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VINAMILK INTERNATIONALIZATION STRATEGIES

TO SINGAPORE
Table of Contents
1

Executive Summary.............................................................................................. 4

Introduction........................................................................................................ 6
2.1

About Vinamilk Company................................................................................6

2.2

Product Mix.................................................................................................. 6

2.3

Targeted Country............................................................................................ 7

Reasons for Internationalizing..................................................................................8

PEST Analysis..................................................................................................... 9
4.1
4.1.1

Political Situations....................................................................................9

4.1.2

Policies to Attract FDIs.............................................................................. 9

4.1.3

Food Safety Policies............................................................................... 10

4.2

Economic Factors......................................................................................... 11

4.2.1

Economic Situation................................................................................. 11

4.2.2

GDP and Inflation Rate............................................................................12

4.2.3

GNI and Unemployment Rate....................................................................14

4.3

Social Factors.............................................................................................. 15

4.3.1

Demographics....................................................................................... 15

4.3.2

Cultural Differences................................................................................17

4.3.3

Tastes and Preferences.............................................................................18

4.4

Political and Legal factors................................................................................. 9

Technological Factors.................................................................................... 19

4.4.1

Infrastructure........................................................................................ 19

4.4.2

Education and Training............................................................................ 20

4.4.3

Technological Readiness..........................................................................21

Singaporean Dairy Market Analysis.........................................................................21


5.1

Threat of New Entrants: HIGH.........................................................................22

5.2

Power of Buyer: MODERATE.........................................................................22

5.3

Power of Suppliers: LOW............................................................................... 22

5.4

Competitive Rivalry: HIGH............................................................................23

5.5

Threat of Substitutes: LOW.............................................................................23

Entry Mode....................................................................................................... 24

Implementation.................................................................................................. 26

7.1

Internationalization Strategy............................................................................26

7.2

Set-up Cost................................................................................................. 26

SWOT Analysis.................................................................................................. 27

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9

Conclusion........................................................................................................ 27

10

Reference Lists............................................................................................... 29

11

Appendix...................................................................................................... 36

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1

Executive Summary

Globalization enables firms to expand their operations not only in the home country but also
internationally. Taking this opportunity, Vinamilk (Vietnam Dairy Products Joint Stock
Company) had exported their products to 29 countries in the world. Singapore is a developed
country which highly encourages foreign companies to invest in. This report will analyze
Singaporean environment to reach a conclusion that Singapore is an ideal place for Vinamilk
to expand to.
Market-seeking and efficiency-seeking motives are two reasons why Vinamilk should expand
to Singapore. As an import-reliance country, Singapore is a potential market for exporters.
Moreover, Vietnam and Singapore are members of WTO, ASEAN and APEC. Vinamilk can
take advantages of lower tariffs and easier administrative procedures.
Moreover, PEST analysis, which consists of political, economic, social and technological
factors, is a crucial framework for analyzing macro-environment factors in Singapore. Firstly,
in terms of politics, one party political system brings stability to this country. Singapore also
imposes many encouraging policies to attract FDIs in terms of procedures and tax incentives.
However, strict food safety policy is an issue that Vinamilk has to be aware of. Secondly,
Singapore is a well-developed economy with high GDP and low unemployment rate. Income
of Singaporean people is relatively higher compared to other countries, which creates a
demand for nutritious products. Thirdly, population aging 25-64 constitutes for a large
proportion. Singapore and Vietnam are having the same culture. Furthermore, the level of
price sensitivity of Singaporean customers is significant. Lastly, infrastructure such as port
stations and warehouses in Singapore is extremely modern. On the other hand, employees are
skillful and online shopping is popular in this country. All of these factors indicate that
Singapore is a suitable market for Vinamilk.
For a closer insight about Singaporean dairy market, Porters Five Forces is used in this
report. It is notable that Singaporean dairy market is high in threat of new entrants and
competitive rivalry. Therefore, the dairy market in Singapore is competitive and brutal.
Overall, by applying Uppsala model, Vinamilk can establish sales subsidiary in Singapore.

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The company had already had experience and knowledge in building factories and
establishing sales subsidiary in other countries. When setting up sales subsidiary,
transnational strategy is appropriate for Vinamilk. This company should consider sending
PCNs, recruiting Singaporean HCNs and hiring offices and warehouses in Singapore.

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2

Introduction

The demand for dairy products in both developed and developing countries is growing along
with rising incomes, urbanization and healthy diets, which creates opportunities for dairy
companies to develop their production. Vinamilk is the largest dairy company in Vietnam,
which creates a sound basis to expand internationally. Taking these advantages, Vinamilk has
headed its products overseas in over 120 countries, such as the U.S., Australia, Canada,
Turkey, Russia and South Korea. However, Singapore is a potential market that Vinamilk has
not expanded to yet (Vinamilk 2014a).
This report will provide detailed analysis of Singaporean market and identify opportunities
and challenges for Vinamilk in expanding to this country.
2.1

About Vinamilk Company

Established in 1976, Vinamilk is mainly engaged in providing dairy products in Vietnam and
internationally (Vinamilk 2014c). They process, manufacture, marketing and distribute their
products regarding milk products, nutrition food and non-alcohol beverages. Vinamilks
managers are wholehearted in providing the best quality product, ensuring food safety and
being innovative in product development to enhance Vietnamese peoples health (Vinamilk
2014a). The strategy of Vinamilk is to gain high customer satisfaction through affordable
prices and the most modern distribution channel in Vietnam (Vinamilk 2014a).
Furthermore, Vinamilk owns intensive physical assets with 13 factories throughout Vietnam
and one milk plant in New Zealand (Vinamilk 2014b). SSI Schaefer (n.d.) states that with
advanced technologies, Vinamilk gains competitive advantage in manufacturing products that
satisfy international standard in nutrients. Moreover, the company engages in raising dairy
cows and developing breeding techniques for stable supply of fresh milk (Vinamilk 2014a).
With all of these capacities, Vinamilk has performed very efficiently in Vietnam and foreign
countries with total revenue of VND 35,704 billion in 2014 (Vinamilk 2014a). It is a solid
base for Vinamilk to expand to Singaporean market.
2.2

Product Mix

Vinamilk has over 10 brands with 200 product lines, which made the company become the
most famous dairy products supplier in Vietnam (Vinamilk 2014c). The fundamental product

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line is fresh milk, yogurt, condensed milk, powder milk, beverages, ice cream and soy milk
(figure 1).

Figure 1. Adapted from: Vinamilk n.d.

The company divides its products into groups of ages. They have products for kids, such as
cocoa malt drink which is sweet and have colourful bottle packages and for pregnant women,
like Dielac Mama providing essential nutrients to enhance mothers health and prevent
constipation during pregnancy (Vinamilk 2014a). Furthermore, Vinamilk offers affordable
price that attracts a wide range of customers from low-income class to high-end segment
(Vinamilk n.d.).
2.3

Targeted Country

Singapore is the targeted market which has a strategic location between the South China Sea
and the Indian Ocean (Euromonitor International 2015h). More importantly, Singapore's
geographic location is nearby Vietnam (CIA 2015). Singapore, which is called as the Lion
City, has grown significantly since independence, and become one of the world's most
prosperous countries with the world's busiest port (CIA 2015). Furthermore, Singapore has a
highly development free market economy in which the economy is open and corruption-free

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(CIA 2015). The economy depends a lot on imports, which is an advantage for foreign
companies to enter the market (CIA 2015).

Reasons for Internationalizing

With regards to Dunnings four reasons for firms to internationalize (Dunning 2000), marketseeking and efficiency-seeking are the two motives that Vinamilk should think of if the
company intends to approach Singaporean dairy market.
In terms of market-seeking motive, because of the lack of land, Singapore has to import over
90% of its fresh produce, specifically vegetables, fresh meat and dairy products (Euromonitor
International 2014a). Moreover, based on MarketLine (2014), in 2018, it is predicted that
Singaporean dairy market would have a value of $807.7 million (a rise of 27.3% since 2013)
and a volume of 48.1 million kilograms (a rise of 26.9% since 2013). With increases in the
market value and volume forecast, Singapore is an ideal market for Vinamilk to enter.
Another potential motive is efficiency-seeking, which is designed to take advantages of free
trade agreements (Dunning & Lundan 2008). According to MarketLine (2015c), Singapore
economy depends on foreign trade to a great extent so that government policies have made
special efforts to reduce trade and investment barriers. Specifically, the country joining WTO,
ASEAN and APEC has removed a large number of import items from its tariff lists
(MarketLine 2015c). For instance, ASEAN Community has effectively lowered intra-national
tariff by Common Effective Preferential Tariff Scheme (ASEAN n.d.). Almost 80% of
products traded between Singapore and Vietnam have been brought down to the 0-5% tariff
range (ASEAN n.d.). Moreover, WTO simplified trade process by standardizing custom
procedures, created transparency by clarifying information related to politics, regulation and
reducing tariffs from 5% to 9% (WTO n.d.). As Vietnam is also a member of WTO, ASEAN
and APEC (Euromonitor International 2015), it could be easier for Vinamilk to enter
Singapore without paying high tariffs.
In terms of psychic distance (Grska 2013), Singapore is an ideal market as the country is
located in the same area, namely South East Asia (SEA) as Vietnam

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4

PEST Analysis

4.1
4.1.1

Political and Legal factors


Political Situations

Singapore is a parliamentary republic where the Peoples Action Party (PAP) has dominated
the countrys politics since 1959 (Euromonitor International 2015a). Being the first prime
minister of The Republic of Singapore, Lee Kaun Yew, who was the founder of PAP, engaged
in making Singapore to be an attractive country to invest in by creating transparent
bureaucracy and effective regulatory systems (Hussain 2015).
The one party system brings stability and minimizes political conflicts between parties in
Singapore. Owing to all contributions from the PAP, the Singaporean government is
considered one of the most effective among Asian countries. The score for absence of
corruption is 0.93/1, which indicates the degree of integrity and accountability of the
Singaporean government are tremendously high (World Justice Project 2015).
4.1.2

Policies to Attract FDIs

4.1.2.1 Procedures
Singapore is the worlds easiest place to do business as it bestows many advantages for FDIs
(World Bank 2015d). This country strongly encourages international firms to invest in. The
laws determine different incentives for different sectors (Euromonitor International 2015a).
According to U.S. Department of State (2014), the legal framework and public policies are
advantageous that attract FDIs into Singapore since there is no restriction on reinvestment or
repatriation of earnings or capital. Moreover, foreign investors will be treated as equal as
domestic firms as they are not being required to enter Singapore via joint ventures or gain the
management control in local companies to do business (Euromonitor International 2015a).
4.1.2.2 Corporate Tax Incentives
Singapores corporate tax rate is lowest in Asia which is 17%, whilst the rate in Vietnam is
22% (MarketLine 2014; Deloitte 2015). Moreover, Singapores Goods and Services tax
(GST) is 7% (Euromonitor International 2015a). With the aim of attracting more FDIs, the
government has many tax incentives including tax exemption or tax reduction for all firms in
all industry (KPMG 2013). Specifically, the government organizes the International

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Headquarter or Regional Headquarter program (IHQ/RHQ) applied for all businesses
incorporated or registered in Singapore (Singapore Economic Development Board n.d.). The
program will reduce the corporate tax rate on incremental income to encourage foreign
entities in considering Singapore as a base to conduct their activities in headquarters
management, control their regional and international operations (Singapore Economic
Development Board n.d.).

Singapore ranks fifth in providing business with friendly tax environment out of 189
countries. It takes only 82 hours per year in Singapore to handle taxation procedures, while
the average amount of the East Asia & Pacific is 204 hours per year (Euromonitor
International 2015a). The total tax payment is equal 18.4% of corporate income, which is a
half of the East Asia & Pacific average rate (34.4%) (Euromonitor International 2015a). This
relatively low level of tax attracts FDI inflows to Singapore.
4.1.2.3 Labor Laws
Singaporean labour market is one of the most flexible markets in the world, which ranked
second out of 144 nations in labour market efficiency of the GCI 2014 (Euromonitor
International 2015g). Labour laws enable businesses to be flexible in labour contracts.
Recruiting and dismissing practices are relatively simple for employers in this country
(Euromonitor International 2015h). Nevertheless, recruitment for foreign labour had been
tightened in 2014 when the Ministry of Manpower required companies to prioritize on hiring
Singaporean labors over foreign ones (Euromonitor International 2015g). Given the fact that
Singaporean workers have a high level of expertise, this is not an issue for Vinamilk in
recruiting employees in this country. Moreover, Singapore does not enforce any minimum
wage regulation and salary can be negotiated between employers and employees
(Euromonitor International 2015g).
4.1.3

Food Safety Policies

Due to an increase in consumer health consciousness, Singaporean place an emphasis on


origin, quality, brands and other factors related to products they will buy (Euromonitor
International 2015c). Being aware of that, the Singaporean government has created stricter
requirements and laws on food safety (MarketLine 2014). Specifically, the importation of
processed food including dairy products, is regulated by the Agri-Food and Veterinary

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Authority of Singapore (AVA) to make sure the food is safe (AVA (a) n.d.). According to AVA
(b) (n.d.), it is illegal to sell, import, advertise or produce dairy products which have
excessive amounts of antibiotic residues or are degradation products.
Moreover, these products are subjected to Sale Food Act and Food Regulations which
contains packaging regulations and labeling requirements (AVA (a) n.d.). Additionally,
businesses are required to give the proof to ensure its products meet the quality requirements
and standards, such as laboratory analytical reports, food safety standardization and other
supporting documents (Singaporean-German Chamber of Industry and Commerce 2013).
According to AVA (b) n.d.), nutrition claim has to be sufficiently emphasized on dairy
packaging. Hence, these strict regulations will increase compliance costs for businesses
which raise difficulties for foreign investors (MarketLine 2014).
4.2
4.2.1

Economic Factors
Economic Situation

Singapore is an ideal country for foreign investors as it has a free market economy with an
opened and friendly environment as well as second rank in strength of investor protection in
2014 (CIA 2015; Schwab 2014). Imports constitute for a large proportion of Singaporean
GDP (figure 2). Therefore, as being one of the most import-dependent countries, Singapore is
an attractive market for foreign exporters to enter (Euromonitor International 2015h).

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Figure 2. Reproduced from: World Bank 2015a
Furthermore, economic ideology of the Singaporean government is to boost government
spending on public welfare and developing free trade environment (MarketLine 2015c). A
research by Heritage Foundation (2015) indicated that Singapores Economic Freedom Index
ranking is at 2 out of 178 countries with 89.4 points, which creates freedom for companies as
the intervention level of government on business activities is very low. Moreover, Singapore
has ranked 2nd in Global Competitive Index for four consecutive years. This country ranked
first in goods market efficiency (Schwab 2014).

4.2.2

GDP and Inflation Rate

Figure 3. Reproduced from: MarketLine 2015b


According to MarketLine (2015c), due to economic crisis in 2009, GDP decreased by 0.6%
(figure 3). The rationale is that Singapore is highly dependent on international trade and
finance with other countries. Additionally, based on Euromonitor International (2015f), total

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GDP of Singapore increased by 34.1% to reach US$ 307 billion in 2014. However, in 2013,
Singaporean economy recovered marginally to 3.93% and in 2014, GDP growth was more
stable at 2.4% (MarketLine 2015c). GDP growth rate in 2015 is forecasted to be 2 to 2.5%
because the global economy experienced downturns in the first half of 2015 (MTI 2015).
Therefore, income of Singaporean tends to be stably high, which leads to higher purchasing
power and demands for value-added products.

Figure 4. Reproduced from: World Bank 2015b


In contrast, figure 4 shows the inflation rate of Singapore dropped from 5.3% in 2011 to 1%
in 2014. The low inflation rate benefits for businesses as money is more valuable which leads
to an increase in the purchasing power of consumers (Bank of Canada 2013). This generates
opportunities for business investment to enhance productivity and stay competitive in
Singapore (Bank of Canada 2013).

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Furthermore, according to Harjani (2015), Singapore dollar dropped 5% compared to US
dollar in 2014, and it is forecasted to decrease by 5% at the end of 2015. It will be beneficial
to export to Singapore because the value of VND will increase and revenue for international
firms will accelerate.

4.2.3

GNI and Unemployment Rate

Figure 5. Reproduced from: Euromonitor International 2015a


Singapores unemployment rate has decreased steadily since 2010 due to steady economic
recovery. In 2015, the unemployment was 2.9% of the economically active population, which
is much lower than the rate of 2009 (4.3%). However, Singapores youth unemployment rate
(aged 15-24) remained tremendously higher at 8.4% in 2015 because experienced workers
are more preferred by employers.

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Figure 6. Reproduced from: World Bank n.d.


GNI per capita in Purchasing Power Parity is an indicator that effectively measures peoples
living standard by converting into a common currency (UNDP n.d.). Figure 6 illustrates that
income generated domestically and internationally by Singaporean is tremendously higher
than average GNI of the world. Thus, Singaporean has a extremely high living standard.

Figure 7. Reproduced from: Euromonitor International 2014a

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The high living standard results in a demand for nutritious products. According to figure 6,
Singaporean expenditure is on upward trend between 2000 and 2013. It is forecasted that this
figure will mount to S$212 per capita in 2016, which creates a potential market for dairy
firms to come to Singapore (figure 7).
4.3
4.3.1

Social Factors
Demographics

According to Euromonitor International (2015h), the population of Singapore was


dramatically increased from 2.4 million in 1980 to 5.6 million in 2014. By 2020, it is
expected that the population will reach 6.1 million (Euromonitor International 2015h). The
increase in the population will become an ideal condition for Vinamilk, since the company
could achieve large sales if it enters Singaporean dairy market.

Figure 8. Reproduced from: CIA 2015

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Although the population of Singapore rises, the countrys society is ageing (figure 8). The
median age is 36 years old, 10.9 years higher than in 1980 (Euromonitor International
2015h). Moreover, the number of people from 25 to 64 years old is 3,435,768 people which
accounted for nearly 60% of Singapores overall population (CIA 2015). Therefore, as
Vinamilk is a big company that has a variety of dairy products served for different customer
segments from mom and kid, adults to elderly (Vinamilk 2014a), ageing structure of
population is not a threat for the company. Conversely, the ageing population helps the
company in realizing adult segment is very potential and it needs to be mainly concentrated
on when operating in Singapore.
4.3.2

Cultural Differences

Figure 9. Reproduced from: The Hofstede Centre n.d.

Figure 8 indicated Singapore and Vietnam have significant cultural similarities. For instance,
in terms of power distance, both countries accept and expect that power is distributed
unequally within an organization or society meaning that employees expect their bosses to be

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told what to do (The Hofstede Centre n.d.). However, there is a minor difference in the level
of uncertainty avoidance between Singapore and Vietnam. Specifically, Vietnamese do not
want to feel threatened by ambiguous or unknown situations and try to avoid them at certain
levels; however, Singaporean seem to have a more relaxed attitude toward ambiguous or
unknown situations and want to take risks with very low score on this dimension (The
Hofstede Centre n.d.). In Singapore, people obey rules and regulations seriously, not because
they need for structure but because of high power distance (The Hofstede Centre n.d.).
Therefore, they call their country a Fine country. You will get a fine for everything (The
Hofstede Centre n.d.). Consequently, from Vinamilks perspective, it is quite easy for the
company to set up its business due to similar cultures. The only issue is that the company
needs to follow regulations and standards if they do not want to get fined when doing
business in Singapore.
4.3.3

Tastes and Preferences

Figure 10. Reproduced from UNDP 2013

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Human development index (HDI) is a composite index that measures the quality of life in
three dimensions (UNDP 2013). According to UNDP (2013), HDI of Singapore ranked 9th in
the world with 0.901 points which is higher than very high human development level (figure
10). This means Singaporean peoples quality of life is really good with high standard of
living, good knowledge as well as a long and healthy life. In order to have this long and
healthy life, Singaporean consumers value healthy products. Based on Euromonitor
International (2015e), due to the increase in the trend of health-concerns, many Singaporean
consumers start to buy soy milk, free-fat milk, sour milk or reduced fat formats; while full fat
formats like cream are perceived to be unhealthy. Moreover, the consumers prefer drinking
yoghurt as they have a deep knowledge of the health benefits gained from yoghurt including
digestive health and boost immune strength (Euromonitor International 2015j). Thus, milk,
soy products and yogurt become largest segments of the dairy market in Singapore which
account for 40.2%, 24.3% and 11.3% of the markets total value respectively (MarketLine
2014b). Being aware of this trend, Vinamilk can choose to provide specific dairy products
that meet Singaporean consumers demand.
In terms of price sensitivity, Singaporean consumers are highly price sensitive. According to
Euromonitor International (2014b), 52% of Singaporean shoppers thought in shopping
decision, price was outweighed brands reputation and quality. Moreover, approximately 56%
of customers focused on promotions and deals; and 42% of them often used discount coupons
(Euromonitor International 2014b). The reason behind that behaviour is because in
Singapore, the government has created stringent laws and requirements on food safety.
Consequently, Singaporean consumers did not need to concern about the quality of products
and they concentrated on the price to save money. Thus, Vinamilk can enter Singaporean
dairy market without having any fear that local consumers will choose existing competitors
products rather than products of new players like Vinamilk.

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4.4
4.4.1

Technological Factors
Infrastructure

Figure 11. Reproduced from: Schwab 2014


The quality of overall infrastructure of Singapore has ranked 5 th in the world with the score of
6.3 out of 7 in 2014 (figure 11). Specifically, qualities of air transport infrastructure, port
infrastructure and roads are extremely high which are in top of the world (figure 11).
Furthermore, based on Euromonitor International (2015a), the Singaporean government will
continue to develop the transport networks and raise residential regions to enhance
infrastructures level due to an increase in the demand of growing population in urban areas.
Additionally, according to World Bank (n.d.), Logistic Performance Index (LPI) is an
international score that utilizes six fundamental dimensions to benchmark the performance of
a country compared to the overall LPI index. In fact, Singapore has an ideal LPI with the
score of 4, which ranked 5th out of 160 in 2014 (World Bank n.d.). This demonstrates that
Singapore has a good performance on trade logistics with the high level of the quality of trade
and transport. Thus, as Singapore has excellent logistics and infrastructure systems
(Euromonitor International 2015a), it is highly easy for Vinamilk to supply its products to
Singaporean customers without having delays that might affect its reputation.

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4.4.2

Education and Training

Figure 12. Reproduced from: Schwab 2014


Singapore is in top 2 in terms of having higher education and training (Schwab 2014).
Specifically, figure 12 shows the quality of the education system ranked 4 th. This rank proves
the education system of Singapore is really good that provides valuable knowledge and
information for students to help them in having good educational background. As having
good educational background, they are more confident to work better and harder in future.
Moreover, the extent of staff training is crucial as Singapore Workforce Development Agency
(WDA) arranged a huge number of programs including Productivity Initiatives in Services &
Manufacturing or English Workplace Program to improve workers technical skills (WDA
n.d.). This explains why the extent of staff training of Singapore ranked 7 th in the world
(figure 12). Consequently, with a well-educated workforce and innovative economy,
Singapores labour productivity was high, at US$136,497, which was the worlds third
highest level in 2014 (Euromonitor International 2015a). Overall, the high educational and
technical skills of Singaporeans will benefit Vinamilk as the company will not have to put
lots of time, money and effort in training employees.

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4.4.3

Technological Readiness

Figure 13. Reproduced from: Schwab 2014


Singapore is one of the countries that has the highest FDI and technology transfer with the
score of 5.9 out of 7 (figure 13). Moreover, the availability of latest technology is quite high
that ranked 15th in the world (figure 13). These advantages in technology will help Vinamilk
to not only boost the product quantity, but also improve the product quality as the company
can learn technological advances to apply to the production process.

Furthermore, in terms of telecommunications, Singapore is one of Asia Pacifics telecom


leaders with leading telecom network and fixed-broadband, mobile Internet and cable TV
penetration (Euromonitor International 2015i). Additionally, because of convenience, online
shopping becomes a trend among Singaporeans. Thus, there is a booming growth in
transactions for both local e-commerce sites and international online retailers (Euromonitor
International 2015i). Specifically, in 2014, 41.6% of Singapores businesses received order
online, compared to 30.2% in 2009 (Euromonitor International 2015i). Therefore, Vinamilk
can take advantages of online network as a way to reach more Singaporean customers.

Singaporean Dairy Market Analysis

Singaporean dairy market has grown steadily in recent years (MarketLine 2014a). Its total
revenue was $643.7 million in 2013 while milk constituted 40.2% of overall market

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(MarketLine 2014a). Specifically, fat-free products are preferred by Singaporean recently as
its value growth is 12% in 2014 (Euromonitor International 2014b).

Fraser And Neave Ltd remains a leading position in Singaporean dairy market which
generates 26.8% of overall market value (MarketLine 2015c), followed by Nestle Singapore
Pte Ltd and Malaysia Dairy Industries Pte Ltd which account for 15.1% and 8.6%
respectively (Euromonitor International 2015b; MarketLine 2015c). Overall, it can be
concluded that Singaporean dairy market is LOW in threat of substitutes and suppliers
power, MODERATE in buyers power but HIGH in threat of new entrants and competitive
rivalry.
5.1

Threat of New Entrants: HIGH

5.2

Power of Buyer: MODERATE

For this force, buyers are not only end consumers but also retailers such as supermarkets or
convenience stores (Johnson, Whittington & Scholes 2014). Firstly, Singaporean consumers
are highly price sensitive. Secondly, as dairy products are crucial in diets, food retailers tend
to stock them, which decrease their buying power (Marketline 2014). Therefore, the power of
buyers is moderate for Singaporean dairy market.

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5.3

Power of Suppliers: LOW

Dairy suppliers have limited ability to differentiate raw materials and it is simple to move
from one supplier to another (Marketline 2014). Thus, the power of suppliers is low.

5.4

Competitive Rivalry: HIGH

5.5

Threat of Substitutes: LOW

As milk is considered to be crucial supplies of calcium, therefore, dairy products are not
easily replaced (MarketLine 2014). Thus, the risk of substitutes is low.
In short, Singapore is a potential market for Vinamilk to enter; however, high degree of
competition is a leading issue the company will have to deal with when expanding into this
market.

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6

Entry Mode

Figure 14. Adapted from: Burns n.d.


Figure 14 shows different foreign market entry strategies with different level of risks in
which wholly owned subsidiary has the highest risk while the lowest risk belongs to
exporting strategy. Additionally, based on the Uppsala model (figure 15), which distinguishes
four successive stages for firms to expand internationally, exporting is the first step giving no
or little market experience and requiring limited commitment of resources to the market
(Forsgren 2002). He also states that as the firm is more confident and have enough market
knowledge and market commitment, it can expand its business activities, such as establishing
sales subsidiaries or even building its own factories to manufacture.
According to Vinamilk (2014a), exporting is the core strategy that the company has chosen to
enter international markets. Specifically, in 2014, Vinamilk exports to 29 nations and regions
in total (Vinamilk 2014a). The company still maintain exporting strategy to its traditional
markets in Middle East and Southeast Asia (Vinamilk 2014a). Key export products are
sweetened condensed milk and powdered milk (Vinamilk 2014a). Hence, export sales
account for about 10% of the companys total revenue (Vinamilk 2014a). Furthermore, based
on Vinamilk (2014a), it already had one joint venture with Miraka Limited to produce milk in

Team: Whatever
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VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
New Zealand, one production and sales subsidiary in California, USA and one sales
subsidiary in Poland.
As having lots of experiences in internationalization, Vinamilk can choose to take more risks
in order to gain higher profits rather than just playing it safe through utilizing exporting
strategy. Specifically, the company could build its own office and sales subsidiaries when
entering Singaporean dairy market. By using this entry mode, Vinamilk can fully control all
of its business operations including physical distribution, marketing, promotion, and
customer service activities in Singapore instead of depending on independent agents.
Overall, the company should set up its own sales subsidiaries. Although the risks could be
high, it can bring a number of benefits for the company in increasing its brand awareness and
revenue.

Figure 15. Reproduced from: Softducks n.d.

7
7.1

Implementation
Internationalization Strategy

Transnational strategy with ethnocentric staffing approach is suitable for Vinamilk in


Singapore. The headquarters will take control of which products to export, amounts of

Team: Whatever
26

VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
products and time to export. Vinamilk can have two PCNs who will control the operation of
Vinamilk and support HCNs. The company can hire ten Singaporean HCNs who are in
charge of managing distribution process as well as marketing and promotional campaigns to
boost sales in this country (Bartlett & Ghoshal 1994).

7.2

Set-up Cost

When setting-up sales subsidiary in Singapore, Vinamilk needs to concern about labour cost,
office rental and warehouse rental expense.
According to Expat Arrivals (n.d.), the salary for an expatriate to Singapore is S$ 250,000
(around 200,000 USD) per year due to high living cost.

Figure 16. Reproduced from: Savills World Report Singapore 2015

Figure 16 shows it will cost S$8 to S$14 per square foot per month to rent an office in
Singapore. Moreover, based on Colliers International (2013), the average monthly gross
rents for warehouse at ground floor and upper floor are $2.62 and $2.15 per square foot per
month respectively. The rents for warehouse are expected to be unchanged (CBRE 2013).

Team: Whatever
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VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
8

SWOT Analysis

Team: Whatever
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VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
9

Conclusion

It is noticeable that Singapore has a transparent bureaucracy and well-developed economy. As


the policy is favorable for FDIs, it is not time consuming and overlapping to establish sales
subsidiary in this country. However, Singaporean dairy market is quite competitive and
undifferentiated. The demand for value-added products is increasing together with concerns
about health. As Vinamilk had experience in expanding to other countries and Singaporean
market is open for FDIs, setting-up sales subsidiary is an appropriate strategy for Vinamilk to
increase market coverage.

Team: Whatever
29

VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
10 Reference Lists
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Expat Arrivals n.d., Salaries for expats in Singapore, Expat Arrivals, viewed 23 August 2015,
<http://www.expatarrivals.com/singapore/salaries-for-expats-in-singapore>.
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model: a critical review', International business review, vol. 11, no. 3, pp. 257-77, viewed 20
August 2015, ScienceDirect database.
Grska, M 2013, 'DOES THE UPPSALA INTERNATIONALIZATION MODEL EXPLAIN
THE INTERNATIONALIZATION PROCESS OF PROFESSIONAL BUSINESS SERVICE
FIRMS?', CBU International Conference Proceedings, vol. 1, pp. 1-8, viewed 20 August
2015, <http://ojs.journals.cz/index.php/CBUConference2013/article/viewFile/8/10>.

Harjani, A 2015, Singapore dollars next stop: 1.40?, CNBC, CME Group, viewed 22 August
2015, <http://www.cnbc.com/2015/01/26/singapore-dollar-likely-to-weaken.html>.
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Team: Whatever
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TO SINGAPORE
Johnson, G, Whittington, R & Scholes, K 2011, Industry life cycle, image, in Exploring
strategy: text and cases, image, 9th edn, Financial Times Prentice Hall, Harlow.
Johnson, G, Whittington, R & Scholes, K 2011, Three Generic Strategies, image, in
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Industry life cycle, 9th edn, Financial Times Prentice Hall, Harlow.
Kotler, P., Amstrong, G., Ang, S., Leong, S., Tan, C. & Hon-Ming, O. 2009, Principles of
Marketing: A global perspective, 12th edn, Pearson Education South Asia, Singapore.
KPMG

2013,

Singapore

Tax

Profile,

KPMG,

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August

2015,

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database.
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TO SINGAPORE
Schwab, K 2014, The Global Competitiveness Report 20142015, table, World Economic
Forum,

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2015,

<http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf>.
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Economic

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2015,

<http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf>.
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Singapore Economic Development Board (EDB) 2015, Incentives for Businesses, EDB
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2015,

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singapore/ready-to-invest/incentives-for-businesses.html>.
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Singaporean-German Chamber of Industry and Commerce 2013, Singapore-Food Industry,
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Vietnam,

SSI

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schaefer.de/en/conveying-and-picking/references/food-industry/vinamilk.html>.

Team: Whatever
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VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
The Economist Intelligence Unit 2014, Business Environment Rankings - Which country is
best to do business in?, The Economist Intelligence Unit, viewed 17 August 2015,
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VINAMILK INTERNATIONALIZATION STRATEGIES


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Vinamilk

2014a,

Annual

Report

2014,

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VINAMILK INTERNATIONALIZATION STRATEGIES


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2015, <http://data.worldjusticeproject.org/>.
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Team: Whatever
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2015,

VINAMILK INTERNATIONALIZATION STRATEGIES


TO SINGAPORE
11 Appendix
Appendix 1. The industry life cycle

Figure 1. Reproduced from Johnson, Whittington & Scholes 2014

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Appendix 2. Marketing plan for Vinamilk in Singapore
As it is the first time that Vinamilk moves to Singapore, promoting brand awareness is a
crucial task. Moreover, marketing campaigns should emphasize on nutritious dairy products
with low level of fat and cholesterol.
1.1. Objectives
2016

In the next 5 years


Introduce fat-free products to
Singaporean market
Get access to Singaporean supermarkets
and convenience stores
Raise brand awareness by Facebook
page

Gain market share of 3%


Increase sale volume by 3% per
year
Rank third for fat-free dairy
distributor in Singapore

1.2. Generic Strategy


According to Euromonitor International (2015c), value-added dairy products such as fat-free,
semi-skimmed and flavoured milk are highly demanded. Customers are seeking for both
nutritious ingredients such as calcium and protein and low fat intake. In Singapore, the
market for value-added milk products is immature as Meiji remains the only key player.
Simultaneously, Singaporean customers are price sensitive. According to Singapore Business
Review (2011), 62% of Singaporean customers are knowledgeable about the price of most
grocery items and noticeable to price change. This figure makes Singapore rank second in
consumers price sensitivity in Southeast Asia.
Therefore, cost focus strategy is appropriate for Vinamilk to apply in Singapore. This
strategy targets price-conscious dairy consumers with differentiation focus on value-added
milk.
1.3. Marketing strategies
a. Segmentation
In Singapore, many international firms have engaged in mass marketing to reach a large
amount of customers. Furthermore, they have gained reputation for providing high quality
dairy products in this country. In order to compete successfully, Vinamilk should concentrate
on niche market with value-added products.
Female constitutes for 50.89% of Singaporean population (CIA 2015). This is the segment
that consumes a large amount of value-added dairy products. Firstly, Vinamilk should focus
on young and middle-aged women whose anti-aging and skin beauty are the leading
concerns. Products with supplement collagen and antioxidant will be attractive to female
segment.
Secondly, young Singaporean customers are seeking for healthy products to maintain their
appearance (Euromonitor International, 2015d). Moreover, 36% of Singaporean population
were overweight in 2014. Therefore, Vinamilk can develop low protein and no sugar added
products which reduce blood pressure and are suitable for dieters.

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VINAMILK INTERNATIONALIZATION STRATEGIES


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b. Targeting
Concentrated
Marketing
Company
resources

Finite

Product
Variability

Limited

Products life
cycle stage

Introduction

Market
Variability

Low

Competitors
marketing
strategies

Undifferentiated

Undifferentiated
Marketing

Vast

Differentiated
Marketing

x
x

High

Maturity

High

Differentiated

Vinamilk has compound annual growth rate of 22% in total revenue and in 2014, revenue was
VND 35,704 billion (Vinamilk, 2014). They have launched various products in order to
satisfy different customers with different tastes and preferences. For example, Vinamilk has
value-added products such as pasteurized low-fat milk and probiotic drinking yoghurt. On the
other hand, their products are in maturity stage because the quality of products are confirmed
by customers as Top 10 Vietnamese high quality product (Vinamilk, n.d.). Finally,
competitors such as Nestle and Fraser And Neave Ltd are applying mass marketing to reach a
large number of customers. Therefore, differentiated marketing is suitable for Vinamilk.
c. Positioning
Product: high quality dairy products to meet with strict health regulations and
customers taste
Vinamilk CanxiPro: contain added protein to build bones with low fat and 9%
collagen.
Pasteurized fresh milk low-fat Vinamilk 100%: reduced milk fat which help control
fitness
Vinamilk Kefir Yogurt: contain Kefir which helps reduce blood cholesterol, suitable
for dieters or diabetics.
Probeauty Yogurt: targets at female segment, with collagen and antioxidants to make
skin smooth and flawless.
Price: As the market is highly price-sensitive, Vinamilk should apply marketpenetration pricing strategy. Initially, Vinamilk should set a low price to effectively
attract a large number of buyers quickly and win a large market share. Thus, the high
sales volume will lead to decrease in distribution costs (Kotler et al., 2009).

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Appendix 3. Three Generic Strategies

Figure 3. Reproduced from Johnson, Whittington & Scholes 2014

Appendix 4. Ease of Doing Business Index

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Figure 4. Reproduced from Worldbank (2013)

Appendix 5. Singapore Dairy Market Category Segmentation

Figure 5. Reproduced from Marketline (2015)


Appendix 6. Singapore Dairy Market share

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Figure 6. Reproduced from Marketline (2015)

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