Marketing solutions for npk fertilizer of petro vietnam fertilizer and chemicals corporation (pvfcco) in the period 2012 2014
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VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
Tran Van Hiep
MARKETING SOLUTIONS FOR NPK FERTILIZER OF
PETROVIETNAM FERTILIZER AND CHEMICALS
CORPORATION (PVFCCo) IN THE PERIOD 2012 – 2014
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
SUMMARY
Supervisor: Dr. Tran Doan Kim
Hanoi – 2011
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ........................................................................................ i
ABSTRACT ............................................................................................................... ii
TÓM TẮT ................................................................................................................. iv
TABLE OF CONTENTS .......................................................................................... vi
LIST ABBREVIATIONS ......................................................................................... ix
LIST OF FIGURES.....................................................................................................x
LIST OF TABLES ................................................................................................... xii
INTRODUCTION .......................................................................................................1
1. The thesis title ......................................................................................................1
2. Necessity of the thesis .........................................................................................1
3. Research aim and objectives ................................................................................2
4. Research questions ...............................................................................................3
5. Data sources and Research methodology ............................................................3
6. Scope of the research ...........................................................................................3
7. Significance of the research .................................................................................4
8. Structure of the thesis ..........................................................................................4
Chapter 1: LITERATURE REVIEW ..........................................................................5
1.1 The concept of marketing ..................................................................................5
1.2. The analysis of macro environment and industry .............................................7
1.2.1. Macro environment analysis ......................................................................7
1.2.2. Industry analysis .......................................................................................10
1.3. Target market segmentation, selection and positioning .................................14
1.3.1. Market segmentation ................................................................................15
1.3.2. Select the target market ............................................................................17
1.3.3. Positioning in the Market. ........................................................................17
1.4. Marketing Mix (4P). .......................................................................................20
Chapter 2: NPK MARKET ANALYSIS OF PETROVIETNAM FERTILIZER
AND CHEMICALS CORPORATION (PVFCCo) ..................................................23
vi
2.1. Process of establishment and development ....................................................23
2.2. Production and operation performance of PVFCCo.......................................24
2.3. Macro environment analysis ...........................................................................26
2.3.1.Politics .......................................................................................................26
2.3.2 Economic factors analysis .........................................................................28
2.3.3 Cultural and social factors .........................................................................29
2.3.4 Technological factors ................................................................................31
2.4. Industry environment analysis ........................................................................32
2.4.1. NPK Fertilizer market analysis ................................................................32
2.4.2. Competitors analysis ................................................................................34
2.4.3. Pressure from Customer ...........................................................................48
2.4.4. Pressure from material sources. ...............................................................49
2.4.6. Pressure from substitute products to NPK fertilizer .................................53
2.5 Target market analysis of competitors .............................................................53
2.5.1 Regional demand .......................................................................................53
2.5.2 Market share ..............................................................................................54
2.6 Customers’ comments on NPK fertilizers. ......................................................57
2.6.1.Farmer customers. .....................................................................................57
2.6.2. Distributor and retailer customers ............................................................59
2.6.3 NPK Products Positioning Analysis ..........................................................60
2.7. Analysis of Competitors’ Marketing Mix ......................................................61
2.7.1. Japan Vietnam Fertilizers .........................................................................61
2.7.2. BinhDien Fertilizers Joint Stock Company..............................................61
2.7.3. Lam Thao Fertilizers and Chemicals Company (LAFCHEMCO) ..........62
2.7.4. Baconco Limited Company ......................................................................63
2.7.5. Nam Sao International Joint Stock Company ..........................................64
Chapter 3: MARKETING SOLUTIONS FOR NPK FERTILIZER
OFPETROVIETNAM FERTILIZER AND CHEMICALS CORPORATION
(PVFCCo)IN THE PERIOD 2012 – 2014 ...................................................................67
3.1 Target market of PVFCCo’s NPK fertilizer ....................................................67
vii
3.1.1. Plant location ............................................................................................67
3.1.2. Marketcompetitiveness .............................................................................68
3.1.3. Market attractiveness ................................................................................69
3.2 Positioning strategy of PVFCCo’s NPK fertilizer ...........................................71
3.2.1. Production technology..............................................................................72
3.2.2. Raw material sources................................................................................72
3.2.3. Production capability................................................................................72
3.2.4. Marketing and distribution capability ......................................................73
3.2.5. Product positioning of PVFCCo’s NPK fertilizer ....................................74
3.3. Marketing targets for NPK products...............................................................76
3.4. Marketing Mix for NPK fertilizer of PVFCCo ..............................................78
3.4.1. Product strategies .....................................................................................78
3.4.2. Price strategies ..........................................................................................79
3.4.3. Place strategies .........................................................................................80
3.4.4. Promotion strategy ...................................................................................85
CONCLUSION .........................................................................................................87
REFERENCES ..........................................................................................................88
APPENDIX ...............................................................................................................89
viii
LIST ABBREVIATIONS
Abbreviations Abbreviation Name
PVFCCo Petro Vietnam Fertilizer and Chemicals Corporation
P.E.S.T Political, Economic, Social-cultural, and Technological factor
N.P.K Nitrogen, Phosphor, Kalium
WTO World Trade Organization
VN Vietnam
FDI Foreign Direct Investment
LAFCHEMCO Lam Thao Fertilizers and Chemicals Company
JSC Joint Stock Company
AFTA Asian Free Trade Area
ASEAN Association of Southeast Asian Nations
SWOT Strength, Weakness, Opportunity and Threat
ix
LIST OF FIGURES
Figure1.1. Marketing Research Process ......................................................................6
Figure 1.2. PEST Model in macro environment analysis ...........................................7
Figure1.3. Five forces model for industry analysis ...................................................10
Figure1.4. Marketing mix model ..............................................................................20
Figure 2.1: Somepictures of PVFCCo’sthe awards ..................................................24
Figure 2.2.FDI into Vietnam in theperiod 2006 – 2010............................................27
Figure2.3. Vietnam agriculture products breakdown in 2010 ..................................28
Figure 2.4: NPK consumer from 3003 to 2010 .........................................................33
Figure 2.5: Consumption – production balance period 2003 -2010 .........................33
Figure 2.6: NPK Import from 2003 to 2010 .............................................................34
Figure 2.7: The main sources to produce NPK fertilizer product (Mixed Acid Route)
...................................................................................................................................49
Figure 2.8: The main source to produce NPK(Nitro phosphate Route) .....................49
Figure2.9.NPK’s regional demand in 2010 (Unit: percentage) ................................54
Figure2.10.NPK’s regional demand in 2010 (Unit: 1000 tons) ................................54
Figure2.11. Market share of main rivals in Northern area ........................................56
Figure2.12. Market share of main rivals in Southern area ........................................56
Figure2.13. Market share of main rivals in Central area ..........................................57
Figure2.14. Reference information of buying fertilizer ............................................58
Figure 2.15.Perceptual Map of NPK products .........................................................60
Figure 3.1.The designed location of NPK fertilizer production plant ......................67
Figure 3.2.Market share of main rivals in Northern area ..........................................68
x
Figure 3.3: Market share of main rivals in Southern area .........................................68
Figure 3.4: Market share of main rivals in Central area ...........................................69
Figure 3.5: NPK’s regional demand in 2010 (Unit: percentage) ..............................70
Figure 3.6: NPK’s regional demand in 2010 (Unit: 1000 tons) ................................70
Figure 3.7: Structure of distribution system of PVFCCo..........................................73
Figure 3.8.Perceptual Map of NPK products ...........................................................75
Figure 3.9.Target output of NPK in period 2012-2014.............................................76
Figure 3.10.Target market share of NPK market in period 2012-2014 ....................77
Figure 3.11.Target revenue of NPK in period 2012-2014 ........................................77
Figure 3.12: NPK Fertilizer prices in period 2012-2014 ..........................................80
xi
LIST OF TABLES
Table 1.1: 4P and 4C relation ....................................................................................21
Table 2.1: Production and operation performance of PVFCCo ................................25
Table 2.2. NPK Production Companies’ business area in Vietnam market .............34
Table 2.3: The strengths and weaknesses of JVF .....................................................37
Table 2.4: The strengths and weaknesses of BinhDien Fertilizer Joint Stock
Company ...................................................................................................................40
Table 2.5: The strengths and weaknesses of LAFCHEMCO ...................................43
Table 2.6: The strengths and weaknesses of Baconco ..............................................45
Table 2.7: The strengths and weaknesses of Nam Sao International JSC ................48
Table2.8. Location, capacity and output of factories ................................................55
Table 3.1: The plants using NPK fertilizer ...............................................................71
Table 3.2 Strengths and weaknesses of PVFCCo .....................................................74
Table:3.3. The distribution system in the target market ...........................................82
xii
INTRODUCTION
1. The thesis title
Marketing solutions for NPK fertilizer of Petrovietnam Fertilizer and Chemicals
Corporation (PVFCCo) in the period 2012 - 2014
2. Necessity of the thesis
In the period of economic renovation reform (often known as “Doi Moi”),
the most outstanding achievement made by Vietnam agricultural sector is the world
appreciation of its food production and exports. After the war end in 1975, Vietnam
fell deep into the food crisis. However, since 1989 Vietnam agriculture industry has
not only served the domestic demand but also exported products to the world
market, namely rice, coffee, cashew nuts, etc. This remarkable achievement is a
result of policy done by the Party and Government, which has paid attention to
agricultural development. In addition, the agriculture has also applied the scientific
and technical methods and effective usage of fertilizers in farming. Despite the
existing achievements, agriculture industry needs further promotion and investment
because Vietnam is still a backward agricultural country. The farming knowledge of
farmers remains limited as they commonly base on their own experience in
cultivation. Vietnam does need a comprehensive agricultural revolution to develop
the industry both in quantity and quality basis or we would fail to catch up the
skyrocketing development of the world economy.
In order to promote agriculture development both in quantity and quality
basis, the industry needs the support and contribution of all economic components,
of which the important role of fertilizer production enterprises is undeniable.
Fertilizers facilitate plants to have high productivity and quality products. Fertilizer
companies must manufacture diversified and good products to meet the market
needs. This would be a responsibility as well as a challenge for PVFCCo when the
firm provides urea and NPK fertilizers in the market.
Before 2006, the production of fertilizer companies did not meet the need of
the market; thus, the marketing activities were not paid enough attention and
1
promoted by the fertilizer companies. Since Vietnam took part in World Trade
Organization (WTO) and other economic organizations together with the
government’s open policy, the fertilizer market has become very active and
effervescent with the participation of both fertilizer production and import firms. As
the result, enterprises have to pay attention to the market, customers and in order to
increase the market share they have to apply the art of marketing mix with product,
price, place and promotion strategies.
PetroVietnam Fertilizer and Chemicals Company joined the NPK fertilizer
market after the big players namely Binh Dien, Vietnam Japan, Lam Thao, etc.; the
completion is rather fierce. To draw customer’s attraction and convince them to use
the company products, PVFCCo must have a right marketing strategy and make the
most of PVFCCo’s competitive advantages to break into the target market. To this
end, it is necessary for the company to carefully analyze the macro and industry
environment and then map out the appropriate marketing solutions for NPK
fertilizers of PVFCCo. All the above-mentioned contents are covered in the thesis.
3. Research aim and objectives
The aim of this thesis is to map out some marketing solutions that are
suitable to the NPK target market of PVFCCo.
To achieve the above goal, the study needs to utilize the following objects.
i. Apply PEST model and Five Forces model to analyze macro-environment
and the NPK industry environment.
ii. Evaluate the target markets of the rivals and PVFCCo.
iii. Base on the study result, post purchase evaluation the customer satisfaction.
Find out what are key characteristics affecting customers’ purchasing
decision, which sources of information customers refer to before purchasing
products.
iv. Apply marketing mix analysis to find out the strength and weakness of rivals
in the marketing mix policy: price, product, place and promotion.
v. Propose some marketing solutions for NPK fertilizer products of PVFCCo.
2
4. Research questions
In order to map out appropriate marketing solution for PVFCCo’s NPK products in
period 2012-2014, the thesis must answer the following questions:
i. Major research question:
What are the right marketing solutions for PVFCCo’s NPK product in
period 2012-2014?
ii. Minor research questions:
What will affect PVFCCo’s marketing policy?
What are the main rivals of PVFCCo in the NPK market? What are
their strengths and weaknesses?
What makes customers satisfied and dissatisfied when they purchased
the company’s NPK products?
5. Data sources and Research methodology
The research methodology is used in this thesis is case study and this
methodology meets the research’s objective. Data used in the thesis were taken
from both realisable secondary data about PVFCCo’s operation collected in the
process of working with PVFCCo and primary data collected from interviewing
agents and customers in target market about its products, prices, places and
promotions and from author’s observation.
There are a number of techniques used to conduct a case study research which
including:
• Interviewing staff and expert
• Economic statistic method
• Methods of description and comparison
6. Scope of the research
The research focuses on evaluating the situation of the Vietnam NPK market,
then proposes appropriate marketing solutions for PVFCCo’s NPK products in
period 2012-2014. Period 2012-2014 is the target market penetration stage; it is a
3
hard stage since PVFCCo must convince distributors, customers to use their
products. To gain competitive advantages when introducing NPK product to the
target market, the thesis must focus on the following issues:
i. Analyze the macro and industry environment of the NPK market using PEST
model and Poter’s Five Forces model.
ii. Analyze the rivals’ marketing mix strategies: product, price, place and
promotion strategies to find out the strengths and weaknesses of rivals.
iii. Propose some appropriate marketing solutions for PVFCCo’s NPK products
in period 2012-2014.
7. Significance of the research
The thesis has summarized the literature review of marketing management
and applied it in fertilizer production industry.
The proposed marketing solutions will be useful for businesses operating in
fertilizer sector.
The thesis can be used as a reference document for experts, MBA students
and college students in researching, teaching and studying.
8. Structure of the thesis
Apart from the acknowledgment, abstract, list of abbreviation, list of tables
and graphs, introduction, conclusion, references and appendix, the thesis is
organized in to 3 chapters.
Chapter 1: Literature review
Chapter 2: NPK market analysis of Petrovietnam Fertilizer and Chemicals
Corporation (PVFCCo)
Chapter 3: Marketing solutions for NPK Fertilizer of Petrovietnam Fertilizer
and Chemicals Corporation in the period 2012-2014
4
Chapter 1: LITERATURE REVIEW
1.1 The concept of marketing
There are now a lot of different concepts towards marketing. Many people
were false to associate marketing as hard selling and sales promotion as the
traditional marketing concept held “marketing is a performance of business
activities that direct the flow of goods and services from producers to consumers”.
Hence, the traditional marketing focused only on consumption and the marketing
activities are sourced from producers
Nowadays, marketing industry has developed enormously that administrators
have to change their awareness. Before, the enterprises sold “what they have?”, but
now they sell “what the market needs?” which makes the marketing concept aligned
with the reality, changing from separate marketing to marketing mix.
Marketing has brought the substantial economic effects on all the aspects of the
economy. It is an important tool both in theory and reality as well as a science that
keeps developing and fulfilling
Marketing science is a science that studies the law and characteristics of
customer needs towards goods, products, services in the market and the
development of approaches to fulfill the customer needs and maximize the
economic efficiency in the process of product, distribution, exchange and
consumption.(Sources: Prof. Dr Nguyen Viet Lam, Quan tri Marketing)
The term of marketing can be understood in different ways, including:
- Marketing is doing market research, promotion or the study of market or
market research.
- Marketing is an art of doing business, is the process of providing the right
products and services to the right people, at the right time, in the right place
and by the right way.
- Marketing is to search for customers, distribute products and collect money
or to do everything to increase sales.
5
- Philip Kotler’s definition is widely used by many people: “The societal
marketing concept holds that the organization's task is to determine the
needs, wants, and interests of target markets and to deliver the desired
satisfactions more effectively and efficiently than competitors, in a way that
preserves or enhances the consumer's and the society's well-being”.
(Source: Philip Kotler (2005), Marketing Management)
This marketing definition is based on the essential concepts of: demands,
needs and wants, product, values, costs and satisfaction, exchanges, transactions and
relationships, market, marketing and marketers.
Marketing Research Process
Marketing research is to design, collect, analyze and present the data and findings of
a certain marketing problem that company is sinking in.
Marketing research process includes 5 stages:
Research
Problem Design Data Data Report
Definition Developed Collection Analysis Presentation
(Sources: Prof. Dr Nguyen Viet Lam, Nghien cuu Marketing)
Figure1.1. Marketing Research Process
Marketing research process is as follow:
Problem and research objectives: marketing managers and researchers need
to carefully and consistently define the problem and research objectives.
In order to collect the suitable data, a detail and efficient research designed
has to be formulated. The research design formulation involves the decisions of data
sources, research methods, tools, sampling and method of contact.
Data collection: the collecting information must be accurate, honest and
objective. Electronic devices can be used in the process of collecting data to save
time and minimize the costs.
6
Researcher should not propose to the board of managers a marketing report
which is full of figures and statistical methods. Instead, major findings relating to
decision making should be highlighted. The less the board of managers hesitates in
making decision, the more practical and useful the study is.
1.2. The analysis of macro environment and industry
1.2.1. Macro environment analysis
The macro environment analysis is based on PEST Modelwhich contains
four elements, including of political, socio-cultural, economic and technological
factor. This model is to analyze and examine the impacts of key macro factors on
business activities
Sources: Michael John Baker(2001), Marketing theory
Figure 1.2. PEST Model in macro environment analysis
These are the direct macro factors that affect the whole economy. Enterprises will
base on the analysis of the impact to map out the suitable policies and business
activities.
a. Political factors:
Political factors include government regulations and legal issue thatdefine both
formal and informal rules under which the firm must operate. These factors can
7
affect the existence and development of any industries within one economy. Firms
have to obey all the regulations and legal issue of the territory or local
administrative unit where they are doing business.
Political stability: Companies always take into account the stability of
politics, diplomatic since a stable political environment will create favorable
conditions for doing business. In contrast, an instable political context and conflicts
have a negative influence on the business activities.
Tax policy: the taxation policy on exports, imports, consumption, income,
etc. will affect the revenue and profit of a company.
Law system: law on enterprises, investment, labor code, anti-monopoly, anti-
dumping, etc. also have an impact on businesses.
Policies: the government policies can have negative or positive enterprises as
they can create both the opportunities and challenges. The government policies
include policy on commerce, industry development, economic development, taxes,
competition regulation, consumer protection, etc.
b. Economic factor: Enterprises need to pay attention to both short-run and long-
run economic factors as well as the government intervention on the economy.
Commonly, enterprises will base on the economic factors to make the
investment decision.
Economic situation: every economy has its own business cycle and
businesses have to make suitable decisions in different phases of the business cycle.
Factors affecting economy are interest rate and inflation.
Government economic policy: basic salary, economic development
strategies, incentives for industry: tax reduction, subsidies, etc.
Future economic prospects: growth rate, GDP growth, investment to GDP
ratio.
c. Socio-cultural factor: each country and territory has it distinctive socio and
cultural values which become the characteristics of consumers in the region.
8
Cultural values are the essential values that shape the society and remain its
existence and development. Hence, the cultural factors are normally protected
carefully and closely in the large scale, especially the spiritual values.
Together with cultural factors, socio factors have also been paid attention to
by enterprises when they do market research. These socio factors will segment the
community into different customer groups. Each group has different characteristics,
psychology and income levels:
+ Age distribution, health consciousness, diet
+ Average income, income distribution
+ Lifestyle, education, aesthetics, psychology
+ Living conditions
d. Technological factor: The world has been in the process of technology
revolution. A lot of new technology are introduced and applied in products and
services. Dating back to 30 years ago, computers are just served as a calculating
tool, but now they can work independently like a person. There were a lot of film
cameras available in the past but now it is impossible to find a film making
producer for cameras. Especially in the field of information technology, modern
media technology has bridged the geographic gap nationwide and worldwide.
Government and business’s investment in R&D activity: in the 60s-70s of
the last century Japan was known and admired all over the world for the
breakthrough of the economy, of which human resource and new technology are the
key pillars. Japan still has the biggest investment to GDP in research and
development in the world. The cooperation between businesses and government to
develop new technology and materials will positively affect the economy.
e. Integration factor: Beside the four key factors above, integration factor also has
substantial effect on the macro environment which firms operate in.
Globalization is an undeniable trend which offers a lot of opportunities for
enterprises. Globalization drives up the competitiveness since there are many rivals
coming from all over the world. The globalization urges businesses to adjust
9
suitably towards comparative advantages, regional and global distribution of labor
force.
Most importantly, in the globalization process trade tariff are gradually lift
and enterprises have the opportunities to do business with partners from all over the
world. This means that customers now not only come from the domestic market
where the companies operate but also from international market.
1.2.2. Industry analysis
Porter’s Five Forces Model was first introduced on Time Harvard Business
Review magazine dated 1979, addressing 2 factors that bring profits for business.
This model, also named “the five forces of Porter”, is considered an effective and
useful tool to understand the source of profits. More importantly, this model
provides the enterprises competition strategies to help maintain or boost the profit.
5 forces here include suppliers, rivals, buyers, new entrants and substitute products
and services.
Source: Mechael E. Porter: Competitive Strategy
Figure1.3. Five forces model for industry analysis
The analysis steps include:
- Bargaining power of suppliers
- Bargaining power of buyers
10
- Assess the existing rivals.
- Threat of new entrants
- Threat of substitute products and services
a. Bargaining power of suppliers: can be seen in the following aspects
- Concentration of suppliers.
- The importance of the products they provide.
- The differentiation of suppliers.
- Impact of inputs on cost or differentiation
- Supplier switching costs relative to firm switching costs.
- Presence of substitute inputs.
- Threat of merging between suppliers.
- Supplier costs compared to total profits.
Number of scale of the suppliers: Number of the suppliers will decide the
competitive pressure, their bargaining power with the business. If there are only few
dominant suppliers in the market, that will intensify the competitive pressure and
affect the whole business activities of the industry.(Source: David, Aaker, Hoboken,
John Wiley (2005), Strategic marketing management)
Presence of the substitute inputs: we will study the inputs that can substitute
the suppliers’ input and the suppliers’ witching cost.
Information about suppliers: Currently, information is always the factor that
promotes trading development. The suppliers’ information has great impact on the
enterprise’s supplier selection decision.
In every industry, suppliers often exert certain pressure on enterprises if they
have economic scale, rare and valuable resource. Therefore, small suppliers
(farmers, handicraftsmen, etc.) have limited bargaining power; despite they are
large in number.
b. Bargaining power of buyers: can be seen in
- Bargaining leverage.
- Buyer volume.
11
- Buyer information availability.
- Typicalness of products.
- Buyer price sensitivity.
- Differentiation of products.
- Buyer concentration.
- Availability of existing substitute products.
- Motivation of buyers.
Buyers’ bargaining power is a competitive pressure that can affect the whole
industry activities.
Buyers are divided into 2 groups:
+ Customers
+ Distributors
These 2 groups both exert pressure of price, products and service quality on
the company and they are the ones who drive the competition in the market through
purchase decision.
Similar to the bargaining power of suppliers, we also need to take into
consideration factors that affect bargaining power of buyers.
+ Number of buyers
+ Importance of buyers
+ Buyers switching cost
+ Buyer information.
We need to pay special attention to the importance of distributors; they can
have strong influence on the business.
Distributors in fertilizer industry have right to negotiate about prices, product
quality as well as marketing policy with the producers because there are many
fertilizer producers in the market, thus distributors have power in selecting their
partners.
c. Threat from new entrants:
12
SCHOOL OF BUSINESS
Tran Van Hiep
MARKETING SOLUTIONS FOR NPK FERTILIZER OF
PETROVIETNAM FERTILIZER AND CHEMICALS
CORPORATION (PVFCCo) IN THE PERIOD 2012 – 2014
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
SUMMARY
Supervisor: Dr. Tran Doan Kim
Hanoi – 2011
TABLE OF CONTENTS
ACKNOWLEDGEMENTS ........................................................................................ i
ABSTRACT ............................................................................................................... ii
TÓM TẮT ................................................................................................................. iv
TABLE OF CONTENTS .......................................................................................... vi
LIST ABBREVIATIONS ......................................................................................... ix
LIST OF FIGURES.....................................................................................................x
LIST OF TABLES ................................................................................................... xii
INTRODUCTION .......................................................................................................1
1. The thesis title ......................................................................................................1
2. Necessity of the thesis .........................................................................................1
3. Research aim and objectives ................................................................................2
4. Research questions ...............................................................................................3
5. Data sources and Research methodology ............................................................3
6. Scope of the research ...........................................................................................3
7. Significance of the research .................................................................................4
8. Structure of the thesis ..........................................................................................4
Chapter 1: LITERATURE REVIEW ..........................................................................5
1.1 The concept of marketing ..................................................................................5
1.2. The analysis of macro environment and industry .............................................7
1.2.1. Macro environment analysis ......................................................................7
1.2.2. Industry analysis .......................................................................................10
1.3. Target market segmentation, selection and positioning .................................14
1.3.1. Market segmentation ................................................................................15
1.3.2. Select the target market ............................................................................17
1.3.3. Positioning in the Market. ........................................................................17
1.4. Marketing Mix (4P). .......................................................................................20
Chapter 2: NPK MARKET ANALYSIS OF PETROVIETNAM FERTILIZER
AND CHEMICALS CORPORATION (PVFCCo) ..................................................23
vi
2.1. Process of establishment and development ....................................................23
2.2. Production and operation performance of PVFCCo.......................................24
2.3. Macro environment analysis ...........................................................................26
2.3.1.Politics .......................................................................................................26
2.3.2 Economic factors analysis .........................................................................28
2.3.3 Cultural and social factors .........................................................................29
2.3.4 Technological factors ................................................................................31
2.4. Industry environment analysis ........................................................................32
2.4.1. NPK Fertilizer market analysis ................................................................32
2.4.2. Competitors analysis ................................................................................34
2.4.3. Pressure from Customer ...........................................................................48
2.4.4. Pressure from material sources. ...............................................................49
2.4.6. Pressure from substitute products to NPK fertilizer .................................53
2.5 Target market analysis of competitors .............................................................53
2.5.1 Regional demand .......................................................................................53
2.5.2 Market share ..............................................................................................54
2.6 Customers’ comments on NPK fertilizers. ......................................................57
2.6.1.Farmer customers. .....................................................................................57
2.6.2. Distributor and retailer customers ............................................................59
2.6.3 NPK Products Positioning Analysis ..........................................................60
2.7. Analysis of Competitors’ Marketing Mix ......................................................61
2.7.1. Japan Vietnam Fertilizers .........................................................................61
2.7.2. BinhDien Fertilizers Joint Stock Company..............................................61
2.7.3. Lam Thao Fertilizers and Chemicals Company (LAFCHEMCO) ..........62
2.7.4. Baconco Limited Company ......................................................................63
2.7.5. Nam Sao International Joint Stock Company ..........................................64
Chapter 3: MARKETING SOLUTIONS FOR NPK FERTILIZER
OFPETROVIETNAM FERTILIZER AND CHEMICALS CORPORATION
(PVFCCo)IN THE PERIOD 2012 – 2014 ...................................................................67
3.1 Target market of PVFCCo’s NPK fertilizer ....................................................67
vii
3.1.1. Plant location ............................................................................................67
3.1.2. Marketcompetitiveness .............................................................................68
3.1.3. Market attractiveness ................................................................................69
3.2 Positioning strategy of PVFCCo’s NPK fertilizer ...........................................71
3.2.1. Production technology..............................................................................72
3.2.2. Raw material sources................................................................................72
3.2.3. Production capability................................................................................72
3.2.4. Marketing and distribution capability ......................................................73
3.2.5. Product positioning of PVFCCo’s NPK fertilizer ....................................74
3.3. Marketing targets for NPK products...............................................................76
3.4. Marketing Mix for NPK fertilizer of PVFCCo ..............................................78
3.4.1. Product strategies .....................................................................................78
3.4.2. Price strategies ..........................................................................................79
3.4.3. Place strategies .........................................................................................80
3.4.4. Promotion strategy ...................................................................................85
CONCLUSION .........................................................................................................87
REFERENCES ..........................................................................................................88
APPENDIX ...............................................................................................................89
viii
LIST ABBREVIATIONS
Abbreviations Abbreviation Name
PVFCCo Petro Vietnam Fertilizer and Chemicals Corporation
P.E.S.T Political, Economic, Social-cultural, and Technological factor
N.P.K Nitrogen, Phosphor, Kalium
WTO World Trade Organization
VN Vietnam
FDI Foreign Direct Investment
LAFCHEMCO Lam Thao Fertilizers and Chemicals Company
JSC Joint Stock Company
AFTA Asian Free Trade Area
ASEAN Association of Southeast Asian Nations
SWOT Strength, Weakness, Opportunity and Threat
ix
LIST OF FIGURES
Figure1.1. Marketing Research Process ......................................................................6
Figure 1.2. PEST Model in macro environment analysis ...........................................7
Figure1.3. Five forces model for industry analysis ...................................................10
Figure1.4. Marketing mix model ..............................................................................20
Figure 2.1: Somepictures of PVFCCo’sthe awards ..................................................24
Figure 2.2.FDI into Vietnam in theperiod 2006 – 2010............................................27
Figure2.3. Vietnam agriculture products breakdown in 2010 ..................................28
Figure 2.4: NPK consumer from 3003 to 2010 .........................................................33
Figure 2.5: Consumption – production balance period 2003 -2010 .........................33
Figure 2.6: NPK Import from 2003 to 2010 .............................................................34
Figure 2.7: The main sources to produce NPK fertilizer product (Mixed Acid Route)
...................................................................................................................................49
Figure 2.8: The main source to produce NPK(Nitro phosphate Route) .....................49
Figure2.9.NPK’s regional demand in 2010 (Unit: percentage) ................................54
Figure2.10.NPK’s regional demand in 2010 (Unit: 1000 tons) ................................54
Figure2.11. Market share of main rivals in Northern area ........................................56
Figure2.12. Market share of main rivals in Southern area ........................................56
Figure2.13. Market share of main rivals in Central area ..........................................57
Figure2.14. Reference information of buying fertilizer ............................................58
Figure 2.15.Perceptual Map of NPK products .........................................................60
Figure 3.1.The designed location of NPK fertilizer production plant ......................67
Figure 3.2.Market share of main rivals in Northern area ..........................................68
x
Figure 3.3: Market share of main rivals in Southern area .........................................68
Figure 3.4: Market share of main rivals in Central area ...........................................69
Figure 3.5: NPK’s regional demand in 2010 (Unit: percentage) ..............................70
Figure 3.6: NPK’s regional demand in 2010 (Unit: 1000 tons) ................................70
Figure 3.7: Structure of distribution system of PVFCCo..........................................73
Figure 3.8.Perceptual Map of NPK products ...........................................................75
Figure 3.9.Target output of NPK in period 2012-2014.............................................76
Figure 3.10.Target market share of NPK market in period 2012-2014 ....................77
Figure 3.11.Target revenue of NPK in period 2012-2014 ........................................77
Figure 3.12: NPK Fertilizer prices in period 2012-2014 ..........................................80
xi
LIST OF TABLES
Table 1.1: 4P and 4C relation ....................................................................................21
Table 2.1: Production and operation performance of PVFCCo ................................25
Table 2.2. NPK Production Companies’ business area in Vietnam market .............34
Table 2.3: The strengths and weaknesses of JVF .....................................................37
Table 2.4: The strengths and weaknesses of BinhDien Fertilizer Joint Stock
Company ...................................................................................................................40
Table 2.5: The strengths and weaknesses of LAFCHEMCO ...................................43
Table 2.6: The strengths and weaknesses of Baconco ..............................................45
Table 2.7: The strengths and weaknesses of Nam Sao International JSC ................48
Table2.8. Location, capacity and output of factories ................................................55
Table 3.1: The plants using NPK fertilizer ...............................................................71
Table 3.2 Strengths and weaknesses of PVFCCo .....................................................74
Table:3.3. The distribution system in the target market ...........................................82
xii
INTRODUCTION
1. The thesis title
Marketing solutions for NPK fertilizer of Petrovietnam Fertilizer and Chemicals
Corporation (PVFCCo) in the period 2012 - 2014
2. Necessity of the thesis
In the period of economic renovation reform (often known as “Doi Moi”),
the most outstanding achievement made by Vietnam agricultural sector is the world
appreciation of its food production and exports. After the war end in 1975, Vietnam
fell deep into the food crisis. However, since 1989 Vietnam agriculture industry has
not only served the domestic demand but also exported products to the world
market, namely rice, coffee, cashew nuts, etc. This remarkable achievement is a
result of policy done by the Party and Government, which has paid attention to
agricultural development. In addition, the agriculture has also applied the scientific
and technical methods and effective usage of fertilizers in farming. Despite the
existing achievements, agriculture industry needs further promotion and investment
because Vietnam is still a backward agricultural country. The farming knowledge of
farmers remains limited as they commonly base on their own experience in
cultivation. Vietnam does need a comprehensive agricultural revolution to develop
the industry both in quantity and quality basis or we would fail to catch up the
skyrocketing development of the world economy.
In order to promote agriculture development both in quantity and quality
basis, the industry needs the support and contribution of all economic components,
of which the important role of fertilizer production enterprises is undeniable.
Fertilizers facilitate plants to have high productivity and quality products. Fertilizer
companies must manufacture diversified and good products to meet the market
needs. This would be a responsibility as well as a challenge for PVFCCo when the
firm provides urea and NPK fertilizers in the market.
Before 2006, the production of fertilizer companies did not meet the need of
the market; thus, the marketing activities were not paid enough attention and
1
promoted by the fertilizer companies. Since Vietnam took part in World Trade
Organization (WTO) and other economic organizations together with the
government’s open policy, the fertilizer market has become very active and
effervescent with the participation of both fertilizer production and import firms. As
the result, enterprises have to pay attention to the market, customers and in order to
increase the market share they have to apply the art of marketing mix with product,
price, place and promotion strategies.
PetroVietnam Fertilizer and Chemicals Company joined the NPK fertilizer
market after the big players namely Binh Dien, Vietnam Japan, Lam Thao, etc.; the
completion is rather fierce. To draw customer’s attraction and convince them to use
the company products, PVFCCo must have a right marketing strategy and make the
most of PVFCCo’s competitive advantages to break into the target market. To this
end, it is necessary for the company to carefully analyze the macro and industry
environment and then map out the appropriate marketing solutions for NPK
fertilizers of PVFCCo. All the above-mentioned contents are covered in the thesis.
3. Research aim and objectives
The aim of this thesis is to map out some marketing solutions that are
suitable to the NPK target market of PVFCCo.
To achieve the above goal, the study needs to utilize the following objects.
i. Apply PEST model and Five Forces model to analyze macro-environment
and the NPK industry environment.
ii. Evaluate the target markets of the rivals and PVFCCo.
iii. Base on the study result, post purchase evaluation the customer satisfaction.
Find out what are key characteristics affecting customers’ purchasing
decision, which sources of information customers refer to before purchasing
products.
iv. Apply marketing mix analysis to find out the strength and weakness of rivals
in the marketing mix policy: price, product, place and promotion.
v. Propose some marketing solutions for NPK fertilizer products of PVFCCo.
2
4. Research questions
In order to map out appropriate marketing solution for PVFCCo’s NPK products in
period 2012-2014, the thesis must answer the following questions:
i. Major research question:
What are the right marketing solutions for PVFCCo’s NPK product in
period 2012-2014?
ii. Minor research questions:
What will affect PVFCCo’s marketing policy?
What are the main rivals of PVFCCo in the NPK market? What are
their strengths and weaknesses?
What makes customers satisfied and dissatisfied when they purchased
the company’s NPK products?
5. Data sources and Research methodology
The research methodology is used in this thesis is case study and this
methodology meets the research’s objective. Data used in the thesis were taken
from both realisable secondary data about PVFCCo’s operation collected in the
process of working with PVFCCo and primary data collected from interviewing
agents and customers in target market about its products, prices, places and
promotions and from author’s observation.
There are a number of techniques used to conduct a case study research which
including:
• Interviewing staff and expert
• Economic statistic method
• Methods of description and comparison
6. Scope of the research
The research focuses on evaluating the situation of the Vietnam NPK market,
then proposes appropriate marketing solutions for PVFCCo’s NPK products in
period 2012-2014. Period 2012-2014 is the target market penetration stage; it is a
3
hard stage since PVFCCo must convince distributors, customers to use their
products. To gain competitive advantages when introducing NPK product to the
target market, the thesis must focus on the following issues:
i. Analyze the macro and industry environment of the NPK market using PEST
model and Poter’s Five Forces model.
ii. Analyze the rivals’ marketing mix strategies: product, price, place and
promotion strategies to find out the strengths and weaknesses of rivals.
iii. Propose some appropriate marketing solutions for PVFCCo’s NPK products
in period 2012-2014.
7. Significance of the research
The thesis has summarized the literature review of marketing management
and applied it in fertilizer production industry.
The proposed marketing solutions will be useful for businesses operating in
fertilizer sector.
The thesis can be used as a reference document for experts, MBA students
and college students in researching, teaching and studying.
8. Structure of the thesis
Apart from the acknowledgment, abstract, list of abbreviation, list of tables
and graphs, introduction, conclusion, references and appendix, the thesis is
organized in to 3 chapters.
Chapter 1: Literature review
Chapter 2: NPK market analysis of Petrovietnam Fertilizer and Chemicals
Corporation (PVFCCo)
Chapter 3: Marketing solutions for NPK Fertilizer of Petrovietnam Fertilizer
and Chemicals Corporation in the period 2012-2014
4
Chapter 1: LITERATURE REVIEW
1.1 The concept of marketing
There are now a lot of different concepts towards marketing. Many people
were false to associate marketing as hard selling and sales promotion as the
traditional marketing concept held “marketing is a performance of business
activities that direct the flow of goods and services from producers to consumers”.
Hence, the traditional marketing focused only on consumption and the marketing
activities are sourced from producers
Nowadays, marketing industry has developed enormously that administrators
have to change their awareness. Before, the enterprises sold “what they have?”, but
now they sell “what the market needs?” which makes the marketing concept aligned
with the reality, changing from separate marketing to marketing mix.
Marketing has brought the substantial economic effects on all the aspects of the
economy. It is an important tool both in theory and reality as well as a science that
keeps developing and fulfilling
Marketing science is a science that studies the law and characteristics of
customer needs towards goods, products, services in the market and the
development of approaches to fulfill the customer needs and maximize the
economic efficiency in the process of product, distribution, exchange and
consumption.(Sources: Prof. Dr Nguyen Viet Lam, Quan tri Marketing)
The term of marketing can be understood in different ways, including:
- Marketing is doing market research, promotion or the study of market or
market research.
- Marketing is an art of doing business, is the process of providing the right
products and services to the right people, at the right time, in the right place
and by the right way.
- Marketing is to search for customers, distribute products and collect money
or to do everything to increase sales.
5
- Philip Kotler’s definition is widely used by many people: “The societal
marketing concept holds that the organization's task is to determine the
needs, wants, and interests of target markets and to deliver the desired
satisfactions more effectively and efficiently than competitors, in a way that
preserves or enhances the consumer's and the society's well-being”.
(Source: Philip Kotler (2005), Marketing Management)
This marketing definition is based on the essential concepts of: demands,
needs and wants, product, values, costs and satisfaction, exchanges, transactions and
relationships, market, marketing and marketers.
Marketing Research Process
Marketing research is to design, collect, analyze and present the data and findings of
a certain marketing problem that company is sinking in.
Marketing research process includes 5 stages:
Research
Problem Design Data Data Report
Definition Developed Collection Analysis Presentation
(Sources: Prof. Dr Nguyen Viet Lam, Nghien cuu Marketing)
Figure1.1. Marketing Research Process
Marketing research process is as follow:
Problem and research objectives: marketing managers and researchers need
to carefully and consistently define the problem and research objectives.
In order to collect the suitable data, a detail and efficient research designed
has to be formulated. The research design formulation involves the decisions of data
sources, research methods, tools, sampling and method of contact.
Data collection: the collecting information must be accurate, honest and
objective. Electronic devices can be used in the process of collecting data to save
time and minimize the costs.
6
Researcher should not propose to the board of managers a marketing report
which is full of figures and statistical methods. Instead, major findings relating to
decision making should be highlighted. The less the board of managers hesitates in
making decision, the more practical and useful the study is.
1.2. The analysis of macro environment and industry
1.2.1. Macro environment analysis
The macro environment analysis is based on PEST Modelwhich contains
four elements, including of political, socio-cultural, economic and technological
factor. This model is to analyze and examine the impacts of key macro factors on
business activities
Sources: Michael John Baker(2001), Marketing theory
Figure 1.2. PEST Model in macro environment analysis
These are the direct macro factors that affect the whole economy. Enterprises will
base on the analysis of the impact to map out the suitable policies and business
activities.
a. Political factors:
Political factors include government regulations and legal issue thatdefine both
formal and informal rules under which the firm must operate. These factors can
7
affect the existence and development of any industries within one economy. Firms
have to obey all the regulations and legal issue of the territory or local
administrative unit where they are doing business.
Political stability: Companies always take into account the stability of
politics, diplomatic since a stable political environment will create favorable
conditions for doing business. In contrast, an instable political context and conflicts
have a negative influence on the business activities.
Tax policy: the taxation policy on exports, imports, consumption, income,
etc. will affect the revenue and profit of a company.
Law system: law on enterprises, investment, labor code, anti-monopoly, anti-
dumping, etc. also have an impact on businesses.
Policies: the government policies can have negative or positive enterprises as
they can create both the opportunities and challenges. The government policies
include policy on commerce, industry development, economic development, taxes,
competition regulation, consumer protection, etc.
b. Economic factor: Enterprises need to pay attention to both short-run and long-
run economic factors as well as the government intervention on the economy.
Commonly, enterprises will base on the economic factors to make the
investment decision.
Economic situation: every economy has its own business cycle and
businesses have to make suitable decisions in different phases of the business cycle.
Factors affecting economy are interest rate and inflation.
Government economic policy: basic salary, economic development
strategies, incentives for industry: tax reduction, subsidies, etc.
Future economic prospects: growth rate, GDP growth, investment to GDP
ratio.
c. Socio-cultural factor: each country and territory has it distinctive socio and
cultural values which become the characteristics of consumers in the region.
8
Cultural values are the essential values that shape the society and remain its
existence and development. Hence, the cultural factors are normally protected
carefully and closely in the large scale, especially the spiritual values.
Together with cultural factors, socio factors have also been paid attention to
by enterprises when they do market research. These socio factors will segment the
community into different customer groups. Each group has different characteristics,
psychology and income levels:
+ Age distribution, health consciousness, diet
+ Average income, income distribution
+ Lifestyle, education, aesthetics, psychology
+ Living conditions
d. Technological factor: The world has been in the process of technology
revolution. A lot of new technology are introduced and applied in products and
services. Dating back to 30 years ago, computers are just served as a calculating
tool, but now they can work independently like a person. There were a lot of film
cameras available in the past but now it is impossible to find a film making
producer for cameras. Especially in the field of information technology, modern
media technology has bridged the geographic gap nationwide and worldwide.
Government and business’s investment in R&D activity: in the 60s-70s of
the last century Japan was known and admired all over the world for the
breakthrough of the economy, of which human resource and new technology are the
key pillars. Japan still has the biggest investment to GDP in research and
development in the world. The cooperation between businesses and government to
develop new technology and materials will positively affect the economy.
e. Integration factor: Beside the four key factors above, integration factor also has
substantial effect on the macro environment which firms operate in.
Globalization is an undeniable trend which offers a lot of opportunities for
enterprises. Globalization drives up the competitiveness since there are many rivals
coming from all over the world. The globalization urges businesses to adjust
9
suitably towards comparative advantages, regional and global distribution of labor
force.
Most importantly, in the globalization process trade tariff are gradually lift
and enterprises have the opportunities to do business with partners from all over the
world. This means that customers now not only come from the domestic market
where the companies operate but also from international market.
1.2.2. Industry analysis
Porter’s Five Forces Model was first introduced on Time Harvard Business
Review magazine dated 1979, addressing 2 factors that bring profits for business.
This model, also named “the five forces of Porter”, is considered an effective and
useful tool to understand the source of profits. More importantly, this model
provides the enterprises competition strategies to help maintain or boost the profit.
5 forces here include suppliers, rivals, buyers, new entrants and substitute products
and services.
Source: Mechael E. Porter: Competitive Strategy
Figure1.3. Five forces model for industry analysis
The analysis steps include:
- Bargaining power of suppliers
- Bargaining power of buyers
10
- Assess the existing rivals.
- Threat of new entrants
- Threat of substitute products and services
a. Bargaining power of suppliers: can be seen in the following aspects
- Concentration of suppliers.
- The importance of the products they provide.
- The differentiation of suppliers.
- Impact of inputs on cost or differentiation
- Supplier switching costs relative to firm switching costs.
- Presence of substitute inputs.
- Threat of merging between suppliers.
- Supplier costs compared to total profits.
Number of scale of the suppliers: Number of the suppliers will decide the
competitive pressure, their bargaining power with the business. If there are only few
dominant suppliers in the market, that will intensify the competitive pressure and
affect the whole business activities of the industry.(Source: David, Aaker, Hoboken,
John Wiley (2005), Strategic marketing management)
Presence of the substitute inputs: we will study the inputs that can substitute
the suppliers’ input and the suppliers’ witching cost.
Information about suppliers: Currently, information is always the factor that
promotes trading development. The suppliers’ information has great impact on the
enterprise’s supplier selection decision.
In every industry, suppliers often exert certain pressure on enterprises if they
have economic scale, rare and valuable resource. Therefore, small suppliers
(farmers, handicraftsmen, etc.) have limited bargaining power; despite they are
large in number.
b. Bargaining power of buyers: can be seen in
- Bargaining leverage.
- Buyer volume.
11
- Buyer information availability.
- Typicalness of products.
- Buyer price sensitivity.
- Differentiation of products.
- Buyer concentration.
- Availability of existing substitute products.
- Motivation of buyers.
Buyers’ bargaining power is a competitive pressure that can affect the whole
industry activities.
Buyers are divided into 2 groups:
+ Customers
+ Distributors
These 2 groups both exert pressure of price, products and service quality on
the company and they are the ones who drive the competition in the market through
purchase decision.
Similar to the bargaining power of suppliers, we also need to take into
consideration factors that affect bargaining power of buyers.
+ Number of buyers
+ Importance of buyers
+ Buyers switching cost
+ Buyer information.
We need to pay special attention to the importance of distributors; they can
have strong influence on the business.
Distributors in fertilizer industry have right to negotiate about prices, product
quality as well as marketing policy with the producers because there are many
fertilizer producers in the market, thus distributors have power in selecting their
partners.
c. Threat from new entrants:
12