Entrepreneurship and New Product Launch in Emerging Market - Vietnam

Problem

Starting a small business in an emerging market new to free market enterprise and introduce products from the world's leading greeting card brand to compliment and capitalize on local traditions of card giving.

Solution

Engaged leading US greeting card company’s Asia-Pacific representative with business plan to introduce product in Hanoi’s anchored on factors including growing affluence, young population, high literacy rates, awareness of quality, and demand for superior US products. With two additional partners, a Business Cooperation Contract (BCC) was created via a Hanoi-based US law firm, permitting the establishment of a private, self-funded, retail and distribution entity. Using a diminishing partnership model, the local partner would be majority partner at end of term.

For ease of logistics, once samples were selected appropriate to the market (e.g. non-religious, suitable humor, non-political), negotiated per / unit price and entered into agreement to purchase product from company's supplier in the Philippines. A simple product was chosen given low cost of storage, non-perishable quality of products, and ease of distribution that reached outside two shops to hotels, bookstores, and grocery stores. Product differentiation from locally printed products included globally recognized brand name, individually wrapped in plastic to protect from humid climate and customer handling, increased retail price versus local product was not a barrier to entry due to superior product and "prestige" customers' felt with their ability to afford a foreign brand greeting card. Sometimes the best business is based on product simplicity.

While an anchor shop location was being selected, the company began with distribution throughout the capital with, at the time had a population of approximately 5 million people. This entailed negotiations with managers and owners of book stores, hotels, and grocery stores allowing for racking and signage to be placed on their property. Marketing focused on the target customer base, local consumers and less so, expatriates as they were not permanent. Brand building among the local base was more viable to the business as they would benefit from higher salaries as the country moved towards a more liberal market system and they enjoyed the offerings of globally recognized products not previously available in country. Once a location for the anchor shop was selected - a space by major universities on a heavily trafficked avenue leading into and out of Hanoi - negotiations with the landlord for a long-term lease was completed as well local contractors to turn a simple space into a warm atmosphere reflecting the product line. In parallel, recruitment and training of sales staff in customer service and the retail business was completed. Employees were incentivized with a salary plus bonus package that was still a new model in Vietnam.

Result

The business saw a full return of capital plus dividends within two years and continued dividends thereafter until sold by local partner. The US company benefitted from added brand recognition in a new market and local consumers enjoyed greater availability of a higher quality product that aligned with their custom of giving greeting cards.

To see the resume of the expert associated with this case study, see the link below.