NATIONAL ECONOMICS UNIVERSITY BUSINESS SCHOOL BACHELOR OF BUSINESS ADMINISTRATION IN ENGLISH ********************** MICROECONOMICS FINAL GROUP PROJECT Class: Group: Lecturer: Dr Tran Thi Hong Viet CATEGORY A) INTRODUCTION……………………………………………………………………3 B) DISCUSSION……………………………………………………………………… I) DAIRY MARKET COMPETITION……………………………………………….3 1) The reality of Vinamilk's competitiveness in the dairy market …………………3 2) Market structure of dairy products in general………………………………… 2.1) Definition of monopolistic competitive market…………………………….4 2.2) The specific characteristics of monopolistic competition………………… 3) The competitive market characteristics of Vinamilk dairy products in Vietnam 3.1)This is a market with many suppliers and products of each company are differentiated from the products of the remaining firms…………………………………4 3.2) Non-price competition forms are adopted by the company…………………5 II) VINAMILK DIARY GOODS MARKET………………………………………….5 1) Demand of Vinamilk dairy products in Vietnam……………………………… 1.1) Overview of Vinamilk's demand in Vietnam……………………………… 1.2) Determinants of demand…………………………………………………… 1.2.1) Prices of related goods………………………………………………… 1.2.2) Consumer income………………………………………………………6 1.2.3) Tastes and Preferences of consumers………………………………… 1.2.4) Expectations…………………………………………………………….7 1.2.5) Market size…………………………………………………………… 2) Supply of Vinamilk dairy products in Vietnam………………………………….7 2.1) Current situation of Vinamilk milk market in Vietnam…………………… 2.2) Determinants of supply…………………………………………………… 2.2.1) Input cost……………………………………………………………… 2.2.2) Technology…………………………………………………………… 2.2.3) Government policies…………………………………………………….8 2.2.4) Seller expectations………………………………………………………9 2.2.5) Number of sellers in the market……………………………………… 3) Growth expectation in the coming years…………………………………………9 C) CONCLUSIONS…………………………………………………………………….10 I) CONCLUSIONS………………………………………………………………… 10 II) RESOLUTION…………………………………………………………………….10 A) INTRODUCTION The economy of Vietnam after the period of world economic integration has made great progress and achieved certain achievements Economic development means that people's lives are much higher than before People are increasingly concerned about nutrition and one of them, milk is a very good nutritional supplement Therefore, in that joint development, it will be a shortcoming without mentioning the Vietnamese dairy market On the market today, the number of suppliers in the market is increasing with a variety of quality and designs Including Vinamilk (Vietnam Dairy Products Joint Stock Company) - the leading enterprise of the milk processing industry With more than 40 years of development, the name Vinamilk is no stranger to Vietnamese consumers With a desire to better understand the market of Vinamilk milk in Vietnam, our group decided to choose the topic: “SUPPLY, DEMAND AND COMPETITIVENESS OF VINAMILK IN VIETNAMESE DAIRY MARKET” Due to limited time and limited knowledge, our essay is still inadequate, looking forward to receiving your comments and opinions so that the essay can be improved We sincerely thank you! B) DISCUSSION I) DAIRY MARKET COMPETITION 1) The reality of Vinamilk's competitiveness in the dairy market By 2018, according to Vietnam Report, Vinamilk's liquid milk segment has risen to the top of the industry with about 55% market share In addition, Vinamilk holds more than 80% market share of yoghurt, more than 80% market share of condensed milk, more than 30% market share in powdered milk industry With efforts to improve technology and pioneer with new product trends, Vinamilk continues to consolidate and affirm its position as the No dairy company in Vietnam Revenue of some big milk companies in Vietnam in 2016 ( million dong) 2) Market structure of dairy products in general 2.1) Definition of monopolistic competitive market Monopolistic competition is the market structure with many manufacturers and providing products that are interchangeable at a high level but different special 2.2) The specific characteristics of monopolistic competition  There are many small sellers  Firms' products differ slightly from each other  There is freedom to enter and exit the market  Firms apply strong forms of non-price competition through advertising, product differentiation 3) The competitive market characteristics of Vinamilk dairy products in Vietnam 3.1) This is a market with many suppliers and products of each company are differentiated from the products of the remaining firms This distinction is expressed through design, packaging, design, These points help the company create its own appeal, maintain traditional customer base With the image of a milk cow in the pasture, this symbol has become familiar and associated with generations This is also the reason why Vinamilk suppliers in the development strategy and product PR always focus on taking advantage of the unique, preeminent and exclusive characteristics of its products Vinamilk milk is produced from organic fresh milk from cow herds grazing on natural grassland, the process of caring, raising cows and processing milk complies with regime “3 No” in accordance with Organic USDA US standards: "No genetic modification, no growth hormone, no antibiotics." This creates confidence for consumers, thereby affecting their demand, increasing revenue and profit for the firm 3.2) Non-price competition forms are adopted by the company By trading items that have the same features as many companies, so as to disseminate product images, to survive and develop, the company must invest large expenses for nonprice competition forms such as: advertising on mass media, promotional costs, product packaging costs, etc One of Vinamilk's great successes is in the advertising market It can be said that in all of Vinamilk advertisements, TVC producers successfully convey what they want to tell customers and all information has a strong influence on consumers' shopping habits Typically we can see that the milk cow family's song focuses on two main factors for babies that are bright and tall Among them, there are advertisements that show that drinking milk brings joy with the image of a smiling cow head, or 100% pure fresh milk that brings health to everyone, all outstanding benefits that Vinamilk products bring to its customers are conveyed very skillfully II) VINAMILK DIARY GOODS MARKET 1) Demand of Vinamilk dairy products in Vietnam 1.1) Overview of Vinamilk's demand in Vietnam Formed in 1976, Vietnam Dairy Company (VINAMILK) has grown and become the leading enterprise of the dairy processing industry, currently accounting for 75% of the dairy market share in Vietnam According to the Brand Footprint report of Kantar WorldPanel recently, Vinamilk continues to hold the position as the brand that consumers choose to buy the most in main cities and rural areas of Vietnam in the group of fast moving consumer goods (FMCG ) 1.2) Determinants of demand 1.2.1) Prices of related goods Prices of other related goods are an important factor affecting demand for goods in the market There are two types of related goods: complementary goods and substitute goods Here, Vinamilk milk is a substitute For the dairy product line for children, Vinamilk's target customers are children who are in the development stage with products that have been reputed in Vietnam market such as fresh milk, powdered milk, cheese In the current competitive environment, Vinamilk has many competitors who choose the same target customers as Dutch Lady, TH true milk, This product targets at children whose parents decide to consume products And using foreign food is deeply ingrained of Vietnamese and they think that imported milk are reputable in the world while Vinamilk is a domestic brand that has no brand in the world Moreover, the majority of parents are willing to transfer the decision to buy other types of milk when there is a price drop of these dairy companies Thus, it will directly affect Vinamilk's demand, reducing the demand of products, greatly affecting the revenue of enterprise 1.2.2) Consumer income Income is a determinant of the ability of consumers to buy Therefore, when income changes, purchasing ability changes, making demand for goods and services change From the impact of income on consumption of goods, German statisticians divided goods into two groups of normal goods and inferior goods For subjects who are students who have average income , income is a factor affecting their ability to consume dairy products However, at the present time, Vinamilk milk still belongs to the kind of normal goods So when income increases, demand for Vinamilk milk will increase 1.2.3) Tastes and Preferences of consumers Taste is a factor that represents a consumer's desire to buy, which helps determine the type of goods consumers want to buy Therefore, when tastes change, consumer demand also changes Therefore, taste is a very important factor that is often concerned by businesses when they produce and business Picking up or creating consumer tastes, increasing demand (or increasing demand at all prices) will make businesses much more profitable than usual Understanding the importance of taste of consumers in general and for Vietnamese students in particular, Vinamilk has been developing its dairy product lines to meet the needs and meet the tastes of consumers also increase the company's demand For Vinamilk, the company is always a pioneer in innovation and new product development, meeting the most rigorous international standards In particular, Vinamilk fresh milk products are 100% premium organic (the first European standard organic fresh milk in Vietnam); Walnut nut soy milk has just launched in the second quarter of 2018; Vinamilk Optimum Gold infant formula (No brand for children) Besides, each customer has the right products - For children under years of age, there is 110ml canned milk, children aged and older and adults have boxes of 180ml, 200ml - Malnourished or elderly people use calcium-rich pasteurized milk People with diabetes and obesity use low-fat, unsweetened milk, without sugar sterilization - There are many ways to pack such as paper boxes, paper bags for convenience when traveling, carrying easily - Ordinary people can use many types such as sugar free, strawberry flavored milk, chocolate,… However, the target customers of Vinamilk liquid milk aiming at it are children and the average market 1.2.4) Expectations For students with an average monthly income, it can be confirmed that they expect the price of goods to decrease in the future so that they can buy milk in larger quantities with the same amount of money In addition, consumers' expectations about future income also affect current demand The prospect of students' income increase in the future (maybe income from part-time jobs, subsidies of parents, ) along with the need to use milk will also make consumption increase, the demand for Vinamilk milk increases at all prices 1.2.5) Market size The more consumers of Vinamilk milk products are, the more demand for these products at each price will increase, bringing more profits for businesses Therefore, Vinamilk mart branches are often distributed in big cities and urban areas where people's living standards are high In addition to continuously expanding and dominating the domestic market, Vinamilk also strengthens the expansion of the world market Currently Vinamilk products are present in more than 40 countries, in many continents and regions such as the US, Europe, Africa, South - Southeast Asia and the Middle East Southeast Asia, Myanmar and Thailand,with increasing demand for milk, are considered to be important potential markets in the company's strategy to expand internationally in general and ASEAN region in particular 2) Supply of Vinamilk dairy products in Vietnam 2.1) Current situation of Vinamilk milk market in Vietnam: Vinamilk has a strong position in the industry with 50% market share Vinamilk owns a strong brand and a wide distribution system with more than 224,000 retail points Thanks to the extensive distribution system, 70% of Vinamilk's domestic revenue comes from rural areas and 70% comes from big cities 2.2) Determinants of supply 2.2.1) Input cost Vinamilk's input materials for milk powder are mainly 80% imported from abroad; 100% fresh milk and sugar are domestic ingredients Vinamilk is promoting the construction of stable power supply systems The company has been having projects to directly raise dairy cows, in addition to supporting dairy farmers The price of production factors directly affects the cost of production and thus affects the amount of goods that producers want to sell Typically, on February 12, 2010, Vinamilk raised milk prices as input materials such as powdered milk increased by about 50%, to USD 3,750 / ton compared to September 2009 price, the sugar price of this company use for production also increased to 100%.This has led to a sharp increase in input costs of enterprises, which forced Vinamilk to raise milk prices 2.2.2) Technology Science and technology not only ensure the development but also create a competitive advantage for businesses Vinamilk has invested a lot in the world advanced methods and technologies to improve the quality and quantity of its products such as UHT high temperature sterilization, industrial fermentation yogurt, condensed milk vacuum, vacuum packaging industry, dried milk powder Most of this is an advanced technological line of Denmark and Sweden, with synchronous, automatic control, meeting all requirements food safety and hygiene as well as expected labor productivity 2.2.3) Government policies In addition to the prices of production and technology factors, government policies also have a strong impact on supply In 2014, the Government imposed a ceiling price for milk for children under years of age, which made Vinamilk milk prices fall On February 4, 2016, Vietnam officially signed the Trans-Pacific Partnership Agreement (TPP) in Auckland, New Zealand After signing the TPP Agreement, the taxes of many foreign dairy products are much reduced and by 2018, when New Zealand and Australian dairy products enter the market with zero tax rates will certainly affect the dairy and business markets Domestic dairy industry in general and Vinamilk's challenge in particular, when many Vietnamese consumers carry “ Foreign-goods psychology” In addition, the Government also has policies to support cow raising to increase Vinamilk milk 2.2.4) Seller expectations Expectations are the predictions and forecasts of producers about future market developments which affect the current supply In 2010, Vinamilk's Slogan, "Niềm tin Việt Nam", expressed its expectation and aspirations for belief about the new generation of Vietnam, bringing the best benefits to the Vietnamese people After changing Slogan, in 2010 Vinamilk set revenue of 3602 billion after tax, revenue increased by 51% compared to 2009, was voted as the best operating enterprise in Asia 2.2.5) Number of sellers in the market The number of sellers directly affects the number of goods sold in the market Vinamilk has the following distribution channels: - Export: Vinamilk sells products (mainly powdered milk and condensed milk) to South East India, Middle East and Africa countries; Vinamilk's products are available in a variety of countries such as Cambodia, Thailand, Korea, Japan, China, Turkey, Russia, Canada, America, Australia The company is continuing to search and expanding markets to Europe, Africa, South America - Domestic channel: Vinamilk uses traditional sales channels and modern sales channels • Traditional sales channels: This is the main distribution channel of the company Vinamilk distributes products to more than 266 agents, then 224,000 retail outlets throughout the country The dense distribution system is VNM's competitive advantage with its current rivals In addition to major cities, Vinamilk's products are distributed to rural areas, beyond the reach of foreign dairy businesses • Modern sales channel: Vinamilk's products are sold in 600 supermarkets in Vietnam, contributing 10% of domestic sales In addition, Vinamilk has three sales offices in Hanoi, Da Nang and Ho Chi Minh City The company has established 60 more stores to introduce Vinamilk products 3) Growth expectation in the coming years Currently, VNM's market share has accounted for about 58% According to the company's original plan every year the market share increased by 1% However, according to statistics, in 2017, the market share of the company has reached a growth rate of up to 2%, doubling the expected target, so the market share of VNM Milk House in the next years is expected to be higher: 60% market share These are positive and encouraging numbers for many reasons: Firstly, domestic demand in recent years has increased quite steadily, the aftershock growth will still be extended in the coming time due to population structure, urbanization process and increased income Secondly, Vinamilk has a strong advantage thanks to its distribution channel Its products are delivered to consumers by a system of 226 agents, 600 supermarkets and 224,000 retail points in the country, in addition to distribution points in foreign markets In addition, the company also possesses other advantages such as marketing capacity, competitive pricing, positive volatility in stock prices, or increased competitiveness when it receives its attention and investment In short, Vinamilk's growth is considered stable and quite satisfactory However, if the company can come up with strategic directions, maybe we have the opportunity to witness long steps in the future C) CONCLUSIONS I) CONCLUSIONS By analyzing the supply-demand market for milk Vinamilk in Vietnam, we see that the dairy market in Vietnam has great potential Based on the analysis of demand-supply analysis and Vinamilk's competitiveness in Vietnam's dairy market, we have the following conclusions: - With a long history of being present in the Vietnamese market, Vinamilk has the ability to identify, understand consumer trends and tastes, which helps the company focus efforts to develop diverse product categories and strong, nationwide distribution and sales network to meet the maximum demand of consumers - As a strong brand with good quality products, Vinamilk also succeeds in advertising It can be said that in all of their advertisements, Vinamilk successfully conveys all information that has a strong influence on consumer shopping habits II) RESOLUTIONS Therefore, in order to grow stronger and prevail in the fierce competition in Vietnam's dairy market, Vinamilk needs: - Vinamilk's dairy products should continue to improve product quality, adding to the product portfolio with new flavors to attract consumers - Improve the capacity of market research and marketing team: implement more attractive advertising programs, better messages to bring products closer to consumers Build brand positioning strategy for Vinamilk products - Implement programs to attract special customers as potential customers and maintain the number of existing customers, THE END ... benefits that Vinamilk products bring to its customers are conveyed very skillfully II) VINAMILK DIARY GOODS MARKET 1) Demand of Vinamilk dairy products in Vietnam 1.1) Overview of Vinamilk' s demand... particular 2) Supply of Vinamilk dairy products in Vietnam 2.1) Current situation of Vinamilk milk market in Vietnam: Vinamilk has a strong position in the industry with 50% market share Vinamilk owns... adopted by the company…………………5 II) VINAMILK DIARY GOODS MARKET………………………………………….5 1) Demand of Vinamilk dairy products in Vietnam……………………………… 1.1) Overview of Vinamilk' s demand in Vietnam………………………………