Trung Nguyen Coffee - Tài liệu tham khảo | Đại học Hoa Sen

[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006 Table of Contents
How has Trung Nguyen coffee company built/expanded in market?...........................................................2
Introduction.................................................................................................................................................2
Internal environments.................................................................................................................................2
Management...........................................................................................................................................2
Customers................................................................................................................................................4
Suppliers.................................................................................................................................................. 4
External factors - PESTEL Analysis................................................................................................................5
Economic factors.....................................................................................................................................5
Social/cultural factors..............................................................................................................................6
Legal constraints......................................................................................................................................6
Core competences.......................................................................................................................................6
Clear and distinctive product...................................................................................................................7
Difficult to copy.......................................................................................................................................7
Competitive advantages..............................................................................................................................7
Product differentiation............................................................................................................................7
Service differentiation.............................................................................................................................8
Quality.....................................................................................................................................................8
The global perspective.................................................................................................................................8
Some restriction of Trung Nguyen and Recommendation.........................................................................10
Conclusion.................................................................................................................................................10 1
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
How has Trung Nguyen coffee company expanded in market? Introduction
As the second largest export, coffee plays an important role in the Vietnamese economy
(Dang, 2004). According to ICARD and Oxfam research (2002), it is cultivated mainly in the
highland places like Dak Lak, Lam Dong and Gia Lai. Although coffee is a crucial commodity, it
cannot bring high income because Vietnam mainly exports bean coffee. In 1996, Vietnam
exported 480,000 tons but it gave 380 million dollar back. In this context, Mr. Dang Le Nguyen
Vu wanted to sell a kind of coffee that could bring more benefit than bean coffee. Therefore, he
and his friends established Trung Nguyen Coffee Corporation in 1996. His company produces,
manufactures and sells coffee. It consists of six members and it will have ten members in the
near future. Besides this, Trung Nguyen is the pioneer in franchising in Vietnam. By the end of
2010, Trung Nguyen had established over 1000 coffee shops and franchising shops in Vietnam
and other countries. The most important thing is that it has expanded its market in 40 countries
over the wold (Witzel, 2011). This essay will examine thoroughly Trung Nguyen Coffee, focus
on the internal and external factors that have impact on the business in order to understand more about business theory. Internal environments Management
`First of all, Mr. Vu has abilities enough to become a successful leader.
The fact is that his coffee brand was planned carefully and he put strong effort to fulfil them. For
instance, he could persuade the customers about coffee quality but there was no effort to
distribute the coffee network. To deal with this problem, Mr. Vu applied the chain of coffee
models of Starbuck Coffee (3). In addition, to face with the foreign brand name, Mr. Vu added
the Vietnamese tradition as a marketing campaign. What is more, Mr. Vu positioned every his
coffee shop as a place where everyone can come and enjoy coffee with Trung Nguyen’s style.
Customers are allowed to drink many kinds of coffee, distinguish the difference between them
and give their comments. As a result, his brand was more well-known and was welcomed by the
domestic market and also the exotic market.
Another example is that in 1998 when the director of Tien Dat company- a kind of tea trademark
refused his coffee brand to become the supplier, Mr.Vu announced that he will buy this brand. By
2001, he bought it and transformed it into one of Trung Nguyen Corporation – Tra Tien (10) 2
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
Secondly, he has a great strategic vision. He set a right way for Trung Nguyen coffee to develop.
Khoinghiep claimed that when Trung Nguyen was still young, he opened 3 coffee shops near
together (14). By this tactic, the manager could control easily his shop and adjust on time with
the trend of market. Besides this, he soon realizes that the way to gain the Vietnamese consumers
is the value of tradition in each coffee cup. Hence, he campaigned many programmes to attract
customers such as “The party of Coffee” in order to get easily a certain position in the domestic
market. Moreover, he conceives the role of the brand name in world coffee trade so he decide to
build the Heaven of Coffee in Buon Ma Thuot – the high land in Vietnam where coffee is grown
popularly. The aim of this project is that he will apply the most advanced method to product,
process and sell coffee firmly and make Trung Nguyen become the number one of coffee in the world (12).
The third characteristic of the head of Trung Nguyen is that Mr.Vu has never stopped created.
With his passion and dedication, he led Trung Nguyen to create G7 instant coffee to counter the
biggest multinationals – Nescafe – the most widespread foreign coffee in Vietnam. In “G7
Instant Coffee Festival” in 2003, 89% of 13000 coffee testers voted in favour of G7 while 11%
selected Nescafe(16). What is more, Passionate coffee for women which is decafein and added
collagen and vitamin P is created and attracts the interest of many women. Now, women can
drink their coffee comfortably without worry about the harm of coffee a lot (17).
Last but not least, Mr. Vu has a strong belief and motivation to support another. In 1996, when
Trung Nguyen was young, he did not have enough money to invest into his company.Thereby,
his friends suggested that even if we do in 20 years we could not do as well as the other did in
six months. He opened 10 days drink coffee free. His way was welcomed strongly by customers.
One of the customers said that:”I have drunk coffee for ten years. This is the first time I can
drink coffee free”. The fact proves that he can do it well. Within 6 months, he made Trung
Nguyen coffee became popular in Tay Nguyen - a large plateau of Vietnam (19). His success is
the dream of many coffee businessmen in the same period and it is the firm step to expand Trung
Nguyen coffee brand name in Vietnam and foreign market. Moreover, he always talk about his
passion about coffee and the development of Vietnamese economy, bring inspiration to the
young Vietnamese generation(appendix 1). Because of his aspiration to coffee, he process three
product coffee companies in Dak Lak, one factory that produces tea in Lam Dong, one breeding
farm in Ma D’rak and the famous brand name coffee Trung Nguyen by the end of 2005 (10). It is really the big growth. Customers 3
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
Customers are one of the affects on the expansion of Trung Nguyen coffee. They are the judges
and decide the fat of one brand name. In order to conquer their customers, Trung Nguyen added
the traditional value into their products. If customers come to Trung Nguyen coffee shop, they
are introduced the way to drink coffee in Trung Nguyen special style and have the change to
taste different types of coffee without charging. Moreover, they continuously create the tasty
coffee product such as the instant G7 coffee. Thanks to this product, Trung Nguyen coffee is
well-known not only in Vietnam but also Singapore and Japan for example. Suppliers
Suppliers can increase their power and also make an impact onto the industry by increasing
supply’s price or lowering the supply’s quality. Trung Nguyen has many advantages to make
their supply become more competitive. Firstly, in 506,000 hectares used for growing coffee
Robusta coffee-the most famous type of coffee in Vietnam occupies 26,000 hectares. About 3/4
Vietnam’s coffee production is in the Highlands places where has many relevant condition for growing coffee.
Table 1: Primary coffee producing areas Province
Planted Area in Hectares Dak Lak 234,00 Lam Dong 100,000 Gia Lai 75,000 Kon Tum 11,000 Dong Nai 60,000 Robusta Total 480,000 Son La 3,5000
As can be seen from the table above, the two largest producting provinces are Dak Lak 234,000
hectares and Lam Dong 100,000 hectares. Trung Nguyen was built in the uprooting areas above
so it can make use of advantages such as saving transportation cost. What is more, with the
available the local labours have experience in processing coffee, Trung Nguyen can hire them
without paying high. Therefore, Trung Nguyen made a good qualitative coffee to sell but they
did not need to spend much money on production cost.
Almost farmers living in the high land is the coffee househould. Their income is from mainly
coffee. However, it is not staintable when the coffee price is declined while they have to get bank
loan to expand their farm (21). Trung Nguyen known this problem of farmers so they promised
to pay the high price with the coddition that farmes have to sell the good product to them. By this 4
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
way, Trung Nguyen established the firm relationship with their suppliers. Trung Nguyen always
had priority to buy the best coffee bean.
External factors - PESTEL Analysis
Gillespie. A (2007) stated that “There are many factors in the macro-environment that
will affect the decisions of the managers of any organisation”. External environment has impact
on the growth of a firm. It brought not only opportunities but also challenges to Trung Nguyen
Coffee and therefore it is important for managers to examine to give visionable decisions.
PESTEL Analysis below will conduct external factors that have impact on the development of Trung Nguyen Coffee. Economic factors
The changes in recent years have in part contributed to a coffee crisis that affects more than 50
coffee producing countries, several of which are dependent on coffee as their main source of
export revenues. As a result, Vietnamese economy underwent some difficulties although it was
modest. Some regional economic shocked when coffee revenues dropped significantly combined
with increased government expenditure (10). However, Trung Nguyen was not affected a lot
when it continuously opend franchising shops in Singapore 2001, Cambodia and Thailand 2003,
Japan 2004 and established the biggest contribution network G7 Mart. The reason to explain the
success of Trung Nguyen is that firstly Vietnamese economic scale was small, meaning that it
was affected by crisis modestly. It was An advantage for not only state company but also private
enterprises, especially Trung Nguyen Coffee. Secondly, Trung Nguyen with the difference from
competitor such as service and productions, Trung Nguyen had firmly position in the market.
Thirdly, coffee was very in favour of customers when it was consider the most favourite drink.
As analysis above, Trung Nguyen could overcome obtacles and less suffered from crisis than the others.
Social/cultural factors
Vietnam is densely populated and agricultural land officially accounts for 28 percent of its 33
million hectares and coffee occupied 4.16 percent of total agricultural cultivating area. Thereby,
coffee is an important part of the rural economy. It directly employs 600,000 workers. (10).
According to the General Statistic Office (2003) about 2.6 million people in Vietnam cultivated 5
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
coffee. These characteristics of social environment support to the growth of Trung Nguyen in
these first steps because Trung Nguyen had a relevant place to cultivate coffee and the cheap
available work force. Trung Nguyen, therefore, could gain more benefit and become more competitative.
Legal constraints
The government had some decision to support import. In 1998, the government allowed private
firms to import fertilizer and removed quantitative import restrictions (Decision 242/1999/QD-
TTg) and quotas (Decision 46/2001/QD-TTg) in 1999. Import taxes on fertilizers have been
reduced to five persent. The Government has encouraged expand coffee export through award
policy. It has implemented some policies to reduce transportation costs by 10% and some
unnecessary proceduces such as police examination of goods. Besides this, in order to reach the
high productivity, the Government delete the taxes on using ground water for growing coffee in
Dak Lak (21). Thereby, Trung Nguyen can decrease the irrigation time and production cost.
Hence, they can increase profits and productivity more effectively when they have a company
which culture coffee as well. Another competitive policy is that exchange rate is adjusted
significantly by the Government (21). This helps the coffee business suffers from crisis less than
other countries which has lower exchange rate. Core competences
Core competency is the one of strong points to overcome the competitors.
Clear and distinctive product that focus on customer group is one of core competencies
helping Trung Nguyen has a firm position in coffee market. With various types of coffee, Trung
Nguyen gives more choice for their customers.Trung Nguyen created G7 instant coffee to
counter the biggest multinationals – Nescafe – the most widespread foreign coffee in Vietnam. In
“G7 Instant Coffee Festival” in 2003, 89% of 13000 coffee testers voted in favour of G7 while
11% selected Nescafe (16. Bùi, 2010). What is more, Passionate coffee which is the coffee for
women appeared the first time in Vietnam has added collagen and vitamin P. It attracts the
interest of many women. Now, women can drink their coffee comfortably without worry about
the harm of coffee a lot. Weasel coffee for the rich class who wants to discover the unique favour
of the King of coffee (25. Lê, 2010). It is clear to say that Trung Nguyen sastisfiy their customers
from all classes with different jobs. 6
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
Difficult to copy that means the company has a unique difference to conquer customers and
can decrease the risk of the new entrants.
Trung Nguyen has various types of coffee that has focused on the wide ranges of customer. With
the rapid expansion, Trung Nguyen has closely saturated the market. Therefore, it is putting the
brakes on further domestic expansion and has more protection itself from the new entrants to
market. It is also difficult for copycats to imitate the Trung Nguyen imagine because copycats
cannot persue customers easily when they are familiar with Trung Nguyen’s name and flavour. Competitive advantages
Product differentiation
To be more competitive, Trung Nguyen designs their coffee shops with the style of Tay Nguyen
where coffee is derived from. When customers come to Trung Nguyen shop, they can expose
into the original coffee environment and try the different tastes of coffee. Moreover, they can
compare and give recommend about the tasty coffee. By this point, customers feel very
interested in Trung Nguyen brand. That marks the success of Trung Nguyen when they want to expand in market.
Service differentiation
Besides the unique Tay Nguyen style to drink coffee, Trung Nguyen makes the flexible way to
sever customers. Each coffee has a distinct style and atmosphere that reflective of the local
community and region. For example, café shops in the center of Ho Chi Minh City are decorated
with colour. Because it aimed at the young, pop music in trend are played loudly. In comparision,
café in conservative city – Hanoi is designed in traditional style. Waitresses dressed in the
traditional flowing tunic of Vietnamese women – Ao Dai. The music atmostphere is in soft flute
music and bamboo and rattan décor. This service difference can sever customers’ favour
relevantly, giving them the interest and comfort in drinking coffee. Quality
It seems that the coffee market is now saluted when customers nowadays have many
brand names to choose. As a result, they are ready to give up Trung Nguyen to taste other coffee
brands. Therefore, quality becomes very important when it is one of factor to conquer customers.
Trung Nguyen (2010) states that they “chooses four different regions where the most delicious
coffee growed: Robusta in Buon Ma Thuot, Vietnam, coffee from Ethiopita, Arabica from 7
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006
Jamaica and coffee from Brazil. With the support of the cutting-edge technology and the secret
of Oriental making coffee in grounding, Trung Nguyen coffee products are so special and
different from another one”. That makes Trung Nguyen coffee more competitive and gain more benefit. The global perspective
The globalisation processes are driven by three main factors, international trade, investment and
the use of information technology. In an economics’ view, countries will become borderless and
governments will be marginalised in regards to the economic markets (Silicon, 2010). Its
founders also think that “The key is to invest in brand and overseas” (Rowse 2002). In 2002,
Trung Nguyen opened its first café in Tokyo, Japan. Reuters (2002) stated that “If we succed in
Tokyo, that will accelerate Trung Nguyen’s expansion plans abroad”. However, when entering to
Japanese market, Trung Nguyen had to face with the famous coffee brand Stabuck. By the end of
1996, Stabuck had set up a beachhead in Japan seven years. Up till now, coffee market in Japan
has been crowed with 38 Stabucks outlets and 74 outlets of lesser-known others. Trung Nguyen
Coffee chose the Coffee Retailer Daisu to open a franchising shop in Japan. Moreover, Daisu had
responsibilities for up-front investment of retail space rental, equipment, décor and employee
salaries. This arrangement minimized the financial risk of Trung Nguyen Coffee. With the
strategy of selling the image of Vietnam combined with some similarities in culture, Trung
Nguyen had more advantage when compare to Stabucks. Café will feature a romantic, idealized
vision of Vietnam. The coffee itself differentiates the brand from other coffeehouses. It is a
bitter-tasting brew that can flavoure with sweetend condensed milk and served over ice.
Supprisingly, the Japan franchise has priced the coffee 50 persent higher per cup than Stabuck
and 25 percent higher than other domestic coffeehouses. It meant that Trung Nguyen positioned
its brand in Japanese market confidently. After the success in Japan, Trung Nguyen opened more
franchised shops in Thailand, China and Cambodia. The reason Trung Nguyen chose to open in
Asia is that these countries have some similarities in culture and style to drink coffee. Coffee
industry does not develop in these countries as well. Trung Nguyen then focus on the top ten
countries which are exported market of Vietnam.
Table 2: Top ten markets for Vietnamese coffee at its export peak 2002 Country Volume (mt) Avg.price (US$/mt) Share of total (%) Germany 112,739 363 15.8 United States 89,288 355 12.5 8
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006 Spain 59,777 352 8,4 Italy 56,263 375 7.9 Belgium 51,170 375 7.2 Poland 47,500 376 6.7 France 33,956 361 4.8 Japan 29,162 364 4.1 South Korea 26,162 364 3.7 United Kingdom 25,799 338 3.6
As can be seen from the table above, Japan, South Korea and United States were main export
markets of Vietnamese coffee. Trung Nguyen knew that and they conquered these markets first
when the people in these countries are familiar to Vietnamese coffee. In 2011, Trung Nguyen
exported 1,400 million coffee into United States and 200 million tons into E-mart retail chains in
Korea (Thenewpaper, 2012). This is a change for Trung Nguyen to promote G7 brand and Vietnamese brands in general.
Some restriction of Trung Nguyen and Recommendation
There success of Trung Nguyen case is not denied. In only three years, Trung Nguyen from a
small shop became popular over Vietnam. It is the second holder in istant coffee market in Vietnam.
However, there are some difficulties which Trung Nguyen needs to consider in order to expand
in global. Trung Nguyen is till a small and young company from a developing country. It is not
avoidable to the invasion of the giant coffee holders in global market such as coffee Nero from
Italy and Stabuck coffee from America. The taste of Trung Nguyen coffee is not unique enough
to compete with the flavour of Italian coffee – Nero. G7 instant coffee is considered a strategic
product to expand into global market. However, this production just serves generally the
majority of customers. Therefore, Trung Nguyen cannot empression its image to customers and
its image as well. Another obstacle that Trung Nguyen need to overcome is that Trung Nguyen
should learn the way to adapt in competitive environments with different languages, cultures,
laws and business practices. The name Trung Nguyen seems that it is difficult to pronounce in
the common language English. It is really mouthful. “So we may have to change it,” said Dang
(2002). He would change it to something simple, like “TN”. In addition, it is clear to say that
many franchised Trung Nguyen coffee shops do not keep the image and style which Trung
Nguyen desires. Now, customers can drink coffee or another type of drink in a Trung Nguyen coffee shop. 9
[PHAM THI QUYNH MAI – PHTQP13 ] Business Strategy – PM1006 Conclusion
In conclusion, these are factors that influenced on the development of Trung Nguyen internally
and externally. Leadership, customers, social factors and legal policy supported Trung Nguyen
coffee to expand. By dint of having wide range of product and special style, Trung Nguyen is
strong enough to cope with their competitors. That is their core competencies and competitive
advantage. However, there is no doubt that Trung Nguyen needs to refresh the network of
franchised shops to keep their image 10