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Student Name: Duanmu Yilong Student ID: 21861110 Unit Code & Name: MKT00724, International Marketing Tutors Name: Dr. Keith Ng Assignment Number: Assignment 2 Due Date: 25/07/2011 Date Submitted: 25/07/2011

Declaration: I declare that this assignment is my own original work and has not been submitted for assessment elsewhere. I acknowledge and irrevocably agree that the assessor of this assignment may, for the purpose of assessing this assignment: Reproduce this assignment and provide a copy to another member of faculty for review and comment, including whether the work is an original work; and/or Provide a copy of this assignment to a plagiarism checking service for review so that it may determine whether the assignment is an original work. The checking service may retain a copy of the assignment on its database for the purpose of future plagiarism checking. I have read and understand the Rules relating to Awards (Rule 3.17) as contained in the University Handbook. I understand the penalties that apply for plagiarism and agree to be bound by these rules. Signed: Date: 06/06/2011 Duanmu Yilong (Please type name here)

Table of Contents
EXECUTIVE SUMMARY.. 1. INTRODUCTION. 2. DATA COLLECTION...... 3 4 6

2.1 Presentation of secondary data... 6 2.2 Presentation of primary data...... 2.3 Analysis data............. 2.4 Difficulties encounted in sourcing data....... 3. SELECTION OF COUNTRY..... 3.1 Screening process...... 3.2 Tools for selection............. 9 10 10 11 11 11

3.3 Reason for country selection.......... 11 4. RECOMMENDATIONS FOR INTERNATIONAL MARKETING STRATEGY........ 13 4.1 Entry strategy......... 4.2 Entry strategy recommendation......... 4.3 Entry International marketing strategy.......... 5. CONCLUTION......... 13 14 15 17

6. REFERENCES........... 18

EXECUTIVE SUMMARY The purpose of this paper is to provide an international marketing plan to ensure the success of our companys international expandsion. Our company has limited access in the Vietnam and Thailand markets. We collected both primary data and secondary data for both Vietnam and Thailand markets. After data collection, I use Jains (2001) framework to conduct preliminary screening then analyze the industry market potential as well as company sales potential. I then adopt BCG method (Ghauri and Cateora, 2006) to choose Vietnam as our next international target market. After choosing the right international market, I follow Ghauri and Cateora (2006) screening process to decide wholly-owned-subsidiary market entry strategy to enter the market. To achieve the international market expansion success, I recommend standardization of product, price and place strategy and adaptation promotion strategy. We believe this international marketing plan will lead our company to next success.

1.

INTRODUCTION Olaer Fawcett Christie Ltd was established in UK in 1758, it was in the UK hydraulic industry for more than 50 years. It is the UKs leading manufacturer of gas-load hydraulic accumulators. Our overall strategy is to be a global market leader in the accumulator market (About us 2011). Olaer focused on the accumulator application in Oil and gas industry. Olaer is able to offer an unrivalled depth of experience and expertise in the hydraulic industry. A continuous research and development effort and strict quality controls of products help us to maintain Olaers leading position in the UK market. Olaers mission is to be the Professional Choice of customers demanding cost effective, innovative and value-added solutions. Olaer Fawcett Christie Ltd has a total of sixty employees currently. There are four sales and marketing managers to look after international business located in the United Kingdom, United Arab Emirate, Brazil and Singapore. Levitt (1983) claims domestic markets have become too small, even the biggest companies have to be in all major markets if they are in global industries. I am in agreement with his claim. Olaer have to go international market to achieve growth of the firm (Ghauri and Cateora 2006). One of Olaer key customers, Aker Solutions Group told Olaer that they will deliver customers needs through their global network and Aker Solutions had set up their new factory in Thailand and Vietnam (Akersolutions 2011). Original manufacturing centre of Aker Solutions is in UK. Aker Solutions wanted Olaer to provide them local support. In Olaer, we all agree to provide local support to our customers to satisfy their international marketing expansion. However Olaer must decide what level of support is needed by the market, can be provided by us. To make a right decision, we have to assess the market opportunity through following market research objectives: 1. Should we enter Thailand and Vietnam market? a. What is the market size? b. What is Olaer market share? c. What is the market entry strategies we should use? 2. Is there a potential in Thailand and Vietnam in Oil & Gas industry? a. What is the market growth trend? b. What is Olaer marketing ability and capacity? 4

3. Is there strong competition in the two markets? 4. Is there market potential for accumulator? To answer above questions and achieve the market research objectives, we will analyze the primary data and secondary data collected for this market opportunity assessment.

2.

DATA COLLECTION 2.1 Presentation of secondary data

Fletcher and Brown (2005) define secondary data refers to the data that has already been gathered for other purposes and the information is already available. The data can be presented using framework developed by Jain (2001) Table 2.1 Secondary data INFORMATION Population size THAILAND 67.7 Million as at 2009 (Key Indicators Database 2011) 9024 Nautical Miles (Sea Distance 2011) VIETNAM 87.2 Million as at 2009 (Key Indicators Database 2011) 8937 Nautical Miles (Sea Distance 2011) The communist partySystem of government A constitutional monarchy (About Thailand 2011) controlled government (System of Government 2011) Vietnam is characterized Political stability and continuity Instability (Bordonaro 2006) by the stability of its leadership. (Political Dynamics 2011) Thailand's economy has Vietnam has been in

Shipping distance from UK

always been very much based transition from a Government involvement in business on decentralized free enterprise. (Economy, Government, Business in Thailand 2011) Thailand will not be centrally-planned to a 'socialist oriented market economy'. (Vietnam Country Brief 2011) Vietnam is a member of a

perceived by the international growing network of free Attitudes toward foreign business community as an open market until it eliminates the overly broad restrictions on service businesses under the trade agreements, both individually and as part of ASEAN. (Vietnam Country Brief 2011) 6

Foreign Business Act. (Its all part of Act 2011) Economic growth: GDP, industry USD 263.7 Billion as at sector 2009, (Data 2011) Contribution of manufacturing, 41% of 2010 GDP. 2011 expected growth rate 3.1%. (Thailand economic monitor April 2011) Oil and Gas industry Crude oil proved reserves 435 Million Barrel (International Energy Statistics 2011) Literacy rate, education level USD 97.1 Billion as at 2009, (Data 2011) Contribution of manufacturing, 41% of 2010GDP. 2011 expected growth rate 6.5% (Background Note: Vietnam 2011) Crude oil proved reserves 600 Million Barrel (International Energy Statistics 2011)

Literacy--94.9% male, 90.5% 94% (Background Note: female (Background Note: Thailand 2011) Vietnam 2011)

Limitation on trade: tariff levels

30% for accumulator (Display Import tariff 2011)

0% for most machinery (Business in Brief 2011) Adopted ASTM (ASTM International News Release 2011)

Local standards

TISI Standards (TISI 2011)

Taxation

30% (Corporate Income Tax 2011)

25% (Vietnam Tax rates 2011) Based on the socialism legal theory and inherited from French civil law system. (Legal System in Vietnam 2011)

Code of laws

Thailand's legal system blends principles of traditional Thai and Western laws. (Background Note: Thailand 2011)

Employment

Unemployment remains low. (Background Note: Thailand 2011)

Unemployment remains low. (Background Note: Vietnam 2011)

2.2

Presentation of primary data

Fletcher and Brown (2005) define primary data as specifically related to the purpose of the study. The primary data was collected through customer visit. Table 2.2 Primary data Q1, Basic business information Facility area Aker Vietnam Aker Thailand Petronas Vietnam Petronas Thailand 25,000 Sqft 2,000 Sqft 33,000 Sqft 18,000 Sqft Business turnover USD 22 Million USD 10 Million USD 25 Million USD 20 Million Employee 32 6 86 37

Q2, Customer needs and desires Do you use accumulator? Aker Vietnam Aker Thailand Petronas Vietnam Petronas Thailand Yes Yes Yes Yes Q3, Competitiveness How many percent do you use Olaer products? Aker Vietnam Aker Thailand 15% 10% Which brand you use other than Olaer? Hydac Hydac Any reason if you dont use Olaer product? Delivery Delivery Olaer doesnt have Petronas Vietnam 10% Hydac local office. Hydac has. Petronas Thailand 10% hydac Response time. How much you buy What local support a year? USD 300,000 USD 10,000 USD 250,000 USD 100,000 you expected? Local stock and technical service. Not much Technical training Technical training

2.3

Analysis data

From the above data, we can find the difference between the Vietnam and Thailand market in various fields. a. Political stability. Thailand is instability but Vietnam is very stable. b. Attitude toward foreign business. Vietnam is more open than Thailand. c. Economic growth. Vietnam will have double growth rate than Thailand. d. Taxation. Vietnam is less 5% corporate taxes than Thailand. e. Oil and gas industry. Vietnam has 40% more volume than Thailand. f. Potential customer buying power. Vietnam is about five times of Thailand. g. Competitive. our main competitor already set up their office in Vietnam. 2.4 Difficulties encountered in sourcing data

The difficulties encountered in sourcing data mainly from secondary data collection, which are availability, age, accuracy, reliability and comparability (Fletcher and Brown 2005). Availability of data

There are no government agencies in most developing countries to collect the industry data regularly. I tried to collect business volume for oil and gas equipment manufacturing in both country, but I cant find it. To solve this problem I will use scientific estimation base on individual company data. Age of data Updated data is not so easy. I couldnt find the most recent GDP data for both countries. To solve this problem, the growth rate will help us to do comparison. Accuracy and reliability of data

I understand that published data are already reproduced by the publisher. The data producing method may vary in different countries, some may be affected by political reason and some may be caused by different scientific approach. In general, accuracy of data will be better in a democratic country. To gather better accurate secondary data, I did cross information check.

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3.

SELECTION OF COUNTRY 3.1 Screening process

Olaer is not involved much in both the Vietnam and Thailand markets. Because of manpower and size of our business constraint, we are not able to go both markets at this moment. We have to evaluate the Vietnam and Thailand markets. Jain (2001) provide us a better framework for the screening process, I will follow the process. 3.2 Stage one: Preliminary Screening Stage two: Analysis of Industry market Potential Stage three: Analysis of Company Sales Potential Tools for selection

After the screening process, I will use BCG method to select the market for us to enter (Ghauri and Cateora, 2006). The BCG method focuses on the country attractiveness and competitive strength of the company. The BCG method can be illustrated in table 3.1. Table 3.1 Country attractiveness Market size (Total and segments) Market growth (Total and segments) Competitive conditions Market uncontrollable (culture, legal and political environment) 3.3 Reason for country selection Competitive strength of the company Market share Marketing ability and capacity Product and positioning fit Quality of distribution services

I will use BCG method to analysis the two markets and select the right market for Olaer to enter (Ghauri and Cateora, 2006). Country attractiveness Market size: Vietnam is 40% bigger than Thailand in oil and gas industry. Accumulator market segment, Vietnam is 5 times than Thailand. Market growth: Vietnam has double growth rate than Thailand. Competitive strength of the company Market share: Olaer has about 13% market share in Vietnam market and 10% market share in Thailand market. There is good potential growth. Marketing ability and capacity: Olaer is market leader in Europe accumulator market.

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Competitive conditions: Olaer Competitor already set up their sales office in Vietnam. Market uncontrollable (culture, legal and political environment): Vietnam has stability government, Vietnam welcome foreign investment, Vietnams Corporation Tax rate is 5% lower than Thailand.

Product and positioning fit: Olaer product always has very good reliability and bean reputation in Europe market.

Quality of distribution services: Olaer doesnt have distribution channel in both countries.

Base on the BCG method analysis, I will select Vietnam as our next target international market.

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4.

RECOMMENDATIONS FOR INTERNATIONAL MARKETING STRATEGY 4.1 Entry strategy

The market entry strategy must reflect the screening of market potential, our company capabilities and the commitment we are going to make to our customers. There is variety of international market entry strategies, such as exporting, licensing, franchising and wholly owned subsidiary. 4.1.1 Exporting

Exporting is the easiest and most common approach adopted by companies when they are entering the international market at beginning stage. The advantage of exporting is less financial loss risk (Ghauri and Cateora 2006). The disadvantage is less local support. 4.1.2 Licensing

Licensing is a company grants foreign entity to adopt its patent rights, trademark and technological processes. The advantages of licensing are to establish a foothold in a foreign market without large capital expends. This market entry strategy is more useful when a country is sensitive to foreign ownership (Ghauri and Cateora 2006). 4.1.3 Franchising

Franchising is one form of licensing. With franchising the franchiser provides a standard package of products, systems and management services for franchisee. The advantage of franchising is to gain flexibility in dealing with local market conditions and yet to allow parent company remaining reasonable degree of control (Ghauri and Cateora 2006). Franchising is an entry strategy widely adopted by food industry. 4.1.4 Wholly owned subsidiary

Keegan and Schlegelmilch (2001) claim that this form of market entry is the most expensive method, as it requires the greatest commitment in terms of management and resources and offers the fullest means of participating in a market. . Doole and Lowe (2001) advise it should only be undertaken if demand for the market appears to be assured. The advantage is to retain tight control over operations. The disadvantage is high cost and risk.

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4.2

Entry strategy recommendation

Ghauri and Cateora (2006) provide a good process to select a market entry strategy as shown in table 4.2. Table 4.2 Factors influencing market entry strategy

Olaer is the UKs leading manufacturer of gas-load hydraulic accumulators. Our overall strategy is to be a global market leader in the accumulator market. The Vietnam market provides a good opportunity for us to extend our market leader position from the UK to the Vietnam market. The Vietnam market will have higher industry growth rate and they welcome foreign direct investment. In the accumulator market, we have a very low market share compared to our market share in the UK and Europe. This is because we have less local support. In the UK accumulator market, we dominate about 65% market share. In contrast, we only have about 13% market share in the Vietnam market. The market situation provides us a big growth potential. To meet customers needs, I recommend wholly owned subsidiary market entry strategy.

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4.3

International marketing strategy

When we enter international market, the marketing strategies play a vital role to ensure the successful of the business. The common marketing strategy approach is standardization or adaptation. Buzzell (1968) define the standardization strategy is the harmonization of the various marketing mix elements across different international markets. Adaptation strategy is the adoption of a unique marketing mix in each market. Levitt (1983) claims standardization enable a company to have better competitiveness in price, quality and delivery. Standardization will help a company achieve better global economies of scale. 4.3.1 Product strategy

The product we are going to sell in the Vietnam market is accumulator. The design principle of accumulator is identical globally. For some international customers, such as Aker Solutions and Petronas, they apply identical specification globally. Therefore I recommend standardization product strategy in the Vietnam market. 4.3.2 Price strategy

Price is typically influenced by cost, competition and customer willingness to buy. Accumulator is a low labor cost involved product, regardless if the product is assembled in Vietnam or it is assembled in UK. The cost of the product remains almost same because the material cost from our appointed supplier is same. In consideration of competition, we acknowledge our competitor apply global standardization price strategy. Thus I recommend standardization price strategy in the Vietnam market. 4.3.3 Promotion strategy

Promotion refers to various communication mixes that marketers can use to provide product information in the market. There are four major promotion tools which are advertising, sales promotion, public relations and direct marketing (Kotler and Armstrong 1999). Successful communication is always associated with understanding culture differences in international market. As De Mooij (2010) concludes most Asian cultures are high context, whereas most western culture is low context culture. The low context culture is more oriented toward the written word, whereas high context culture is more visually oriented. Vietnam culture is high context, thus we need more direct marketing effort in Vietnam market. Olaer should visit the customer more often

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and conduct more customer training programs. This is an adaptation promotion strategy to reflect the culture differences. 4.3.4 Place strategy

Place is the distribution channel through which we can deliver the product to customer. The oil and gas industry requires high knowledgeable and experienced sales person to provide package solutions, thus direct sale to end user is common practice in this industry. We will adopt standardization place strategy in the Vietnam market.

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5.

CONCLUTION Marketing is the delivery of customer satisfaction at a profit (Kotler and Armstrong 1999). When our customers decide to go international, we must follow them to meet their changing needs, also growth of the firm forces us to go international. After analysis of the environment between Thailand and Vietnam markets, we will choose Vietnam as our next target international market. We plan to adopt wholly-ownedsubsidiary market entry strategy base on market situation screening, industry potential analysis and our company overall strategy. To succeed in this international market expansion, we will adopt standardization product, price and place strategy. We will apply adaptation promotion strategy to reflect the culture difference between host country and home country. We belief this international marketing plan will lead our company to next success.

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6.

REFERENCES About Thailand, Royal Thai Embassy, viewed 17 July 2011, http://www.thaiembassy.sg/about-thailand/government About Us, Olaer Fawcett Christie Ltd, viewed 17 May 2011, http://www.fch.co.uk/ukolaer-portrait.htm ASTM International News Release, ASTM International, viewed 18 July 2011, http://www.astmnewsroom.org/default.aspx?pageid=2122 Background Note: Vietnam, US Department of State, viewed 17 July 2011, http://www.state.gov/r/pa/ei/bgn/4130.htm Bordonaro, F 2006, Instability threatens Thai economy, viewed 17 July 2011, http://www.atimes.com/atimes/Southeast_Asia/HE12Ae01.html Business in Brief, VietnamNet, viewed 18 July 2011,

http://english.vietnamnet.vn/en/business/9255/business-in-brief-15-6.html Buzzell, R D 1968, Can you standardize multinational marketing? Harvard Business Review 46 (6): pp. 102-113. Corporate Income Tax, The Revenue Department, viewed 19 July 2011, http://www.rd.go.th/publish/6044.0.html Data, The World Bank, Viewed 17 July 2011,

http://data.worldbank.org/indicator/NY.GDP.MKTP.CD De Mooij, M 2010, Global marketing and advertising: understanding culture paradoxes, 3rd edn, SAGE Publications, Inc. Display Import Tariff, Integrated tariff data base, viewed 18 July 2011, http://igtf.customs.go.th/igtf/en/main_frame.jsp Doole, I and Lowe, R 2001, International Marketing Strategy. 3rd edn, Bedford Row, London, Thomson. Economy, Government, Business in Thailand, Thailand guru, viewed 17 July 2011, http://www.thailandguru.com/economy-government-business.html Fletcher, R and Brown, L 2005, International Marketing an Asia-Pacific Perspective, 3rd edn, Pearson Education Australia, Frenchs Forest Ghauri, P & Caterora, P 2006, International Marketing, 2nd edn, McGraw-Hill, Maidenhead, Berkshire, pp. 268-272

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International Energy Statistics, US Energy Information Administration, viewed 19 July http://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=5&pid=57&aid=6 Its all part of Act, Business Report Thailand, viewed 17 July 2011, http://www.businessreportthailand.com/thai-fb-part-of-the-act-12283 Jain, S C 2001, International Marketing, 6th edn, South-Western, Ohio Keegan, W J and Schlegelmilch, B B 2001, Global Marketing Management: A European Perspective. New York, Financial Times Prentice Hall. Key Indicators Database, APEC Homepage, viewed 17 July 2011, 2011,

http://statistics.apec.org/index.php/key_indicator/kid_result_flash/19 Key Indicators Database, APEC Homepage, viewed 17 July 2011,

http://statistics.apec.org/index.php/key_indicator/kid_result_flash/21 Kotler, P & Armstrong, G 1999, Principles of Marketing, 8 edn, Prentice-Hall Inc., Upper Saddle River, New Jersey. Legal System In Vietnam, Asian Disaster Reduction Center, viewed 19 July 2011, http://www.adrc.asia/management/VNM/VietnLaws.html?Frame=yes Levitt, T 1983, The globalization of markets, Harvard Business Review 61 (3): pp. 92-102 Levitt, T, 1983, The marketing imagination, Free Press, New York Political Dynamics, Country Studies, viewed 17 July 2011,

http://countrystudies.us/vietnam/54.htm SEA DISTANCES - VOYAGE CALCULATOR, World Shipping Register, viewed 17 July 2011, http://e-ships.net/dist.htm System of Government, Country Studies, viewed 17 July 2011,

http://countrystudies.us/vietnam/56.htm Thailand economic monitor April 2011, The World Bank, viewed 17 July 2011, http://www.worldbank.or.th/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIF ICEXT/THAILANDEXTN/0,,contentMDK:22875845~pagePK:1497618~piPK:2178 54~theSitePK:333296,00.html TISI Standards, TISI, viewed 18 July 2011,

http://www.tisi.go.th/eng/index.php?option=com_content&view=article&id=4&Itemi d=5

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Vietnam country brief, Australian Government Department of Foreign Affairs and Trade, viewed 17 July 2011, http://www.dfat.gov.au/geo/vietnam/vietnam_brief.html Vietnam Tax Rates, Tax Rates, viewed 19 July 2011,

http://www.taxrates.cc/html/vietnam-tax-rates.html

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