title system.

Consultancy

Consultancy is an young industry in Vietnam It is growing with the development ofthe whole economy while the service sector has been improving and developing And asmore and more foreign investors are coming to Vietnam, they would require moreconsulting services

Customers Customers of a Vietnamese Firm Consulting Foreign Investors are

foreign investors in Vietnam and Vietnamese companies, especially who would be partners

of the foreign investors Foreign investors need the information about the Vietnamesemarket usually both secondary and primary market data They expect of course high qualityconsulting services from VFCFIs as they are used from the consulting firms in the region(HongKong, Singapore, Bangkok, etc.)

Competitors Competitors of a VFCFI are other VFCFIs, are foreign consulting firms

operating in Vietnam as well as foreign consulting firms locating abroad (Bangkok,Singapore, Hongkong, Australia, the USA, etc.) The competition, therefore is severe Thenumber of VFCFIs seems to increase more rapidly than the volume of foreign investors.Besides, there are a lot of consulting firms operating without licenses from SCCI, includingsome foreign companies In general, the quality of consulting service is not high sinceVFCFIs lack qualified manpower and expertise as well as effective marketing planning.VFCFIs can not compete with the foreign consulting firms in term of service quality, and willnot be able to do so unless they change their attitude toward the necessity of using somemarketing techniques

Labor Vietnamese are not as experienced and well-trained as foreigners in the

same field They are now learning more English and computer, however, this is not enoughfor a person in the moving market of Vietnam today Hence, the VFCFIs are still short ofskilled staff and senior consultants

Suppliers In the VFCFIs' environment we find different organizations from

government to local organizations, from state-owned to private firms, from one industry toanother industry, etc These organizations can provide VFCFI with secondary data, up-dated regulations, or services like computer service, etc Therefore, keeping the relationshipbetween VFCFIs and these organizations are essential to every VFCFIs

As mentioned earlier in Chapter 1, the major customers of VFCFIs are foreigninvestors in the tourism and construction industries Consequently, the development of thetourism and construction industries influence constantly on the VFCFIs

Tourism

According to ThoiDai (Vietnamese newspaper) dated January 20,1995, the signals

of Vietnam tourism development are:

· Foreign tourist coming to Vietnam : 1 Million increase 330,000 in comparison with

1993

· Establish a PATA (Pacific Tourist Association) branch in Vietnam

· Signed 7 agreements at the National Level concerning Tourism Cooperation withLao, Thailand, Malaysia, China, the Philippines, Myanmar and Singapore andsigned a minute of the tourism cooperation with Indonesia

· The General Department of Tourism attended the Economic CooperationConference including six countries: Cambodia, Lao, Vietnam, Myanmar, Thailand,China in April 1994 The issues on cooperation and development tourism werediscussed in the conference

· Two 4 stars hotels have opened in HoChiMinh City: NEWWORLD Saigon - 543rooms and OMNI Saigon - 250 rooms

· From 1988 to the end of 1994, there are 129 projects within tourism industry (117Joint Venture projects, 5 projects with 100% foreign capital, 7 agreements oneconomic cooperation) have been given licenses The projects in operationoccupied 30% of total projects

· Total investment capital: 2 billions USD Legal Capital: 1,500 Millions USD

The development of the tourism industry will attract more foreign investors to invest

in this industry The expansion of the tourism industry links closely with constructionindustry because hotels, entertainment centers, transportation network, etc are the results

of the construction process

Construction

The construction industry in Vietnam suffered great damages during the long war forindependence After the war, the Vietnamese economy in general and the constructionindustry in particular have faced many difficulties However, in the last few years somechanges have been noticeable due to the renovation policy of the government The number

of foreign investment projects in construction are increasing significantly (See Appendix 5)

The changes in the Vietnamese construction industry are visible by the development

of its physical infrastructure (housing, roads, ports are improved) Yet, there are a lot ofproblems are facing by this industry as follows:

· Lack of management knowledge and experience

· Shortage of technical staff and workers

· Shortage of modern construction machines

· Vietnam can not produce high quality building materials Thus, high quality materialsmust be imported and it makes the construction cost high

· Poor reputation in bidding contracts

It is hopeful that in the near future, the construction industry will grow quickly andbecome more attractive to foreign investors At present, there are some constraints in theLand Law (the land belongs to government, foreigners are not allowed to buy land), leasingland price is high in comparison with other countries in the region Normally, expenses forbuy or lease land occupies a major part of a construction project Expensive land andunskilled labor may make investor hesitate to invest in Vietnam

Managers of VFCFIs should clarify the inter-relationship between tourism,construction and consultantcy in order to arrange suitable services for investors in theseindustries

From the external analysis (general and operating environment), Table 5.1summarizes the opportunities and threats of the VFCFIs