HEILBRONN UNIVERSITY
Business Administration and Management
Diploma Thesis
SUCCESSFUL PROMOTION OF CONSUMER GOODS IN VIETNAM
AN EXPLORATORY INVESTIGATION OF VIETNAMESE
CONSUMERS AND CULTURE
Author:
Fabian Heymer
Winter Semester 2007/2008
TABLE OF CONTENTS
LIST OF FIGURES
VI
LIST OF TABLES
VII
LIST OF ABBREVIATIONS
VIII
ACKNOWLEDGEMENTS
IX
1.
INTRODUCTION
1
1.1
Background
1
1.2
Problem Formulation
2
1.3
Purpose
3
1.4
Research Questions
3
1.5
Structure
4
2.
THEORETICAL FOUNDATIONS
6
2.1
Disambiguation
6
2.1.1
Promotion
6
2.1.2
Consumers and Consumer Goods
7
2.1.3
Culture
9
2.2
Introduction to Promotion Theory 10
2.2.1
Role of Promotion 10
2.2.1.1
Overview 10
2.2.1.2
Impacts on other Marketing Mix Elements 11
2.2.1.3
Impacts on Marketing Strategies 12
2.2.2
Communication Process 13
2.2.3
Promotion Mix 15
2.2.4
Integrated Marketing Communications 17
I
3.
COUNTRY OVERVIEW 20
3.1
Key Data 20
3.1.1
History 20
3.1.1.1
Overview 20
3.1.1.2
Pre-colonial and Colonial History 20
3.1.1.3
Development of the Socialist Republic of Vietnam 21
3.1.1.4
Doi Moi Policy and Recent Milestones 23
3.1.2
Geography and Climate 24
3.2
Promotion Environment 27
3.2.1
Overview 27
3.2.2
Politics and Administration 27
3.2.3
Economy 29
3.2.3.1
Key Economic Ratios 29
3.2.3.2
Economic Structure 30
3.2.4
Legal Environment 31
3.3
Selected Industries 32
3.3.1
Consumer Goods Producing Industry 32
3.3.2
Promotion Industry 33
3.3.3
Retail Industry 35
3.3.3.1
Overview 35
3.3.3.2
Traditional Retail 36
3.3.3.3
Modern Retail 39
3.3.3.4
Other Formats 42
4.
CONSUMERS 43
4.1
Population and Employment 43
4.2
Living Conditions 46
4.2.1
Overview 46
4.2.2
Income 47
4.2.3
Working Conditions 49
4.2.4
Housing Conditions 49
4.2.5
Health Care 52
4.2.6
Other Factors 53
II
4.3
Shopping Behaviour 54
4.3.1
Influences on Outlet Selection 54
4.3.2
Characteristics of Traditional and Modern Trade 56
4.4
Female population 58
4.5
North South Differences 59
5.
CULTURE 63
5.1
Cultural Influences 63
5.2
Categorizing Vietnam's Culture 64
5.2.1
Core Cultural Dimension Models 64
5.2.2
Hofstede's Five Dimensions of Culture 65
5.2.2.1
Overview 65
5.2.2.2
Power Distance 65
5.2.2.3
Individualism 66
5.2.2.4
Masculinity 67
5.2.2.5
Uncertainty Avoidance 67
5.2.2.6
Long-Term Orientation 68
5.2.3
Lewis Three Culture Categories 68
5.3
Elements of Culture 69
5.3.1
Overview 69
5.3.2
Education 70
5.3.3
Communication and Language 71
5.3.4
Social Organizations 73
5.3.5
Religion 74
5.3.6
Values and Attitudes 76
5.3.7
Aesthetics 79
5.3.8
Other Cultural Elements 80
6.
RESEARCH DESIGN 82
6.1
Overview 82
6.2
Secondary Research 83
III
6.3
Primary Research 84
6.3.1
Overview 84
6.3.2
Expert Interviews 85
6.3.3
Focus Groups 86
6.3.4
Observation 87
6.4
Research Constraints 88
7.
DISCUSSION OF FINDINGS 89
7.1
Target Consumer Groups 89
7.2
Promotion Mix 91
7.2.1
Advertising 91
7.2.1.1
Overview 91
7.2.1.2
Role of Advertising in Vietnam 91
7.2.2
Sales Promotion 96
7.2.2.1
Overview 96
7.2.2.2
Role of Sales Promotion in Vietnam 96
7.2.3
Public Relations 102
7.2.3.1
Overview 102
7.2.3.2
Role of Public Relations in Vietnam 103
7.2.4
Personal Selling 106
7.2.4.1
Overview 106
7.2.4.2
Role of Personal Selling in Vietnam 106
7.3
Message 107
7.3.1
Message Content 107
7.3.2
Message Execution 107
7.4
Media 112
7.4.1
Overview 112
7.4.2
Television 113
7.4.3
Print 114
7.4.4
Outdoor 115
7.4.5
Internet 118
7.4.6
Radio 119
7.4.7
Others 120
IV
7.5
Taboos 120
7.6
Outlook 122
7.6.1
Consumer Trends 122
7.6.1.1
Overview 122
7.6.1.2
Health Consciousness 122
7.6.1.3
Brand Consciousness 123
7.6.1.4
Confidence and Sophistication 125
7.6.1.5
Personal Appearance 126
7.6.1.6
Changing Shopping Preferences 127
7.6.1.7
Cultural Influences 127
7.6.1.8
Convenience 128
7.6.1.9
Scepticism towards Promotion 129
7.6.1.10
Other Consumer Trends 129
7.6.2
Future Challenges and Opportunities 131
7.6.2.1
Overview 131
7.6.2.2
Challenges 131
7.6.2.3
Opportunities 133
8.
IMPLICATIONS 135
9.
CONCLUSIONS 141
9.1
Addressing the Research Questions 141
9.2
Limitations 143
9.3
Further Research 144
APPENDIX A: Project Description
XI
APPENDIX B: Interview Introduction
XIII
APPENDIX C: Interview Guidelines
XV
APPENDIX D: Interview Rankings
XIX
APPENDIX E: Focus Group Guideline
XXI
REFERENCES
XXX
V
LIST OF FIGURES
Figure 1: Illustration of Problem Formulation
2
Figure 2: Reference framework of consumer goods
7
Figure 3: Impacts of promotion 10
Figure 4: Communication process 13
Figure 5: Communication process in a marketing context 15
Figure 6: Comparison between Promotion Categories and AIDA model 17
Figure 7: Geography of Vietnam 25
Figure 8: Key Economic Rations 29
Figure 9: Window of opportunity analysis for retailers 2007 35
Figure 10: Retail Formats in Vietnam 36
Figure 13: Map of Vietnam's population density 44
Figure 14: Age structure in Vietnam 45
Figure 15: Monthly declared household income 48
Figure 16: Number of household members 50
Figure 17: Reasons to shop at the supermarket 55
Figure 18: Shopping frequency at supermarkets 57
VI
LIST OF TABLES
Table 1: Household durable consumer goods in Vietnam by residences 51
Table 2: Differences between North and South Vietnamese
60
Table 3: Strengths and weaknesses of qualitative research 85
Table 4: Advertising appeals and Hofstede's cultural dimensions 110
VII
LIST OF ABBREVIATIONS
ASEAN
Association of Southeast Asian Nations
FDI
Foreign
Direct
Investment
FMCG
Fast Moving Consumer Goods
GDP
Gross
Domestic
Product
GNI
Gross
National
Income
HCMC
Ho Chi Minh City
IMC
Integrated
Marketing
Communication
MPR
Marketing
Public
Relations
NLF
Nation Front for the Liberalisation of South Vietnam
PoS
Point
of
Sale
PR
Public
Relations
SOV
State
of
Vietnam
SRV
Socialist Republic of Vietnam
UNCTAD
United Nations Conference on Trade and Development
USD
U.S.
Dollar
USP
Unique
Selling
Proposition
VNAA
Vietnam
Advertising Association
VNI
Vietnam
Index
VTV
Vietnam
Television
VIII
ACKNOWLEDGEMENTS
First, I would like to thank the DAAD (German Academic Exchange Service) for
their belief in my project and granting me a research scholarship which helped me
to finance my study trip to Ho Chi Minh City Vietnam.
Moreover, I remain grateful to all interview partners who received me and patiently
answered my questions, despite their busy schedules. Some of them
recommended me to other interviewees, supplied me with further information and
even became friends. Also, I would like to thank all participants of the focus
groups, who sacrificed their day off in order to take part in my project.
Special acknowledgement goes to my supervisor Prof. Dr. Löffler for supporting
my scholarship application and having confidence in my abilities. Due to the nature
of this project, I would not have been able to approach it without his flexibility.
For spontaneously initiating contact to Mr. Nguyen Van Trinh, Vice Dean of the
National University, who became my contact person in Vietnam, I am grateful to
Prof. Dr. Marsden.
I also want to thank my academic assistants, La Bao Chau and Nguyen Than
Thuy who supported me by translating Vietnamese sources and recruited the
participants of the focus groups. I also remain grateful to Le Phuong Hai for
introducing me to the Vietnamese culture and leisure time activities, being a good
friend and further updating me about current developments in Vietnam.
For giving me the opportunity to conduct the focus groups in the conveniently
located Goethe Institute in downtown Ho Chi Minh City, I would also like to thank
Mr. Helmut Frielinghaus.
This thesis marks the end of my studies at Heilbronn University. Hence, I would
like to express my sincerest thanks to my parents and my brother for their support
in all aspects of my life and encouraging me whenever they feel I have to be
heartened. Finally, in particular, my girlfriend Vanessa Wartusch needs special
acknowledgment for her emotional assistance during my studies and bravery to
accompany me on my field trip to Vietnam.
IX
"Without promotion something terrible happens... nothing!"
P.T. Barnum, American Circus Entertainer
X
1. Introduction
1. Introduction
1.1 Background
Vietnam has gradually opened its market economy towards foreign investors and
businesses in recent years, climaxing in the accession to the World Trade
Organization at the beginning of 2007. Having one of the highest economic growth
rates in Asia, Vietnam is evolving rapidly and in the centre of attraction of foreign
producers and retailers all over the world. In particular Vietnam's increasing popu-
lation, half of its 85 million people being below the age of 30
1
, makes the country
so appealing for consumer goods companies. Furthermore, consumers' purcha-
sing power is increasing fast. With limited choice during years of centrally planned
economy, Vietnamese consumers these days face growing market liberalisation
and personal wealth and hence must learn how to successfully navigate the new
abundance of products and brands.
Confronted with the challenge of gaining foothold, as well as increasing and
defending market-share, foreign and indigenous consumer goods companies are
beginning to realize the absolute essentiality of doing promotion successfully in
this potential market. Meanwhile, more and more promotion agencies
2
develop to
provide support in an increasingly competitive environment. Thus, it is more
important than ever to understand the Vietnamese way of thinking and lifestyle
and gain deep insights of promotion within the context of Vietnam's culture.
This thesis attempts to provide in-depth information about promotion in Vietnam.
Based on secondary research as well as primary data gained in expert interviews,
focus groups and observation during a three-month field research in Vietnam, it
will describe Vietnamese consumers and culture and draw implications for
designing a sound message, promotion mix and media mix. Furthermore, it will
present current consumer trends. Only those marketers who are able to tailor their
promotional efforts to fit the culture and lifestyle of Vietnamese consumers stand
to reap the benefits.
1
Cf. Oxford Economics Database (2008).
2
Please note that in the course of this thesis the term "promotion agencies" also comprises
advertising agencies.
1
1. Introduction
1.2 Problem
Formulation
Despite being a highly potential market, little consumer research has been
conducted in Vietnam so far. Even though thousands of books about the country
exist, most of them deal with Vietnam's eventful past, predominantly the Vietnam
War. The Vietnamese consumer is relatively unknown. Many companies lack the
sensitivity to truly understand differences in consumer tastes and preferences.
Marketers often underestimate the paramount importance of local knowledge
when it comes to promotion causing insufficient results and the risk of offending
consumers. Beside consumers, culture also profoundly impacts the way of doing
promotion as it influences consumers. In fact, culture is "an integrated part of the
consumer, not an environmental one"
3
. Despite the fact that Vietnamese culture is
not as unfamiliar as the Vietnamese consumer, it has yet not often been related to
consumer behaviour and thinking as well as promotion. The following figure
illustrates the problem:
Problem
Consumers
Culture
Promotion
Figure 1: Illustration of Problem Formulation
The problem is formulated as follows:
There is a lack of in-depth information regarding characteristics of Vietnamese
consumers and culture to derive success factors how to promote consumer goods
in Vietnam.
This problem formulation is rather broad due to the fact that a holistic approach will
be followed in the course of this thesis. Only if an integrated view is taken, cohe-
rences and interrelations between consumers, culture, promotion and media can
be investigated.
3
De Mooji, M. (2004), p. 19.
2
1. Introduction
1.3 Purpose
The problem formulation leads to the suggestion of several research objectives.
First, this thesis shall provide in-depth information about the current state of
promotion in Vietnam. It aims to describe Vietnam's promotion environment, such
as the political, economic and legal environment and illustrate the development,
recent market situation and trends of the consumer goods producing-, promotion-
and retail industries. Second, the purpose of this thesis is to present deep
understanding of Vietnamese consumers. Obviously, they are heavily affected by
external factors. Hence, the historical, geographical and climatic environment shall
be described and their influence on consumer behaviour identified. Moreover, this
thesis aspires to illustrate behaviour oriented, psychographic and socio-
demographic characteristics of Vietnamese consumers and present miscellaneous
consumer groups. Besides, current consumer trends shall be discovered and
described in the context of promotion. Third, as it is widely recognized that cultural
factors exert a profound impact on consumers, this thesis aspires to categorize
Vietnam's culture and describe certain cultural elements. Its purpose is to further
analyze how these cultural elements are influencing the way to do promotion in
Vietnam. Finally, this thesis aims to provide information how to fine-tune the
promotion and media mix in Vietnam. It shall discuss the functions of the major
promotional tools, analyze the implications of culture's influence on the message,
illustrate media-availability and media-regulations and evaluate their significance
for consumer goods producers.
1.4 Research
Questions
The following research questions will be addressed in the course of this thesis:
S What are behaviour oriented, psychographic and socio-demographic
characteristics of Vietnamese consumers? What consumer groups are most
attractive to consumer goods producers? Which consumer trends can be
observed in Vietnam?
S How can Vietnam's culture be categorized? What are its peculiarities? What
influences does Vietnam's culture have on consumers?
3
1. Introduction
S Which kinds of promotional tools are possible in Vietnam? What are their
characteristics? What should marketers consider when designing the
message? What are specific features of the various media in Vietnam?
What are sensitive issues when doing promotion in Vietnam?
1.5 Structure
The thesis has the following structure:
Chapter 2 lays the theoretical foundation of this thesis and is divided into two
parts. First, the terms "promotion", "consumers", "consumer goods" and "culture"
will be defined. Subsequently, a short introduction of promotion theory will be
given, namely the role of promotion, the communication process, promotion mix
and integrated marketing communication.
Chapter 3 presents an overview of Vietnam. After the key data about Vietnam's
history, geography and climate are illustrated, the promotion environment will be
examined. This includes the political, administrational, economic and legal
environment. Furthermore, selected industries that is to say the consumer goods
producing-, promotion- and retail industries will be described to provide information
about the context in which marketing communications take place.
Chapter 4 characterizes Vietnamese consumers and consists of six parts. After
socio-demographic features such as population, employment and ethnic origin of
Vietnamese have been explained, living conditions of rural and urban Vietnamese
consumers will be illustrated. Afterwards the shopping behaviour will be analyzed
in regard to the traditional and modern trade channel. Finally, differences between
the genders and the two geographic regions of North and South Vietnam will be
addressed.
4
1. Introduction
Chapter 5 analyzes the culture of Vietnam in the context of promotion. It begins
with demonstrating external influences on Vietnamese culture and afterwards
categorizing it in the context of theoretical frameworks developed by Geert
Hofstede and Richard D. Lewis. Lastly, various elements of Vietnamese culture
will be examined.
Chapter 6 introduces the research design. First, an overview of the applied
research methods will be given which are secondary research, and the primary
research methods expert interviews, focus groups and observation. Then, the way
these methods have been executed in the course of this thesis will be explained in
more detail. The chapter closes with a description of the research constraints.
Chapter 7 presents the findings of the field research conducted in Vietnam which
will also be put in a context and discussed. The findings are categorized into six
parts, which are target consumer groups, promotional tools, message, media,
taboos and outlooks.
Chapter 8 draws implications which derive from the findings of the research
conducted in the course of this thesis.
Chapter 9 will provide a conclusion of this thesis, pick up the research questions,
show limitations and give recommendations for future research in Vietnam.
5
2. Theoretical Foundations
2. Theoretical
Foundations
2.1 Disambiguation
2.1.1 Promotion
The term promotion has been extensively used during the last decades,
unfortunately in various meanings and contexts. Kotler defines it as ,,activities that
communicate the product or service and its merits to target customers and
persuade them to buy"
4
. This definition is rather narrow. Other authors follow wider
approaches in several aspects:
S Besides customers, other audiences can be targeted with promotion such
as trade, employees, shareholders, community groups, government bodies
and so on,
5
S Ideas, brands and persons can be promoted, too, not only products and
services,
6
S Provoking purchase is not the only intention of promotion, but "to create a
favourable predisposition"
7
about the promoted object/subject in general.
However, even within the marketing context, there are different meanings
associated with the term "promotion" as it is often misleadingly used interchange-
ably with "advertising" or "sales promotion". As will be discussed later in more
detail, advertising and sales promotion are just two of the promotional tools
available to marketers. In recent years, the term "marketing communications" also
has been brought up by academics as a synonym to replace promotion. In the
course of this thesis, the term "promotion" will be used for two reasons: first, it is
still the most common; second, communication goes beyond promotion in the
sense that e.g. the product's price, type of outlet etc. also communicate something
to the audience. However, these are part of the other marketing elements and
hence not covered by this thesis.
4
Kotler, P. et al. (2005), p. 34.
5
Cf. Doyle, P. (2003), p. 239.
6
Cf. Semenik, R.J. (2001), p. 7.
7
Cf. Ibid.
6
2. Theoretical Foundations
2.1.2
Consumers and Consumer Goods
By definition, consumers are ,,individuals and households who buy goods and
services for personal consumption"
8
. In fact, almost every human being is also a
consumer. Often, a consumer identifies a need or desire, purchases the product
and finally consumes it but this is not always the case.
9
Regularly, other people
are involved in this process. It might be another person who actually buys the
product or influences the buying decision. For instance, small children, even
though being the end-consumers of instant milk would not be able to do the
purchase. This could be the father who has been influenced by the mother which
brand to buy. Studying consumers is crucial for the consumer goods producing
industry. A consumer good is defined as "a product bought by final consumers for
personal consumption"
10
. It might prove helpful to put it in a reference framework:
Product
Ideas
Consumer Goods
Durable Goods
Non-Durable Goods
Unsought
Convenience
Shopping
Specialty
Industrial Goods
Services Persons
Physical Objects
Places
Organisations
Figure 2: Reference framework of consumer goods
The above figure shows that a product not necessarily must be tangible. However,
consumer goods are always tangible even though they can include intangible
elements, like value-adding services (e.g. hotline, guarantee etc.), as part of a
complex bundle. One can differentiate consumer goods concerning their durability.
Durable goods are usually used over a longer period, for instance, furniture or
washing machines. In contrast, non-durable products are consumed quickly and
for a short term only, such as food or beauty products.
8
Kotler, P. et al. (2005), p. 255.
9
Cf. Solomon, M.R. (2002), pp. 44.
10
Kotler, P. et al. (2005), p. 540.
7
2. Theoretical Foundations
Based on consumer shopping habits, consumer goods can in turn be categorized
into four classifications unsought, convenience, shopping and specialty goods.
11
The main feature of unsought products is the fact that consumers usually do not
have them in mind, simply because of not being aware of them or even having
negative interest. Thus, customers first have to be educated about it (e.g. a new
communication concept). Convenience goods are frequently purchased low priced
goods (e.g. toothpaste, salt, etc.). Customers hardly make many efforts prior to
purchasing these products. Customer involvement is more intensive when buying
shopping goods (e.g. apparel, TV, etc.). Being of higher price, customers spend
more time and effort on comparing these goods and planning the purchase.
Finally, luxury goods, e.g. Gucci handbags or cars belong to the category specialty
goods. Its main characteristic is the considerably higher price. Customers are
highly involved in the purchase decision and have a strong brand preference.
It is worth mentioning that consumer goods, as well as all other products
traditionally consist of several levels or layers, namely:
12
S the core product, which stands for the functional, problem-solving benefit
(for instance, a soft drink to satisfy someone's thirst),
S the actual product, which includes the quality level, features, styling, brand
name and packaging and
S the augmented product, which is the complete bundle consisting of
services and other benefits.
Ultimately, the customer will evaluate on how far the complete solution can satisfy
his needs.
11
Cf. Kotler et al.(2005), pp. 540.
12
Cf. Ibid., pp. 539.
8
2. Theoretical Foundations
2.1.3 Culture
Culture is a very complex concept. It is pervading almost everything and
dominantly affects all relationships, behaviours and interactions, in short, virtually
every part of life.
13
Considering marketing and promotion in particular, the para-
mount importance of culture is beyond dispute. Culture impacts communication
appeals that are appropriate, the offers and attributes consumers value, their
wants and needs, product usage and the decision process.
The concept of culture has been researched extensively and several hundred
definitions exist. Probably one of the most popular ones was introduced by Gert
Hofstede that culture is "the collective programming of the mind that distinguishes
the members of one group or category of people from others".
14
This definition
emphasizes that culture is learned rather than biologically inherited. Additional
characteristics are that culture is interrelated (consists of various elements
interacting and influencing each other) and is shared among members of a
group.
15
Culture comes in different layers consisting of visible parts, e.g. body
language or clothing which are manifestations of underlying invisible values and
assumptions, e.g. family values or national identity.
Due to the universalism of the concept, one researcher considered it might prove
helpful to ask if there is anything not encompassed by culture and came to the
conclusion that culture is everything but nature.
16
13
Trompenaars/ Woolliams (2004), p. 7.
14
Hofstede/ Hofstede (2004), p.4.
15
Cf. Hollensen, S. (2001), p. 159.
16
Cf. Trompenaars/ Woolliams (2004), pp. 21.
9
2. Theoretical Foundations
2.2
Introduction to Promotion Theory
2.2.1
2.2.1.1
Role of Promotion
Overview
Putting promotion in a reference framework is essential to truly understand its
scope. Promotion can be assigned to the marketing area. Marketing traditionally
consists of four responsibilities product, price, place and promotion also
referred to as the "4 Ps of marketing" or "marketing mix".
17
Concerning promotion
two implications can be drawn: First, promotion is not the only critical factor in the
marketing mix. The quality of the products, the attractiveness of the pricing and the
distribution are fundamental as well. If there are problems in any of these factors, it
will be hard or even impossible for promotion to compensate this. Second, pro-
motion is of paramount importance for the success of the marketing strategy as it
is one of the basic elements in the marketing mix and essential to successfully
implement the other elements. Thus, companies are not confronted whether to
communicate or not, the question is how much to spend on promotion and in what
ways. Every company is inevitably communicating with internal and external
audiences. The following figure shows the effect of promotion on other marketing
mix elements and its impact on the strategies:
Segmentation
Price
Place
Promotion
Product
Differentiation
Positioning
Introducing
Building
Maintaining
Persuading
Informing
Affecting
Accessing
Securing
Revenues & Profit
Figure 3: Impacts of promotion; based on: Semenik, R.J. (2001), pp. 18
17
Cf. Pickton/ Broderick (2005), p. 4.
10
2. Theoretical Foundations
There are two main impacts of promotion. Its impact on the other elements of the
marketing mix will be discussed and its impact on the marketing strategies seg-
mentation, differentiation and positioning.
2.2.1.2
Impacts on other Marketing Mix Elements
One of the most evident roles of promotion is its impact on product
management.
18
First of all, with the help of the promotional tools beneficial
information can be distributed to the company's various target audiences. It is self-
evident that intro-duction of new brands or products would be unsuccessful if it
was not supported by promotion to attract attention. Aside from purely informing, a
large part of promotional efforts aims for influencing and persuading audiences in
certain ways, for instance, changing customers' usual shopping behaviour in
favour of the company's brands. Finally, another effect of promotion on the product
manage-ment is to build and maintain brand loyalty so that consumers repeatedly
purchase the company's brand(s).
19
Building brand loyalty with promotion also has effects on pricing as it enables
companies to increase prices without losing customers. When customers perceive
the value of the offer higher than its costs they will eventually consider buying it.
Moreover, promotion directly impacts pricing in the consumer market. Examples
for the former are coupons and price-reductions (reduction of the costs) on the one
hand and premiums and sweepstakes (increase of value) on the other hand.
20
Instances for the latter are case-lot discounts and other incentives.
Ultimately, promotion has effects on distribution (place) in two ways. First, it is
enhancing consumer access to brands e.g. if merchandising is used at the point of
sale (PoS).
21
Likewise, companies could include databases on their webpage,
also part of promotion, to inform customers about stores where the products or
brands can be purchased. The second effect of promotion is on securing trade
18
Cf. Semenik, R.J. (2001), pp.18.
19
Please note that a one way relationship between brand loyalty and repeat purchase exists; brand
loyalty affects the probability the customer buys the brand again, but repeated purchase does not
necessarily mean the customer is brand loyal.
20
Please refer to chapter 7.2.2 for further information about these tools.
21
Cf. Semenik, R.J. (2001), p.19.
11
2. Theoretical Foundations
distribution. Prior to the introduction of new products for example, intermediaries
are much easier to be convinced of listing the innovation when seeing that it is
backed-up by heavy promotion. Besides, they expect promotional items and
merchandising to assure high sales.
2.2.1.3
Impacts on Marketing Strategies
In the case of market segmentation, defined by the American Marketing
Association as "the process of subdividing a market into distinct subsets of
customers that behave in the same way or have similar needs"
22
, promotion's task
is to:
S design the message which is most relevant to the specific segments,
S choose the most appropriate forms of promotional tools to appeal to each
target audience,
S select the media with which to reach the target group and
S manage these elements in a way which is effective and efficient.
To put it more dramatically, the use of market segmentation would be rather
ineffective without being the foundation of diversified promotion.
23
Another key role
of promotion concerns product differentiation in two ways tangible and
intangible. Promotional tools, like on-packs (attaching an additional item to the
product for a limited time) differentiate the offer physically from competitors' offers.
Still, differentiation can also take place based on consumer perception rather than
actual (e.g. material or functional) attributes. As aforementioned, promotion is
communicating the benefits and merits of the offer. Thus, it is affecting customers'
mindset and thereby creating difference to competitors' offers. Perceived
distinctiveness is one of the main drivers for purchase decisions at the PoS.
24
Differentiating brands, products and services from competitors' offers in
audiences' minds is one important aspect of promotion. Another aspect is
22
American Marketing Association (2008).
23
It could be argued that market segmentation is also essential for product management, as also
services, products and other offers can be differentiated according to segments' needs. However,
in the broader sense of promotion as a communication process, customers would not be informed
about these differences without the use of promotion.
24
Cf. Semenik, R.J. (2001), p. 20.
12
2. Theoretical Foundations
choosing where exactly to position it, relative to competitors. While marketing
analysis might for example identify a certain positioning of the brand as
advantageous (e.g. high quality but reasonable price), it is promotion's task to
move the product there. Again, this is based on the perception, or in other words
the minds of consumers, rather than material attributes. Recapitulatory, it can be
said that promotion has a strong impact on many other of the marketing elements.
It directly contributes to generating revenue by creating brand loyalty and rising
sales. Also, it affects profits through
causing price flexibility and contributes to
economies of scale. In this sense, marketing in general and promotion in particular
should be seen as investments by the organisation not as costs.
2.2.2 Communication
Process
As has been outlined, in the marketing context promotion is a process to convey
information. Effective communication requires an understanding of the underlying
elements and processes. Essential for a communication to take place is that at
least two parties are involved: one party which is sending a message and another
party which is receiving it. The communications process consists of several
elements which are shown in the following figure and will be explained below:
Media
Sender
Receiver
encoding
decoding
Message
Response
Feedback
Sender's field of experience
Receiver's field of experience
Transmission
encoding
decoding
Noise /
Interference
Figure 4: Communication process; based on Kotler et al. (2005), p. 729;
Pickton/ Broderick (2005), p. 49
13
2. Theoretical Foundations
The sender is the source of the message and consequently the starting point of
every communication process. This could be the marketer or the company in
general. By the use of symbols, words, pictures, music and other sensory
stimulants the sender is encoding the intended message. In the following, the
transmission of the message takes place which means the encoded message is
moved from sender to receiver. Media, such as magazines or TV are of utmost
importance in carrying the message but also influencing its effectiveness.
25
If the
message finally gets through (which is obligatory if the communication process is
to take place), the receiver, e.g. customer or employee, interprets the message
(decoding).
There are two options how the communication process might continue. If the
receiver does not show any reaction, the communication process will stop here.
On the contrary, the receiver might show any reaction or response. What is often
overlooked is the fact that the response is also encoded. For instance, a
customer's response could be to visit the webpage of the company, purchase the
product or tell other people about it.
Finally, there are distortions affecting all elements of the communication process.
Noise is the unintentional distortion, for instance, through a blackout while
watching TV, interference is referred to as a deliberate attempt to distract the
receiver e.g. through distracting a car driver from listening to the radio commercial
with a billboard at the street side.
26
Needless to say, distortions are more difficult
to handle when communicating to prospective customers in different markets
around the globe.
In conclusion, two major problems must be considered in the communication
process: interpretation and attention.
27
Concerning interpretation the sender must
make sure that the receiver's decoding coincidences with the intended message
content. This is only presumable if both participants "share a common field of
25
As will be discussed in chapter 7.3, the media itself can be seen as a message.
26
Pickton/ Broderick (2005), p. 48.
27
Cf. Doyle, P. (2003), p. 241.
14
2. Theoretical Foundations
experience"
28
. Communicators thus need to understand their targeted receivers in
terms of their needs, values etc. when designing the message. Still, even if the
message is designed in such a way, a second critical element exists: attention.
Assuming that audiences are exposed to a message it is still unclear whether they
pay attention to it.
2.2.3
Promotion
Mix
The general communication process has been described above. The following
figure shows the application of the communication process in a marketing context
and the classification of the promotion mix in this model:
Company
Promotion
Mix I
Intermediaries
Consumers
Publics
Promotion
Mix II
Word of
Mouth
Figure 5: Communication process in a marketing context
Today, companies are communicating with three groups: intermediaries (such as
retailers), consumers and publics (e.g. society, government, employees, etc.).
Additionally, intermediaries themselves communicate with consumers and publics
and meanwhile consumers communicate with each other and other publics.
Finally, all groups provide feedback. How companies design their marketing
communication can be described as the promotion mix. In the figure above, two
promotion mixes can be distinguished, "promotion mix I" and "promotion mix II".
The former is managed by the company/producer and directed towards the
intermediaries, consumers and publics. The latter is managed by the
intermediaries who target consumers and publics. Due to the fact that this thesis
28
Pickton/ Broderick (2005), p. 48.
15
2. Theoretical Foundations
shall provide means how to successfully promote consumer goods for consumer
goods companies, the author focuses on the "promotion mix I" only. Hence, the
target groups "intermediaries" and "publics" will also be disregarded.
The promotion mix is the blend of different marketing tools, with which the
company tries to achieve its communication objectives. One can distinguish
different elements or areas which must be taken into account when designing this
mix. However, different classifications exist. Some authors differentiate adver-
tising, personal selling, public relations, sales promotion and sponsorship.
29
Others categorize sponsorship as a tool of public relations and add direct
marketing instead.
30
In its most basic form, the promotion mix is subdivided into
the following four elements:
31
32
S Advertising,
S Public
Relations,
S Sales
Promotion,
S Personal
Selling.
Unfortunately, it remains debatable for some communications tool where exactly to
assign them. Hence, many overlaps exist, for instance, direct mail could be
attributed to advertising or sales promotion.
In theory all these four categories have their merits. This can best be illustrated
when opposing them to the hierarchy of effects model AIDA.
33
This model is
based on the perception that individuals move through different stages when
confronted with promotion until purchase, trial or consumption takes place. Even
though this model is not without drawbacks and is disputable, its simplicity makes
it neverthe-less helpful.
29
Cf. Czinkota/ Ronkainen (2006), p. 394.
30
Cf. Jobber, D. (2007), p.498, Kotler, P. et al. (2005), p. 719.
31
Cf. Pickton/ Broderick (2005), pp. 16.
32
The author is using this categorization due its simplicity and reduction of complexity in particular
regarding the expert interviews.
33
Cf. Pickton/ Broderick (2005), p. 517.
16
2. Theoretical Foundations
The following figure shows the comparison of the promotion categories and
hierarchy of effects model:
Advertising
Public Relations
Sales Promotions
Personal Selling
Awareness
Interest
Desire
Action
Figure 6: Comparison between Promotion Categories and AIDA model; based on:
Pickton/ Broderick (2005), p. 598
The AIDA model, which is one of the earliest developed hierarchies of effects
frameworks, distinguishes four phases. The first phase consumers pass through is
awareness. Being confronted with promotion, consumers find out about the
product's existence. After they know about it, some of them will become interested
in it. This is the second stage of the model. The promotional tools falling into the
categories advertising and Public Relations are predominantly adopted to build
awareness and move consumers to the second stage through generating interest.
However, knowing and being interested in the promoted product does not
automatically result in purchase. Only if consumers are also overcome by desire
they will finally act and purchase or consume the product. To arouse desire and
obtain action, promotional tools attributed to the categories sales promotion and
personal selling are the prevailing means of promotion.
2.2.4 Integrated
Marketing Communications
Today, marketers can chose from a variety of promotional tools and
communication channels to deliver the message. This may be seen as an
opportunity and threat at the same time. Opportunity, as it allows marketers to
precisely target those audiences which are of interest to the company and build
closer relationships with them. Also, target audiences can be reached at several
17
2. Theoretical Foundations
contact points (also referred to as consumer touch points) which makes
communication more effective. Nevertheless, marketers must be aware of the fact
each brand contact will deliver a message to the consumer. On account of this,
array of choices could be conceived as a threat, too. Consumers do not
differentiate between channels and tools, used to deliver the message. Instead, all
the messages from different sources make up the single overall message of the
company.
Given that consumers could be confused by blurred or even contradictory
messages, marketers must attend to integrate the promotional efforts. Hence,
more and more companies are adapting the Integrated Marketing Communications
(IMC) concept. Put in its simplest form, IMC is "a way of looking at the whole
marketing process from the viewpoint of the customer"
34
. The following features
are part of IMC:
35
S Clear identification of marketing communication objectives,
S Planned approach covering all promotion activities, all media and all target
audiences,
S Management and integration of all forms of contact (within the organisation
and between the organisation and its publics),
S Inclusion of all products/brands etc. and corporate marketing,
S Clearness, consistency, credibility and competitiveness of the message
strategy (which does not necessarily have to be a single message strategy).
The characteristics reveal that IMC is a complex philosophy involving various
players beside the marketing organization, such as other internal departments
(customer service, sales etc.) and external agencies like media organizations,
advertising agencies, PR agencies and so forth. Even worse, the various external
players often will compete for the marketing spending or might not be willing to
cooperate with each other to achieve a sound coordination. Still, companies
34
Kotler, P., in: Pickton/ Broderick (2005), p.3.
35
Cf. Pickton/ Broderick (2005), pp.25, Jobber, D. (2007), pp. 500.
18
2. Theoretical Foundations
picking up and successfully solving these challenges will eventually be rewarded
with the following benefits:
36
S Improved consistency and impact,
S Clearer
positioning,
S Operational
efficiency,
S Cost
savings,
S Synergy effects in media,
S Greater agency accountability,
S Media-neutral
planning,
S Unbiased evaluation of promotional tools.
36
Cf. Semenik, R.J. (2002), pp. 27, Pickton/ Broderick (2005), pp. 27, Jobber, D. (2007), pp. 500.
19
3. Country Overview
3. Country
Overview
3.1 Key
Data
3.1.1
3.1.1.1
3.1.1.2
History
Overview
To understand Vietnam, its people and culture it is essential to have a look at their
past since the country's history still shapes Vietnamese body of thought. It is said
"Vietnam is a place where history is not an abstraction but a living, breathing
entity."
37
Due to its geography Vietnam has always been vulnerable to invasion
and the Vietnam War in particular (which is referred to as the American War by the
Vietnamese) continues to shape the image of foreigners towards Vietnam. In fact,
thousands of books dealing with Vietnam's eventful history, especially the Vietnam
War, exist. Furthermore, "memories of the past remain an important part of all
contemporary Vietnamese socio-cultural systems".
38
Many stories and poems are
dedicated to Vietnamese heroes and the spirit of resistance and independence is
etched on people's minds. In the following the most important events in Vietnam's
history will be described.
Pre-colonial and Colonial History
Vietnam's current name was established at the beginning of the nineteenth
century.
39
Vietnam means "people of the South", whereby "Viet" refers to the
ethnic majority and "Nam" stands for the South, as Vietnam was a southern
province of China from 179 B.C. until 938 A.D.
40
Even though there were times in
which Vietnamese accepted the Chinese domination, economic exploitation
eventually resulted in resistance and rebellion. Finally, after more than a
millennium of occupation (as it was seen by most Vietnamese), Vietnamese
leaders expelled Chinese forces. China's efforts to regain power in Vietnam
continued during the following centuries being successful only for a brief period
37
Ashwill/ Thai (2005), p. 28.
38
Jamieson, N.L. (1993), p. 2.
39
Cf. Chong, L.C. (2002), p. 12.
40
Cf. Ashwill/ Thai (2005), p. 30.
20
3. Country Overview
between 1407 and 1427.
41
During this time, the region was returned to the status
of a Chinese province and a policy of assimilation pursued, meaning that works of
Vietnamese literature were destroyed and Chinese customs enforced. Using
guerrilla warfare, the Chinese were defeated again. From the mid 15
th
century the
cultivation of Southern Vietnam took place (Southward Movement).
42
The country
was divided throughout the 17
th
and 18
th
centuries.
43
In 1858 the French navy attacked Da Nang following the decision to gain admini-
strative control over the country (referred to Indochina by the French).
44
The first
region controlled by the French was the South by 1961.
45
After several provoked
conflicts, France ultimately got full authority in Vietnam in 1885 and divided the
country into three protectorates: Cochinchina (south), Annam (central) and Tonkin
(north). The following decades, Vietnamese saw themselves confronted with a
modern and developed Western power. Even though the French carried out public
works, e.g. construction of schools, hospitals and roads their policy was
determined by the belief to be superior to Vietnamese in every aspect. They
exploited people and natural resources ruthlessly and introduced heavy taxation
and state monopolies on alcohol, opium and salt.
46
3.1.1.3
Development of the Socialist Republic of Vietnam
During French occupation several anti-colonial groups formed to regain
independence. The founder of the most successful formation was Nguyen Sinh
Cuong (best known as Ho Chi Minh). During World War II France agreed
Japanese troops to be stationed in Vietnam. In 1941, Ho Chi Minh founded the
Vietnam Independence League (Viet Minh) to fight the occupying forces.
47
Following the defeat of Japan in 1945, Ho Chi Minh proclaimed Vietnam's
independence on September 2
nd
.
48
Yet the French sought to regain power over
Vietnam. This eventually resulted in the First Indochina War in which France was
41
Cf. McLeod/ Nguyen (2001), p. 6.
42
Cf. Ibid., p. 17.
43
Cf. Chong, L.C. (2002), p. 12.
44
Cf. Viettouch (2007).
45
Cf. Jamieson, N.L. (1993), p. 43.
46
Cf. Chong, L.C. (2002), p. 13.
47
Cf. McLeod/ Nguyen (2001), p. 31.
48
Cf. Ashwill/ Thai (2005), p. 36.
21
3. Country Overview
finally defeated through Chinese support and revolutionary warfare. The ensuing
peace agreement, which was signed at the Geneva Conference in 1954,
temporarily divided Vietnam into the communist North and the capitalist South
including the accord of free elections the year after. Nonetheless, the occupation
power broke the engagement fearing that popular Ho Chi Minh would win the
elections. France rather appointed a chief of a State of Vietnam (S.O.V.) itself.
49
The USA, being concerned about the communist threat also entered the scene,
encouraging the acceptance of Ngo Dinh Diem as Prime Minister. He declared
himself president of South Vietnam in 1955 thereby founding the R.V.N. so that
two Vietnams existed.
In 1960 the National Front for the Liberation of South Vietnam (NLF, also known
as the Viet Cong) was founded by the communist regime of the North "dedicated
to destroying the R.V.N., terminating US influence, and reunifying Vietnam"
50
. In
an incident in the Gulf of Tonkin in 1964, the US Navy claimed they had been
under attack of Vietnamese forces (this should prove wrong later on) providing a
reason to begin bombing the country. This Second Indochina War became famous
as the Vietnam War. In its meantime, the troop strength of the Americans
amounted to more than 500,000 soldiers using about 15 million tons of
ammunition.
51
Using guerrilla warfare, a sophisticated tunnel system and simplest
weaponry the communists finally wore down the Americans. Following the Tet
Offensive in 1968 public opinion worldwide turned against US involvement.
52
The
American combat forces withdrew in 1973 "leaving behind a devastated country,
with poisoned grounds, destroyed infrastructure and an unbelievable misery
15% of the Vietnamese population had been wounded or killed".
53
However, even
after American withdrawal the war continued between Vietnamese for two years.
Finally, in 1975 the R.V.N fell and the country reunified in 1976 becoming the
Socialist Republic of Vietnam (S.R.V.).
54
Saigon was renamed into Thanh Pho Ho
Chi Minh (Ho Chi Minh City) and Hanoi became the nation's capital.
49
Cf. McLeod/ Nguyen (2001), p. 33.
50
McLeod/ Nguyen (2001), p. 34.
51
Cf. Ashwill/ Thai (2005), p. 39.
52
Cf. Ibid.
53
Cf. Chong, L.C. (2002), p. 14.
54
Cf. McLeod/ Nguyen (2001), p. 36.
22
3. Country Overview
3.1.1.4
Doi Moi Policy and Recent Milestones
In view of the fact that the economy in Southern Vietnam had depended on U.S.
aid and expenditures from 1955 to 1975, the withdrawal of US forces came along
with major economic problems. Even though Vietnam "won" the war, it had been
very costly and a lot of destroyed infrastructure needed to be rebuilt. Soon after
the reunion, Soviet-style central planning was adopted. Privately owned land was
confiscated by the government, agriculture collectivized and industry was
nationalized. To make matters even worse, the U.S. managed to effectively isolate
the country by persuading its European allies to place a trade and aid embargo
against Vietnam in 1979.
55
Following the economic difficulties, hundreds of
thousands of Vietnamese began fleeing the country via boat in several emigration
waves. In 1986, after the death of former president Le Duan, the "Doi Moi" policy
(Renovation) was launched.
56
Its main objective was "to raise production via
market incentives with limited political liberalization"
57
. However, it was not before
1989 until the reform process accelerated and eventually resulted in improved
macroeconomic performance.
In 1994 the US dismissed its trade embargo on Vietnam giving it the opportunity to
become the 126
th
member of the World Bank.
58
One year later, on 28
th
July 1995,
Vietnam joined the Association of Southeast Asian Nations (ASEAN)
59
and
resumed diplomatic relations to the US, thereby further boosting its economic
growth.
Unfortunately, the Asian Economic Crisis, which started in July 1997
60
also
caused severe turbulences in Vietnam's economy. Having heavily relied on
Foreign Direct Investments (FDI), the economy began struggling when investors'
confidence decreased and registered FDI fell by 11.3 percent.
61
Another major
impact was the shrinking of the export market due to the fact that many of
Vietnam's trade partners were under strong pressure as well. Contrariwise,
55
Cf. Ashwill/ Thai (2005), p. 46.
56
Cf. McLeod/ Nguyen (2001), p. 41.
57
McLeod/ Nguyen (2001), p. 41.
58
Cf. World Bank Group Archives (2005), p. 233.
59
Cf. Association of Southeast Asian Nations (2007).
60
Cf. Karunatilleka, E. (1999), p. 4.
61
Cf. Binh, D.T. (2000), p. 49.
23
3. Country Overview
imports rose further "causing difficulties for the already troubled domestic
enterprises".
62
Hence, the government decided to increase its efforts to control
imports and protect its economy, even using means such as banning foreign
products which could be produced on home soil.
In recent years, namely between 2000 and 2005, "Vietnam has stood as an
example of a development model that has lifted millions of people out of poverty
while ensuring the benefits of its vibrant market economy are fairly evenly
distributed across society"
63
. On 11
th
January 2007, after eleven years of
preparation Vietnam finally joined the World Trade Organization and became its
150
th
member
64
thus bringing with it commitments and challenges but also
opening the door for many new opportunities.
65
3.1.2
Geography and Climate
Being located in the centre of South-East Asia, Vietnam is bordered by China to
the North, Laos, Cambodia and the Gulf of Thailand to the West and the Gulf of
Tonkin and the South China Sea to the East and South. Its land area comprises
approximately 331,688 square kilometres
66
with more than 3,400 kilometres of
coastline
67
. Three-quarters of the country are hills, mountains and tropical
forests.
68
Vietnam is long on a north-south axis and very thin, with less than 40
miles width at the narrowest part as can be seen in the following map:
62
Cf. Binh, D.T. (2000), p. 49.
63
Cf. World Bank Group Archives (2005).
64
Cf. World Trade Organization (2007).
65
In fact, Vietnam became member of the WTO on 7 November 2006, but commitments were put
into effect on the 11
th
of January 2007.
66
Cf. Federal Research Division Library of Congress (2007).
67
Cf. CIA World Fact Book (2007).
68
Cf. Federal Research Division Library of Congress (2007).
24
3. Country Overview
Figure 7: Geography of Vietnam; Source: University of Texas Libraries (n.D.)
Vietnamese often compare their country to a shoulder pole with rice baskets on
both ends.
69
This is due to the fact that Vietnam can be divided into three areas:
the North consists of the highlands and the densely populated, grain-producing
Red River Delta with Ha Noi, the capital of Vietnam, situated in this area. The
northern highlands are rich of natural resources such as iron ore and coal.
70
The
69
Cf. McLeod/ Nguyen (2001), p. 1.
70
Cf. Ibid.
25
3. Country Overview
Red River is used for transportation, irrigation and power supply for the
surrounding areas. The centre consists of central mountains and less productive
and densely populated narrow coastal lowlands. Da Nang, the third largest city in
Vietnam, is located in this area. This part is often struggling with extensive flooding
and typhoons during the raining season. Finally, the South consists of the also
heavily populated Mekong River Delta. The largest commercial city of Vietnam, Ho
Chi Minh City (formerly known as Saigon) is situated in the Southern part. The
Mekong River's flood is more predictable and usually calmer than in the Central
parts of Vietnam.
One problem about geographical terminology in Vietnam is that many changes in
place names have occurred. However, the old and new names are often still used
interchangeably, e.g. Southern Vietnamese still refer to Ho Chi Minh City as
Saigon, thereby sometimes indicating political preference.
Given Vietnam's long north-south stretch-out and differences in topography, the
country has various climatic conditions. In general, the weather is affected by
seasonal monsoons between October to March a relatively dry and cold winter
monsoon and between April to October a wet and warm summer monsoon. The
latter accounts for approximately 90 percent of the country's total rainfall.
71
Vietnam has an average humidity of 84 percent.
72
The country's climatic regions
are separated by the Hai Van Mountain pass. While average temperatures in the
Northern part are between 22 and 24 degrees Celsius
73
on average (in the
northern highlands they can even fall below 10 degrees Celsius in winter time),
temperatures in Southern Vietnam are steadier with an average of 25 to 29
degrees Celsius
74
.
71
Cf. McLeod/ Nguyen (2001), p. 6.
72
Cf. Federal Research Division Library of Congress (2007).
73
Cf. United Nations Environment Programme (2001).
74
Cf. Worldclimate (2007).
26
3. Country Overview
3.2
Promotion Environment
3.2.1
3.2.2
Overview
Promotion does not take place in a vacuum. There are various environmental
factors constantly affecting and shaping the circumstances in which marketing
communications occur. Accordingly, monitoring the promotion environment is vital
for consumer goods companies as well as promotion agencies, for instance, to
identify possible opportunities and threats. The technological infrastructure affects
the availability of certain media, such as billboard technologies, mobile phone
penetration etc. The government encourages the transfer of advanced technology
from abroad through tax reductions.
75
In recent years the telecommunication
performance, which is of peculiar importance to the promotion industry, has
improved substantially, in 2005 and 2006 growth rates exceeded 50%.
76
Concerning communication access, 191 telephone main lines (per 1,000 people)
compared to an average of 214 telephone main lines in the East Asia & Pacific
Region existed in 2005.
77
Political and administrational factors determine the
general context of promotion, e.g. what barriers foreign companies are facing or
which message contents are appropriate. Economic aspects not only verify
consumers' resources, they also provide insights into the economic infrastructure,
penetration of media etc. Obviously, the legal or regulatory dimension also heavily
impacts promotion, as it dictates what marketers must bear in mind when
designing and executing promotional campaigns. It answers questions such as
which promotional tools being permitted to employ. In the following, the political,
administrational, economic and legal environment of Vietnam will be examined.
Politics and Administration
For the last decades, Vietnam remained to be a one-party state with the
Communist Party being the leading force of state and society. Every five years the
National Congress takes place in order to review, discuss and approve the
country's strategies and direction. At least semi-annually, a smaller Central
Committee meets.
75
Cf. Pricewaterhouse Coopers (2006), p.5.
76
Cf. Ibid., p. 8.
77
Cf. World Bank (2007), p. 1.
27
3. Country Overview
The National Assembly is the highest representative legislative body in Vietnam.
Its responsibility is to promulgate and amend the Constitution and Laws, especially
in the areas of planning and budget.
78
Appointing the President for a five-year
term is another duty of the National Assembly. Currently Nguyen Minh Triet is the
head of state. He represents Vietnam in domestic and foreign affairs. While the
National Assembly is responsible for law-making, the Government is the executive
body. Its head is the Prime Minister, who is Nguyen Tang Dung at present.
Historically, People's Councils and People's Committees played an important role
in Vietnam's political system as a major communication channel between the
Communist Party and the people. The population of the locality elects the
members of the People's Councils, being "responsible for supervising the
implementation of laws, policies and tasks at the local level, and for taking
decisions on local socio-economic development programs and budgets"
79
.
Even though the government has recognized the importance of fighting corruption,
a report of Business Monitor still identifies it as a major threat.
80
Vietnam ranks
number 123 of 179 countries in the Corruption Perception Index 2007, published
by Transparency International.
81
As it will be discussed in chapter 7.6.2.2 this also
has implications for promotion especially when it comes to censorship issues.
At present, political issues do not pose a threat to Vietnam and the broad social
census supports maintaining stability. The country ranks number ten on the short-
term political risk rating of Business Monitor (with 86.7 ranking points compared to
70.2 points global market average).
82
Nevertheless, in the long term tensions
could increase as oppositional and pro-democratic forces are striving to put the
one-party-state to an end. Hence, Vietnam ranks 101
st
on the long-term political
risk rating of Business Monitor.
83
78
Cf. Ashwill/ Thai (2005), p. 17.
79
Cf. Pricewaterhouse Coopers (2006), p. 5.
80
Cf. Business Monitor International Ltd (2007), p. 6.
81
Cf. Transparency International (2007).
82
Cf. Business Monitor International Ltd (2007), p. 7.
83
Cf. Ibid.
28
3. Country Overview
3.2.3
3.2.3.1
Economy
Key Economic Ratios
The government's open attitude towards foreign consultation and learning from
best practices of neighbouring countries can be seen as strength also from an
economic point of view. For instance, the government follows China's approach to
prioritize the growth of the economy and studies Thailand's achievements in
becoming a main tourist destination.
84
Market-orientated reforms are under way to
ensure this in the future.
By constantly achieving real Gross Domestic Product (GDP)-growth of more than
7.5 percent since 2004
85
, Vietnam is currently one of the fastest-growing
economies in Asia (second to China only) and the world. The transformation to a
market-based economy in the early 1980s and abolishment of the US trade
embargo in 1994 were the triggers to commence the economy's growth (with the
exception of the Asian Economic Crisis
86
) as can be seen in the following figure:
Key Economic Ratios
-2
0
2
4
6
8
10
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
%
Gross Domestic Product (annual rate of growth) [1]
Unemployment rate (in urban areas) [2]
Consumer Price Index (vs. previous year) [3]
Figure 8: Key Economic Rations; Sources: Oxford Economic Database (2008), United
Nations Statistic Division (2007), General Statistics Office of Vietnam (2007)
87
84
Cf. Trinh, T. (2007), p. 5.
85
Cf. General Statistics Office of Vietnam (2007).
86
Please refer to chapter 3.1.1 for more details.
87
[1]: 1985 2007 Source: United Nations Statistics Division (2007); 2008 2011 Forecast
Source: Oxford Economics Database (2008) [2]: Source: General Statistics Office of Vietnam
29
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