Introduction:
This research paper discusses the entry prospects of PARKnSHOP supermarket with its home base in Hong Kong into the Vietnam market. PARKnSHOP Supermarket chain is a market leader in Hong Kong, boasting more than 290 stores in Hong Kong and Macau. An online store, PARKnSHOP, is a member of the A.S. Watson Group (ASW), which is a subsidiary of international beauty products retail company CK Hutchison Holdings Limited, founded in Hong Kong on 1841(PARKnSHOP Limited, 2020). This research employs the use of Porter’s diamond model to analyses the lucrativeness of the Vietnam market to this market-leading supermarket chain.
The Vietnamese market is a demographic that has a vast untapped potential, and ParknShop has achieved market dominance in Hong Kong with limited opportunities for expansion within china as such a foreign market is a lucrative opportunity for this retail giant.
The porter’s diamond economic model is best suited at analyzing this Supermarket’s strength and those intrinsic factors that make it excel at its home, which can, in turn, be replicated in this new overseas market this company seeks to penetrate. The four-point model will enable an in-depth analysis of what this company is doing right and what it is doing wrong in the local market and how these lessons can be used in this foreign market to ensure the company has seamless penetration to the lucrative Vietnamese market. The model is suitable for analyzing the external environment and bring to light the determinants of competitive advantage in this case.
The four determinants advanced by porter are represented by the table below wish aim to show the relatedness between the four-factor conditions and a specific firm’s external competitive advantage:
Figure 1. A representation of factors that influence the external competitiveness of a firm.
- Firm’s strategy and rivalry; this looks at what kind of competition the firm and in our case this chain of Supermarket has in the local market, competitors have the effect that an organization continues to endeavor to improve the products and service offering it delivers to its customers to encourage customer loyalty and stay ahead of its competition. This also spurs innovative ways of improving their offering to the customers and as such a company that has thrived in a fiercely competitive market like Hong Kong is likely to do exceptionally well in the vast and entirely unexplored new markets of Vietnam, noting that this huge demographic market has massive potential for a multiplier effect in the production process of the PARKnSHOP supermarket chain. The nature of competition at home also means this supermarket chain will be offering superior commodities in term of value proposition and offering as opposed to its competitors, the financial stability of this Supermarket in Hong Kong, and its capability of offering reasonable prices that it can sustain over a reasonable duration of time while remaining profitable is a vast an advantage.
- Factor conditions: this is all those sets of requirements that this Supermarket will have to overcome to penetrate the foreign Vietnam market. They include a local biased and promotion of indigenous companies. Having to overcome new trade regulations that are the company is not conversant with at the home turf. Another factor condition is that the home-grown competitors have a home ground advantage in that they understand what exactly the client needs and how to respond to the client’s needs in their domestic market and language.
- Related and supporting industries: this is another condition in that it examines all the supermarket support structures, where it sources for its raw materials and its distribution channels. It also looks at the availability of companies that services equipment ,and in the case of this supermarket chain this is he competitive advantage in that from its home market it has established supplier channels and also the nature of this supermarket chain is that it owns its own supporting outlets which are profitable enabling the supermarket chain to consolidate profits and minimize capital drainage from the organization. That this supermarket chain is a member of a giant conglomerate puts it in unrivaled league with its business acumen and prospect at home indicating that it can take over the domestic home-grown competitors market to the extent of driving them out of the market, this though an advantage is also a factor that might put this county at a disadvantage in that the local government regulators will be monitoring this Supermarket to ensure it does not come up with monopolistic tendencies. The premise of free trade is also deemed that it will be subject to government interference in that while the Vietnamese government welcomes foreign direct investment, it will ultimately institute measurers to ensure its local home-grown companies remain competitive. This might come in the form of a prohibitive corporate tax and also in demand on employment quotas. By venturing into the Vietnamese market PARKnSHOP supermarket chain will have to train locals to occupy a management position in its organizational structure as the Vietnamese government is opposed to an influx of expatriates taking jobs that could be offered to the people of Vietnam, this, in turn, will mean. However, the mother company in China and specifically the city of honking has an experienced workforce; it will fin itself in a scenario where the duties of the Vietnam supermarkets have to be handled by inexperienced Vietnamese nationals.
- Demand conditions: this includes all the factors that this supermarket chain will demand it to be fully operational and, in essence, how much requirement and acquisition of the same either put this endeavoring multinational at a comparative advantage or gives the upper hand to the indigenous supermarkets. Economies of scale inform that this Supermarket chain is better predisposed at supplementing its raw material and processing demand, and also, the ability to offer personalized and branded goods will create brand visibility within a short period.
The argument for and against entry into the Vietnamese market:
For valid entry into the Vietnamese market, ParknShop supermarket will have to undertake the following pre-entry and post-entry steps.
Pre-entry Steps; The company will have to carry out a thorough market analysis to identify the needs that it can meet in this market, it will also need to determine what are the gaps in what is being offered and what they intend to provide market analysis will also be aimed at understanding customers motivations and biases before entre to be able to attract customers to the business. Another step that the company needs to take is to carry our PESTLE analysis to examine all the external factors of this new market PESTAL analysis includes putting into context all the Political, Economic, Social, Technological, Legal and Environmental factors, that are present in this market that enable formulation of an entry strategy. A SWOT analysis is also another critical planning procedure that is integral when planning entry in the Vietnamese market to understand what are the Strengths, Weaknesses, Opportunities, and Threats that present themselves in the Vietnamese company. This analysis is essential, and in it, the company needs to study the competitor’s and compare with themselves, these two studies will offer an apt appreciation of the offerings that can give to this market and the offerings that can be accrued from this market the two reviews will help form the entry plan which will include.
Entry steps; a pilot the entry this is where the firm initiates a limited entry to gauge the reception of the customers towards the offerings and value proposition this new international organization is taking to Vietnam, a pilot entry will also allow the organization to carry out a marketing campaign to popularize their product and create anticipation and desire in the locals. Once this has been achieved, and after compliance with all legal issues, the company then pinpoints the location. Then it plans on the scale of entry based on the availability of resources. There are two approaches advised one being stunning approach where the supermarket stocks a full range of its value offering to the new market and this creates an interest in customers who are interested in the variety of quality products being delivered a second approach is a gradual approach to proffering of value proposition where the company plans gradual restocks meant to captivate the minds of the potential customer over an envisaged rhythmic period.
The above arguments and modalities once exhausted answer the question of the viability of this market and how this new entrant can effectively create competitive advantage while maximizing on profit margin with the capital investments poised to pay bay the value invested and remain profitable. This strategic approach to the entry, into the Vietnamese market, will ensure that PARKnSHOPS supermarkets will successfully gain a footing in this new market and also consolidate their core strengths in a new region with the significant untapped potential of this market becoming ripe for exploitation.
In conclusion, the Vietnamese market is a market that offers attractive prospects in that this country has investor advantages, which include the country has a steadily growing GDP, which indicates a rise in the purchasing power of the people. It is also a market where it is readily available human capital that is affordable; this is a substantial incentive investor. Even the government of this country has instituted policies to attract investor which include laying the infrastructural framework, opening up of its market and embracing a free market economy all espoused in political goodwill to encourage foreign direct investment with the Cambodian government offering incentives and also opening up tourist sites which enables an influx of more people in this region thereby meaning more customers for investors. AS such for the PARKnSHOP supermarket to successfully enter and establish itself as highlighted it needs to identify with the needs of this market, acknowledge the challenges in this market and tailor methods of overcoming the and finally the PARKnENTER supermarket company needs to study the culture of this region to effectively run marketing campaigns that are appealing to the people and being effectively accepted as a local company and avoid apathy and hostility reserved for foreign investors who do not give back to the society and end up being seen as drainers of a countries capital reserves. The model adopted by this supermarket chain is the make or break in the entry with a recommendation that the market analysis and market study needs to be exhaustive to avoid unplanned for challenges. With all indicators being that the Vietnamese market is a market ripe for the exploitation of those that dare venture into this new territory.
Pilot study: T
Identification of location
Citation: