ECON 1194 Prices and Markets - RMIT Vietnam

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RMIT International University VietnamBachelor of Business ProgramAssignment Cover PageSubject Code:ECON 1194Subject Name:Prices and MarketsLocation & Campus (SGS or HN):RMIT Vietnam SGSTitle of Assignment:Assignment3Student Name:Dang Hong Thu ThaoStudent NumberLS3778772Lecturer:Tam LeAssignment due date:September 8th, 2019Number of pages including thisone:14Word Count:2200(exclusive of the reference list)Question 1:According to RMIT materials, a monopoly is considered as the only firm that is grantedpermission from the governments to provide products or services for people and hence, theirproducts or services become unique. Moreover, a firm can be seen as a monopoly when othercompetitors are incapable of entering the market due to some restriction and these restrictionare known as “barriers to entry" to access the market and compete with an existing firm (TBeveridge, 2011). In addition, there is one statement that Vinamilk is one of the monopoliesin the milk market in Vietnam, and 3 main points below will determine whether thisstatement is right or wrong.1
Vinamilk was founded in 1976 and it is a Vietnam Dairy Products Joint Stock Company.Nowadays, Vinamilk is the leader in the nutrition group in Vietnam achieving more than 1billion USD in the revenue (Vinamilk 2016).1.Concentration:Despite the fact that Vinamilk is the leader in the milk market share in Vietnam, it stillhas to compete with many competitors in the same field such as TH True Milk, NutiFood,Friesland Campina, etc. Despite the fact that Vinamilk can be considered as the top milkbrand in Vietnam, it only holds a 55% market share in Vietnam (Vietnambiz 2019).Inparticular, for liquid milk, Vinamilk remains to be a leader with 54,5% (Quynh Nhu2019), but Vinamilk still has to encounter some well - known brands TH Milk, Nestle,IDP and Moc Chau (Anh, H. 2019).A monopolist occupies 80% of market share,meanwhile Vinamilk just holds 55% market share. For this reason, Vinamilk can’t be amonopoly in diary market.Moreover, toevaluate the position of Vinamilk being seen as “monopolist" in the diarymarket, product differentiation such as packaging design and branding activities shouldbe considered.2.Product differentiation:Packaging design:It is clear that packaging design plays an important role in recognizing brands andattracting customers to pay for products (Keller 2009). Therefore, each milk firm has ownspecific design and Vinamilk has also built its brand image by utilizing the image ofhealthy cows are grazing in the green field that no other milk brands have. Besides, 2lines above and below of the logo represent 2 drops of milk. Hence, the integrationbetween unique logos and interesting illustrations as well as an informative manifestationbrings friendliness and closeness to both children and adults that help Vinamilk prove itsposition in the market (IBN 2017).2
Figure 1: Adapted from Hoa Nhap.Marketingstrategies and branding activities:According to the Vietnam Investment Review, Vinamilk is ranked in the 1st place at thetop of domestic milk companies in image promotion cost. Especially, Vinamilk spentVND 4.557 trillion (equivalent to 82%) for advertising, promotion activities and marketsurvey (Vui, 2019). Vinamilk is considered to be very successful in terms of digitalmarketing, by creating videos following with new trendsand teaching how to cook withVinamilk products to easily approach to Vietnamese mothers and some series for childrenVinamilk succeeds not only in marketing field but also in branding activities, speciallyare community activities. In particular, Vinamilk has been a pioneer in implementingprogram called “Milk School" since 2007.Furthermore, Vinamilk is also renowned for “1million trees fund for Vietnam" that has brought 680.000 diversified trees for 22Vietnam's provinces (Vy, 2019). Hence, in marketing plans as well as branding activitiesperspective, Vinamilk has defeated the rivals in the same industry.3.Barriersto entry:Furthermore, to assess how far a business can be seen as a monopolist, emphasizing onthe level of “barriers to entry” is indispensable.And those barriersconsist of thegovernment regulation, start-up costs, the economies of scales and technological payment(Aeron Hill 2018).Apart from the quality of milk, nowadays, the diary market requires firms to have apotential finance (Doanh Nhan 2017).Due to the fact that diary products are nutritional3
products in which its components are complicated, requiring high - qualifiedtechnologies. Additionally, brandingactivitiesalso playsan important role and itdemands firms to have financial resources (BrandsVietnam,2018).Therefore,capitalinvestment is always seen as barriers for new businesses to enter diary market. On theother hand, on August 12th 2010, the Ministry of Finance issued Circula 122/2010/TC -BTC on registration and price regulation which means that the retailers, producers ordistributors have to register the price when the products are first released in the market orwhen the price changes. However, these registration costs that both new firms andexisting firms have to bare are quite high.For the economies of scales’ side, because of the large amount of input production ofVinamilk such as the purchase of large quantities of milk from farmers has shown that themore proactive it is to import raw materials, the greater the Vinamilk's products and itleads to an increase in the total revenue of Vinamilk (Thi, 2018). Moreover, becauseVinamilk has large production scale, so it has a large amount of labour and they aredivided into different departments, they have different tasks to specialize, hence thislabour specialization leads to the labour productivity and effective contributions forVinamilk based on the annual report in 2018 of Vinamilk.On the other hand,for the technology advance,Vinamilk also invests the mostmoderntechnologies to increase manufacturing capacity. By adopting this technology, it increasesthe capacity from 400 to 800 million litre per year. In addition, 2 more machinesproducing yogurt which are considered the most state-of-the-art and largest capacity inthe world produce 80,000 bottles for 1 hour per machine (Vinamilk 2018). Therefore, itcan be concluded that these machines not only help Vinamilk less relies on the labour butalso enhance the productivity of their production.In conclusion, the barriers for newfirms to enter the milk market is high.To conclude, despite the fact that Vinamilk is not a monopoly, it still has high degreeof product differentiation and the barriers to entry is also high. Therefore,the positionthatseen as “monopolist" in the diary marketof Vinamilk is not low.Question 2:4
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