Difference btw PULL &PUSH strategy

In marketing and distribution, businesses employ different strategies to promote and sell their products
or services. Two commonly used strategies are push strategy and pull strategy. While both strategies
aim to increase sales and reach customers, they differ in their approach and focus. This article aims to
highlight the differences between push and pull strategies, including their definitions, characteristics,
and implications for marketing and distribution.

Points Push Strategy Pull Strategy

Definition A push strategy is a marketing approach A pull strategy is a marketing
that involves actively pushing products approach that aims to create
or services from the producer to the end consumer demand for a product or
consumer through various marketing service. The focus is on attracting
and promotional activities. The focus is consumers to seek out the product
on creating demand by promoting the or service by creating brand
product directly to retailers, awareness, generating interest, and
wholesalers, or distributors. encouraging customer demand.
Direction In a push strategy, the direction of In a pull strategy, the direction of
marketing efforts is from the producer marketing efforts is from the
to the intermediaries (such as retailers or producer directly to the end
distributors) and then to the end consumer, aiming to create
consumer. consumer demand and generate
interest in the product or service.
Promotion Push strategies heavily rely on personal Pull strategies focus on advertising,
selling, trade promotions, salesforce public relations, social media
activities, advertising to intermediaries, marketing, content marketing, and
and other promotional activities targeted other promotional activities
at the supply chain. targeted directly at the end
consumer to create brand awareness
and generate interest.
Channel Push strategies primarily target the Pull strategies primarily target the
Focus distribution channel members, such as end consumer and aim to create a
retailers or wholesalers, to ensure strong brand image, generate
product availability and push the consumer interest, and drive
product through the distribution chain. consumers to actively seek out the
product from retailers or
distributors.
Demand Push strategies aim to generate demand Pull strategies aim to generate
Generation by convincing intermediaries to stock demand by creating brand
the product and encouraging them to awareness, generating interest, and
promote and sell it to the end consumer. creating a desire for the product or
service among the end consumers.
Inventory In push strategies, the producer may In pull strategies, the producer can
Management need to estimate the demand and push respond to actual consumer demand
inventory to intermediaries based on as it occurs, which can lead to a
forecasts or sales agreements. more demand-driven approach to
inventory management.
Customer Push strategies focus on developing Pull strategies focus on developing
Relationship relationships with intermediaries, such direct relationships with end
as retailers or distributors, to ensure consumers to build brand loyalty
product placement and promotion. and create a consumer-driven
demand for the product.
Control over In push strategies, the producer has In pull strategies, the producer has
Marketing more control over the marketing less control over the marketing
activities and promotional efforts, as activities, as the focus is on creating
they are primarily targeted at the consumer-driven demand and
intermediaries. attracting consumers to the product
or service.
Timeframe Push strategies may be more effective Pull strategies may be more
for products with a shorter sales cycle or effective for products with a longer
products that require quick distribution sales cycle or products that require
to reach the end consumer. consumer research or consideration
before making a purchase decision.
Examples Examples of push strategies include Examples of pull strategies include
trade shows, salesforce activities, advertising campaigns, social
channel incentives, and promotions media marketing, content
targeted at intermediaries. marketing, and creating brand
ambassadors to generate consumer
interest and drive demand.

Push Strategy

Definition of Push Strategy

Push strategy is a marketing approach that focuses on pushing products or services through the
distribution channel to the end customer. In a push strategy, businesses aim to generate demand by
actively promoting and persuading intermediaries, such as retailers, wholesalers, or distributors, to
carry and sell their products.

Key Characteristics

o Proactive Promotion: Businesses employing a push strategy actively promote their products or
services to intermediaries through advertising, personal selling, trade promotions, or incentives.
o Indirect Customer Engagement: The primary focus is on intermediaries rather than end
customers. Businesses aim to convince intermediaries to stock and sell their products.
o Control Over Distribution: Companies using push strategy exert control over the distribution
channel, ensuring their products are available to customers through intermediaries.
o High Inventory Levels: A push strategy often involves maintaining higher inventory levels to
meet anticipated demand from intermediaries.

Examples

o Salesforce visiting retail stores to persuade them to carry and promote a new product.
 o Offering trade discounts or incentives to distributors to encourage them to purchase and
distribute products.
o Using advertising and promotional campaigns targeted at intermediaries to create awareness and
generate demand.

Pull Strategy

Definition of Pull Strategy

Pull strategy is a marketing approach that focuses on creating demand directly from the end customers,
which in turn pulls products or services through the distribution channel. In a pull strategy, businesses
aim to build brand awareness, generate customer interest, and create a desire for their products or
services.

Key Characteristics

o Customer-Centric Promotion: Businesses employing a pull strategy invest in marketing efforts

targeted directly at end customers, aiming to create brand awareness, generate interest, and drive
demand.
o Direct Customer Engagement: The primary focus is on engaging and attracting end customers.
Businesses aim to create a desire for their products, resulting in customers actively seeking them
out.
o Collaborative Distribution: In a pull strategy, businesses collaborate with intermediaries who
respond to customer demand by stocking and supplying the products.
o Demand-Driven Inventory Management: A pull strategy often involves a demand-driven
inventory management approach, where products are produced or stocked based on actual
customer demand.

Examples

o Creating engaging advertising and promotional campaigns that directly target end customers to
build brand awareness and generate interest.
o Implementing content marketing, social media, and influencer marketing strategies to engage
with customers and create a desire for products.
o Offering limited-time discounts or promotions directly to customers to encourage them to
purchase products.Unlimited Test Re-Attempts

Differences Between Push and Pull Strategy

Approach and Focus

o Push Strategy: Push strategy focuses on intermediaries, aiming to convince them to carry and
sell products through proactive promotion and incentives.
o Pull Strategy: Pull strategy focuses on end customers, aiming to create brand awareness,
generate interest, and build customer demand through targeted marketing and customer
engagement efforts.

Customer Engagement
 o Push Strategy: In a push strategy, customer engagement is indirect, as the focus is on
intermediaries. The goal is to persuade intermediaries to stock and sell products.
o Pull Strategy: In a pull strategy, customer engagement is direct, with a focus on building brand
awareness, generating interest, and creating a desire for products among end customers.

Supply Chain Management

o Push Strategy: Push strategy involves more control over the distribution channel, as businesses
actively push products through intermediaries to reach customers.
o Pull Strategy: Pull strategy involves collaborative distribution, where businesses respond to
customer demand, and intermediaries stock and supply products accordingly.

Inventory Management

o Push Strategy: Push strategy often involves higher inventory levels to meet anticipated demand
from intermediaries, as products are actively pushed through the distribution channel.
o Pull Strategy: Pull strategy often involves demand-driven inventory management, where
products are produced or stocked based on actual customer demand, resulting in lower inventory
levels.

Conclusion

In summary, push strategy and pull strategy are two distinct marketing approaches used to promote and
distribute products or services. Push strategy focuses on persuading intermediaries to carry and sell
products, with an indirect customer engagement approach. Pull strategy, on the other hand, aims to
create customer demand directly by engaging with end customers through targeted marketing efforts.
Understanding the differences between push and pull strategies helps businesses determine the most
effective approach to reach their target audience and drive sales.

In scenario analysis, a scenario with a very low likelihood can be valuable in deepening managers’
understanding for several reasons, even if it never occurs:

1. **Enhanced Risk Awareness**: Low-probability scenarios often highlight risks and vulnerabilities
that might otherwise be overlooked. By considering these scenarios, managers can become more aware
of a wider range of potential threats and uncertainties, improving their overall risk management
strategies.

2. **Improved Strategic Planning**: Analyzing unlikely scenarios encourages managers to think

beyond the usual assumptions and consider alternative futures. This broader perspective can lead to
more robust and flexible strategic plans that can better withstand unexpected events.

3. **Stress Testing**: Low-probability scenarios often involve extreme conditions. By stress testing
their plans and operations against these scenarios, managers can identify weaknesses and develop
contingency plans to ensure resilience.
4. **Encouragement of Creative Thinking**: Considering unlikely scenarios fosters creative thinking
and innovation. Managers are pushed to think outside the box and explore unconventional solutions,
which can lead to novel approaches and opportunities.

5. **Preparation for Unexpected Events**: While the specific low-likelihood scenario might not occur,
the exercise of planning for it prepares managers to deal with other unexpected events. This enhances
their overall readiness and ability to respond to crises.

6. **Identification of Interdependencies**: Unlikely scenarios often expose hidden interdependencies

within an organization or between an organization and its external environment. Understanding these
interdependencies can help managers better anticipate and mitigate cascading effects in the event of
disruptions.

7. **Enhanced Communication and Coordination**: Discussing and planning for unlikely scenarios
involves collaboration and communication across different parts of the organization. This process can
improve coordination and information sharing, which are crucial during actual crises.

8. **Building a Culture of Resilience**: Regularly considering and planning for low-likelihood

scenarios helps build a culture of resilience within the organization. It emphasizes the importance of
being prepared for a wide range of possibilities and encourages proactive rather than reactive
management.

9. Improved adaptability: Practicing with unpredictable scenarios helps organizations become more
flexible and adaptable when faced with unexpected changes in reality. This helps them maintain
stability and continue operating effectively in a volatile business environment.

In summary, even though a low-likelihood scenario may never occur, the process of analyzing it can
significantly enhance managers’ understanding of potential risks, improve strategic and operational
planning, and foster a culture of resilience and innovation within the organization.

What is Joint Venture?

Joint Venture – Joint Venture (Strategy/venture enterprise) is a form of economic cooperation at a

relatively high level, conducted in many different forms, with its own advantages and limitations, but
all aim to achieve the best business performance.

Joint ventures can be made between two independent enterprises, or between an independent business
with the government, or with a foreign enterprise based on the agreement of the parties. The
participating parties will jointly contribute capital to establish a company, or build a project and jointly
manage, develop and share profits as discussed and agreed.

Joint venture strategy is also a method of business cooperation to minimize risks for a business, or
when the business is not capable and capital to make investments alone. Thanks to joint ventures,
businesses can mobilize large resources, create conditions for parties to exploit technology and market
and create the highest economic efficiency.

The capital contribution ratio of the parties to the joint venture is the decisive factor to the level of
participation in management, the percentage of profit. The party who contributes more capital means
that it has more right to manage and operate business activities and enjoy a higher profit.
In short, it is possible to understand the joint venture according to the brief ideas below:

· The joint venture company was established as an independent company;

· Is a combination and cooperation between two or companies and corporations with each other or with
the government, not by individual joint ventures with each other;

· Management is based on equality between partners to bring the highest benefits;

· The level of management participation and % of profit depends on the capital contribution ratio of the
parties;

· 100% owner not allowed.

'With the form of joint venture, the party who contributes more capital has the right to manage and run
more business activities and enjoy higher profits.'

What are the benefits of Joint Venture?

It can be said that joint venture is a fast and short direction when businesses want to develop their
business activities quickly, or want to take on large but incompetent projects when implementing
alone... The joint venture strategy will bring a lot of benefits to businesses:

· Combining resources: When joint venture, the parties can combine the resources of both parties to
create favorable business: human resources, capital, relationships..., helping to implement the project
quickly and conveniently.

· Professionalization: Each business will have its own way of operating and different professional
strengths. When joint venture, these professional elements will converge selectively, creating strength
for the business.

· Cost savings: The joint venture helps businesses make the most of the relationships of both parties
involved. This will help businesses save money on their products or services, such as marketing,
packaging, or PR costs...

· Easily penetrate new markets: When a business wants to exploit foreign markets, a joint venture with
a local company there will help businesses have an understanding of the nature of the new market as
well as develop a suitable business strategy. From there, business activities and profits can be achieved
to the maximum.

What are the advantages and limitations of Joint Venture?

As a good form of business cooperation, the joint venture will still have its own advantages and
limitations. So what are the pros and cons of Joint Venture?

Advantages:

– Joint ventures help businesses limit risk rather than own it all, because each partner only bears the
risk of its capital contribution.
– Is a form for the company to research, learn and penetrate the domestic market before establishing a
wholly owned branch.

– Improve the competitiveness of domestic enterprises when they are encouraged to join joint ventures
with foreign companies, or foreign enterprises are required by the government to share ownership with
domestic companies, or have preferential incentives for them to establish joint ventures.

– Opportunities to improve capital, technology and human resources when implementing projects of
international stature

– Opportunities for large enterprises to expand their business market, business field or company size.

Disadvantages:

– There may be conflicts and ownership disputes between the parties due to the failure to agree on
investments or profit sharing.

'- It is possible to release the situation of ''Big fish swallowing small fish'' due to inexperienced and
small-scale businesses.'

– The possibility of great risk if the joint venture company has a stifle.

– Language, thinking and cultural barriers between cooperating parties

– Having many legal problems when venting ventures in cultural-related projects.

Common forms of joint venture

Forms of joint ventures are divided based on the purpose and way the parties participate in the joint
venture. Here are 4 popular business forms:

· Forward integration joint venture: is a form of joint venture in which the parties agree to invest and
cooperate together to produce finished products and launch them to the market.

· Backward integration joint venture: in which the parties focus on the production and exploitation of
input materials for finished products. It can be seen that companies produce components and
accessories for automobiles, machinery, engineering, and joint venture electronics in this form a lot.

· Buyback joint venture: An acquisition joint venture is established when the production enterprise has
a certain minimum size but wants to have a larger scale and is not capable. The joint venture will be the
best option to be able to get a larger scale.

· Multistage joint venture: occurs when a partner associates with a business to improve the business
efficiency of each party. For example, a manufacturer partners with a reseller to distribute better sales.
Or a fashion clothing manufacturer will joint venture with a retail unit of this item to be able to
improve the efficiency and also the image/brand of each party.

When should the joint venture be dissolved?

Ventures are often formed with certain goals and do not necessarily act as a long-term partnership.
Here are some common reasons to dissolve the joint venture:
– The initial period of time established for the joint venture operation has been completed and the
parties agree that no additional benefits are obtained when continuing the joint venture.

– Each party's own goals are no longer consistent with the general goals of the joint venture.

– Legal or financial issues have arisen with one or both parties that make it no longer possible to
continue the joint venture.

The joint venture had no significant revenue growth and it is thought that there is no possibility of
significant growth when the deal continues. In other words, the parties found that the benefits they
hoped would gain from the joint venture were not realized and were unlikely to be achieved even if the
joint venture was continued.

Changes in market conditions, such as new economic policies or changes in political conditions, lead
joint venture partners to conclude that the joint venture is no longer capable of bringing profit to either
party.

What is the difference between Subsidiaries, Associates and Joint Venture?

Subsidiaries

A subsidiary is defined as a unit controlled by another unit.

Control means that the parent company can govern the financial policies and operations of the
subsidiaries to benefit from the operations of the subsidiary. Control can be achieved if more than 50%
of the voting rights are obtained. This is usually done by buying more than 50% of the subsidiary's
shares. Investors control when they have all of the following:

(a) Have rights to the invested party;

(b) Have the ability or right to the profits that change from the participation of the invested parties; and

(c) Be able to use its power over the invested party to affect the investor's profits.

Joint Venture

A joint venture is a joint agreement whereby the parties have general control over the net assets of the
agreement.

Associates

Associates is an organization where investors have significant influence.

Significant influence means the right to participate in the financial and operational policy decisions of
the invested party but not the right to control or jointly control such policies. Significant effect is
usually obtained by purchasing more than 20% of voting rights but less than 50%.

A joint venture is the way in which the company wants to share ownership with a partner in business
activities. A separate company established and simultaneously owned by at least two independent legal
entities to achieve common business goals is called a joint venture.
Forms of joint venture

Illustration. Source: Pearson Education

- Forward integration joint venture: this form of joint venture, the parties agree to invest together in
business activities in the downstream segment - activities that gradually progress to the production of
complete products or serve to the end consumer.

- Backward integration joint venture: is a form of association in which companies show signs of
moving to business activities in the upstream segment - activities that gradually progress to the
production and exploitation of original raw materials.

- A buyback joint venture is a form of joint venture in which its inputs are provided or/and outputs are
received by each partner in the joint venture.

An acquisition joint venture is established when a production facility has a certain minimum size, needs
to achieve scale performance, while neither party has the need to achieve it. However, by joint venture,
partners can build a facility that serves their demand, especially enjoying the benefits of scale
advantages.

- Multistage joint venture is a form of joint venture in which one partner integrates downstream while
the other partner integrates in the upstream segment. For example, a manufacturer of sports goods can
associate with a retailer of sports goods to establish a distribution company to improve business
efficiency on each side.

Advantages of joint venture

- The joint venture has less risk than the company owns the whole, because each partner only bears the
risk of its contribution.
- The company can use the joint venture to learn more about the domestic business environment before
establishing a wholly owned branch. Some joint venture companies are wholly acquired by their joint
venture partners when they have enough experience in the domestic market. And the company can use
the venture to enter the market without missing out on its opportunities.

- Some governments require foreign companies to share ownership with domestic companies or have
preferential incentives for them to establish joint ventures. The goal here is to improve the
competitiveness of domestic companies by learning from international partners. On the contrary, the
government will intervene less if this intervention can lead to damage to the operational results of the
joint venture.

Disadvantages of joint venture

- Joint ventures can cause ownership disputes between the parties. Disputes can occur in the 50:50 joint
venture, each party has the same management rights, leading to possible disagreements in making the
final decision. Disputes can occur due to the absence of a consist on future investments and profit
sharing.

- The loss of control over a joint venture can occur when the local government is one of the partner
parties. This situation occurs most often in industries that are considered culturally sensitive or of
importance to national security such as radio, infrastructure and defense.

Therefore, the profits of the joint venture may be affected because the local government has motives
based on cultural preservation or security.

(According to the International Business Textbook, National Economics University Publishing House)

4.2. COMMERCIAL AGENCY

4.1.1. Definition

Article 166.- Commercial agency (Law on Commerce, 2005) Commercial agency means a
commercial activity whereby the
principal and the agent agree that the agent, in its own name, sells or purchases goods for the principal

or provides services of the principal to customers for remuneration.

4.1.1. Definition

Article 167.- Principals and agents

1. Principals are traders that deliver goods to agents for sale or

provide money to agents for purchase of goods, or traders that authorize the provision of services to
service-providing agents.
2. Agents are traders that receive goods to act as sale agents or receive money to act as purchase agents
or accepts the authorization to provide services.

4.1.2. Forms of agency

Article 169.- Forms of agency

1. Off-take agency is a form of agency whereby the agent definitely sells or purchases a specific
quantity of goods or provides a full service for the principal.
2. Exclusive agency is a form of agency whereby a sole agent is authorized by the principal to sell or
purchase one or more goods items or to provide one or more types of services within a given
geographical area.

3. General goods sale or purchase or service provision agency is a form of agency whereby an agent
organizes a network of sub-agents to sell or purchase goods, or provide services for the principal.
The general agent represents the network of sub-agents. Sub-agents operate under the management and
in the name of the general agent.

4. Other forms of agency agreed upon by the parties.

4.1.3. Rights and obligations of principal/agent

Article 172.- Rights of principals

Unless otherwise agreed, principals shall have the following rights:

1. To fix prices of goods purchased or sold or charge rates of services provided to customers under
agency;
2. To fix agency prices;
3. To request agents to take security measures as provided for by law;
4. To request agents to make payments or deliver goods under agency contracts; 5. To inspect and
supervise the performance of contracts by agents;
4.1.3. Rights and obligations of principal/agent

Article 173.- Obligations of principals

Unless otherwise agreed, principals shall have the following obligations:

1. To guide, supply information to, and facilitate, agents to perform agency contracts; 2. To bear
responsibility for quality of goods of goods sale or purchase agents, and quality of services of service-
providing agents;
3. To pay remuneration and other reasonable expenses to agents;
4. To return to agents their assets used as security (if any) upon the termination of agency contracts;
5. To bear joint responsibility for law violation acts of agents if such law violation acts are partly

attributable to their faults.

4.1.3. Rights and obligations of principal/agent

Article 174.- Rights of agents

Unless otherwise agreed by the parties, agents shall have the following rights:
1. To enter into agency contracts with one or more principals, except for cases specified in Clause 7,
Article 175 of this Law;
2. To request principals to deliver goods or money under agency contracts; to take back assets used as
security (if any) upon the termination of agency contracts;
3. To request principals to guide, supply information and create other related conditions for the
performance of agency contracts;
4. To decide on goods sale prices or service charge rates for customers, for off-take agents; 5. To enjoy
remunerations and other lawful rights and interests brought about by agency activities.
4.1.3. Rights and obligations of principal/agent

Article 175.- Obligations of agents

Unless otherwise agreed, agents shall have the following obligations:

1. To purchase or sell goods or provide services to customers at prices or charge rates fixed by
principals; 2. To comply strictly with agreements on handover and receipt of money and goods with
principals;
3. To take security measures for performance of civil obligations as provided for by law;
4. To pay to principals any proceeds of the sale of goods, for sale agents; to deliver purchased goods to
principals, for purchase agents; or to pay service charges to principals, for service-providing agents;

5. To preserve goods after the receipt thereof, for sale agents, or prior to the delivery thereof, for
purchase agents; to bear joint responsibility for quality of goods of purchase or sale agents or quality of
services of service-providing agents in cases where they are at fault;
6. To submit to inspection and supervision by principals, and to report to principals on their agency
activities;

7. Where it is specified by law that an agent shall be allowed to enter into an agency contract with a
principal for a certain type of goods or service, such provision of law must be complied with.

5.2. MULTI-LEVEL MARKETING (MLM)

5.2.1. Definition

Multilevel marketing (MLM) is also known by different names as network marketing (NM), and
network marketing direct selling organisation (NM DS).
“Multilevel marketing (MLM) is a form of retail direct selling (i.e., face-to-face selling away from a
fixed retail location) that by definition has a multilevel compensation structure.”

5.2.1. DEFINITION

Direct selling, including MLM, is a particular retail channel of distribution wherein salespeople or
distributors are in business for themselves and operating as independent contractors. These distributors
sell to consumers, including themselves, and as such MLM is a form of consumer marketing.

5.2.2. MLM vs pyramid schemes

A pyramid scheme is a fraudulent operation by which promoters of so- called “investment” or

“trading” schemes enrich themselves in a geometric progression through the payments made by recruits
to such schemes (World Federation of Direct Selling Associations, 2011b, p.1)

5.2.2. MLM vs pyramid schemes

 - Individuals who have been recruited into an organisation are compensated primarily for
recruiting other individuals into the organisation rather than for making legitimate retail sales of
a product or service to so-called “end consumers”;
 - Requirement to pay a substantial fee for joining the organisation, pressure on distributors to
buy large amounts of inventory (“inventory loading”);
 - The absence of a policy regarding the buying back of unsold inventory, also known as buy-
back;
 - Profit is made by geometric progression - by the progression of the network itself - and not (or
at least much less than) by the progression of sales to consumers outside the network, or even
sales representing internal consumption;
 - Pyramid schemes are readily identified because of the lack of a tangible product Such as
certificates, training programs, magazine subscriptions, illusory discounts, or “miracle”
treatments

5.2.3. Regulation on MLM in Vietnam

According to Article 3, DECREE on management of business activities under multi-level method

(Decree No.: 40/2018/ND-CP)
“In this Decree, the following terms are construed as follows:
1. Multi-level business means a business activity run through a network of participants at levels and
branches, which allows participants to receive commissions, bonuses and other economic benefits from
their sale activities and sale activities of other people in the network.

2. Multi-level sale enterprise means an enterprise which organizing its business activities under multi-
level method to sell goods.
3. Multi-level sale participant means a person who signs multi-level sale agreement with multi-level
sale enterprise.

5.2.3. Regulation on MLM in Vietnam

4. Multi-level sale contract means an agreement in writing on participation in multi-level sale network
between individuals and multi-level sale enterprises. 5. Rules of operation means a set of rules of a
multi-level sale enterprise which governs behaviors of multi-level sale participants, processes and
procedures to perform multi-level sale activities.

6. Compensation plan means a plan used by multi-level sale enterprises to calculate commissions,
bonuses and other economic benefits received by multi-level sale participants from the sale results of
their own and of other people in the network.

7. Multi-level sale position, multi-level sale code means the position and code of a multi- level sale
participant arranged in the network to calculate commissions, bonuses and other economic benefits to
be payable to such multi-level sale participants.”

5.2.3. Regulation on MLM in Vietnam

According to Article 4 - Objectives of multi-level business, DECREE on management of business

activities under multi-level method (Decree No.: 40/2018/ND-CP)
1. Multi-level business is only applied to goods. All business activities under multi-level method of
objectives which are not goods are prohibited, except otherwise regulated by other regulations.

2. Goods which are not allowed to sell under multi-level method:

a) Medicines, medical equipment, all types of veterinary drugs (including aquatic veterinary drugs);
plant protection drugs; chemicals, insecticide and disinfectant products which are restricted and
prohibited to use in the domestic home sector and in the health sector and all types of hazardous
chemicals;
b) Digital information goods.

5.2.3. Regulation on MLM in Vietnam

Article 5 - Prohibited acts in business activities under multi-level method:

1. Multi-level sale enterprises are prohibited from conducting the following activities: a) Requesting
other people to deposit or submit a certain amount of money in order to sign multi-level sale contract;
b) Requesting other people to buy a certain quantity of goods in order to sign multi- level sale contract;
c) Allowing multi-level sale participants to receive money or other economic benefits from the act of
introducing other people to participate in multi-level sale activities, but not from purchase and sale of
goods of such introduced people;
d) Refusing without a legitimate reason to pay commission, bonuses and other economic benefits that
multi-level sale participants are entitled to receive;
dd) Providing misleading information about compensation plan, benefits from participation in multi-
level sale networks;

5.2.3. Regulation on MLM in Vietnam

e) Providing misleading or confusing information about the function and use of goods or operations of
multi-level sale enterprise, through nominated speakers, trainers at conferences, seminars and training
courses or through documents of the enterprise;
g) Maintaining more than one multi-level sale contract, multi-level sale position, multi- level sale code
or other similar forms with one multi-level sale participant;
h) Conducting promotion based on using network consisting of levels and branches in which the
participants of promotion have more than a position, code number or other equivalent forms;
i) Organizing commercial intermediary activities in accordance with regulations of law on commerce
which serve the maintenance, expansion and development of multi-level sale networks;

5.2.3. Regulation on MLM in Vietnam

k) Receiving or accepting the application or any other form of documents of multi-level sale
participants, in which multi-level sale participants declare that they waive a part or all of their rights
under the provisions of this Decree or allow the enterprise not to perform its obligations towards multi-
level sale participants in accordance with regulations of this Decree;

l) Trading via multi-level method with respect to the subjects are not allowed regulated at Article 4 of
this Decree;
m) Failing to use the system of management of multi-level sale participants which was already
registered with multi-level sale registration authority to manage multi-level sale participants;

n) Trading or transferring networks of multi-level sale participants to other enterprises, except for the
acquisition, consolidation or merger of enterprises.

5.2.3. Regulation on MLM in Vietnam

2. Multi-level sale participants are prohibited from conducting the following activities:
a) The acts mentioned at point a clause 1 of this Article;
b) Providing misleading or confusing information about the benefits of participation in multi-level sale
networks, the function and use of goods and the operations of multi-level sale enterprise;
c) Organizing conferences, seminars and training courses regarding multi-level business without a
written delegation issued by multi-level sale enterprise;
d) Inducing, enticing, corrupting multi-level sale participants of other multi-level sale enterprises to
join the network of multi-level sale enterprise in which they are participating;
dd) Using positions, authorization, social and career positions to encourage, require, induce, entice
other people to participate in multi-level sale networks or to purchase goods traded via multi-level
business;
e) Performing multi-level sale activities in provinces where multi-level sale enterprise has not been
granted the confirmation for the registration of its multi-level sale operations in such localities.

5.2.3. Regulation on MLM in Vietnam

3. Organizations and individuals are prohibited to carry out multi-level business, organizing
conferences, seminars, training, introduction of business activity in form of multi- level of their own or
of other organizations, individuals without obtaining multi- level sale registration certificates, except
otherwise regulated by the laws.
4. Individuals are prohibited to participate in activities of organizations and individuals who carrying
out multi-level business without obtaining multi-level sale registration certificates, except otherwise
required by the laws.
What Is Blue Ocean Strategy?
The blue ocean strategy aims to shift strategic imperatives from outperforming competitors in existing
markets to creating new industries, thereby making the competition irrelevant. Companies may use this
strategy when the current supply in their existing market exceeds demand or if turnover has increased
and profit margins are diminishing.

Blue ocean companies focus on creating uncontested market space with new demand for products or
services that don’t exist yet by simultaneously pursuing the following:

 Differentiation
 Low Costs

Advantages of blue ocean strategy:

 Businesses can create uncontested markets that have new opportunities.

 This framework offers a new perspective and encourages unorthodox thinking about creating
consumer value.
 The Blue Ocean process helps companies understand customer needs and desires more deeply.
 It moves strategic imperatives away from competition and towards differentiation.

Disadvantages and possible limitations of the blue ocean strategy:

 There is a risk that efforts won’t result in the creation of a blue ocean. This strategy's success
depends on an organization’s resources, talent, and position in the market.
 Balancing dual strategic imperatives (cost reduction and buyer value) can take time and effort
for organizations.
 Organizational hurdles, such as scarcity of resources and a lack of strategic alignment, can
impact the outcomes of the blue ocean strategy.
 Businesses must attract enough customers to generate economies of scale and dissuade
immediate competition.
 Blue ocean markets will eventually become red oceans as competitors appear.

What Is Red Ocean Strategy?

Red ocean strategies are the opposite of the blue ocean strategy. They describe business
strategies organizations use to grow and succeed in established markets.

However, there are significant pitfalls (cạm bẫy) to pursuing a red ocean strategy:

 Red oceans are filled with businesses competing for the same customers.
 Maintaining growth becomes increasingly tricky as profits diminish in red oceans.
 Red ocean markets force enterprises to choose between cost leadership or differentiation.
 Success in red ocean markets requires simultaneous exploitation of demand and beating your
competitors.
 Red ocean markets need greater resources and scale to compete effectively.
But before you start despairing, it’s important to note that red ocean strategies aren’t always a bad
move. Red ocean companies can and still do experience great success in red ocean markets with high
levels of competition.

Some examples of when a red ocean strategy may be a better choice include when:

 A company has experience, knowledge, or skills that it can leverage in the existing market.
 There are limited resources, and they can’t afford to spend significant capital on finding blue
oceans or capitalizing on them.
 An organization has a low-risk tolerance or is in a period of stabilization.
 A company has a good position and level of profitability in an existing market.

Strategies are essential for succeeding in the business world. Companies navigate the competitive seas
with the help of two essential approaches: the Red Ocean and Blue Ocean strategies. The Red Ocean
strategy emphasizes competition and gradual improvements while taking on established competitors in
a well-known market. On the other hand, the Blue Ocean strategy stimulates businesses to venture
into uncharted territory, establishing new markets through creative thinking and originality. These
strategic decisions set the direction for a company's journey through the vast ocean of business
opportunities and influence how it deals with the difficulties of competition and market development.
What is the Red Ocean Strategy and Its Benefits
The traditional business strategy known as the "Red Ocean" strategy is when businesses compete in
their current markets to outperform competitors and capture a larger market share. This frequently
entails emphasizing differentiation, price, or a mix of the two. The phrase "Red Ocean" refers to a
metaphorical situation in which competitors are engaged in a fierce battle for the same customer base.
This tactic has advantages even though it might seem obvious.
Benefits
 Competes in the current market.
 Outperforms the opposition.
 Takes advantage of the current demand.
 Makes the trade-off between value and cost.
 Synchronizes a company's entire operational system with its low-cost or differentiation
strategy choice.
Red Ocean Strategies and Examples
Red Ocean's strategies usually center on using well-known tactics to compete in already-established
market spaces. Cost leadership, for instance, entails lowering production costs within the sector to draw
in price-conscious clients. In contrast, product differentiation emphasizes providing distinctive features
to make a name for yourself in a crowded market.
The fast-food market is highly competitive, with high-profile ads, aggressive pricing, and new product
varieties. McDonald's is a prime example of a company that has successfully used the red ocean
approach. All that McDonald's accomplished was to stay under the radar while providing excellent
burgers made with fresh ingredients in a restaurant with a conventional aesthetic. When it comes to the
food industry, McDonald's delivers on authenticity.
What is the Blue Ocean Strategy and Its Benefits
The Blue Ocean Strategy is an innovative marketing technique that emphasizes innovation over direct
competition to revive companies. The strategy, which was first introduced in 2005 by W. Chan Kim
and Renée Mauborgne, entails creating new market niches and increasing customer demand to
eliminate the need for competition.
Benefits
 Makes market space uncontested.
 Renders the rivalry meaningless.
 Generates and seizes additional requests.
 Overcomes the value-cost trade-offs to achieve low cost and uniqueness by coordinating with
all of a firm's operations.
Blue Ocean Strategies and Examples
Instead of competing for a piece of the market that already exists, Blue Ocean's strategies focus on
generating new value for their clients. For instance, Cirque du Soleil transformed the business of circus
around the world, by fusing theater and circus elements, making it appealing to a broader audience than
just traditional circus visitors. By carving out a new market niche, this calculated action helped the
company break away from the fierce rivalry within the established circus sector.
Meta (Formerly Facebook): CEO Mark Zuckerberg declared in October 2021 that Facebook would
now go by the name Meta. When Facebook first launched, social networks were a completely new
industry. After more than ten years, social networking has grown into a monopoly. By changing its
name, Meta can focus its product offerings on the "metaverse," an uncharted territory that is thrilling
and novel. Although the strategy shift has yet to be proven, it is clear that the idea of moving from the
red ocean of social media to the blue ocean of the metaverse influenced the decision.
Blue Ocean vs. Red Ocean Strategy: Main Differences
The two concepts that outline different market strategies are the Red Ocean Strategy and the Blue
Ocean Strategy. Here's a table comparing them:
Conclusion
A company's competitive environment is shaped in the business world by selecting between red-ocean
and blue-ocean strategies. The Blue Ocean business strategy promises uncharted territory and
innovative potential, while the Red Ocean presents a well-known battlefield with fierce rivalry. The
decision between these approaches ultimately comes down to a company's objectives, willingness to
take on risk, and desire to explore creative paths in the wide and constantly evolving world of business.

The Driving Forces: Reasons for Mergers and Acquisitions

Again, to underline the point, if the real driver for M&A was financial (i.e. profit), there would be very
little to consider other than this when considering transactions. The reality is starkly different.

Below constitutes what we believe to be a quite exhaustive list of the driving forces for mergers and
acquisitions:

1. Market expansion
Acquiring a company in a different geographic market can open access to new customers, industries,
markets, and suppliers. A company which has excelled at this strategy is Spanish (and now, global)
bank, Santander, which has acquired domestic banks in over 20 countries to fuel its growth.
 2. Increased market share
Acquiring a competitor generally tends to allow a company to gain a larger market share, thus
strengthening their market position. This is common among banks, where consolidation has led to most
countries having a ‘Big 4.’

This was also a facet of the U.S. food retail industry, where a wave of M&A in the 1990s led to the
bigger players holding significantly increased market shares.

3. Diversification
M&A enables companies to diversify their product or service offerings, reducing reliance on a single
market or industry. This has traditionally been one of the drivers behind acquisitions among
conglomerates, who have several business lines at once, enabling them to diversify their revenue flows,
thereby reducing their risk. Nestlé is a textbook example of diversifying through M&A.

4. Cost Savings
Merging operations can often result in cost savings through economies of scale, streamlined processes,
and reduced duplication (for example, having one HR function instead of two). This is common to most
M&A transactions, and is usually filed under ‘synergy creation’, which is the next bullet point.

Airline mergers are good places to look for cost savings, as there are huge costs generated at all parts of
their value chains (e.g.., ground staff, baggage handlers, customer service, etc.). The merger of U.S.
Airways and American Airlines saved an estimated $150M in costs per year.

5. Synergy creation
Synergy creation can be revenue synergies (i.e., where more of each product or service sells by virtue
of grouping it with another product or service), or cost synergies (like those mentioned in the ‘cost
savings’ bullet above).

Most transactions cite at least one of these as their primary motive. The most high profile example of a
deal which achieved both forms of synergies was the merger of Exxon and Mobil back in 1998.

6. Talent acquisition
Sometimes, smaller companies are acquired because they’ve got a few highly skilled individuals on
their roster, which have attracted the attention of a rival company. This isn’t a common driver for
M&A but it does exist. Facebook has acquired a series of company with the principal aim of owning
their talent.

7. Enchancing competitive advantage

In this context, enhancing competitive advantage means acquiring something so that others cannot gain
access to it. This is usually something not repeatable (i.e., it is patented or one-off in some other way).

The issue here is that companies don’t admit to it. In fact, they active underplay it, in an attempt to
avoid the gaze of the antitrust office. One to consider here is Amazon’s purchase of Kiva in 2012. This
article outlines how, by not sharing Kiva with anybody else, Amazon enhanced its own competitive
advantage significantly.
 8. Accelerated growth
When growth is sclerotic in a certain segment of an industry, companies will often look to other higher
growth segments to acquire companies that can speed up sales. A good example here is provided by the
soft drinks industry, which went through a phase of buying energy drinks - which were growing much
faster than traditional soft drinks around a decade ago.

The classic case is Coca-Cola acquiring the now ubiquitous Monster Energy in 2008.

9. Vertical integration
DealRoom has an article that talks about vertical integration at some length. In short, vertical
integration is driven by the motive to acquire upstream or downstream operations, ensuring better
control over the supply chain.

A textbook example is furniture maker IKEA acquiring Romanian forests in 2015, providing it with the
raw materials to churn out its flatback chairs, tables, and beds.

10. Access to new technologies

Mergers and acquisitions enable companies to gain access to innovative technologies or R&D
capabilities that they don’t currently possess. Most technology acquisitions include some element of
this.

A good example of this comes from a somewhat unlikely source, however: Disney’s acquisition of
Pixar in 2006 was driven by many factors, one of which was the desire to gain control of Pixar’s then
revolutionary animation technology.

11. Brand strengthening

Acquiring a well-known brand enhances brand value, reputation, and even customer loyalty for the
acquiring party. The French conglomerate, LVMH, has acquired dozens of luxury brands with the
intention of creating an unrivaled portfolio of luxury brands that takes in everything from shoes and
accessories to perfumes and haut couture.

Each extra brand, in theory, gives the LVMH brand a more illustrious reputation.

12. Access to licensing or distribution

There are a couple of ways of thinking about M&A for licensing or distribution. The first is acquiring a
company and gaining control of its distribution channels (relationships with vendors, warehousing, and
even retail). This is a subset of ‘market expansion’, the first bullet point on this list.

Another facet of this is licensing: Acquiring a foreign company to acquire its licences to provide a
service or produce something within a country. Here, acquisitions of national telecoms firms are a good
example. Consider Vodafone’s acquisition of Telcim, Turkey’s second largest mobile operator, in
2005.

13. Economies of scale

If ‘diversification’ might also be called ‘economies of scope’, economies of scale are the benefits that
result from building a company to a size, which has market power. That is to say, it creates value by
virtue of being big.
An example is Walgreen’s acquisitions of several other pharmacy chains over the past decade, giving it
enhanced bargaining power with large pharmaceutical suppliers looking for distribution for their drugs.

Why M&A Can Fail: A Look at Potential Pitfalls

With so many different motives for mergers and acquisitions, by extension, there are multiple ways of
them going wrong. And for practitioners of M&A, the bad news is that it can go wrong at any stage of
the process, even when the deal is strategically sound.

The pitfalls are diverse and aren’t always well highlighted. In a previous article, FirmRoom looked
into seven of M&A pitfalls and suggested some solutions to each.

Conclusion: The Strategic Imperative of Mergers and Acquisitions

Few billion dollar companies are made without some well executed mergers or acquisitions.

M&A continues to evolve. While artificial intelligence is predicted to change everything irrevocably
this year, next year will bring new concerns, new challenges, and new obstacles to value generation.

DealRoom will continue to adapt, because it has flexibility built into its DNA. As your company looks
towards its first transaction, or its next transaction, and wants to know where to turn, use DealRoom to
guide you in this decision.
Both are a strategic imperative for companies that want to achieve meaningful growth. Achieving this
requires the right tools and partners - themselves part of the strategic decision.
DealRoom was developed with the intention of being one such tool, whose focus is M&A transactions
with positive outcomes.

What is widespread (wide) distribution?

Extensive distribution is the manufacturer's use of all distributors, product distribution channels across
a specified market area (find as many consumption points as possible). Due to the complexity and risk
when investing in the construction and development of this strategy, businesses should have a strategic
orientation and implementation plan to minimize the risk ratio and possibility of failure. A broad
distribution strategy is a strategy that uses multiple product distribution channels to customers to
increase product awareness/idention (goods/services). This strategy is the opposite of selective
distribution strategy in business – this form targets specific channels.

Wide distribution strategy

The distribution strategy aims to spread the word about a specific product or product line to multiple
people. Choosing the right distribution strategy is an important decision that can lead the business to
success or decline. Although the wide distribution strategy may sound like a good idea at first, it
requires a lot of resources to implement, making it difficult for small and medium enterprises (SMEs),
startups, startups,...

Some factors you need to pay attention to when choosing your business's distribution strategy:
  Product type: Enterprises trading in consumer products (products in the fast-moving consumer
goods group - FMCG) often apply this strategy.
 Budget: Budget is probably one of the most important factors that businesses must consider
when choosing the best distribution strategy. A broad distribution strategy may require a huge
budget to implement, so be prepared to make a few cuts elsewhere.
 Intermediaries: intermediaries help ensure the rapid and efficient distribution of goods and
services by businesses. However, businesses need to review their own budget before making any
decisions.
A typical example for businesses that successfully apply a wide distribution strategy is the two big guys
in the beverage industry, Coca-Cola and Pepsico. Thanks to consistent efforts and unique, innovative
marketing tactics, both brands have a huge competitive advantage over other non-alcoholic beverage
brands.

Advantages and limitations of a wide distribution strategy

Advantages of a wide distribution strategy:

 Wide range: The presence of the product in the market is the largest.
 Raising product awareness: A broad distribution strategy increases product awareness and
helps resonate among potential customers. Companies can easily maximize these results by
increasing investment and further efforts in marketing.

 Create competition between distributors/distribution channels; improve distribution

efficiency.
Besides the advantages brought to businesses, the wide distribution strategy also has
some limitations as follows:

 Requires more effort: Instead of focusing on a few stores, a broad distribution strategy requires
businesses to spend their energy through countless marketing channels. This will also require
access to a larger number of resources that small businesses may not have access to, especially
in the beginning.
 Difficult to control: Due to their wide reach, companies may have difficulty controlling market
coverage, which may also have difficulty increasing sales if they do not have the resources to
implement this strategy. Even the manufacturer will lose control of the operation of the channel
(display, arrangement, additional services, selling price).
 Poor efficiency in building brand image reputation.

 The risk of counterfeit goods, counterfeit goods is high.

Distinguish between extensive distribution and exclusive distribution

Widely distributed Exclusive distribution

 (Extensive Distribution) (Exclusive Distribution)

The producer will lose control of the The manufacturer has good control over
1. Control
channel's operation. marketing policies in distribution.

Lower due to diversification of Having an exclusive distributor should be

2. Risk
distributors in the market high risk.

3. Product
The presence of the product on the Limited, depending on the exclusive
presence on the
market is the largest. distributor.
market

This method is often used for ordinary This method is often applied to luxury,
4. Conditions of
department store consumer goods, high-end products, high-value products,
application
goods of small value. imported products.
Considering the current resources as well as product characteristics, has your business identified
and chosen the right distribution strategy?

With a team of experts with high professional knowledge and extensive experience in implementing
practical marketing activities, DTM Consulting can completely help your business conduct
research, marketing advice and propose the optimal and most suitable product distribution plan! In
addition, DTM Consulting also has a distribution network of consumer goods across the country, so we
are very happy and willing to become a distribution partner of your business.

CONCLUSION
Distribution is an extremely important stage, the shortest way to bring products to consumers with the
most authentic experiences, directly affecting the company's business results. Understanding
distribution – Businesses will know what to do to distribute products with the highest efficiency.