ECON 1194 Prices and Markets - RMIT Vietnam
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Added on 2020-11-30
ECON 1194 Prices and Markets - RMIT Vietnam
Added on 2020-11-30
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RMIT International University VietnamBachelor of Business Program Assignment Cover Page Subject Code:ECON 1194Subject Name:Prices and MarketsLocation & Campus (SGS or HN):RMIT Vietnam SGSTitle of Assignment:Assignment 3Student 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 granted permission from the governments to provide products or services for people and hence, their products or services become unique. Moreover, a firm can be seen as a monopoly when other competitors are incapable of entering the market due to some restriction and these restriction are known as “barriers to entry" to access the market and compete with an existing firm (T Beveridge, 2011). In addition, there is one statement that Vinamilk is one of the monopolies in the milk market in Vietnam, and 3 main points below will determine whether this statement 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 1 billion USD in the revenue (Vinamilk 2016).1.Concentration:Despite the fact that Vinamilk is the leader in the milk market share in Vietnam, it still has 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 milk brand in Vietnam, it only holds a 55% market share in Vietnam (Vietnambiz 2019). In particular, for liquid milk, Vinamilk remains to be a leader with 54,5% (Quynh Nhu 2019), 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 a monopoly in diary market.Moreover, to evaluate the position of Vinamilk being seen as “monopolist" in the diary market, product differentiation such as packaging design and branding activities should be considered.2.Product differentiation:Packaging design:It is clear that packaging design plays an important role in recognizing brands and attracting 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 of healthy cows are grazing in the green field that no other milk brands have. Besides, 2 lines above and below of the logo represent 2 drops of milk. Hence, the integration between unique logos and interesting illustrations as well as an informative manifestation brings friendliness and closeness to both children and adults that help Vinamilk prove its position in the market (IBN 2017). 2
Figure 1: Adapted from Hoa Nhap.Marketing strategies and branding activities:According to the Vietnam Investment Review, Vinamilk is ranked in the 1st place at the top of domestic milk companies in image promotion cost. Especially, Vinamilk spent VND 4.557 trillion (equivalent to 82%) for advertising, promotion activities and market survey (Vui, 2019). Vinamilk is considered to be very successful in terms of digital marketing, by creating videos following with new trends and teaching how to cook with Vinamilk products to easily approach to Vietnamese mothers and some series for childrenVinamilk succeeds not only in marketing field but also in branding activities, specially are community activities. In particular, Vinamilk has been a pioneer in implementing program called “Milk School" since 2007. Furthermore, Vinamilk is also renowned for “1million trees fund for Vietnam" that has brought 680.000 diversified trees for 22 Vietnam's provinces (Vy, 2019). Hence, in marketing plans as well as branding activities perspective, Vinamilk has defeated the rivals in the same industry.3.Barriers to entry:Furthermore, to assess how far a business can be seen as a monopolist, emphasizing on the level of “barriers to entry” is indispensable. And those barriersconsist of the government 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 a potential finance (Doanh Nhan 2017). Due to the fact that diary products are nutritional 3
products in which its components are complicated, requiring high - qualified technologies. Additionally, branding activities also plays an important role and it demands firms to have financial resources (BrandsVietnam, 2018).Therefore,capital investment is always seen as barriers for new businesses to enter diary market. On the other 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 or distributors have to register the price when the products are first released in the market or when the price changes. However, these registration costs that both new firms and existing firms have to bare are quite high. For the economies of scales’ side, because of the large amount of input production of Vinamilk 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 it leads to an increase in the total revenue of Vinamilk (Thi, 2018). Moreover, because Vinamilk has large production scale, so it has a large amount of labour and they are divided into different departments, they have different tasks to specialize, hence this labour specialization leads to the labour productivity and effective contributions for Vinamilk based on the annual report in 2018 of Vinamilk.On the other hand, for the technology advance, Vinamilk also invests the most modern technologies to increase manufacturing capacity. By adopting this technology, it increasesthe capacity from 400 to 800 million litre per year. In addition, 2 more machines producing yogurt which are considered the most state-of-the-art and largest capacity in the world produce 80,000 bottles for 1 hour per machine (Vinamilk 2018). Therefore, it can be concluded that these machines not only help Vinamilk less relies on the labour but also enhance the productivity of their production. In conclusion, the barriers for new firms to enter the milk market is high. To conclude, despite the fact that Vinamilk is not a monopoly, it still has high degree of product differentiation and the barriers to entry is also high. Therefore, the positionthatseen as “monopolist" in the diary market of Vinamilk is not low.Question 2:4
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