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Essay: Retail Industry In Vietnam

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Retail Industry In Vietnam

The first section identifies the research topic and formulates research questions. Consequently, the chapter commences with the research background which includes the industry context and the concrete object, then point out the importance of customer satisfaction in service sector and the motives for researching in this area. The research questions and structure of the report will end the chapter.
1.1. Research background
1.1.1. Retail industry in Vietnam
In today’s global economy, the retail environment is as dynamic as it has ever been. According to Phillip Kotler, retailing includes ‘all the activities involved in selling goods or services to the final consumers for personal and non-business use’. It has a tremendous impact on the economy as the largest private sector in the world, the level of retail sales is an important indicator of the health of a country’s economy. Competition in this field is increasingly intensifying and shifting to new arenas as a commercial endeavor in global, and consumers are rapidly evolving their approach to purchase decisions.
Vietnam is among the world’s dynamic and potential retail markets. With a population of 90 million (The General Office for Population – Family Planning, 2013), Vietnam is ranked 14th in the world’s most densely populated country and the third in Southeast Asia, which implies huge demand and plentiful human resources. In the last five years, while the global economy did not recover from the crisis, Vietnam’s economic growth remained higher than 5%. With an aim to attract Foreign Direct Investment (FDI), Vietnam has simplified the regulatory procedure and draw consumer’s attention toward modern retail concepts. In May 15, 2008, AT Kearney’s Global Retail Development Index (GRDI) ranked Vietnam as the fourth most attractive retail market in the world based on potential growth owing to both increasing demand for consumer goods and rising disposable incomes, behind India, Russia and China. Unfortunately, its rankings have continued to fall due to the country’s high inflation rate and interest rate after that. Vietnam retailing ranked in sixth place in 2009 but dropped to 14th in 2010 and 23rd place in 2011. By the end of 2012, it was not listed in the top 30 most attractive retail countries in the world. Despite this, Vietnam retail value sales still shows double digit growth thank to rapid urbanization, relatively large young population and increasing middle income.
The retail operation in Vietnam is currently conducted through two main channels: traditional markets and modern supermarkets. The trend for shopping is shifting from traditional to modern method, but still in slow pace. So far, there are about 700 supermarkets in 60/63 provinces and cities (Association of Vietnam retailers, 2013). Although traditional markets business still account for over 80% of the market share distribution, shopping trends in Vietnam have been many changes. Consumers began to tend to choose the type of modern retailing in supermarkets, commercial centers, convenience store, etc. Increasing purchasing power, changing lifestyle, and influence of western culture are some of the key growth drivers in the country’s modern retail market.
Since Vietnam market began to open to foreign retailers beginning in early 2009, with the entry of companies such as Metro Cash & Carry and Lotte Mart, the landscape of modern retail in Vietnam has changed. Some foreign retailers are expanding their distribution networks to rural regions. Statistics from the Ministry of Industry and Trade (MoIT) shows by the end of 2012, foreign groups accounted for 40 percent of about 700 Supermarkets in Vietnam. Meanwhile, 31 out of 125 commercial centers in the country were foreign-invested. According to the MoIT, competing with foreign retail businesses will be a challenge for domestic companies. Leading international retail groups have poured large sums of money into their plans business expansion in Vietnam. More outlets and trade centers have been opened to compete with local retail businesses.
The situation will be more ‘fierce’ as the country is to be fully opens up to foreign retailers required by the World Trade Organization (WTO) obligations, which will come into effect from January 11, 2015. Under obligations of WTO, Vietnam will have to permit the establishment of wholly foreign-owned businesses, including retailers, and some of the world’s leading retailers have great expressed interest in the Vietnamese market. Fierce competition requires greater efforts from local enterprises to meet higher customer demand and secure a firm foothold in the market. According to Pham Quoc Manh, CEO of Phu Thai Group, which is among leading local retailers, the opening of retail market means that domestic retailers will have to be well-prepared to compete with their foreign rivals. Vietnamese retailers will face great difficulties if they do not cooperate with one another and find a good development strategy.’ The CEO also shared the intention to cooperate with a foreign partner to better position.
1.1.2. Retail industry in Cao Bang province and the establishment of Ngoc Xuan Supermarket
1.1.2.1. Retail industry in Cao Bang province
Cao Bang is a province of the Northeast region of Vietnam. It shares a common international border (322 kilometers) with the Guangxi province of the People’s Republic of China. The geographical setting of the province is mostly mountainous, with land available for habitation but in a limitation.
Cao Bang is among the poorest province in Vietnam with the economy centering on agriculture and forestry, although other industries exist. Public facilities such as schools and hospitals are still in poor condition, but gradually improved. Cao Bang city in the center of the province is thriving on infrastructure in order to promote the economy, improve the quality of life of the people and meet the renewal requirements from the state and local.

1.1.2.2. History of Cao Bang Import and Export Company
Cao Bang Import and Export Company was established in a very special period of time, marking an important milestone of Cao Bang Trade industry and Vietnam Trade industry in early stage of national building and defense.
In May 1951, the two governments of Vietnam and China signed trade agreements on currency regulations and export-import contracts. At the same time, Import and export companies in the border were launched under the management of the Ministry of Industry and Trade with the duty of importing and exporting goods. In 1953, Cao Lang (in short of Cao Bang and Lang Son province) Import and Export company was born, the forerunner of Cao Bang Import and Export Joint stock company today.
The company has three main business groups :
‘ Import – export sales and services: industrial and handicraft products, supplies, materials, equipments, machines, and consumer goods.
‘ Integrated supermarket: wholesale and retail with diverse types of high-quality goods, including food, confectionery, beverage, cosmetic, clothing, books, furniture, electric appliances,.v.v..
‘ Two-wheel motorcycle sales and repair: wholesale and retail with 07 stores in cities and towns. The company is the largest agent of Vietnam Honda, YAMAHA… in Cao Bang and the number of customer increases 15 % per year on average.
The company operates for the benefit of the community and its businesses. It always desires to serve consumers’ needs with various goods, reasonable price and high quality service. The consumers are provided detailed information about the origin and quality of the products. The company also continuously updates new information about trend of the market so that it can keep up with consumers’ change of preference.
1.1.2.3. Establishment of Ngoc Xuan supermarket
Before 2007, Cao Bang town (Cao Bang city now) has not had any commercial service center correspondent to its position as a economic, cultural and social center of the province. In its development plan, Cao Bang town strived to achieve the criteria of City type III in 2010, which required the town to speed up commerce and service meeting the demand of the development. For this reason, Cao Bang Import and Export Joint stock company pioneered the construction of a shopping center system in large scale and modern model with a variety of goods and high quality of service, contributing to the growth of the local economy and satisfying the increasing demand of dwellers.
The building of Ngoc Xuan supermarket was the commencement of the plan. It was launched in October 20, 2007 and played its role as the first supermarket of the province. The supermarket was recognized supermarket ranked number 2 as defined in Regulation of supermarket trade center, issued with the decision dated September 24, 2004 No. 1371/QD-BTM by Minister of Commerce Ministry. The supermarket is run in the model of integrated supermarket with more than 12 thousands of product lines, meeting the demand of customers of all ages and all classes. It also provides convenient services suitable to new trend so that retains customers.
So far, Cao Bang has 3 more small supermarkets located in the city but remains unqualifiedly ranked. However, threat of new entrants in this fiercely competitive market and difficulty of the economy require companies to reform continuously, otherwise it’s easy to be beaten by rivals and loses its market share.
1.2. Research motives
While traditional markets are still primarily channels in rural markets, buying habits have been moving towards more modern and convenient tendency in urban areas of Vietnam. Many housewives selected shopping for essential items such as food, clothing, electrical goods… at the supermarket, rather than in the traditional market as before. For the retailers, reduced prices, invested promotions and clear origin of goods are the advantages that have not been witnessed in traditional markets. Most supermarkets implement a procedure of monitoring and controlling quality of goods so as to ensure its quality, quantity and origin. They also coordinate closely with manufacturers or suppliers to implement promotions of discounts for customers. In traditional markets, some items can be cheaper but vary erratically, especially when the shortage of supply or the increase in demand occur, not even to mention the risk of buying goods with no origin or expired, and no technical instruction.
The presence of big brands in the retail sector is not simply changing the shopping habit for popular goods. Going along with it is changes in cognition and culture. For example, instead of paying cash as the traditional way of buying and selling, so many customers have chosen the payment of ATM (Automatic Teller Machine) card through POS (Point Of Sale) machines located at supermarkets, or by credit card with preferences from not only the retailers but also the banks. On the other hand, the culture of being served also becomes more common as the retail market draws attention from professional retailers. Consumers can complain even with supermarket managers when goods or services are uncomfortable or satisfied. Many supermarkets also sell through websites online with free home delivery when customers do not have time to go around the offline markets finding the location of the product they need.
The diversity of choices gives the customers opportunity to compare and select out the most beneficial one. This urges retailers to ensure and improve quality service so that satisfy the customers. When customers have good perceptions about a brand, they will always choose to go for the brand, because consumers form their preferences relative to perceptions and attitudes about the brands competing in their minds. Because customer satisfaction is the main concern of business sectors of today, the researchers are always conducting research about the customers especially on what relates to their satisfaction. Moreover, because this problem of satisfaction concerns the most unpredictable stakeholder in the business environment (the customers), who remains the main character that keeps the business in operation; and because satisfaction varies and changes among individuals, there is a need for continuous research in this area.

Although there are other factors such as price, product quality etc other than service quality that determine customer satisfaction (Wilson et al. 2008, p. 78-79), the author’s interest in service quality alone for this study is because service quality has been proven to be the best determinant of customer satisfaction when it come to service sectors. Also, providing quality services is one of the main targets when it comes to management with respect of customer satisfaction in the business environment of today, meaning it is a very vital topic.
Ngoc Xuan supermarket has really existed in more than six years, however, the concept of customer satisfaction and service quality are quite new to supermarket managers. It is very difficult to measure customer satisfaction and the level that service quality satisfies customer. Moreover, the application of SERVQUAL model to indentify customer satisfaction in Vietnam is quite new. That’s the reason why the author chooses the matter to study. Hopefully, this study can be regarded as practical guideline for the supermarket management. The outcome of this study will develop the supermarket’s service quality to meet customer satisfaction.
1.3. Research objectives
This research is to identify and measure factors affecting service quality and customer satisfaction at Ngoc Xuan supermarket, and determine the relationship between them. The dimensions of service quality are focused from the consumer’s perspectives through assessing their expectations and perceptions of service quality. These purposes can be expressed by as below:
‘ To understand the applicability of SERQUAL model in supermarket context.
‘ To identify the relationship between service quality and customer satisfaction in the supermarket sectors in term of service quality dimensions.
‘ To measure customers’ perception and expectation from their perspective towards Ngoc Xuan supermarket’s service
‘ To identify dimensions that affect customer satisfaction
‘ To find out the most effective ways of narrowing service quality gaps and choose which gap to focus on to improve Ngoc Xuan supermarket’s service to meet customer expectation.
Consequently, the proposed research questions for the study are as follows:
‘ How is the applicability of SERVQUAL model in supermarket context?
‘ What is the link between customer satisfaction and service quality in term of service quality dimensions?
‘ What is the discrepancy between customer’s expectation and perception toward service quality at Ngoc Xuan supermarket?
‘ How do customers perceive service quality?
‘ Which factors affect customer satisfaction?
‘ What is the effective way to improve service quality to meet customers’ expectations?
1.4. Research procedure
The thesis consists 5 chapters and each chapter is summarized as below:
Chapter 1 is to introduce the topic to the reader. The overview of the industry and the significance of service quality, customer satisfactions are presented and discussed in this chapter. Through this chapter, readers also know about the need, the purpose of the study.
The aim of chapter 2 is to present all concepts and existing theoretical framework on customer satisfaction, service quality, service quality dimensions and the relationship between customer and service quality. Besides, a presentation of the service quality models also will be made in this chapter.
The next is chapter 3 ‘ methodology. The purpose of this chapter is to show how the study is conducted. The research design, the research approach and research strategy will be explained in this chapter.
Chapter 4 will show the empirical results and how the data is analyzed. Based on the SERVQUAL model, the description of variables, dimensions will be displayed. This chapter will answer all the research questions in chapter 1.
The final chapter is chapter 5. This chapter gives a summary of the findings and makes recommendations to improve service quality. The limitations and suggestions for further research are also stated in this chapter.

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