International Business Report: Power Root Berhad's Vietnam Entry

This report critically analyzes Power Root Berhad's international marketing strategy, focusing on its potential entry into the Vietnam market. The company, a Malaysian organization dealing in herbal energy drinks, aims to expand internationally due to a saturated domestic market and decreasing sales growth. The analysis employs PESTLE and Porter's Five Forces models to assess the external environment, revealing opportunities and challenges in Vietnam. The recommended mode of entry is a joint venture to leverage local brand awareness and build customer trust. Key recommendations for gaining a competitive advantage include new product development, product differentiation, extensive promotional strategies, cost leadership, and quality management. The SWOT analysis identifies strengths like affordable pricing and healthy products, weaknesses like low brand awareness, opportunities in the growing Vietnamese market, and threats from competitors and substitutes.

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INTERNATIONAL BUSINESS
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2-17-2019

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Executive summary
The company selected for the assignment to critically analyze the aspects of international
marketing was Power Root Berhad. Power root Berhad is a Malaysian organization founded in
1999, dealing in an herbal energy drink. This is an international company dealing in various
regions like the Middle East, Korea, Indonesia, Singapore, China, Hong Kong, Taiwan, Japan,
and Thailand. Major reasons for going international for the company was saturated domestic
market, increased scope of the product worldwide, sales growth decreasing, and to gain
economies of scale. The company decided to enter Vietnam market for expanding business.
The business tools and frameworks applied in the report were PESTLE analysis, and porter’s
five force model for external environment analysis. After anylzing the inter and external
analysis, the most approachable mode of entry to Vietnam was joint venture, the reason being the
company do not have good brand awareness, due to which joint venture with a popular company
of Vietnam, that is already established would help the company to create brand awareness and
could be helpful in developing trust among the customers, as the goodwill of the joint venture
can be used.
Some of the major recommendation for the company to gain competitive advantage included
New product development, Product differentiation, Extensive promotional strategy, Cost
leadership, and Quality management

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Contents
Executive summary.........................................................................................................................1
Introduction to organization............................................................................................................3
Business tools and market selection analysis..................................................................................5
PESTLE analysis.........................................................................................................................5
Porter’s five force model.............................................................................................................8
Mode of entry to the foreign market................................................................................................9
SWOT analysis..........................................................................................................................10
Strengths................................................................................................................................10
Weakness...............................................................................................................................10
Opportunity............................................................................................................................11
Threats/risks...........................................................................................................................11
Mode of entry............................................................................................................................12
Management responses..................................................................................................................13
Recommendations to gain competitive advantage........................................................................14
References......................................................................................................................................16

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Introduction to organization
Going international is a very crucial plan for an organization, as the company has to analyze the
internal and external environment. The company selected for the assignment to critically analyze
the aspects of international marketing is Power Root Berhad. The company deals with instant
beverages like coffee (businessjargons, 2018).
Power root Berhad is a Malaysian organization founded in 1999, dealing in an herbal energy
drink. This is an international company dealing in various regions like the Middle East, Korea,
Indonesia, Singapore, China, Hong Kong, Taiwan, Japan, and Thailand (powerroot, 2019). For
this report, this company would be considered to enter a new foreign market that is Vietnam.
Objectives/reasons for going international
 Saturated market – the market in which the company already exist was saturated, that is
the scope for growth in the existing nation was not found, for which the company decided
to expand the foreign market, and increase the customer database through entering a new
market
 The company’s mission is to provide techno-savvy and innovative products to meet
customer’s need while expanding the business in the international market, for creating the
brand name globally. To accomplish the vision and mission of the company, the best
approach would be to find opportunities in the foreign market to target maximum
customers
 Increased scope of the product worldwide, the obesity level is increasing, especially
among youth, which led to an increased scope of energy and herbal drinks. This is one of
the major reason for the company to target nations with higher obesity rate and gain
opportunity from the same. The company’s one of the most popular herbal energy drink,
that is Tongkat Ali, which can be offered by the company to international customers
suffering such health issues. The company is the manufacturer of Ah hauat and Alicafe
line of products.

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Figure 1: (Source: (ourworldindata, 2019)
From the figure, it can be said that from 1975 to 2014 the rate of obesity is gradually
increasing for all the regions worldwide. This indicates the opportunity for power root to
expand the business in these regions. This has led the company to reach out to the customers
for feeling energetic and refreshed.
 Sales growth – considering the sales growth of the company from 2014 to 2018, it has
been decreasing. The sales of the company have increased but the rate of increasing sales
has been decreasing for the company. For instance, in 2015 the sales growth was 15.29%,
which reduced to 6.26% in 2018 (wsj, 2019)
 Economies of scale – another reason or objective for the company to expand market
internationally is to gain the advantage through economies of scale that is lowering the
cost of the goods while increasing the number of production of goods (Kaplan, 2015).

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Business tools and market selection analysis
The foreign market selected for power root to enter is Vietnam, a nation of Southeast Asia, it has
not been targeted by the company yet. For analyzing, the external environment, PESTLE
analysis and for industry analysis, Porters five force model would be used (Knight & Cavusgil,
2015).
PESTLE analysis
1. Political factors – these factors of external environment, or political laws of a country are
highly responsible for the opportunity or threat for the company while entering into a
foreign market. Some of these aspects include the political stability of the company,
taxation policies. Considering the Vietnam political stability, the facts provided by the
world back is presented below
Figure 2: (Source: (theglobaleconomy, 2019)
From the figure, it can be said that Vietnam is not very stable in this aspect, although it is
neither too week nor too strong as the average political stability index is 0.26, which
indicate that conducting business by power root would not be too risky
(theglobaleconomy, 2019).

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A positive aspect that could be the reason that selecting this market could be profitable
for power root is the corporate tax rate, which is decreasing since years, according to
facts provided by KPMG, presented below
Figure 3:( Source: (theglobaleconomy, 2019)
2. Economic factors – the economy affect the company to a large extent while entering or
working in a nation. These factors include the GDP of a nation, inflation rate, foreign
direct investment, economic stability. The GDP of Vietnam is increasing with years,
which indicate that the company would be in benefit to invest in the nation, facts as
presented below

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Figure 4: (Source: (theglobaleconomy, 2019)
Moreover, the import of the company is increasing since years, which means the scope for
investing in the company is high and beneficial for power root to invest in the nation (McGee &
Peterson, 2017).
3. Social factors – while going international, social trends and cultural factors play a vital
role in taking entering or marketing decision. For power root, the major social trend
would be that the residents of Vietnam are coffee lovers or prefer tea more. Considering
the coffee culture of Vietnam, it is the second largest coffee producer in the world, and
the culture of coffee is gradually brewing in the nation, which makes the place a good
region to target, would be beneficial for power root to enter into this nation and gain
opportunity (sbs, 2019).
4. Technological factors – these include the technological advancement in the country, this
is responsible for the use of technology in the business process for the company. Vietnam
is one of the technologically advanced nations, moreover have a strong infrastructure,
which indicates that power root can enter the market to gain opportunity while applying
technology through its business process (Miao, et al., 2017).
5. Legal factors – legal factors include legal rules, laws, and regulations that will be held
responsible for the legal requirements that have to abide by the country while entering
Vietnam. This also consists of the corruption level of the nation, which the country is

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improving the corruption legal framework. This could be beneficial for the company to
invest in the nation (Mühlbacher, et al., 2016)
6. Environmental factors – these also consist of demographic factors of the company, which
could be responsible for the company’s growth or increase in the sale or not. The major
demographic aspects are presented below
Figure 5: (Source: https://www.indexmundi.com/vietnam/demographics_profile.html)
The higher population is beneficial for the company to target maximum customers. moreover,
since the urban population is more, the company can target this customer segment for better
revenue (firstcarbonsolutions, 2018).
Porter’s five force model
For analyzing beverage industry, the five forces that affect the business would be
1. Competitors – competition is very high in this industry. The major competitors of power
root are Nestle, Food Empire Holdings, and old town Bhd serving instant coffee in Asia.

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The company has to make strategies in order to gain competitive advantage for sustaining
in the market
Figure 6: (Source: (malaccaresearch, 2019)
From the figure, it can be said that the company is a leading company in Malaysia, it has
to be continue to lead in new foreign market.
2. The threat of new entrants – the restriction to enter this industry is negligible, which
means that the entry to this industry is very rapid. Therefore, the threat exists with the
company, as the company can enter with new technologies to compete with power root
(Ogutu & Mathooko, 2015)
3. The threat of substitutes – in the beverage industry, power root serving the natural herbal
drink and instant coffee, which has various substitutes, like fresh juices, soft drinks, hard
drink, which can be a major threat to the company (Dobbs, 2014)
4. Bargaining power of suppliers – the company major suppliers are coffee growers, which
the company can mitigate through build relation with various suppliers worldwide, which
make the bargaining power, not in hands of the supplier (Dolan & Kawamura, 2015)
5. Bargaining power of buyers – since the competition is high in the industry, the bargaining
power is in hands of customers to a large extent (Pandey, 2015)
Mode of entry to the foreign market
Before planning over the entry mode to the Vietnam market, it is essential to analyze the
strengths, weakness, opportunities, and risks of the company. The external environment has been

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analyzed in the previous section, and for the internal analysis SWOT analysis tool will be
included
SWOT analysis
Strengths
 Affordable price – the pricing strategy of the company include the penetration strategy
that is keeping the prices lower. This is one of the strengths for the company, in order to
gain opportunity through cost leadership
 Goodwill – the company’s brand recognition in its domestic market is high, which is
again a strength for the company (powerroot, 2019)
 Healthy product – the company is also focusing over the healthy products, that is the
herbal teas, which is beneficial for the company as the health issues are generally
increasing among the population, so as the obesity rate (powerroot, 2019)
 Healthy and local ingredients – the ingredients used by the company that is Tongkat ali,
and labisia pumillia found in Malaysia, which means the cost to the company in this
aspect would not be very high
 Effective benefits – togkhat all is said to be the bitter cure, which is responsible for
various diseases such as an anti-cancer, anti-rheumatic, and antioxidant. Therefore, the
benefit from the single herbs are too many and are effective in nature, eventually leading
to a better product by the company. Moreover, it is also liable for enhancing the original
taste of various beverages like coffee (Gencer, 2017)
Weakness
 Lower consumer loyalty – customer loyalty for the company is not too strong, which
tends the customer shift from this company to another
 Low brand awareness – the brand is not been awarded in the international market, it
could a recognized brand in Malaysia, and majorly in the Middle East. However, not a
very popular brand in all the regions in the world (Anokhin & Morgan, 2015)
 Lower promotional tool usage – the promotional tools are not used by the company often.
This is the weakness of the company, as it is not helpful for the company to persuade
customers (powerroot, 2019)

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 Lower outdoor activity – the company outdoor activities are very low, which could be
one of the reasons for the lower brand awareness in the target market (Carvalho & Junior,
2015) (Curry, 2018)
Opportunity
 Improved supply chain – the company can bring change through its distributors. This can
include an increase in suppliers to make the supply changing more agile to reach the
international market
 Approaching sports activity – this is an opportunity for the company to enter into new
customer segment, that is the approach the sports activity
 Newmarket development – this is the expanding strategy of the company, which include
searching for a new market to be targeted due to saturated existing market
 Product differentiation – the company can gain opportunity through entering into the new
product line, which can be helpful for the company to increased revenue (Cabral &
Mathiason, 2015)
Threats/risks
 Major competition – the competition in the industry is very high, there are many global
leaders in the industries which can be a threat to the company
 Change in consumer preference and lifestyle – one of the threats to the company is
changing preference and social trends of the company, this may lead to a decrease in the
in revenue of the company (Schewen, 2018)
 Health threats
 Losing new market trades (Arena & Azzone, 2015)