FITT R
Author: 305107
For: FITT

Research project
Executive Summary.......................................................................................... 3
About Danier Leather....................................................................................... 5
Research Plan.................................................................................................... 5
Research Methodology...................................................................................... 8
Relevance, Reliability and Currency of Data Collected................................. 9
Logic and Analysis of Data............................................................................... 10
Market and Competitive Intelligence.............................................................. 16
Conclusion and Action Plan............................................................................. 23
Bibliography...................................................................................................... 26
Appendices......................................................................................................... 29
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Danier Leather (DL) is the North America’s leading manufacturer, designer, distributors and retailer of high-quality, in-trends leather apparel, accessories for women and men since 1972. DL’s products include coats, jackets/blink, pants, skirts and dresses, top vest, handbags, gloves, wallets, scarves, belts, briefcases, laptop cases and many more. DL currently operates 91 retail locations across
Canada and actively pursuing other markets such as Australia, Belgium, China, Japan, Germany, South
Korea, Norway, Sweden, Switzerland, United States and United Kingdom. As for this project, I picked
Malaysia and Vietnam to be DL’s next potential market. I picked these two countries because they were the most open and the fastest-growing economies in the world. Upon entering one of these two countries,
DL had a chance to expand its products into Asian market as a whole. The targeted city in Vietnam is Ho
Chi Minh and Malaysia is Kuala Lumpur (KL). I picked these cities because it had a lot of businesses, people are open for new things and has the biggest population compared to other cities.
At the beginning of the research, I had laid out a numbers of objectives which I thought the most important for the research. The objectives included determine political stability of the target market, determine the demand for leather products in the target market, identify all the costs of starting up a business in the target market, find out information about the, identify what kind of service offerings/warrantees/price of the competitors, identify all the available resources such as raw material and describe the weather climate in each country. These objectives were important to DL because they determine the viability of doing business in the target market. I had also included some issues involve in doing business these two countries.
Due to the time constraints and limitation of resources, primary research was impossible so most of the data were from the secondary research. By using the internet and library resources, I was able to get the data needed for the research. Sources such as government’s websites, company’s website, competitors’ website, locate newspapers and international corporations’ websites were creditable because they were up-to-date and their information was reliable. Upon analyzing the political and legal environment, technological environment, textile and leather industry, competitors, business structure, labour environment, tax systems, product adaptability, trade agreement, and market and competitive intelligence, I was able to determine which country DL should enter. From what have found, I recommended Danier Leather (DL) to enter Vietnam instead of Malaysia because of the political environment, the demand and the lack of competition in the Vietnamese market. Vietnam had better political stability than Malaysia even though there were a few problems with the government in terms of monopoly power and corruption. There was also a high demand for DL products plus people were more
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Research project willing to pay compared to Malaysia since similar products were sold relatively cheap there. Vietnam had greater potential customers as Vietnam population is 91,519,289 million and Malaysia is
29,179,952 million. There weren’t many competitors in the Vietnamese market compared with Malaysia market which was saturated. Also, due to the fact that the Canada government just refused a Malaysian state-owned company proposal to buyout Canada oil company that might affect the relationship between the two countries. We don’t know the side effect of this yet but for now I wouldn’t recommend DL to invest in Malaysia
Before the implementation plan, I had analyzed the criteria and alternatives for the market entry strategy. Criteria included maximizing profits, gaining market share, acquiring resources, and repositioning the business. The alternatives included distributors, agents, strategic alliance (partner with a manufacturer to produce the products) while operating retail stores, and Greenfield investment. From the analysis, it seemed logical to go with Greenfield investment strategy but with the world current economy situation (the debt crisis in the Europe, US and the current Sandy storm that affected over 112 million people in the east coast US); I wouldn’t recommend Danier Leather to use Greenfield investment strategy.
Therefore, I recommended DL to use the second logical alternative that was strategic alliance because strategic alliance allowed DL to accomplish most of the objectives. For the action items, I had look for a manufacturer; evaluate the manufacturer and the price, receive financial needs, insurance and document requires in Export Development Canada (EDC), set up retail stores and promotion campaign
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Danier Leather (DL) is the North America’s leading manufacturer, designer, distributors and retailer of high-quality, in-trends leather apparel, accessories for women and men since 1972. DL’s products include coats, jackets/blink, pants, skirts and dresses, top vest, gloves, belts, handbags, wallets, scarves, briefcases, laptop cases and many more. According to report of the second quarter in 2012, DL reported to have a net earnings increased by 4% ($8.5 million) compared to the same period last year. DL currently operates 91 retail locations across Canada and actively pursuing other markets such as Australia,
Belgium, China, Japan, Germany, South Korea, Norway, Sweden, Switzerland, United States and United
Kingdom. As for this project, I had picked Malaysia and Vietnam to be DL’s potential target markets. The targeted city of Malaysia was Kuala Lumpur and Ho Chi Minh City was for Vietnam. The products that were going to be imported to these countries composed of:
Core products:

Women: Jackets, Skirts and dresses, top and vest and pants

Men: Jackets, top and vest
Supplementary products (accessories):

Handbags, wallets, gloves and belts
Potential countries introduction
Vietnam
Vietnam is known for the lengthy number of years in War between the North versus the South involving Vietcong, China, Japan, France, and the United State. Vietnam is now called Socialist Republic of Vietnam. Nguyen Tan Dung is the prime minister and Truong Tan Sanh is the president of Vietnam.
Vietnam has two capital cities, one is Hanoi located in the north and another is Ho Chi Minh City located in the south. Vietnam used to be considered a very poor country because everything was destroyed by the war. However, since the economic reforms started in 1986, Vietnam, from a country on the verge of economic collapse and isolation has transformed itself into one of the most open and fastest-growing economies in the world. The targeted city was Ho Chi Minh City, one of the fastest growing cities of
Vietnam and a hot spot for tourists’ attraction. The city has population of 7.163 million according to census 2009 and predicted to reach 10 million by the end of 2012.
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Population
Ethics
Location
Land
Language
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Population
Ethics
Location
About Vietnam
91,519,289 (July 2012 est.)
Kinh (Viet) 85.7%, Tay 1.9%, Thai 1.8%, Muong 1.5%, Khmer
1.5%, Mong 1.2%, Nung 1.1%, others 5.3%.
Southeastern Asia, bordering the, Gulf of Tonkin, Gulf of Thailand and South China Sea, Cambodia and Laos
329,569 square kilometers
Vietnamese, English is becoming popular
Land
Language
Malaysia
Malaysia had its dependence since 1957 and was formed in 1963. Malaysia is a constitutional monarchy. The current king and also the chef of state is ABDUL HALIM Mu'adzam Shah, and the current Prime Minister is NAJIB Razak. Malaysia's multi-racial society with many different ethnic groups and this is one of the reasons to internal conflicts. Malaysia was successful in converting the economy that based on exports of raw materials to the development of manufacturing, technology, services and tourism as known as knowledge-based economy. The targeted city in Malaysia was the capital city, Kuala
Lumpur (KL), the modest and fastest growing city. KL has a population of 1.8 million and is the fastest city in developing trade and commerce. The city is known for the twin tower, the Petronas Twin Towers.
About Malaysia
29,179,952 (July 2012 est.)
Malay 50.4%, Chinese 23.7%, Indigenous 11%, Indian 7.1%, and others 7.8%.
Southeastern Asia, borders Indonesia in the south, the Philippines in the east and Thailand in the north, ,
329,758 square kilometers
Bahasa Malaysia

Research project
Strategic objectives
There were many things that Danier Leather (DL) needed to research before choosing a target market.
However, for the simplistic of the project, I’d outlined some strategic objectives below which I thought the most important:

Determine political stability of the target market

Determine the demand for leather products in the target market

Identify all the costs of starting up a business in the target market

Find information about the competitors

Identify what kind of service offerings/warrantees/price of the competitors

Identify all the available resources, such as raw material and labor

Describe the climate, weather condition in each country
These objectives were important to DL because they determined the viability of doing business in the target market. Determine the political stability was one of the most important issues because if one of the country’s political was not stable, DL would not do business with them just because there would be too many risks to mitigate. Determine the demand was important because if there was no demand for leather products then DL shouldn’t operate there. Looking at all of the expenses of doing business in the target market was to determine the profits ratio. Finding information on competitors and what they offer was to give DL an idea of what DL should be doing in that market and to create a competitive edge for the company. Available resources such as raw material and labor were important because if DL could acquire low price materials with high quality, DL could cut cost and lower the selling price. The last one, I thought it was important because Danier’s products are depending on the weather condition. DL’s products are best suited in country with mild weather condition. If the weather was too extreme and it was not suitable for wearing a leather jacket, DL wouldn’t do business there.
To determine which country to pick, I had analyzed both countries and compared them by the objectives to see which was most beneficial to DL.
Macro-level source of country attractiveness

Political and legal environment

Technological environment
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
Textile and Leather industry

Competitors

Business structure

Labour environment

Tax systems

Product adaptability

Trade agreement
These issues were important because they had the answer to the objectives of the research. They also gave DL an overall idea of how the business would look like in each country.
For the simplicity of the project and the time constraints, the research conducted in this project was secondary research. Below is a table of the types of source/sources and some example of the sources that I believed that was crucial in the project.
Types of source
Internal source
External source
Source Expected data
Company webpage http://www.danier.com/S12Home.aspx?lang=en
Danier Leather’s financial report http://danier.mwnewsroom.com/pressreleases/danier-leather-reports-fiscal-2012-firstquarter-r-tsx-dl-201110190737023001
Government website and various internet site
Vietnam: http://chinhphu.vn/portal/page/portal/English
Malaysia: http://www.malaysia.gov.my/EN/pages/default.aspx
Other resources: https://www.cia.gov/library/publications/the-worldfactbook/ http://www1.ifc.org/wps/wcm/connect/corp_ext_content
/ifc_external_corporate_site/home
Trade journals, competitor website and industry association http://www.estsleather.com/about%20us.html
http://www.moresales.com.my/catalog/entry/ijjlravr.sh
tml http://shop.mango.com/MY/mango/new http://www.lelong.com.my/kx/leather+jacket.htm
About the company
Costs, revenues, trends, and target customers
About the target country
Political and legal environment
Technological environment
Market size and condition
Leather industry
Competitors
Financial environment
Labour environment
Tax systems
Product adaptability
Trade agreement
About the competitors
Demand and trends
Service offerings/Warrantees/Price
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I used the internet (Google) and Algonquin College library to research all the required data to answer the objectives. The research also involved the use of qualitative research and quantitative research.
The data that had been collected in this project was relevance because each data collected meant for specific information. Most of data were from government’s websites, competitors’ websites and trustworthy online sources such as The World FactBook and the International Finance Corporation (IFC) are creditable because their data updated almost every year. Data from other online sources that might not creditable were doubled check as I went through the process to eliminate all the unnecessary data and added more information if needed. I also made sure all of the information was accurate and up to date information.
Information that related to the case such as these below were researched and analyzed carefully to determine the viability of doing the business in each country.
Quantitative
Price of the competitors
Location of the competitors
Qualitative
Leather industry/market condition
Demand
Labour supply
Climate
Resource (raw material)
Tax disadvantages and advantages
Likes and dislike
Culture and life style
Innovation of the competitor
Industry trends
This information was important because they were the factors that determined whether or not DL should enter the target market. They also contained useful information that decided the successful rate in that market. Without this information, the company was destined for failure.
The useful of the data was determined by the date that it was published. If the data was out of date, I won’t it because the information was irrelevance. I only used data that was current within 5 years back from now.
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Vietnam :
Political and legal environment: Vietnam is governed by the Vietnamese Communist Party (VCP).
Although, the country is running by the Communist party, the political system is very stable comparing to some other neighbouring countries. There aren’t any internal conflict within the government occur for the past several years. However, there were still issues with corruptions, monopoly and unfair practices among the government. The current president of Vietnam is Truong Tan Sanh and the prime minister is
Nguyen Tan Dung. In Vietnam, the legal system comprises of constitution, directives, ordinances codes, laws, decrees, circulars, and official letters.
Technological environment: Technology for specific sectors or industries such as machinery and supported programme were normally underdeveloped compare with other developing countries. However, the uses of internet and mobile phones were wild spread in Vietnam as everyone could access internet and mobile phone easily. Internet cafes phone booths were popular and operation in every corner of the streets. This could be seen as an advantage when it came to marketing. Everyone in Vietnam is accessing the web and read online newspapers. DL could use the technology as tools to get the message to the customers. However, due to the government’s internet control, certain websites and information were blocked and couldn’t access in Vietnam.
Textile and leather industry: According to Vietnam IMEX, a website that shows trades between countries showed no reports on leather products that imported into Vietnam. This meant that there aren’t official international company that operated in Vietnam. However, due to the demand for fashionable products, there were many clothing stores in Vietnam which sold similar or related products. Most of clothing stores got their products from local manufacturers, hand-carried products and illegally imported goods.
There were also a lot of imitation products. Even though, textile and garment are in the top 10 exported industries in Vietnam, they didn’t specialize in manufacture leather outerwear products such as jackets and dresses. This is a great opportunity for DL to enter this market and gain market share. From personal experience and other online sources, Vietnamese liked to purchase products that are from America including Canada because Vietnamese believe that they are real and it shows other people that they are high class.
Competitors: There weren’t major competitors when it came to leather goods. I assumed that this was due to the climate in Vietnam and respectively low price on related textile and apparel goods. However,
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Research project because of the young population and the influence from other cultures through media channels, leather goods were highly sought after in Vietnam. Leather good represented for cool and stylish among the young. For substitution products, there were many companies such as Vietnam’s Gia Dinh Textile and
Garment Corp (Giditex), Vinatex (Vietnam National Textile & Garment Corp), Nino Maxx- NMSG, Viet
Thy brand, Fugamex, Thai Tuan Nha Be Garment Company, Viet Thang, Viet Tien, Thanh Cong and
Nike. They accounted for a large clothing market shares and were highly appreciated in Vietnam.
Business structure: There were several procedures an enterprise needs to do before operating a business in
Vietnam. Here is a link on how to start a business in Vietnam http://www.doingbusiness.org/data/exploreeconomies/vietnam/ . As for business etiquette, Vietnam is a high context culture. Therefore, business etiquette is very important. Knowing how to behave and respect the partner’s culture will likely to help in negotiating a deal. Here is a link that provides some tips on etiquette http://www.business-in-asia.com/vn_tips.html
. As for payment method, the use of cards to purchase commodities was not common in Vietnam. Most purchases were being made using direct cash method. However, when dealing with a large sum amount of money, it was suggested to use some sort of letter of credit.
Labour environment: According to The World Fact Book, the current labour force of Vietnam is 46.48 million (2011 est.) with an estimate 45% of the population was younger than the age of 35 and the unemployment rate 4.6%. Vietnamese are hard-workers, fast-learner and self- disciplined people. There were many skilled workers in the textile and garment industry as it was the biggest industry in Vietnam.
Averages wages were range from $80-$150 US depend on the skill sets in manufacture industry. There also labor acts and unions that enforce and prevent unfair practices.
Tax systems: Vietnam tax system was structured depending on the products and services. Here is some general information about the tax system in Vietnam.
1.
Corporate Income Tax (CIT): include Preferential CIT rates is10% and 20% depending on the industry and the standard CIT rate which is 25%.
2.
Import – Export Duties: Export duties were range from 0% to 45% depending on the industry.
Import rate composed three different of tax (1) standard rate, (2) preferential rate and (3) special preferential rate depending on the origin of the goods. Standard rate is 150%, preferential rate
(MFN) 23.5% for agricultural produce, and industrial products is 16.6%.
3.
Special Sales Tax (excise tax) or (SCT) applied to the importation and production of certain goods. Special sales tax ranged from 10% to 75%
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4.
Value Added Tax (VAT) applied to goods and services sold in Vietnam. Applicable rate are 0% to 10%
5.
Personal Income Tax (PIT) applies to residential individual that has income inside and outside of
Vietnam. Depending on the tax bracket, personal income tax rate is range from 5%-35%
According to duty calculator about the tax rate for leather products, the preferential rate (MFN) was
30% and sale tax is 10%
Product adaptability: Asia sizes were relatively smaller than typical America sizes. For example a medium size in US is a large size in Vietnam. Therefore, DL products need to adjust the sizes when enter this market. Here is the link for the sizes in Vietnam http://fashionblast.com/fashionblast-aboutsize.action
. However, by adjusting the sizes would cost DL money and resources
Trade agreement: Canada and Vietnam have a long standing relationship dated back in 1973. Canada has a Consulate General in Ho Chi Minh and an Embassy in Hanoi. Vietnam has Embassy in Ottawa.
Vietnam and Canada shared membership in multiple multilateral forums, including ASEAN, the
Francophonie and the United Nations, the World Trade Organization (WTO), Asia-Pacific Economic
Cooperation (APEC), the ASEAN Regional Forum and the Foreign Investment Promotion and Protection
Agreement (FIPA). In the appendix, there will be a chart of the trade between the two countries.
Malaysia
Political and legal environment: Malaysia practises Parliamentary Democracy with a constitutional monarch, the current king and also the chef of state is ABDUL HALIM Mu'adzam Shah and the current
Prime Minister is NAJIB Razak. Political stability in Malaysia was unstable due to many factors. First, there were internal conflicts for power, between ethics and policies within the government. Second, there were external conflicts with neighbouring countries such as Singapore and Indonesia. Third one was due to terrorism within the country. A side from this, corruption and bribery were also major issues in
Malaysia.
Technological environment: Technology was well-developed and was one of the best countries amongst the developing countries in Asia. Technological advancement has become a part of Malaysia's growth as an industrialised nation. The help of the technology development had provided Malaysia with the modern technology that was required by investors to make their business success and contribute the economic growth as an industrialised country. Communication systems were one of the finest.
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Textile and leather industry: The industry is very saturated. Many well-known fashion designers such as ,
Polo, Alain Delon, Kohl’s, Gucci, Nike, Ralph, Reebok, Yves St Laurent, Lauren, Adidas, Calvin Klein,
Brooks Brothers and many more famous brands who manufactured their clothing goods and sold them in
Malaysia. There also many clothing stores sold South Korea and Japan leather goods such as jackets and coats. In 2011, this industry was the 10th largest export earner which contributed approximately 2.3 % to the exports of manufactured goods. During 2011, Malaysia`s exports of textile and clothing increased by
28.4% which is US$3.8 billion. Within 3.8 billion, textile exports account for US$2.5 billion, representing a 65.3% share of total textile and clothing exports, while clothing exports increased account for US$1.3 billion, representing a 34.7% share. As for domestic market, there are plenty of shops that sold similar to
DL products. However, there was still a demand for leather goods as number of leather stores increased every year.
Business structure: There were several procedures DL needs to do before starting a business in Malaysia.
Here is a link on how to start a business in Malaysia http://www.doingbusiness.org/data/exploreeconomies/malaysia/ . As for business etiquette, Malaysia is a multicultural society. Therefore, business etiquette is also very important. It would be nice for DL to show some respect of the culture and this would help in dealing with partners in Malaysia. Here is a link that provides some tips on etiquette http://www.kwintessential.co.uk/resources/globaletiquette/malaysia.html# . As for payment method, the use of cards to purchase commodities is common in Malaysia. A study shows that two in five Malaysian use credit cards to purchase. However, when doing business in Malaysia, it’s always safe to use some types of letter of credits.
Competitors: DL would face many competitors in this market. Through a rough research online, I had found over five ecommerce shops that located in Kuala Lumpur (KL) such as Lelong, ESTS Leather,
Mango, topshop, and Moresale. These were only a few examples of stores that sold similar products; there were many more famous international brands such as Gucci. There were knock-off shops, cheap and high quality shops, cheap and low quality shops and imitation shops. Their prices are so low that DL won’t be able to compete with them in terms of price wise. Their prices ranged from $15- 100 US and DL prices ranged from$100-500 US on jackets. The only things that DL had over the competitor would be the after-service and warrantee. It was normal in Malaysia that once the customers make the transaction, he/she couldn’t return to exchange for a different one.
Labour environment: According to The World Fact Book, the current labour force of Malaysia was 11.91 million (2011 est.) and the unemployment rate is 2.8%. The minimum wages was from $215-$300 US for factory workers and it depended on the skill sets. However, the minimum wages would increase
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Research project significantly for the next couple years as costs of living increased. In Malaysia, there were employment acts and unions that protect employees from unfair practices as well as holiday pay and overtimes pay.
Tax systems: Malaysia tax system was structured depending on the products and services. Here is some general information about the tax system in Malaysia.
1.
Personal Income Tax (PIT): applied to every individual on income earned or received inside
Malaysia or outside Malaysia. Depending on the Tax bracket, income tax is ranging from 0% up to 26%
2.
The corporate tax rate: applies to all businesses in Malaysia, the standard tax is 25%
3.
Sale tax and service tax applied on certain goods and services.

The rate of Sales tax: 5%-10%

The rate of Service tax: 5%.
4.
Import tax and Export tax: import tax applied to goods that imported to Malaysia, tax ranged from 5% to 50% depending on the goods such as machinery, raw materials, and necessary foods related. Pharmaceutical goods were normally non-dutiable or subjected to lower tax rates. Export tax was generally imposed on goods that were being exported to other countries. The standard tax ranged from 0% to 10%.
5.
Excise tax applied on goods that were imported or manufactured in Malaysia. Goods that subjected to excise duty included beer, other intoxicating liquors, cigarettes, playing cards and motorcars. The rates of excise duties were vary depend on the products. The tax ranged from 60% to 105%.
Malaysia also has double taxation agreement with Canada.
Product adaptability: If DL products were to import to Malaysia, the size of the clothing need to change to
Malaysia size. This is because Malaysian is smaller than a typical American. This link will provide more details on sizing in Malaysia http://fashionblast.com/fashionblast-about-size.action
.
Canada and Malaysia have a long standing relationship. In fact, Canada was the very first country that recognized Malaysia as an independence country in 1957. High Commission of Canada is in Kuala Lumpur and High Commission of Malaysia is in Ottawa. The Canada and Malaysia were partnered and cooperated in many different international organisations such as World Trade Organization
(WTO), the Commonwealth, Association of Southeast Asian Nations (ASEAN), the Asia-Pacific
Economic Cooperation (APEC) and the United Nations. Canada and Malaysia also have double taxation agreement to avoid double taxation. Recently, a Malaysian state-owned company (Petronas) offered $6-
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Research project billion to buy Progress Energy Resources Corp. (a Canadian natural gas firm). The offer got refused because Petronas did not meet the standard requirements for takeover Canada’s Company, although it still had an opportunity. Pentronas had one month to resubmit the proposal but we still don’t know the result.
But, this refusal might damage the relationship between Canada and Malaysia. For now, it was hard to say that the Malaysia government won’t do anything to revenge Canada companies which operated in
Malaysia.
Objectives
Determine political stability of the target market
Determine the demand for leather products in the target market
Identify all the costs of starting up a business in the target market
Find out about the competitors and what do they sell and their market share
Identify what kind of service offerings/warrantees/price of the competitors
Identify all the available resources, such as raw material and labour force
Describe the climate, weather condition in each country
Vietnam
Even though, it was ran by the communist party, the political is very stable
There is a huge demand for DL products due to the young, fashionable population and people were willing to pay for them
Approximately $150 US and up and it could take 47 days to start a business
There aren’t many major competitors, mostly local companies that DL had to face.
However, people were willing to pay for products that imported from America include Canada.
It was unknown because there weren’t any data available online.
From personal experience, most of the time when you purchased the products and walked outside of the stores, you couldn’t bring it back for a refund or exchange
The labor force is 46.48 million
(2011 est.). Raw material was available and they are cheap
The climate is varied from
Northern part to Southern part.
The northern part has a dry and cool weather from November to
Malaysia
Unstable due to the facts that there were conflicts within the government and external conflicts with neighbouring countries. As well as terrorism.
There was a demand for DL products but not sure if people would buy them because of the different in price
Approximately $1500 US and up and it could take 5-6 days to start a business
There are many major international companies that are located in Malaysia to manufacture and sold similar products. It was very hard for DL to enter and gain a market share or make a significant benefits
It was different depending on the companies. However, products that have been purchased were generally not exchangeable or refund. DL’s after service offerings/warrantees were better than the competitors.
The labor force is 11.91 million
(2011 est.). Raw material was available and they are cheap
The country is divided into two main regions known as the East and Peninsula.
The east coast is hot and sunny for much of the
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April. Rainy and hot weather start from May to October.
Central part has wet and cool weather between December and
February. The southern part is humid and hot from February to
May. May to November is the raining season. year. Heavy rain during the raining season. Peninsula has hot and humid climate, temperatures range from 22ºC to 32ºC year round. Less rain during the raining season compare to the
East
From the chart, Vietnam is more attractive than Malaysia according to the objective of the research. The Data collected in this section is relevance to the research because it gives investors basic knowledge about the countries and the market in each country.
Vietnam:
Market intelligence
This section contains general information about the target market (Vietnam) and some factors that made it attractive to investors.
Factors affecting the political, legal and business environment: Vietnam is a socialist republic of Vietnam
(SRV) controled by Vietnamese Communist Party (VCP- Vietnam Cong San Dang). Most of the times, the political was very stable because there was only one party running the country. However, this could be a problem because there was no other party that would oppose decisions from the communist party.
Vietnam is a member the WTO and the World Intellectual property Organization (WIPO), since then the government had established a legal guideline to measure the protection of intellectual property rights.
Depending on the case, violator of the IP rights could to be fined from VND20-200 million and face 1-15 years in prison. Counterfeiters or traders of counterfeit goods such as medicines and food would be imprisoned from 2 to 7 years.
Vietnam is very open for international trade and has a good, long standing relationship with
Canada. This could explain through the rapidly-increasing trade and investment between the two countries (see Figure1). Vietnam is also a part of the ASEAN Federation of Textile Industries (AFTEX), a group of textile and garment associations include Philippines, Indonesia, Laos, Cambodia, Singapore,
Malaysia, Brunei, Thailand, and Myanmar. The purpose of this Organization was to create trade policies and to promote ASEAN textiles & apparel to the global marketplace.
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Market infrastructure (logistics): According to the Vietnam General Statistics Office in 2010, Vietnam had about 175,000km of roads but roughly 10% were paved, and 15 % of bridges had a capacity of more than ten tones. The Government is planning to spend $18 billion USA between 2008-2020 to build
National Highway 51 from Dong Nai to Ba Ria Vung Tau provinces, and $20 billion in urban transport networks in Hanoi City and $10 billion in Ho Chi Minh City. Vietnam also had over 100 sea ports and
3,260 km railway network. Two main domestic airlines in Vietnam were Jeststar Pacific and Vietnam
Airlines. Vietnam ranked the 97 out of 134 countries on transportation infrastructure.
Factors affecting the market (market size, trends and dynamics): Clothing/textile and fashion industry in
Vietnam was booming due to the young population and international demands for Vietnam’s garment products. In 2010, about 52.4% of the total population was under the age of 30. The major player was
Vinatex (Vietnam National Textile & Garment Corp) which produced substitute products such as jackets, pants t-shirt and so on. However, through extensive research on the internet and library sources, I couldn’t find any statistics regarding to Danier’s core products in Vietnam which is leather products being sold in
Vietnam. Most of the leather products were handmade such as jackets by small unknown groups of people in Ha Noi city and across the country. These products were also being sold in street markets and in-stores. The sources of these products were unknown; some rumors said they came from Thai, China,
Malaysia and majority of them are from personal hand-carried. There were problems with counterfeit products in the textile industry in Vietnam. E-commerce was not used wide spread and limited because I found only a few websites. Primary research is strongly recommended.
Suitability of the product for the market: Danier’s products was suitable for the Vietnam market because of the young population and the growing demand for fashion products. More than 52.4% of the population was aged under 30 and this number is growing. According to just-style fashion in Vietnam, the domestic apparel market grew by 9% in 2010 to reach VND39, 911bn (US$2.1bn). Global Retail
Development Index 2010 ranked Vietnam 14th out of 30 countries in terms of having the most attractive retailing industry worldwide. Many young adults were willing to spend crazy amount of money to have their hands on stylist, fashionable, in trends and American piece of clothing.
Competitive intelligence
This section focuses on specific target within the country. I had selected Ho Chi Minh (HCM) as the target city for Danier Leather in Vietnam. This is because DL business model is retailing therefore it made more sense to focus one city first before expanding its business across the country. This was to mitigate the risks of loss if the business is failing.
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Important factors/characteristics in the industry: Ho Chi Minh City (HCM) is formerly called Saigon and still being called Saigon. This city is the largest, the most excited, populated and modest city in Vietnam.
Many people had come from different provinces in Vietnam to Ho Chi Minh City with their dreams of making a good living and support family back home. The city has provided access to many imported products and technology to the local people due to the density of international businesses in HCM compare to other city. If DL success in HCM, it will likely success in other city. The most important factors that create success in this industry include:
Population: 7.163 million according to census in 2009 but reaching 10 million by the end of 2012
Fashion demand: A large portion of the population were young and fashion-oriented who were hunger for the newest styles, this could be proven by the countless of clothing shops in HCM city. These people were willing and able to afford imported goods. HCM city is also known for its night life with many people expressed themselves through the way they wear. The cooler the styles are, the more popular.
Marketing Mix: Marketing played an important role in the success of the business in Vietnam. First impression creates a strong brand loyalty among the young and these young people were very easy being influenced by celebrities. First bad impression was likely to drive customers away. Social networking site such as Facebook, blogs, newspaper “Bao Tuoi Tre”, and phone services certainly were the best way to reach customers in Vietnam.
Reputation: Such as bad or good would highly affect the business.
Raw materials: Also played an important role, being able to acquire raw materials in Vietnam would give
DL massive competitive power over the competitors because the materials were very cheap and not easily available in Vietnam unless many researches taken in place. This was why joint venture was the most popular way to enter Vietnam market.
The competitors in the market: Through the online research and other resources, I couldn’t find any international companies that were selling leather goods due to the lack of e-commerce. If anyone wanted to buy something, they had to go to a store. From reading countless blogs, I found many small shops that sold leather goods. Their products mostly came from local manufacturers, imported from Thai, Japan,
China, Cambodia and some other Europe countries. The ways they imported these products were varied and some illegal to avoid tariffs. As for substitute products, there is Vietnam’s Gia Dinh Textile and
Garment Corp (Giditex), Vinatex (Vietnam National Textile & Garment Corp), Nino Maxx- NMSG, Viet
Thy brand, Fugamex, Thai Tuan Nha Be Garment Company, Viet Thang, Viet Tien, Thanh Cong, Nike and countless clothing shops.
Current positions of the competitors and their dominant in the market: Vinatex (Vietnam National Textile
& Garment Corp) was the most competitive and the largest textile garment corporations. Next was
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Vietnam’s Gia Dinh Textile and Garment Corp (Giditex). These companies were not only focus on the domestic market but also international market especially the United State and Japan. Vinatex had many facilities for researches and development, and about 120 smaller companies. These smaller companies are joined together through the mother company and each specialized in different fields. They had manufacture, commercial service, wholesaler, and retailer etc. Giditex is best known for selling equipment, accessories, raw material, trading service, agent service, and office for lease. Giditex has committed to provide the best customers satisfaction by providing the right qualities, the right quantities, the right time and the right price. This company also certified ISO 9002. However, majority of clothing wear by the people are no names and imitation because they much cheaper than any name clothing.
Competitors’ competitive forces in the market: I used the porter’s five forces to analyze the competitors’ competitive forces in the market.
Risks of new entrants: less likely to have new competitors entering Vietnam market because of the lack of information of the industry. Second, due to the hot climate in Vietnam, no one would have thought selling leather goods was logical. This was the reason why there aren’t any major companies in the market.
Supplier bargaining power: Because of the lack of information, I couldn’t tell whether this is a threat or not. But one thing for a certain, that if they got paid higher for their materials, they will sell them to you instead of their buyers.
Buyer bargaining power: There were so many people in HCM city who are hunger for leather goods.
They were willing to pay any price for it if they wanted it. Vietnamese also believed that the more expensive a product is, the better it is.
Threats of substitution products: This is the greatest threats because there were countless of small, big shops which were selling products that can replace DL’s core products.
Competition among rivalry: Competition among competitors was very intense in this industry due to countless small clothing shops. They were willing to do anything to have a competitive edge over their competitors
Achieving competitive advantage for the Danier Leather: In order to again competitive advantages in this market place, DL should market their products through social networking site such as Facebook, blogs, newspaper “Bao Tuoi Tre”, and through phone services. Locate the business in big mall and obtain
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Malaysia:
Market intelligence
This section contains general information about the target market (Malaysia) and some factors that make it attractive to investors
the political, legal
Malaysia is a federal constitution monarchy state with the adoption of parliamentary democracy. This can be seen as
stable government.
However due to the internal conflicts between different religions and external conflicts with neighbouring countries, Malaysia’s political become unstable. Moreover, the government has numerous legislation that favor more indigenous people than other race. Also,
high level of corruption and bribery involve in doing business in Malaysia. This would affect DL greatly because Canada is against any types of corruption and it could result in prison. Canada and Malaysia has long standing trade relationship (see
Figure2). Malaysia is a member of World Trade Organisation (WTO) and World Intellectual Property
Organisation (WIPO)
geographical indications, layout designs of integrated circuits;
, industrial designs, trademarks and copyright
Malaysia also a part of the ASEAN Federation of Textile Industries (AFTEX), a group of textile and garment associations include Philippines, Indonesia, Laos, Cambodia, Singapore, Malaysia, Brunei, Thailand, and
Myanmar. The purpose of this Organization was to create trade policies and to promote ASEAN textiles
& apparel to the global marketplace. The Malaysian government also demonstrated its support for and its commitment to this industry by creating a favourable environment to give opportunities for companies to achieve growth and generate profits.
Market infrastructure (logistics): Malaysia has 63,445 km of roads and was among the best in Asia.
Products were able to transport to Peninsular Malaysia by via Thailand and from Singapore. Malayan
Railways and Keretapi Tanah Melayu Berhad (KTM) connects all major towns in the Peninsular
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Factors affecting the market (market size, trends and dynamics): textile and leather apparel industry in
Malaysia is saturated. There were countless stores own by the local people and major international companies. Major companies such as Polo, Alain Delon, Kohl’s, Gucci, Nike, Ralph, Reebok, Yves St
Laurent, Lauren, Adidas, Calvin Klein, Brooks Brothers and many more famous brands made up most of the market. This meant that competition is really intense between competitors. However, there was still a growing demand for the newest trends and a growing number of e-commerce websites domestically. As for export, they have Turkey, USA, Indonesia, Japan and China as Malaysia’s top 5 export destinations for Malaysia’s textiles and apparel. The government has also developed plan to double exports by 2020 by involving a focus on high-tech and higher added value products .
Suitability of the product for the market: Even though, the market is saturated, there is a growing demand for online clothing stores in Malaysia. Here is a link that provides a list of online stores that sell clothing http://my.88db.com/Buy-Sell/Clothing-Shoes-Accessories/1/ . This showed that there was a good chance for DL to enter the market and make some profits.
Competitive intelligence
This section focuses on specific target within the country. I had selected Kuala Lumpur (KL) as the target city for Danier Leather in Malaysia. This is because DL business model is retailing therefore it made more sense to focus one city first before expanding its business across the country. This was to mitigate the risks of loss if the business is failing.
Important factors/characteristics in the industry: Kuala Lumpur is the capital of Malaysia and the largest city in terms of population and a hotspot for businesses. KL is a multi-cultural city with many different ethics background and this was why it’s hard to market something that appeal to the entire population.
The most important factors that created success in this industry include:
Population: According to KL’s website, KL’s population as of 2011 is 1.8 million and the city has the highest proportion of working-age residents, where more than 53% of its residents are of 20 to 55 years of age and about 25% of the City’s resident population are students. For clothing industry, this is the time when people spend a lot of money on clothing.
Fashion demand: Even though the market was very saturated, there was a growing demand for newest style and current trends. This indicated by the growing numbers of e-commerce across the country.
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Marketing mix: Very important because there were many competitors in this market. If a company wanted to survive in this market, they had to come up a marketing strategy that gives them a competitive edge.
Reputation: Due to advance technology in Malaysia, customers can compare prices and rate. If a company has a bad rating then this would drive customers away.
Raw Material: Not only obtaining cheap but also high quality raw material to be able to success in this market otherwise new entrant can’t compete with other competitors.
The competitors in the market: For international companies that located in Malaysia, there are Alain
Delon, Gucci, Adidas, Nike, Reebok, Brooks Brothers, Kohl’s, Polo, Ralph Lauren, Calvin Klein, Yves
St Laurent and many more famous brands. For domestic companies there were over than five store that have include e-commerce i n Kuala Lumpur (KL) such as Lelong, ESTS Leather, Mango, topshop, and
Moresale. Their prices ranged from $15- 100 US and DL prices ranged from$100-500 US on jackets.
There were more companies that located in Malaysia but don’t have e-commerce.
Current positions of the competitors and their dominant in the market: There were so many competitors that it was almost impossible to gain a competitive advantage without losing or not making a lot of profits. Each competitor had their own uniqueness in the market that the customers want such as quality, stylist, and low price. There was no major company that totally dominate the market due to the variety of ethics group in KL. One a single product didn’t appeal to everyone in KL because of the different tastes between cultures.
Competitors’ competitive forces in the market: I used the porter’s five forces to analyze the competitors’ competitive forces in the market.
Risks of new entrants: Low risk because the market was so saturated. New entrants know that they would have many competitors and low profits. This drove new company away from this market.
Supplier bargaining power: Moderate because buyers could purchase raw material from other local businesses and neighbouring countries.
Buyer bargaining power: high risks because customers can shop online and compare prices.
Threats of substitution products: Very high because of market saturation.
Competition among rivalry: Very intense because there weren’t only one or two competitors but many.
Achieving competitive advantage for the Danier Leather: In order to again competitive advantages in this market place, DL should market their products through social networking site such as Facebook, blogs,
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Research project local newspaper, and fashion journals and through phone services. Located the business in big mall and obtain cheaper raw materials to reduce the current selling price. Focused on quality management, customer satisfaction set up e-commerce and added higher value-added products. Focus on research and development to create the newest trends.
From what had found, I recommended Danier Leather (DL) to enter Vietnam instead of
Malaysia because of the political environment, the demand and the lack of competition in the Vietnamese market. Vietnam had better political stability than Malaysia even though there were a few problems with the government in terms of monopoly power and corruption. There was a high demand for DL products plus people were more willing to pay compare to Malaysia since similar products were sold relatively cheap there. Vietnam had greater potential customers as Vietnam’s population is 91,519,289 million and
Malaysia is 29,179,952 million. There weren’t many competitors in the Vietnamese market compare with
Malaysia market which was saturated. Also, due to the fact that the Canada government just refused a
Malaysian state-owned company proposal to buyout Canada oil company, this might affect the relationship between the two countries. We don’t know the side effect of this yet but for now I wouldn’t recommend DL to invest in Malaysia.
The size of the products needs to be adjusted accordingly to the Vietnamese size. This is because American size is bigger than Vietnamese due to their smaller body. Here is the link of the size measurement: http://fashionblast.com/fashionblast-about-size.action
Market entry analysis: Before entering in Vietnam, DL needed a good market entry strategy. A good market entry strategy involved evaluating the criteria (objectives) and the alternatives that best suited and beneficial to the company.
Objectives:
1.
Gain profits
2.
Market share
3.
Acquire resources
4.
Reposition the business
These objectives were important because 1) Danier Leather is a publicly traded company, it would attract more investors if DL showed a profits. 2) Gaining market share was important because DL is new to the market and many people probably don’t know about DL. In order to this, DL had to expand the
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Research project sales and get more customers. If DL succeeds, DL could make profits in the future. 3) Acquire resource:
Vietnam is known for cheap labor and a supplier of raw materials. If DL was to find a supplier in
Vietnam that supplies cheap materials with high quality, this would help DL reduce production cost and lead to the reduction of the selling price. Or a manufacturer that would to produce products for DL at a cheaper cost. Either way, it would help DL gain a competitive edge over the competitors in the domestic and international market. 4) If DL could acquire the right resources, DL could try a different approach in the domestic/international market such as lowering the price to attract medium/lower income class.
Alternatives:
1.
Distributors
2.
Agents
3.
Strategic alliance (partner with a manufacturer to produce the products) while operating retail stores.
4.
Greenfield investment
These alternatives were important because 1) using a distributor wouldn’t cost a lot of money, DL could quickly gain profits and market share because the distributor has its own customers. However, DL wouldn’t acquire the resources that the company wanted, had to share profits and couldn’t reposition the business. 2) An agent was similar to a distributor but more work must be done by DL. 3) Formed strategic alliance with a manufacturer to produce products while operating selling office in Vietnam would require more capital. However, DL could keep all the profits and able acquire cheaper products even though DL didn’t actually get the raw materials. DL gained market share by having selling offices in Vietnam and can reposition its business. 4) Greenfield investment was the most expensive market entry strategy.
However, DL could keeps all profits and able acquire the resources that DL wanted (cheaper labor and cheaper raw materials) and DL could reposition its business. As for market share, DL wouldn’t able to gain the percentage that DL might want because DL is new to the market. Check out (figure 3) in the
Appendix to see the rating.
It was seemed logic to go with Greenfield investment strategy but with the world current economy situation (the debt crisis in the Europe, US and the current Sandy storm that affected over 112 million people in the east coast US); I wouldn’t recommend Danier Leather to use this strategy. Therefore, I recommended DL to use the second logical alternative that was strategic alliance. This was because strategic alliance allowed DL to accomplish most of the objectives.
(action items):
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1.
Look for a manufacturer; evaluate the manufacturer and the price
2.
Receive financial needs, insurance and document required in Export Development Canada (EDC)
3.
Set up retail stores
4.
Promotion campaign
The time frame that DL should be able to accomplish these action items was 4 months. 1) DL can look for a manufacturer through the embassy of Canada located in Vietnam and Amcham (a company that help finding a manufacture http://www.amchamvietnam.com/5754 ). Once found a manufacturer, DL then evaluated the company such as background check and reputation, then negotiated term and conditions and price. This could be done in 2 months. 2) DL needed to go to Export Development Canada
(EDC) to obtain the financial needs, insurance, document required to export and knowledge about the market. This can be done in 2 weeks. 3) DL needed to find available spaces to set up retail stores. I recommended DL to open retail stores in big malls in Ho Chi Minh City. This link will provided a list of malls and how to contact each mall management http://www.vietnamonline.com/best-of-vietnam/top-5shopper-paradises-of-ho-chi-minh-city.html
. This could be done in 3 weeks.
4) Lastly, DL needed to advertise the products. There were several ways to do it. DL could advertise the products through a local newspaper, social networking sites and mall-to-mall personal advertising. Bao Tuoi Tre was a newspaper that popular amongst young Vietnamese, here is the link http://tuoitre.vn/ . DL could contact the management team and asked them to write about DL on their newspaper. Facebook and yahoo were social networking sites that also population in Vietnam. DL could create a Facebook and yahoo pages to advertise and to attract customers. DL could also hire a marketing team to do mall-to-mall personal selling. At the Consulate General of Canada in Ho Chi Minh City, DL could find a list of marketing teams. Here is the link http://www.tradecommissioner.gc.ca/eng/contact-our-team.jsp?oid=595 .
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.
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Figure 1: Canada's Merchandise Trade with Vietnam
Canada’s Trade with Vietnam (C$) Trade with Vietnam (C$)
January - December January - June
Exports
Imports
Trade Balance
2010
247,593,853
2011
317,374,706
2011
147,516,176
2012
171,706,762
1,173,393,940 1,332,127,093 577,310,460 732,359,278
-925,800,087 -1,014,752,387 -429,794,284 -560,652,516
Canada’s Merchandise Trade with Vietnam, 2011 rade with Vietnam, 2011
Canadian Imports from Vietnam
Merchandise Classification %
1
Woven clothing and apparel articles
2
Furniture and stuffed furnishings
Canadian Exports to Vietnam
Merchandise Classification %
12.77 Fertilizers 28.08
12.51
Oil seeds and misc. fruit, grain, etc. 15.17
3 Knitted or crocheted apparel
4 Footwear
12.50 Fish, crustaceans, molluscs
12.40
Boilers, mechanical appliances,
10.72
6.18
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7.93 Iron and steel 5 Fish, crustaceans, molluscs
6
Electrical machinery and equipment 7.69
Pearls, precious stones or metals
7
Boilers, mechanical appliances, etc.
8 Edible fruits and nuts
9 Leather articles
4.97 Raw hides, skins and leather
3.61 Meat and edible meat offal
2.53 Plastic and plastic articles
3.64
3.45
10
Prepared food: meat, fish, seafood
Top 10 as % of total from
Vietnam
2.00 Cereals 2.10
78.92 Top 10 as % of total to Vietnam 77.36
Vietnamese imports as % of Cdn total 0.30
Vietnamese exports as % of Cdn total
Figure 2:
Canada’s Trade with Canada’s Trade with Malaysia (C$) Trade Malaysia (C$)
0.08
2.97
2.65
2.41
Exports
January - December
2010
729,544,208
2011
708,524,949
January - June
2011
474,715,626
2012
414,830,818
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Imports
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2,290,873,029 2,138,820,852 1,039,634,868 1,090,456,922
Trade Balance -1,561,328,821 -1,430,295,903 -564,919,242
Canada’s Merchandise Trade with Malaysia, 2011
-675,626,104
Canadian Imports from Malaysia
Merchandise Classification %
Canadian Exports to Malaysia
Merchandise Classification %
1
2
3
4
Electrical machinery and equipment
Boilers, mechanical appliances, etc.
Optical, medical, scientific, technical instrumentation
Fats, oils and waxes
47.32 Fertilizers
7.33
Boilers, mechanical appliances, etc.
41.21
15.23
Oil seeds and misc. fruit, grain, etc. 7.72
6.98
6.97
Electrical machinery and equipment 6.78
5.71 5 Rubber and rubber articles
6
Furniture and stuffed furnishings
6.67 Aircraft and spacecraft
4.88 Fats, oils and waxes
7 Cocoa and cocoa preparations 1.12 Cereals
8 Plastic and plastic articles 1.04 Plastic and plastic articles
4.69
3.15
3.14
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9
Aluminum and aluminum articles
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0.97
Inorganic chemicals, precious metals
0.92
Optical, medical, scientific, technical instrumentation
2.81
10 Iron or steel articles
Top 10 as % of Total from
Malaysia 92.46
Top 10 as % of Total To
Malaysia
2.48
84.67
Malaysian Imports as % of Cdn
Total 0.48
Malaysian Exports as % of Cdn
Total 0.18
Figure 3 : Rating table for marketing entries alternatives
Closed to 1 is least effective and closed to 5 is the most effective
Alternatives
Criteria
Profits
Market share 4
Acquire resources 2
Distributors Agents Strategic alliance Greenfield investment
3 4 5 5
4
2
4
4
3
5
Reposition
Total
1
10
1
11
5
18
5
18
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