CHAPTER 3 ENVIRONMENT & MARKET ANALYSIS
3.4 SWOT & Porter analysis
SWOT Strength
- Get Advantage from Partner company Back Khoa company - Reliable local Mechanical &
Electrical Contractor in Vietnam - Good relationship with Contractors,
Consultants, Owners
- Finance guarantee from Back Khoa company & Credit line from Trane - Experienced Sale executive - Equipment stock
Weakness
- New organization - Capital
Opportunity
- Growing up market
- More investment from both local and FDI
- Trend of using official parts, equipment of Owners
Threat
- More competitors from local and foreign
- Fluctuation in foreign ex. rate - High interest rate of VND - Smuggle and Fake products
Base on SWOT analysis, we see that BKEA Company has credit line with Trane 200,000
USD with payment term two months so can stock common equipments in his warehouse;
this is one of his strong point. In additional, BKEA also have finance guarantee from Back Khoa Company for opening letter of credit with bank for big contract value. The bank only pledges 10% of contract value.
He will grant some accessories to support air conditioning system which enhance performance and durability of sold units such as filter driers, moisture indicators... Value added is our advantage in convince customer to sign contract with us. This is other his strong point.
His threat related to translation effect, He pays in USD and receive in VND, exchange rate this period is complicated fluctuation, the government would like to keep the exchange rate stable but there is huge shortage in currency and the big different between parallel market
& official rate. To carry out big contract, they have big risk in exchange rate. In additional, they also have loan from bank and interest rate based on market‘s need. Current rate is 18%/year. It’s fair high rate to company who get loan to do business. CEO have to be careful when he sign contract with big value to prevent risk in exchange rate.
Porter Analyses
a. Threat of new entrants
The threat of new entrants for air conditioner market is low because we only focus on B2B market, we have contract by relationship with customer, experience & reputation in the market.
b. Bargaining power of buyers - Buyer concentration
BKEA Company focuses on the Business to Business market; the products are mostly distributed direct to Back Khoa Company, contractors and Investor.
- Buyer volume
We expect sales turnover of 2010 is about 2 M USD & 2.6 M USD for the year 2011.
Based on market research by BRSIA and Bach Khoa sale volume, we think that our market growth rate for year 2010 about 15 – 20%, and it will increase 30% (including Hanoi
office) for the year 2011 on ward.
- Buyer profits
The air-conditioning market in Vietnam is growing, but with strong competition between distributors which creates the downward pressure on price of air-conditioners. This is really benefits for the buyer.
- Product differences and brand identity
Local brand name (Reetech, Nakagawa, Funiki ...) is cheaper than foreign brand name like Trane, Panasonic, LG, Daikin. Based on investor‘s fund and design, contractor will chose suitable brand name.
- Impact on quality/performance
The buyer has not much impact on quality, as the quality is standard as industry requirements, with the trend towards high technology products, with less energy consumption.
ợ Conclusion: The bargaining power of buyers is strong c. Bargaining power of suppliers
As a rule of game, we only supply Trane brand name for air-conditioning product. We can get best price from Trane however we have to follow up his policy. If he changes payment term and credit line, we are in passive status
ợ Conclusion: The bargaining power of suppliers is strong d. Threat of substitute products
It is fairly high because there are big four suppliers. Buyer will choose product based on their knowledge, investment fund.
e. Industry competitors Industry growth:
- The market share is big enough for all the existing players, as the rate of air conditioning systems in Vietnam remains relatively low compared to regional countries. There is not much official market research about Vietnam market at this moment.
Concentration and diversity from competitors
- There are many suppliers in the market. We just compare competitors with the same size – SME – we have about 50 companies. Our main competitors are less than 10. We classify
them based on brand name which they sell on the market Carrier
- Trung Quan Company Ltd - Dong A Company Ltd Daikin
- Viet Kim Joint Stock Company Trane
- Back Khoa Company Ltd - Hong Quang Company Ltd
- NPT Trading & Services Company Ltd Yorks
- Hung Tri Refrigeration Industry Joint Stock Company - Hong Phuc Company Ltd
- Following is Trane analyze about market share & size
Figure 3-6: Product market share
Applied (Chiller) Market Share Competitors
2007 2008 2009 AOP
Trane 35.0% 30.0% 35.0%
Carrier 40.0% 40.0% 40.0%
York 15.0% 15.0% 15.0%
Others 10.0% 15.0% 10.0%
Figure 3-7: Product market share Unitary Market Share Competitors
2007 2008 2009 AOP
Trane 6.0% 7.0% 8.0%
Carrier 15.0% 15.0% 15.0%
York 3.0% 4.0% 4.0%
Others 76.0% 74.0% 73.0%
Figure 3-8: Product market size
Market Size in M USD
2007 2008 2009 AOP
Applied (Chiller) 3.5 4 4.5
Unitary 13.5 15 18.0
Total Equipment 17.0 19 22.5
Exit barriers:
No barrier to exit the market, as the strong competition in this industry, there will be 100%
foreign company join market in near future.
ồ Conclusion: High degree of competition among existing players in the market.