International Marketing Channels Orana Case

5650 words - 23 pages

. ORANA uses both its own sales staff and independent distributors to increase retail sales in Vietnam. Discuss the advantages and disadvantages of this strategy.

ORANA realized the huge opportunity in covering new market areas due to the increasing demand in Vietnam as an emerging market, many indications showed that annual sales has a potential growth rate of around 20%, due to the increasing purchasing power, the middle class is growing, and people are willing to try new products. Therefore ORANA wanted to take the opportunity of being a fast mover and expanded its distribution from Ho Chi Minh City (Saigon), to the central and northern parts of Vietnam, by starting direct sales through independent distributors instead of relying only on own sales staff.

Advantages:
- Increase market coverage: By penetrating new geographical areas, ORANA makes it easy for customers to find the product, to achieve spatial convenience and easy availability which is important for retailer sales, these convenient goods are for everyday use, and buyers will take what is on offer rather than search for favorite brand.
- Reduce liability of foreignness: National distributers are likely to have advantages over ORANA’s own sales staff, because they have important information and critical knowledge about their country’s:
* Culture: A minimum of 9 different ethnic groups, with the majority of 86% Vietnamese, concentrated in center and northern parts (Map 3.1), a local expertise is required to handle the differentiation of products required and/or service output.
* Language: Vietnam has many different spoken languages, not everybody speaks English, especially not in the rural areas, which will create language gaps that only a local can handle, and this can be very useful when a conversation with authorities is needed.
* Geography, land scape: The southern part of Vietnam is a low flat delta, but in the north and central highlands is hilly and mountainous specially in the far north and northwest, where physical infrastructure and public service are relatively undeveloped which makes it difficult for transporting goods for the non-expert.
* Population Distribution: The northern and specialy central parts of Vietnam are mainly rural areas with a very low population density in some parts. (Map 3.2)
* Poverty: The majority of the poor are farmers who live in rural, isolated, mountainous or disaster prone areas, the households often have many children, the poor are disproportionately likely to be from an ethnic minority, In the rural areas, households with average income of US $150 (Wikipedia) are regarded as poor households. Poverty line percentage for Vietnam’s households was estimated 12 percent at the end of 2011. (Wikipedia).
For ORANA to collect this information will cost time and money, besides in some countries locals may not cooperate with foreigners just because of lack of understanding, or cultural reasons.
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