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Mini Report GSM Nhóm 4 CT5
Mini Report GSM Nhóm 4 CT5
COLLEGE OF ECONOMICS
DEPARTMENT OF INTERNATIONAL BUSINESS –
MARKETING
Final Essay
Topic:
Choose a global brand, which has not entered the Vietnam
market, analyze the market attractiveness towards that
brand. Suggest a possible entry mode for that brand.
Final Essay
1. Company overview:
Walmart, Inc. (WMT) is an American multinational discount store operator and one of the largest
corporations in the global retail industry. It was founded in 1962 by Sam Walton in Rogers, Arkansas. In
addition, the company headquarters is located in Bentonville, Arkansas.
Walmart was formerly known as Wal-Mart Stores – one of the most famous and highly valued retail
brands in the world. Walmart started in the US as a discount store, a model of selling more goods at a
cheaper price. Now, Walmart has many different types of retail stores, discount stores, supermarket
centers. The multinational company is now the world's largest retailer.
2. Business Model:
Walmart expanded and innovated on the methods and ideas that defined its sector after emerging from
the "five-and-dime store" business environment to become the worldwide retailing powerhouse it is today
which include:
- Discount retailer: Offers a wide variety of products at lower prices than competitors.
- Large stores: Warehouses and supercenters provide one-stop shopping for groceries, general
merchandise, and more.
- Economies of scale: Bulk buying and efficient supply chain management allows for lower prices.
- Private label brands: Develops and sells its own brands alongside national brands, often at a lower
cost.
Ultimately, Walmart has become a retail giant because of its history in inexpensive retailing as well as its
emphasis on scale and efficiency. The necessity to adjust to shifting customer tastes and internet
competition present additional difficulties for the business, though.
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II. VIETNAM INDUSTRY ANALYSIS
A. MARKET ANALYSIS
1. Overview
The middle class in Vietnam has been expanding geographically and becoming more varied over the last
few years. Vietnam's middle-class consumers tend to be optimistic, and this attitude seems to be
continuing as the nation emerges from a period of economic contraction and restraint.
However, when it comes to overall optimism, Vietnamese consumers continue to rank among the highest
in the world. Vietnamese consumers expressed optimism that the nation's economy will recover in two to
three months and develop at least as strongly as it did before the COVID-19 epidemic, according to more
than 60% of respondents to a 2022 McKinsey Vietnam Consumer Pulse Survey (Exhibit 1). This is still
the case in 2023, when 70% of Vietnamese consumers anticipate increasing their Tet celebration spending
from 2022 levels. Customers also clearly expect to "splurge" and indulge themselves; over 70% of
respondents stated they plan to spend more on categories of goods or services that they haven't spent as
much on in the previous 18 months.
Exhibit 1:McKinsey COVID-19 Consumer Survey 2022 conducted in Aug (For Australia, China, India,
Indonesia, Japan, and South Korea), Oct (Philippines), and Dec (Vietnam); McKinsey research indicates
no significant changes in consumer COVID-10 sentiment between Aug and Dec, except for China, where
positive changes in sentiment were expected due to the government lifting COVID-19 restrictions.
Despite their optimism, Vietnamese customers are nevertheless growing more discriminating and value-
conscious. Compared to consumers in other Asia-Pacific nations, Vietnamese consumers are more likely
to foresee a decline in income and savings; over 90% of them have noted price rises, inflation worries,
gas shortages combined with increased fuel costs, and rising interest rates (Exhibit 2). The increasing
financial strain and unpredictability are driving people to make more thoughtful purchasing decisions.
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Vietnamese consumers report the highest percentage of reduction in income spending, and savings when
compared with other Asia-Pacific countries.
2. Consumer’s behaviors:
Vietnamese consumer behavior: Vietnamese consumers are getting smarter and appear to be changing in
four areas: they are looking for a purpose in their purchases, they are more value-conscious, they prefer
omni channel platforms, and they are less brand and shop loyal. The "four zeros'' are a framework that
can be used to describe this.
- "Zero mainstream": Value-conscious consumers save money on certain items yet overspend on
others:
+ Spending is increasing across categories due to inflation and customers moving to premium
goods, although spending appears to be down due to a decrease in the number of items purchased.
+ A net intent to spend is reported by consumers in most categories, with the exception of "core"
areas like grocery and petrol. Additionally, consumers are willing to spend more on personal care
products and domestic necessities but less on eating out. There was an increase in net intent for
a few discretionary categories, including vitamins, over-the-counter medications, exercise
products, and personal healthcare items. Second, within categories, spending is likely to be
concentrated in either premium or more "value for money" goods, with middle-of-the-road
products perhaps losing out to unsold inventory.
- Zero boundaries: Customers want a "phygital" experience and prefer omnichannel purchasing.
+ The media and technology companies that are delivering omnichannel solutions are what are
driving this trend. In addition, as purveyors increase the range of products and services they offer,
distinctions between different product categories are also becoming less clear. Groceries and
vitamin supplements are two examples of specific products that defy this trend and are preferred
by customers to purchase in-store, but these are the outliers.
+ Social media, particularly YouTube, Instagram, and Tik Tok, has a much greater influence on
younger consumers' purchase decisions. Social media information about makeup and skin care,
shoes and jewelry accessories, personal hygiene items, and takeout or delivery of meals has a
special effect on Generation Z. Customers are purchasing a lot of remote and digital services, and
they appear to have no intention of stopping across all service categories.
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More than 65 percent of Vietnamese consumers intend to use alternative methods to in-store shopping
post pandemic.
Compared to other nations in Asia-Pacific, Vietnamese consumers are the least loyal to stores and brands.
- Net zero: Customers make deliberate purchases and opt for local, sustainable, and healthier options.
+ McKinsey reports that net intent increased for discretionary categories related to sustainability
and health. For instance, 75% of customers questioned want to keep up healthy habits like using
telemedicine services and wellness apps; 28% anticipate brands to have a purpose, which includes
things like sharing customer values and attending to the well-being of their staff.
+ Even though consumers value sustainability, it appears that supporting the environment is not as
important to them as it once was. Only 24% of consumers say they think it is important to buy
products made with recyclable packaging and eco-friendly ingredients, and 31% say they would
be willing to pay more or switch to more expensive, premium brands in order to support the
environment.
- Price sensitivity: Eighty percent of Vietnamese consumers are aware of price changes for products,
making Vietnam one of Southeast Asia's most price-sensitive marketplaces.
+ According to a study by market research firm Nielsen, price promotions may account for as much
as 56% of sales in the nation.
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+ Vietnam's product price elasticity is -2 percent, which means that if a business raises a product's
price by 1%, sales will decrease by 2% as fewer people purchase it.
+ This indicates that Vietnamese consumers are more price-sensitive than consumers in other Asian
economies, like Malaysia (-1.9 percent), Singapore ( -1.7 percent), and Thailand (-1.6 percent).
+ As to the survey, manufacturers are only earning an additional 29 cents in sales for every $1 spent
on promotions, which is less than the average sales increase of 50 cents worldwide.
+ "As many people have been negatively affected by the (Covid-19) pandemic, having the right
price and promotion strategy is extremely important. There are many businesses that have wasted
too much on promotion, and it’s time to leverage the opportunity of saving money," said Richard
Thomas, sales effectiveness director of Nielsen Vietnam.
B. COUNTRY ATTRACTIVENESS
1. Cultural distance:
Cultural distance between Vietnam and Walmart’s home country America can be analyzed using
Hofstede's cultural dimensions framework. One key dimension is "Uncertainty Avoidance," which looks
at how societies handle situations. Another important dimension is "Power Distance," which examines
how power is distributed within institutions.
Power distance: In Vietnam, organizational and cultural standards are strongly embedded with respect
for authority and hierarchical systems. There are obvious differences between individuals in positions of
authority and their subordinates, and rank and seniority are given more weight. Top-down decision-
making methods involve commands being sent from superiors to subordinates with little opportunity for
discussion or involvement. This stands in stark contrast to the more egalitarian communication
approaches and flatter organizational structures frequently observed in American corporations like
Walmart. Within Walmart's culture, open communication and managerial accessibility are frequently
prioritized, with staff members being encouraged to express their thoughts and participate in decision-
making. Overcoming this cultural divide in power relations might be difficult for Walmart to implement
its management style and encourage employee involvement in Vietnam.
Uncertainty Avoidance: Vietnamese society is generally more flexible and accepting of uncertainty than
American society, which is where Walmart first started. In the midst of uncertainty, Vietnamese culture
frequently values adaptability and improvisation, with a readiness to move through murky circumstances
without rigidly adhering to established norms or institutions. This is in contrast to Walmart's corporate
culture, which prefers precise guidelines, protocols, and standardized processes. Walmart's concentration
on predictability and structure may make it difficult to modify its operations in Vietnam, a country that
values flexibility and agility. In order to successfully navigate the cultural terrain and establish operations
in the Vietnamese market, Walmart will need to strike a balance between its demand for consistency and
predictability and the Vietnamese inclination for flexibility and improvisation.
2. Resources:
Vietnam has a large and relatively low-cost labor force, which is one of the key attractions for foreign
investors like Walmart. The labor market in Vietnam is distinguished by a youthful and energetic working
force, with a large proportion of workers in the 15-54 age group. In addition, Vietnam's labor expenses are
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often less than those of industrialized countries. To support its retail operations and corporate expansion,
Walmart can invest in building and maintaining a skilled and motivated workforce in Vietnam.
Regarding raw materials, Vietnam clearly has an edge. Walmart can access a wide range of materials for
its worldwide supply chain or private label manufacture because of this diversification. Due to Vietnam's
fertile land, skilled workforce, and competitive production costs, raw materials can be sourced at potentially
lower prices compared to other regions.
- Agricultural Products: Coffee, rice, cashews, fruits (mango, dragonfruit), vegetables (spices,
herbs), nuts (macadamia) – ideal for Walmart's global supply chain or private label food processing.
- Textiles and Apparel: Cotton, silk, man-made fibers – a potential hub for garment manufacturing
under Walmart's private labels.
Walmart may fortify its supply chain, perhaps lower manufacturing costs, and even become a pioneer in
sustainable sourcing methods by strategically utilizing Vietnam's varied and reasonably priced raw
resources.
Transportation and Logistics: Due to significant government expenditures aimed at enhancing the
nation's transportation network, Vietnam's transportation infrastructure has seen a significant transition in
recent years. The government has made major investments in infrastructure, particularly in the areas of
highways, airports, and seaports, as part of its aim to accelerate the nation's economic growth. The economy
has benefited greatly from these investments which have made it possible for businesses to transport goods
and people more effectively while also cutting costs and boosting competitiveness.
Warehousing and Distribution Centers: Vietnam has seen an increase in the establishment of modern
warehousing and distribution centers, particularly in major cities like Ho Chi Minh City and Hanoi. These
facilities provide efficient storage, order fulfillment, and distribution services, which can support Walmart's
supply chain operations.
3. Country risks
Vietnam generally offers a peaceful environment for investors, characterized by political stability and a
relatively low level of internal conflict. The country has enjoyed decades of political stability under the
leadership of the government which has implemented policies aimed at promoting economic development
and attracting foreign investment.
There are mainly 3 risks that may affect the performance of business: shareholders’ value, employee’s
exposure, operational exposure.
- Shareholders’ exposure: Asset destruction: In some situations, there may be a risk to shareholders'
assets in Vietnam being destroyed. This might involve occurrences like typhoons, floods, or civil
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upheaval causing damage or destruction of physical assets like buildings, machinery, or goods.
Vietnam has improved its readiness and reaction to natural disasters, but it is still susceptible to them,
especially in its rural and coastal regions.
- Employee’s exposure: gangsterism, crime, or kidnapping in Vietnam's workplace is not commonly
reported or considered a prevalent issue. Vietnam generally maintains a safe and secure environment
for businesses and investors, with low crime rates compared to some other countries in the region.
- Operational exposure: There aren't many examples of operational vulnerability in Vietnam that
cause disruptions to the market. It is not, however, impervious to internal or foreign shocks that can
cause its markets to collapse. As an instance, the COVID-19 pandemic significantly affected
international markets, especially the Vietnamese market, causing supply chain interruptions,
alterations in consumer behavior, and changes in economic activity. Vietnam may not experience as
many or as severe market disruptions as some other nations, but investors and companies should
nonetheless be on the lookout and ready to adjust to shifting market circumstances.
- Vietnam has enjoyed years of high economic growth, often exceeding 6%. However, due to a global
slowdown, experts predict a decrease to around 4.7% in 2023. This might not be a bad growth rate
compared to others, but it's a significant shift for Vietnam.
2. Economic unstable:
- External Pressures: Global factors like the war in Ukraine and ongoing trade tensions are creating
economic uncertainty worldwide. This can affect foreign investment and disrupt supply chains,
impacting Vietnam's export-reliant economy.
- Domestic Challenges: Issues like high public debt from inefficient state-owned enterprises (SOEs)
and a fragile banking system can also contribute to domestic economic instability.
3. Inflation:
- Rising Costs: The annual inflation rate in Vietnam advanced to 4.4% in April 2024 from 3.97% in
the previous month. It was the highest inflation rate since January 2023, with food prices rising the
most in eight months (4.32% vs 4.05% in March) and also, prices accelerated for transport due to
higher gasoline prices, for clothing, health services, etc. This translates to higher prices for everyday
goods and services in Vietnam, putting pressure on household budgets and potentially reducing
consumer spending.
4. Input Costs:
- Global Squeeze: The cost of raw materials and components used in manufacturing, often imported,
has increased due to global factors. This puts pressure on Vietnamese businesses, especially
exporters, who may struggle to maintain profit margins.
5. Exchange Rate:
- A Strong Dollar: The price of USD on the date of 9/5/2024 increased in the global market, the USD-
Index rose by 0.2 points to 105.5 points. The USD strengthened in the past trading session as
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investors bet on the US economy outperforming other economies. The US dollar's rise weakens
Vietnam's currency, the VND. This makes imports more expensive (as discussed above) and can
discourage foreign investment.
- Central Bank Balancing Act: The Vietnamese central qbank needs to manage the exchange rate to
control inflation but also avoid discouraging exports, a crucial part of the economy.
In Vietnam, the rate of corruption remains at a relatively high rate, 45.6% in 2022 on the scale from 0-
100 where 0 is absolute corruption and 100 is no perception of government corruption according to World
Economics. Corruption messes up how markets work, making it harder for everyone to compete fairly
and scaring away investors. When there's a lot of corruption, it's tough for the economy to grow and get
better, because people spend more time trying to get around the corruption than actually getting work
done.
Yet, Vietnam’s government has been making a strong push against corruption in recent years and there
are seemingly no cartels in the Vietnamese retailing industry for Walmart to consider facing at the
moment. However, there are still many competitors in the country. Established players like Saigon Co.op
and Big C in the supermarket sector, The Gioi Di Dong and WinMart in the convenience store space, and
Lotte Mart in the discount arena would be formidable rivals. Walmart would also need to contend with
e-commerce giants like Shopee and the enduring presence of traditional wet markets to make a name for
itself here.
Coming to Vietnam’s market, Walmart will have to face certain regulations that protect local goods and
in return, receive government incentives. As a foreign investor, Walmart will be subject to the Trade
Remedies law which ensures a level playing field for both domestic and foreign investors, providing a
favorable environment for foreign investment, the same as first comers like Big C. While it seems to give
fairness and equality in the market, Walmart might face increased competition from domestic players
who have a better understanding of the local market and consumer preferences. This could make it harder
for Walmart to gain market share and establish a strong foothold in Vietnam, especially if domestic
competitors have already built strong brand loyalty among consumers.
4. INCENTIVES:
- Taxes:
+ Corporate Income Tax (CIT): Vietnam offers preferential tax rates (reduced tax rates)
and tax holidays (tax exemptions) to both foreign and local investors. These incentives
are granted to promote investment in sectors aligned with national development
strategies. The CIT incentives can apply for a certain period or throughout the project
execution1.
+ Import Duties: Exemption or reduction of import duties or tax on goods imported as fixed
assets, raw materials, supplies, and parts used for the project.
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● High-Tech: Information technology, biotechnology, new material technology,
automation technology, and supporting products for high technology.
● Large-Scale Manufacturing: Projects with a minimum invested capital of VND
6,000 billion (with annual revenues of VND 10,000 billion by the fourth year or
employment of at least 3,000 workers).
● Social Importance Sectors: Education, vocational training, healthcare, culture,
sports, and environmental projects.
- Subsidies
+ Corporate Income Tax (CIT) Incentives:
● 10% CIT for 15 years.
● CIT exemption for 4 years.
● 50% reduction on payable CIT for 9 years.
- Land rental:
+ Investment projects are given a land rental fee exemption in encouraged sectors or certain
business fields, varied from 3, 7, 11, 15 years of exemption or exemption for the whole
operational period depending on particularly difficult socio-economic conditions.
3. ENTRY
A. FIRM ANALYSIS:
The company’s vision is to be the first choice for customers who are looking to save money, no matter
how they choose to shop. Rather than being a statement, this proved to be a guiding principle that shapes
every decision the company makes. It reflects Walmart’s commitment to understanding and meeting the
primary needs of its customers. The “no matter how they want to shop” also implies flexibility. Whether
customers choose to shop in-store or online, Walmart aims to be their go-to destination for savings. This
vision is not limited to just products and prices but extends to the overall shopping experience. Walmart
strives to provide a seamless and convenient shopping experience, whether customers are in a physical
store or browsing online.
This customer-centric approach is evident in everything Walmart does, from the products it offers to the
way it interacts with its customers. In the past, Walmart’s vision was to be the best retailer in the hearts
and minds of consumers and employees. While this vision served the company well, it evolved to reflect
the changing retail landscape and the evolving needs of its customers. The current vision, focused on
being the preferred shopping destination for customers seeking to economize, is a testament to Walmart’s
adaptability and its commitment to staying relevant in a rapidly changing retail environment.
Walmart’s vision is not just about being the biggest or the most profitable retailer. It’s about making a
difference in the lives of its customers by providing them with affordable, high-quality products and a
convenient shopping experience. This vision is what drives Walmart and sets it apart in the competitive
retail landscape. It is also the principle that guides the company’s decisions and actions, ensuring that it
remains focused on its mission of helping customers live better.
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Walmart’s statements did receive criticism, however, for being more like a slogan than a clear articulation
of the company’s purpose. There are also arguments on the negative economic impact and concerns about
wages. These criticisms highlight the importance of having a well-defined and comprehensive mission
and vision that not only guide a company’s strategies but also consider the welfare of all stakeholders,
including employees and the communities in which the company operates.
2. Core value:
“The three cardinal beliefs Wal-Mart’s founder relied on for attracting and keeping customers were:
providing great customer service, showing respect for the individual and striving for excellence. These
beliefs were translated into ten specific business rules that he tried to implant into the heart of every
executive, manager and associate.”
Walmart places a high emphasis on customer service, or simply put, to give customers what they want,
at the lowest price possible, in the most pleasurable environment. The company is dedicated to providing
exceptional shopping experience, always putting the customer’s needs first and striving to exceed their
expectations. This value is not just about meeting the customer’s needs, it’s about going above and beyond
to ensure customer satisfaction. Since the early days of operation, Walmart understood the vital
importance of customers and made immense effort to ensure their return, by providing economical value
and granting comfortability to their customers.
The father of the US retail giant - Sam Walton - also stressed the value in treating all individuals with
respect, whether they are customers, employees, or partners. This value underscores the importance of
diversity and inclusion, and it fosters a culture where everyone is treated with dignity and respect. Along
with this, the company is committed to continuous improvement and innovation. This value encourages
employees to learn, grow, and strive for excellence in everything they do, which fosters a culture of high
performance and continuous improvement.
Walmart’s core values are the guiding principles that shape the company’s culture and influence its
strategies. They are integral to Walmart’s mission of saving people money so they can live better. These
values guide how Walmart operates and interacts with its customers, employees, and communities,
ensuring that the company stays true to its statements and preserve its ways of doing business.
3. Positioning:
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Walmart has positioned itself as a retailer that offers the convenience of one-stop shopping for everyday
products at the lowest possible price. This positioning is primarily targeted towards price-sensitive
customers. The company’s operational excellence, inventory management, and logistics infrastructure
enable it to maintain this positioning. Walmart also uses a mono-segment type of positioning, appealing
to a single customer segment that places greater value on the price attribute of products compared to other
attributes. Due to its low price positioning, Walmart has had a significant impact on several smaller
retailers over the decades of its operations.
“To avoid head-on competition with giants such as Sears and Woolworths which dominated big cities,
Walton opened stores in “one-horse”, rural, backwater towns ignored by other retailers. The stores aimed
to serve customers who, up until then, had to travel long distances to save money. Now they could buy
the same goods cheaply at home. This positioning proved to be critical to Wal-Mart’s success in the years
to come as it grew outside competitors’ radar screens to a substantial size to command economies of
scale.” - Walmart Stores: “Everyday Low Prices” in China
4. Value chain:
Walmart has a value chain that is a testament to its operational efficiency and effectiveness, which
comprises primary and support activities:
- Logistics and Operations: Walmart owns an optimized and enhanced logistics and procurement
system that allows full and real-time tracking of transportation and transactions to ensure that the
right products are available at the right time. This system also involves interactions with its
suppliers. Additionally, the system is a tool to manage the supply chain and Walmart’s extensive
network of stores.
- Marketing, Sales and Service: Walmart’s marketing and sales activities focus on promoting its
value proposition of low prices and enhancing customer relationships. Customer service involves
all activities required to maintain the product or service’s effectiveness for the buyer after it is
sold and delivered. Walmart strives to provide excellent customer service to enhance customer
satisfaction and loyalty.
- Other supporting activities: Include investment in infrastructure, human resources management
and technology. These acts are vital especially in the new era for Walmart to adapt and retain its
competitiveness long-term.
5. Business model:
The cornerstone of Walmart’s business model is its commitment to offering products at the lowest
possible prices. This value proposition is achieved through efficient supply chain management,
economies of scale, and operational efficiencies. Walmart’s ability to procure goods at a lower cost than
its competitors allows it to pass on these savings to its customers, thereby reinforcing its position as a
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price leader. Another key component of Walmart’s business model is its focus on providing customers
with convenient access to a wide range of products. With a vast network of physical stores and a growing
online presence, Walmart ensures that customers can shop for their needs whenever and wherever they
want. This convenience, coupled with low prices, enhances the overall shopping experience and
encourages customer loyalty.
Walmart also differentiates itself through the wide assortment of products it offers. From groceries to
electronics, clothing, and more, Walmart caters to a broad customer base with diverse needs. This wide
assortment not only attracts more customers but also increases the chances of cross-selling and up-selling,
thereby driving revenue growth.Walmart’s operations are divided into three main segments: Walmart in
the U.S., Walmart International, and Sam’s Club. Each segment contributes to the company’s overall
revenue and plays a unique role in its growth strategy. For instance, while Walmart in the U.S. focuses
on maintaining its leadership position in the domestic market, Walmart International is tasked with
expanding the company’s footprint in global markets.
6. Strategic objectives:
Walmart is in constant combat with its competitors (such as Amazon) to hold its ground as a top US
retailer. The business strategy revolves around expanding and hosting a wide range of channels, as well
as gaining competitiveness through digitalization of its operations:
- Omnichannel: Walmart reaches customers by setting up its extensive network of stores and
focuses on its core value of EDLP to persistently attract returning buyers.
- Digital Operation: Walmart rapidly adapts with digitalization to leverage its presence through e-
commerce and online service, along with the strategic placement of distribution and fulfillment
centers to further enhance its efficiency. This allows Walmart to meet customers demands and
further build its reputation as a reliable retailer.
7. Key partnership:
Partnerships also play a crucial role in Walmart’s business model. The company works with various
partners, including suppliers and technology companies, to support its operations. These partnerships not
only enhance Walmart’s operational capabilities but also enable it to offer a wider range of products and
services to its customers. Some key cooperators include
- Flipkart and Rakuten, which are results of Walmart’s attempt to further upgrade its e-commerce
capabilities and overseas expansion.
- Plug Power Inc, a leading developer of hydrogen fuel cell technology, assisted Walmart to refine
its technology and install it on a mass scale.
- Procter & Gamble is one of Walmart’s key suppliers of consumer goods.
8. Competitive advantage:
“The secret of success lay in a unique combination of culture and strategies at Wal-Mart that set it apart
from its competition.”
- Optimal costs: Walmart’s primary competitive advantage is its ability to offer customers low
prices. The company achieves this through efficiency at scale, logistics expertise, private labels,
and purchasing power.
- Adaptation: Since the first years Walmart has been a fast mover among its competitors in
adopting digital trends like barcode, RFID, and cross-checking supply chain strategy. This has
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given Walmart an edge in the increasingly digital retail landscape. Later generations of the firm
also invest heavily in IT and data analytics, along with improving logistics operations.
- Private labels: Walmart earns higher margins on its popular private brands like Great Value,
Member’s Mark, Marketside, Freshness Guaranteed, Ol’ Roy, Parents Choice which brings the
ability to offer national brands at low prices.
B. MARKET ANALYSIS:
1. PESTEL
1.1. Political:
- Stability of the government: Vietnam has a stable politics , the authority implements policies
which support the development of the economy, including the retail industry.
- Government policies: The government has issued laws and policies which assist the
development of the retail industry, such as liberalizing regulations and encouraging foreign
investment.
1.2. Economical:
- Economic growth: Vietnam economy has been expanding rapidly for the last few decades which
result in the increasing of consumption especially the demand for retail products and services.
- Inflation: Inflation has a huge impact on consumer buying. Especially after the COVID-19
epidemic and the world economic crisis, Vietnam's economy is recovering progress.
1.3. Social-Cultural:
- Demographic trends: Vietnam's young people are increasing in the last few years which change
the citizen’s lifestyles and preferences influencing consumer behavior. Young generation prefers
shopping in a supermarket are shopping online to purchasing goods in traditional market
- Urbanization: Urbanization contemporary results in the increase of new retail formats such as
shopping malls and supermarkets. Meanwhile, the number of traditional markets are decreasing.
1.4. Technological:
- New ways of purchasing and payments: The adoption of technology, including digital payment
systems e-commerce platforms and online marketing, is reshaping Vietnam’s retail landscape.
- Transport and logistics: The advancements of new technology are being applied in logistics and
transport such as blockchain technology, GPS trackers, artificial intelligence, and robotics and
automation.
1.5. Environmental:
- The stability of climate: Vietnam is in the tropical climate area. The country’s weather is quite
stable. Natural disasters rarely appear in Vietnam. This would create favorable conditions for the
supply chain and operation costs.
1.6. Legal:
- Labor laws: Retailers must comply with labor laws and regulations including working
conditions, employment practices and wages.
- Government supporting: Vietnam government issues law and incentives assists FDI such as tax
reduction and priority in many projects.
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2. FIVE FORCES ANALYSIS
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2.5. Threat of Substitutes (Moderate):
- Number of Substitutes: There are various retail formats in the Vietnam market, such as
traditional markets, online retail platforms, convenience stores and mini-marts, direct-to-
consumer (DTC) brands. However, Walmart’s strong brand reputation, wide range of products,
competitive pricing and good services can help this enterprise compete with their substitutes.
3. S.W.O.T
INTERNAL
3.1. Strengths:
3.2. Weaknesses:
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Walmart still receives a significant portion of its revenue from the US market despite its global
development. Approximately 10,500 Walmart locations can be found worldwide. Of Walmart's stores,
4,648 are situated in the United States. Walmart is susceptible to shifts in the American economy due to
its excessive reliance on the domestic market. Walmart's revenue is mostly derived from the US market,
thus any slowdown or recession there has the potential to have a big effect on the company's financial
results. A prime illustration of this occurred during the global financial crisis of 2008. Walmart's earnings
and sales were not immune to the negative consequences of the American economic crisis.
- Labor Practices:
Walmart employs more than 2 million people, making it the largest private employer in the world, yet its
labor policies have long been the focus of debate and criticism. The business has been charged with
mistreating workers, which has raised various worries about worker safety and brought Walmart bad
press.
- Limited E-commerce Presence:
In addition to its extensive global network of physical locations, Walmart has recently made large
investments in e-commerce. However, because it currently trails behind other rivals in this market, the
company's e-commerce growth is restricted. Many of Walmart's rivals, including Amazon and Alibaba,
have developed strong online stores with a large selection of goods and services. Customers may shop
with ease from any location at any time thanks to these platforms, which is a big benefit in the current
market. Walmart's e-commerce platform remains relatively tiny as compared to its competitors, which
may provide a competitive disadvantage for the corporation.
- Inconsistent Customer Service:
Walmart's operation of hypermarkets has drawn criticism due to its poor customer service, characterized
by lengthy wait times, disorganized stores, and challenges in locating merchandise. This outcome is a
direct consequence of inadequate training, insufficient remuneration, and other related factors.
Insufficient training and support for employees can hinder their ability to deliver consistent and excellent
customer service. This might result in employee discontent and dissatisfaction, which can have a negative
impact on their job performance and overall morale. This can have a detrimental influence on both the
organization and its customers.
- Thin Profit Margins:
Walmart is well-known for offering affordable products to its patrons. Although this is a strength that
helps the business draw in new clients and keep hold of current ones, it is also a vulnerability. Walmart
may have narrow profit margins as a result of its cost leadership approach. Walmart just generates
extremely little money on each item sold due to its narrow profit margin. This is a result of the company's
extremely low profit margins stemming from its branding strategy of maintaining the lowest feasible
costs. Walmart's profitability may be impacted by the need to sell a lot of things in order to turn a profit.
Walmart's low pricing is also a weakness since they are susceptible to changes in the state of the world
economy. Walmart's profit margins will be harmed if labor or raw material costs rise.
EXTERNAL
3.3. Opportunities:
- Global Expansion:
Walmart is the biggest retailer in the world, with more than 10,000 locations in about 27 countries.
Nonetheless, there is still room for the business to grow into other areas. Walmart has a great opportunity
to grow internationally since it can enter new countries, diversify its sources of income, and attract more
customers. Entering new overseas markets will benefit Walmart in a number of ways.
- E-commerce Growth:
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Global retail e-commerce sales are expected to surpass US$ 7 billion, indicating the e-commerce
industry's strong expansion. The COVID-19 epidemic is among the many causes that have expedited the
shift to online buying, creating a wealth of potential for businesses in the e-commerce sector. Walmart
may gain a substantial portion of this market by utilizing its current advantages and making investments
in its online storefront.
- Demand for Environmental Friendly Products:
Demand for sustainable and eco-friendly products is rising as people get more aware of environmental
issues. Walmart may take advantage of this by publicizing its eco-friendly policies and providing a large
selection of sustainable products. Walmart's sustainability initiatives have already yielded notable results.
The corporation has set aggressive targets to boost the usage of renewable energy sources in its operations
and lower its greenhouse gas emissions. Walmart, a prominent retailer, can, nevertheless, step up its
efforts to enhance its reputation and appeal to a wider spectrum of customers.
- Diversification:
Walmart should think about diversifying into related industries like healthcare and financial services as a
major chance to further increase its business as the retail market continues to change. Walmart can
increase the range of products it offers in these new markets even if it is currently involved in some of
these categories.
- Technological Advancements:
One of the most important aspects of Walmart's growth strategy is technological advancement. In order
to streamline operations and boost customer satisfaction, the corporation has already made large
investments in technology, including machine learning, artificial intelligence, and data analytics. Walmart
can still improve its operations, customer experience, and online presence by utilizing technological
advancements.
3.4. Threats:
- Intense Competition:
Due to the numerous big and small companies fighting for market share, the retail sector is extremely
competitive. Several major shops, such as Amazon, Target, and Costco, compete with Walmart. Walmart
finds it difficult to compete with these shops as they have substantial resources and a strong web presence.
Walmart's profits is at risk since this gives shoppers more options.
- Economic Downturns:
A major risk to Walmart's operations is fluctuations in customer spending and economic downturns.
Consumer spending tends to decline and price sensitivity increases during economic downturns. Walmart
may see a decline in sales and revenue as a result of this. Furthermore, shoppers may be more likely to
shop at discount stores or buy cheaper goods during economic downturns, which might put Walmart
under additional competition.
- Changing Consumer Preferences:
The Walmart Business Model has additional challenges due to the dynamic nature of consumer
preferences and buying behaviors. A variety of factors, including alterations in society ideals,
technological improvements, and economic fluctuations, can influence changes in consumer preferences.
For instance, customers' awareness of ethical corporate practices and environmental sustainability has
grown in recent years. Consequently, even if it takes shelling out more money, consumers could be more
likely to purchase at establishments that uphold these ideals. Consequently, if Walmart is unaware of
these shifting preferences, they risk losing a lot of business.
- Increasing Regulatory Scrutiny:
One of Walmart's biggest obstacles is the growing regulatory scrutiny given by different countries
because the company is bound by the rules of the nations in which it conducts business. Governments all
17
throughout the world are growing more and more concerned about the sway and power that big businesses
like Walmart have. They have therefore implemented a number of laws intended to safeguard consumers
and advance just competition. Governments may, for instance, apply taxes, tariffs, or other rules that
make it more challenging for Walmart to conduct business in a given area.
- Litigation:
The act of pursuing legal action is referred to as litigation. Walmart faces up to 5000 lawsuits annually,
with roughly 20 cases every day. It is common for customers, governmental organizations, and even
Walmart personnel to file these claims. Walmart is a major international firm that faces many legal
dangers, thus lawsuits are nothing new to it. Intellectual property conflicts, product liability lawsuits, and
employment issues are just a few of the potential causes of these hazards. Nonetheless, Walmart may be
impacted by these claims in a number of ways.
C. Implementation analysis.
Walmart, one the the most renowned retail giants came from USA, has seen Vietnam not only as a good
supply center in Asia but also a promising market for it to expand. The strategic solutions that appear to
be the most appropriate for Walmart to enter this new market are:
1. Joint Ventures.
How? Walmart formed an alliance with a local retail company and both brought their strengths to the
joint venture. Walmart provides financial support, its globally recognized trademark and experiences in
information and distribution management to manage its partner’s stores and supermarkets. If the strategy
is successful, Walmart will introduce its own brand to Vietnam later on.
Pros: A joint venture can help Walmart gain access to new geographic markets which provide cost-
effectiveness and also to another company’s customer base. Besides, both the companies can combine
expertise and their diverse pool of resources such as suppliers, manpower,…
Cons: There will be high potential for conflicts during the cooperation within the holding company and
the local one about cultures and management styles. The exclusivity of joint ventures can affect individual
partner growth because of the clauses/concessions about interest.
What? Setting up a new operation in Vietnam with 100% investment from the holding company.
When? After having a place of business whether by itself or through any of the agents.
18
How? Walmart imports products from international suppliers, uses products also from international
brands but produced in Vietnam or from domestic suppliers to supply the stores. Walmart also built a
logistic and managing system from warehouses and distribution centers to the stores.
Pros: This strategy gives Walmart the highest level of control over business operations, manufacturing
quality, brand image, staffing and sale of products. By setting up wholly-owned subsidiaries, Walmart
can protect their vision and core value from those region-specific conditions.
Cons: This strategy requires higher setup costs due to additional cost for researching the market, managing
supply chains, branding and staffing. There are challenges from government regulations that hamper
direct investment like this from a foreign company like Walmart.
3. Acquisition.
How? Walmart investigates and values promising targets. After the company is selected, it’s time for the
negotiation. If both companies reach an agreement, the integration of them is necessary due to differences
in many aspects: culture, information systems, strategies,…
Pros: The biggest advantage of this strategy is tax benefit by making full use of tax-shields, boost financial
leverage and take advantage of alternative tax benefits.
Cons: Walmart will face difficulties in managing staff of the united companies which easily lead to
frictions and internal conflicts. In addition, merging two firms with similar activities means duplication
and over capability.
19
Branding: If the branding of the joint venture is not clearly aligned with the brand identities of the
participating companies, it can lead to brand dilution or confusion among customers.. (4/10)
Low Expense: Joint ventures can be a cost-effective strategy for Walmart to pursue development
possibilities without bearing the entire expense and risk of doing so alone. Partners can obtain economies
of scale by pooling expenses like marketing and distribution. (7/10)
Customer Satisfaction: Joint ventures that are agile and responsive to changing customer needs and
market trends are more likely to satisfy customers over the long term. (8/10)
Controllable/Management: Since a joint venture consists of more than two parties, Walmart won’t have
full authority to decide the management system or plans but have to go through it with their partner .
(3/10)
Low risk: Typically, partners in a joint venture bear an equal share of the venture's risks and rewards. The
presence of shared risk can afford a degree of safeguarding against personal liabilities and losses, given
that companions bear no exclusive liability for unfavorable consequences. (6/10)
Quick: Joint Venture strategy requires a shorter process to reach the results since there is help from the
business partner. (6/10)
Total: 34
20
Branding: Wholly owned subsidiaries strategy helps Walmart bring their brand directly into the
Vietnamese market, build a strong brand identity to differentiate themself from other competitors more
effectively than the other two options. (9/10)
Low Expense: A wholly owned subsidiary can be costly to establish and maintain from the financial point
of view. Cost of physical presence, legal and administrative fees has to be considered when Walmart joins
an unfamiliar market like Vietnam. (3/10)
Customer Satisfaction: Wholly owned subsidiary strategy can provide local expertise and insights into
the new market. This helps Walmart decide the appropriate marketing campaigns to organize, the right
products/services to target to win the customer goodwill. (8/10)
Controllable/Management: Since the holding company has complete control over the subsidiary’s
operations, Walmart can make decisions about overall company matters and strategies. This avoids the
conflicts that can be met during cooperating or partying. (8/10)
Low risk: There are many risks that Walmart has to deal with while choosing this strategy. The risk of
investment funds, loss of brand equity, customer attitude towards the brand are some to name. (5/10)
Quick: Establishing a wholly owned subsidiary requires considerations and preparations which take a lot
of time. This strategy needs a longer process to make it work out than the other two options. (3/10)
Total: 36
21
Branding: Acquiring a well-known or respected brand can enhance the acquirer's brand portfolio and
reputation in the market. This can lead to increased customer loyalty, brand recognition, and market
credibility, driving further growth and expansion opportunities. (8/10)
Low Expense: The costs of an acquisition strategy that deviates significantly and abruptly can increase.
It is possible that these expenses will surpass all initial estimates. Even if the acquisition lacks sufficient
value to justify it, the process may have progressed too far to be halted. (3/10)
Customer Satisfaction: Acquisition strategy can help Walmart combine the two cultures of the holding
company and the partner. This ensure that the customers won’t feel too offended to a foreign brand like
Walmart. (7/10)
Controllable/Management: Walmart as a strategic buying company will have more control compared to
when using joint venture strategy and less control compared to when using wholly owned subsidiary
strategy. (6/10)
Low risk: There are many risks that Walmart has to deal with while choosing this strategy: integration
challenges, financial risks, market and competitive risk, management and distribution issues … (6/10)
Quick: Acquiring a company needs time and effort to investigate potential targets since this is the most
important step of the process. (4/10)
Total: 34
The most suitable strategy in this case is Wholly owned subsidiary (Option 2) as this strategy has the
highest score. Since the analysis before demonstrates that Vietnam’s business environment is a friendly
and potential one for foreign companies and its policies encourage the retail sector, Walmart can
maximize their competitive advantages when joining the new market.
22
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