proposal solutions to enhance market share of nissan grand livina in vietnam’s auto market

The research aim to: - Study and analyze external factors, attractiveness of Vietnam’s auto market, customers’ needs and buying behavior; focus to MPV segmentation - Determine advantages

DAO HOANG TRONG

PROPOSAL SOLUTIONS

TO ENHANCE MARKET SHARE OF NISSAN GRAND LIVINA

IN VIETNAM’S AUTO MARKET

MASTER PROJECT MASTER IN BUSINESS & MARKETING MANAGEMENT

Tutor’s Name: Dr TRINH THUY ANH

Ho Chi Minh City

(2012)

Management Program 5 of Solvay Business School and Open University of HCM City

kind advices, valuable guidance and comments for my project

I wish also to say thank you very much Mr Nguyen Huu Nhan _ Director of Nissan Mien Tay for his advices and valid data to study Vietnam auto market

I wish to express my great appreciation to my colleagues, friends and managers of car dealers who spent time to help me complete interviews and questionnaires

Thanks my classmates in MBMM5 for useful recommendations

I would like to say special thanks and best wish to Master in Business and Marketing Management Program of Solvay Business School and Open University

of HCM City

Finally, I thank my family for assisting me in during my research

Executive Summary

1.1 Rationale of project 2

1.2 Objectives of project 3

1.3 Scope of project 3

1.4 Research methods 4

1.5 Project Structure 4

II PROBLEM AND SITUATION ANALYSIS 2.1 Problem Statement 5

2.2 External analysis 6

2.2.1 Macro environment _PESTEL Analysis 6

2.2.2 Vietnam’s Auto market analysis 9

2.2.3 Segmentation 13

2.2.4 Competition 14

2.2.5 Customer Assessments 16

2.3 Internal Analysis 19

2.3.1 Nissan Overview 19

2.3.2 Product analysis 20

2.3.3 Pricing 21

2.3.4 Targeting & positioning 23

2.3.5 Distribution & Services System 23

2.3.6 Communication 23

2.4 SWOT 24

2.5 Conclusions 25

3.3 Re-targeting 27

3.4 Pricing 27

3.5 Action Plan 28

IV CONCLUSIONS 28

V REFERENCES & APPENDIX

AFTA : ASEAN Free Trade Area

CBU : Complete Build Up

CKD : Complete Knock-down

EBD : Electronic Braking Distribution

FAB : Feature – Attribute - Benefit

GSO : General Statistics Office

MPV : Multi-purpose Vehicle

NGL : Nissan Grand Livina

SUV : Sport-Utility Vehicle

VAMA : Vietnam Automobile Manufacture’s Association WTO : World Trade Organization

Chart 2: Market share of passenger car in 2011 12

Chart 3: Segmentation of Vietnam’s Auto market 13

Chart 4: Market share of multi-purpose vehicle segment 14

Chart 5: Competitors analysis 15

Chart 6: Survey result of factors influenced on consumers’ buying behavior 18

Chart 7: Sales volume of multi-purpose vehicle in 2011 21

Chart 8: Nissan Grand Livina Price & Sales Positioning Map 22

Chart 9: Willing to pay measurement 22

Executive Summary

With the advantage of a stable political environment, Vietnam’s economic is developing strongly Growth of GDP is increasing readily in recent years, average 6.78% for 2010-2011 As forecasting of analysts, annual GDP growth accelerate to

an average 7.2% from 2012-2014 Development of economic make high demands

of products; among that demand of using cars is increasing quickly Most of automakers penetrate and invest to Vietnam and get big success In spite of being a renowned car maker and joining Vietnam’ market two years ago, Nissan do not get the market share yet that commensurate with their brand, just about 2% in very attractive and high potential market

Observing and recognizing this problem, the writer wants to apply knowledge

in marketing to study Vietnam’s auto market to find out causes of problem and propose solutions to improve shares of Nissan Vietnam The project just focuses to share of Nissan Grand Livina, which is the first vehicle model, is being assembled

in local as CKD type

To understand market, firstly the exploratory research is implemented by face

to face interview with professional salespersons, managers of car dealers in HoChiMinh city included Toyota Ben Thanh, Mitsubishi Isamco, An Thai Joinstock, SaigonFord and Nissan Mien Tay Secondly, data of market were collected from various secondary sources The survey had also been done with 100 end users to understand consumer’s behaviors, purchasing decision process

After studying and analyzing, root causes of the problem were identified Basing on literature review and collected data, the writer can suggest improvement steps to solve problem and increase shares

Finally, the writer would like to propose solutions for managers of Nissan Mien Tay who supports to study Vietnam’s auto market, especially multi-purpose vehicle segment

I INTRODUCTION

"The marketing concept is the philosophy that firms should analyze the needs

of their customers and then make decisions to satisfy those needs, better than the

competition " (Source: http://www.netmba.com/marketing) For any enterprises,

customers are who decide survival and development in business It is very important

to satisfy customers in all business activities of enterprises if enterprises want to get profit and grow They have to study their customer needs, behaviors,… and then making adequate business strategies to satisfy all customer’s requirements No one can negate the critical roles of marketing in modern business environment Marketing becomes more essential today because of fast development of hi-technology, globalization, continuously changing of world, more fierce competition, therefore, absolutely all companies/organizations have to recognize great important

of marketing and have to build up strategies carefully if they want to get advantages

in competition with others and control the market share

In automotive industry, not only is one of three best manufacturers of Japan but also is one of top ten motor manufactures on the world, Nissan is a well-known motor brand providing best passenger cars in many countries Since December

2008, Nissan has penetrated Vietnam market as an importer and they distribute Nissan’s products and spare parts, Nissan set up factory and dealer system in Vietnam in 2010 Although Nissan brand is famous, the first model that was launched in Vietnam is Nissan Grand Livina, this model does not meet consumers’ expectation yet, so that market share of this car is small

What is the reason of problem and why? Can we apply marketing to find out causes of problem and solutions?

Because of these above reasons, I choose the project “Proposal solutions to enhance market share of Nissan Grand Livina in Vietnam’s auto market”; through this project, I have condition to review knowledge studied in Master in Business &

Marketing Management Program of Solvay Economic School, I try to apply the knowledge scientifically to study market, analyze causes and problems of Nissan Grand Livina in Vietnam and then proposing solutions to increase market share of this product

I hope that my research will contribute added value for Nissan Mien Tay that

is a new dealer in Ho Chi Minh City to improve marketing and business activities to meet needs of consumers

The research aim to:

- Study and analyze external factors, attractiveness of Vietnam’s auto market, customers’ needs and buying behavior; focus to MPV segmentation

- Determine advantages and dis-advantages of Nissan Grand Livina and strategy of Nissan Vietnam for this vehicle

- Identify root causes of small share of Nissan Grand Livina in Vietnam

- Give proposal solutions to increase sales volume in three next years

Due to limitation about the geography and time, the research just only is implemented:

- On market share of multi-purpose vehicle segment

- Observation & face to face interview in HoChiMinh City (~70%)

- Online, telephone survey in Binh Duong City and Hanoi Capital of Vietnam (~30%)

1.4 RESEACH METHODS

The research method follows the process as following:

Identify research

objective & problem

-Objective: Review and apply marketing theory to study market

-Why is the market share of Nissan Grand Livina small?

Literature Review

-Review marketing knowledge

o Strategic Marketing Management_Jean Baeyens

o Market Research _Jean Tondeur

o Business & Marketing Planning _ Olivier Kupferman

o Marketing Management, Millenium Edition 2001_Philip Kotler

External & Internal

Analysis

-Primary research

o Face to face interview with 5 sales managers

of car dealers of Toyota, Ford, Mitsubishi, General Motor and Nissan in HoChiMinh City

o Survey on 100 persons who are using MPV

or looking for a new MPV

-Secondary research: Data were collected various sources such as VAMA, Vietnam Register, Nissan reports, internet, magazine,…

-Analysis researched data and present results

Recommendations --Innovate product and adjust strategy Operational actions plan

The project consists of 5 parts:

- Part 1 : Introduction of project

- Part 2 : Problem statement and situation analysis

- Part 3 : Recommendation

- Part 4 : Conclusions

- Part 5 : References & Appendix

II PROBLEM STATEMENT & SITUATION ANALYSIS

To develop automotive industry of countries, it is very important to choose the key vehicle for long term development strategic For example, pick-up truck has been chosen as a key vehicle in the development strategy of Thailand automotive industry and then Thailand has already become second largest pick-up truck market

on the world and ASEAN's largest automotive market (Source:

http://www.business-in-asia.com) In Vietnam, although there are many

recommendations of specialists that the government should choose multi-purpose vehicle as a strategic vehicle, government has still not chosen a kind of key vehicle

to build up the long term development strategies for local automotive industry yet Actually MPV has became to the favorite vehicle for most of peoples and families

in Vietnam because of the convenience and suitable for many using purposes The demand to use a MPV for business and family is increasing continuously Most of auto makers in Vietnam have recognized this and focused to increasing in production of MPV in order to meet demand of Vietnamese consumers, for instant Toyota Vietnam introduces Zace, Innova; Mitsubishi produces Jolie, Zinger, Grandis; General Motor Vietnam has Vivant; Ford Vietnam has Ford Everest; Kia has Carens, Canival and a lot of import vehicle models

Market is attractive and potential for auto makers, especially for Japanese makers because of preferred of Vietnamese with Japanese products However, some

of them do not get share that adequate with their reputation and resource, Nissan Vietnam is a typical example As a famous Japanese auto maker, Nissan choose Grand Livina to introduce to Vietnamese consumers Launching in April 2010, Nissan Vietnam expects sales to total 2000 units in the first year, however, the actual sales volume just only 433 units in first year, achieved 21,6% of target Although, accumulative sales increase positively in 2011; market share is still so

small at 1.4% (Source: Nissan Vietnam)

Even that penetrating Vietnam market, that is the developing market, later than the others, they hoped that they can have good business because of good brand, but the results of the first year do not commensurate with their image The research will present overview of market, opportunities and challenges for Nissan Grand Livina to find out preferences as well as how long Nissan would take to familiarize themselves with Vietnamese and then increasing market share

2.2.1 Macro environment (PESTEL Analysis)

Factors of macro environment always effect greatly on decisions of the board

of management of companies such as tax changes, trade barriers, and government policy changes,…Therefore, analyzing and understanding these factors clearly will support to make right decision in business for managers The PESTEL model is applied to analyze Vietnam’s macro environment and its effects on auto market

- Political factors:

o First is tax policies, there are many kind of tax effect on car purchasing

in Vietnam such as import tax, special consumption tax, registration tax These taxes make high selling price of car; currently, price of car in Vietnam is one of highest price on the world Tax policies for auto market are changed continuously For instant, since 2011, decree no 45/2011/NĐ-CP of government effect on 1 Sep 2011, increased vehicle registration tax up to 20% car price Briefly, tax is one of tools that government is using to control auto market and then these policies effect strongly on purchasing a vehicle of consumers

o Second is gasoline price, consumers always mentions about fuel prices because if this price increase then price of other product increase also For car consumers, gasoline price is an important element affect on their purchasing decision At present, domestic price is high at

20,800VNĐ despite world price tends decrease (Source: http//www

petrolimex.com.vn)

o Other political factors of government also effects on this market, for instant trade balance, CPI, FDI As collected information, government tries to control trade deficit; current trade balance is as follow: Export increase 35.4% ~ 70Bl US, import increase 26.9% ~ 76.9 bil US The government also makes effect to control the CPI In 2010, CPI is 9.19% but 9 months 2011 is 18.16% and forecast 2011 is 22% FDI of 9 months 2011 reached 9.9 bil USD, increased 1.1% compared last year The changing of these factors will impact strongly on consuming behaviors and purchasing decision of consumers also

- Economic factors:

o In 2010, GDP of Vietnam is at 6.78% exceeding target of 6.5%; 9 months of 2011, GDP reached 5.76%, target at 7 – 7.5% Increasing of GDP affected on purchasing power, shopping needs changes positively However, Vietnam is facing with high inflation, this rate increase up to 17.5 %; forecast 2011 up to 18.8% The devaluation of Vietnam Dong

is more seriously and high raising costs impact on consuming of people Another thing, bank interest rate is high at 19% - 24%., this factor effect

on car purchase decision because most of people like buy a car through the bank Exchange rate factor strongly influence on price of car, USD price index increased continuously as the state bank stated

o Recently, gold market have strong fluctuation, gold price is changing sharply; people pay more attention in investing gold instead of consuming In addition, Vietnam stock exchanges critical bleak due to tough economic context This situation makes decrease of customer of auto market seriously

o In summary, there are both positive and negative factors but all of these factors affected on Vietnam market clearly

- Social:

o Vietnam population is young, about 87 mil, among that under 20 years old is 39%; 20~29 is 20%; 30~39 is 15%; 40~49 is 12% and over 50 is 14% The target customer for car business is about 18~40 years old, occupy more than 60% This is very large chance for investors In addition, the transportation habits of Vietnamese are private means because of asynchronous development of traffic and infrastructure

o Besides that, there are new trends and new demands currently; a lot of young people want to replace motorcycle by cars or using public transportation because they emphasis on safety or want to prove the success or show-off

- Technological: Changing of technological factors also effect on consuming

of Vietnamese such as fast development of automation or high technology Eco friendly technologies: saving energy, green environment,… are factors that contribute to changing purchasing behavior of customer

- Environmental: Awareness for environmental increase and government

appeal social responsibility

(Source: http://www.GSO.gov.vn)

Summary: As collected data, although there are many changes in all aspects

of political, economic, social and other factors; in general macro environment

have a positive effect to the automobile business, for instants:

o High GDP growth
Make positive effects on purchasing power

o Tax policies are being changed to protect consumers when buying car

o Positive trend in consuming car
more persons want to own a private

car

This environment makes a high potential and attractiveness of auto

market for automakers

2.2.2 Vietnam Auto Market analysis

a Economic overview: Viet Nam fully joined to AFTA in 1998 and WTO in

2007 (source: http://www.chinhphu.vn); investors look up Vietnam has high potential for further economic growth, average GDP from 2007 to 2011 is 6.5%

(Source: http://www.web.worldbank.org) Simplification in business registration

procedures, tax waivers and preferential loans has being encouraged private businesses to expand and attracting foreign investors The government continues to perfect its legal system, created more incentive policies for foreign investors and fulfill its commitments to the international community However, Vietnam is also impacted of global economic crisis; the economy is in tough period, government has

to tighten monetary policies, lending and VND-USD exchange rates It’s high pressure pushing on the local auto market

the speed of the fastest urbanization in Southeast Asia In 1986, the percentage

of population living in urban areas in Vietnam is 19% (approximately 11.8 million people) in 2010 has increased to 30.5% (approximately 26.3 million people) Urbanization of outskirts of HoChiMinh City and Hanoi is accelerating strongly through the development of road systems, buildings and infrastructure In addition, for economic of a country, automotive is one of most important industries because this industry makes high revenue and meets transportation demands for social Recognizing this, in decision No.55/2007/QD-TTg of Prime Minister, Vietnam’s government determined special roles of automotive industry in economic development strategy of national and created good conditions for all local, foreign

investors to build and develop automotive field in Vietnam (Source: Vietnam

Economic Forum)

vehicles which are licensed at the end of 2010 Accumulate of sales volume in 9

months of 2011 is 80,681 units, increase > 10% compared same period last year,

among that 54% is passenger cars (Source: Vietnam Register, VAMA) Despite

government issues some policies aiming to control too fast growth of private vehicles in order to appropriate with growth of transport infrastructure, number of cars are still being increased continuously However, comparing with some country

in South East Asia such as Thailand or Indonesia, market size of Vietnam remains small with around 150,000 car units per year

Source: VAMA

As graph, trend of auto market in Vietnam is increasing yearly The average growth is at 26% per year Comparing with China and Thailand that are largest auto markets in Asia, the developing speed of Vietnam’s auto market make deeply impression for investors The average growth of Thailand’s auto market is at 12% in

recent year and at 25% for China’s market (Source:

http://www.business-in-asia.com)

Vietnam has a population of about 87 million peoples, the rate

of car ownership is low at present (15vehicles/1.000 peoples), comparing with other

8,82012,942

17,923

31,577 19,319

27,366 25,300 40,115 49,356 62,723 57,779

0 10,000

market on the world, Vietnam is not big market but full of potential and very active With the differentiate advantages, Vietnam has been attracted investors in local, oversea to joining and playing in auto market

e Rivalry & attractiveness of market: Basing on Porter’s Five Force to analyze

- Power of suppliers: Power from suppliers to Nissan Vietnam is low because

main components that are assembled into Nissan Grand Livina are provided by suppliers which are controlled by Nissan Global, it’s not easy for Nissan Vietnam and supplier to switch Therefore these suppliers cannot make high pressure on Nissan Vietnam except increasing price of material

- Threats of potential entrants: Not only enterprises of Vietnam but also

enterprises on other countries stand high pressure of China’s enterprises, this is big threats and rising because of their strong development and flexible price China’s auto makers bring to market products with flexible price to attract customers

Power of suppliers: Low

- Switching to another supplier is

difficult and/or expensive

- Increasing price of materials

Threats of potential entrants:

Rising

- Pressure from others makers, especially China’s auto makers with diversify models and

cheap prices

- Pressure from grey market, importers

Threats of substitutes: Rising

- Public transportation means

because of imbalance between

private means and growth of

transportation infrastructure

Power of customers: High

- Have enough powerful in dealingbecause of having selection from

many brand

- Price sensitivityQuality and services

Rivalry exiting competitors: High

- Fierce between many competitors with high

energy (Toyota, Kia, …)

- Diversify products of competitors

- Power of customers

Vietnam market so that there are many choice for customer

on car sellers about the price, quality and services

makers is not so high The important is cooperation between makers

serve customers; high power of customer effect on both makers & dealers

- Threats of substitutes

government for public transportatio

use public mean and

Nissan Vietnam as well

- Rivalry exiting competitors

Nissan in Vietnam’s auto market is very high with many big brand like Toyota, General Motor, Mitsubishi, Ford,… and fierce completion of importers in grey market

In passenger car market,

the new power in spite of just joining recently It is

Nissan do not adequate wi

Summary: Even

fierce rivalry of existing competitors, high pressure from new entrants,

government policies,… but the attractiveness

Power of customers: It is high because of there are many car brands in

Vietnam market so that there are many choice for customers, this make high power

on car sellers about the price, quality and services The pressure from dealers to

not so high The important is cooperation between makers

serve customers; high power of customer effect on both makers & dealers

Threats of substitutes: This threat is rising strongly because priority of

ic transportation is increasing; low costs encourage people to use public mean and limit to use private means This is threat for car sellers like

as well

Rivalry exiting competitors: The pressures from directly competitors for

Nissan in Vietnam’s auto market is very high with many big brand like Toyota,

, Mitsubishi, Ford,… and fierce completion of importers in grey

he market share of passenger cars in 2011 as follow

In passenger car market, Toyota Vietnam is always a leader

e of just joining recently It is very clear that market share of adequate with their brand name, just at 2.2%

Even though there are a lot of challenges from market such as fierce rivalry of existing competitors, high pressure from new entrants,

policies,… but the attractiveness and high growth of market create big

ecause of there are many car brands in

, this make high power The pressure from dealers to not so high The important is cooperation between makers and dealers to serve customers; high power of customer effect on both makers & dealers

: This threat is rising strongly because priority of

low costs encourage people to This is threat for car sellers like

: The pressures from directly competitors for Nissan in Vietnam’s auto market is very high with many big brand like Toyota,

, Mitsubishi, Ford,… and fierce completion of importers in grey

opportunities for auto makers like Nissan who has good reputation in manufacturing car

A survey about attitude of Vietnamese to car brands was done including brands of Japan, Korea, China, United State and the results showed that brands of Japan are preferred by Vietnam’s users with more than 90% agreed

Therefore, Nissan has good chance to approach Vietnamese consumer

2.2.3 Segmentation

As Philip Kotler, marketers start with market segmentation to identify and

profile distinct groups of buyers who might prefer or require varying products and

marketing mixes (Source: Marketing Management, Millenium Edition 2001_Philip

Kotler) Companies analyze and choose a segment to allocate recourses and

prioritize investment; if having good segmentation analysis, companies are able to use cost efficiency and build competitive strategies For automotive, normally base

on characteristics of vehicles, segment of vehicle is defined as sedan, multi-purpose vehicle (MPV), sport-utility vehicle (SUV), pick-up, (Source: http://autovina.vn)

The segmentation of Vietnam’s auto market is displayed below

Source: VAMA

The above data show that beside sedan segment which is various types such as mini-car, small car, medium car,… is biggest segment; the increasing of MPV

0 10,000

SUV segment Minibus segment

Pick-up segment

segment higher than remain

approach this customer segment will be high appreciated about effect of investment and save cost This segment is potential and also has

competition

2.2.4 Competition

At current situation, t

other in Vietnam’s auto market

manufacturers which do not join to VAMA

increasing extremely

ASEAN’s tax reduction trajectory

survive tough conditions a

market

Actually, most of players

segment since 2003; right after penetrated Vietnam market, they invest to assemble multi-purpose vehicle

assemble Jolie, Zinger

Similarly other maker

beginning time to approach this market

The market share

At current situation, there are a lot of players who are competing

auto market consisting of VAMA’s memberwhich do not join to VAMA and importers Therefore, competition is

fierce Market competition will be even fiercer driven by ASEAN’s tax reduction trajectory It would be inevitable that some firms could not survive tough conditions and go dismantled while some others jump into the

ost of players have been interested in multiright after penetrated Vietnam market, they invest to assemble purpose vehicle, for example Toyota assemble Zace,

Zinger… importers also look for MPV models to bring to Vietnam Similarly other makers, Nissan introduced Nissan Grand Liniva

beginning time to approach this market in 2010

The market share of MPV segment as follow

, so that selecting this segment to invest and approach this customer segment will be high appreciated about effect of investment

a lot of challenges,

who are competing against each consisting of VAMA’s members, other local

Therefore, competition is Market competition will be even fiercer driven by

would be inevitable that some firms could not

nd go dismantled while some others jump into the

in multi-purpose vehicle right after penetrated Vietnam market, they invest to assemble

Innova; Mitsubishi

… importers also look for MPV models to bring to Vietnam

Grand Liniva as a MPV at the

Source: VAMA