Topic analysis of vinamilks competitive position and international business strategy in the italian market

Group 4 IB1401 IBS301m
International Finance (IBF301)

Group4.IB1401.IBS301m.GroupProject

INTERNATIONAL BUSINESS STRATEGY

TOPIC: Analysis of Vinamilk's competitive position and international business strategy
in the Italian market.
Subject code

IBS301m

Group members and ID

Nguyen Minh Nhat – CS140222
Nguyen Thanh Hue – CS140488
Nguyen Huu Doan Nhung - CS140461
Ho Ngoc Tran – CS140255
Le Nhat Thien Thy – CS140513

Can Tho, 06/11/2021
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TABLE OF CONTENT
LIST OF ACRONYMS
LIST OF FIGURES
LIST OF TABLES
ABSTRACT
CHAPTER 1: OVERVIEW OF VIETNAM DAIRY JOINT STOCK COMPANY
(VINAMILK)
1.1. General information of VNM
1.2. History of Vinamilk Company
1.3. Main areas of business activities
1.4. Vinamilk current internationalization strategy and scope
CHAPTER 2: TOOL APPLICATION
2.1. Analysis of dynamic strategy
2.2. Analysis of international business strategy of VNM
2.2.1. Patterns of Internationalization
2.2.2. Analysis of international business strategy of Vietnam Dairy Products Joint Stock
Company (Vinamilk) in the Italian market
2.2.2.1. SWOT Analysis
2.2.2.2. PESTL Analysis
2.2.2.3. Porter's Five Forces Analysis
2.2.3. Strategic objectives when Vinamilk enters the Italian market
2.2.3.1. Market penetration method
2.2.3.2. Content of strategy implementation
2.2.3.3. Business partner information
2.2.3.4. Product development
2.3. Analysis of stakeholder strategy
2.4. Analysis of diversification strategy
CHAPTER 3: SYNTHESIS OF FINDINGS
CHAPTER 4: CONCLUSION
CHAPTER 5: ADDENDDUM OF EXHIBITS AND CITATIONS

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LIST OF ACRONYMS
VNM: Vinamilk
ASEAN: The Association of Southeast Asian Nations
CLC: Competitive Life Cycle
BC: British Columbia
UHT: Ultra- High Temperature
WTO: World Trade Organization
VAT: Value Added Tax
EU: European Community
GDP: Gross Domestic Product
HS: Harmonized System
IA: Industry Attractiveness
BUCA: Business Unit Competitive Advantage
NGO: Non-governmental organization
COO: Country of origin

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LIST OF FIGURES
Figure1: CLC S-curve
Figure 2: Competitive Life Cycle Chart
Figure 3: CLC 3 phases table
Figure 4: Patterns of Internationalization
Figure 5: EU dairy tariff
Figure 6: Ansoff Matrix
Figure 7: McKinsey Diversification Matrices

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LIST OF TABLES
Table 1. SWOT Analysis of Vinamilk Company
Table 2. Nutritional information per 100ml
Table 3. List of some major suppliers of Vinamilk

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ABSTRACT
The report "International business strategy of Vietnam Dairy Products Joint Stock
Company (Vinamilk)" in which the market scope is Italy. With the goal of systematizing
the theoretical basis of international business and business strategy in the international
market of enterprises, analyzing the competitive position and international business
strategy of Vinamilk in Italy, from which assessment of achievements and limitations in
the implementation of the enterprise's strategy, in addition to proposing solutions to
perfect the development strategy for Vinamilk in the Italian market in the future.

CHAPTER 1: OVERVIEW OF VIETNAM DAIRY JOINT STOCK
COMPANY (VINAMILK)
1. GENERAL INFORMATION OF VINAMILK
Vietnam Dairy Products Joint Stock Company (VNM) (stock code VNM listed on HOSE),
formerly known as Southern Coffee and Milk Company, was established in 1976. The
company mainly operates in the field of processing, manufacturing, trading, importing
and exporting dairy products and other nutritional products. Vinamilk, officially operated
under the model of a joint stock company since 2003, is the largest dairy company in
Vietnam with a market share of more than 50% in the dairy industry in Vietnam. The
company has developed a nationwide distribution system with 202 distributors covering
nearly 251,000 retail points. Currently, there are over 3,250 supermarkets and
convenience stores nationwide selling VNM products. VNM's products are directly
exported to 35 countries around the world.
2. HISTORY OF VINAMILK COMPANY
• Vinamilk was established on August 20, 1976 on the basis of three dairy factories

from the old regime:
➢ Thong Nhat Dairy Factory (formerly known as Foremost factory)
➢ Truong Tho Dairy Factory (formerly known as Cosuvina factory)
➢ Dielac Powdered Milk Factory (formerly known as Nestl攃Ā factory (Swiss)
• In the 2000s, Vinamilk applied new technology, installed advanced equipment and
modern machines to all of its factories. Besides, Vinamilk also established Public
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Health Nutrition Consultant Centers in the country and launched over 30 new
products.
• In 2012, Vinamilk inaugurated Danang Dairy Factory, Lamson Dairy Factory,
Vietnam Beverages Factory with modern production lines originating from the US,
Denmark, Germany, Italy and the Netherlands.
• Around 2015, Vinamilk officially launched its brand in Myanmar, Thailand, and
expanded operations in ASEAN.
• In 2017, Vinamilk launched the first 100% A2 Fresh milk product in Vietnam.
With the investment of importing nearly 200 "cows" of pure A2 milk from New
Zealand.
3. MAIN AREAS OF BUSINESS ACTIVITIES
• Producing and trading in canned milk, milk set, nutritional powder, cake, fresh
milk, soy milk, beverage and other dairy products.
• Trading in food technology, equipment and spare parts, supplies, chemicals and
raw materials.

• House business, real estate leasing brokerage, warehouse and yard business, freight
transport business by car, loading and unloading goods.
• Production and sale of alcohol, beer, beverages, processed foods, tea, coffee
roasted - ground - filter – instant.
4. VINAMILK CURRENT INTERNATIONALIZATION STRATEGY AND
SCOPE
Vinamilk also actively invests in business activities, international marketing, research and
development, expanding the scope of production investment and operating branches
abroad. Vinamilk has invested 22.8% stake in Miraka factory (New Zealand), invested 70%
stake in Driftwood factory (USA), held 51% stake in Angkor Milk factory in Cambodia,
opened a new factory in Vietnam. subsidiary in Poland as the gateway to trade Vinamilk's
commercial activities in Europe.
Vinamilk's products have been present in more than 42 countries around the world and are
continuing to seek and expand markets to Europe, Africa, and South America. On average,
Vinamilk exports nearly US $200 million annually to foreign countries.
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After equitization, Vinamilk has risen to the Top 100 most valuable companies in
Southeast Asia, Top 300 enterprises in Asia, Top 50 best listed companies in Vietnam and
set its development strategy to become one of the most valuable companies in the world.
50 largest dairy enterprises in the world with sales of 3 billion USD in the coming years.

CHAPTER 2: TOOL APPLICATION

2.1. ANALYSIS OF DYNAMIC STRATEGY

Figure 1. CLC S-curve

Figure 2. Competitive Life Cycle Chart
The CLC describes 3 phases which are mature, emergent, and growth. Each phase begins
and ends whenever annealing, shakeout, and disruption appear. In the dairy products
industry, new innovation changes such as in certificated products organic fresh milk, 100%
A2 fresh milk from pure A2 cows, ice cream introduction, processed cheese… Overall we
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call it the changes in the technology that allows new breakthroughs in every industry that
has ever existed. Since Vinamilk was first established in 1976, the company brand has
been through changes, new technologies which describe its cycle that include the 3 phases
and timing. To enter the Italian dairy market, the first step is to bring the Vinamilk milk
taste to Italian milk consumers. The brand needs to address the 3 factors in the CLC:
• Annealing: The emergent phase ends as customer adoption accelerates and the
product concept solidifies around a core set of design features. In many cases, what
emerges is a offerings. This process refers to as annealing a reduction in variance in product
offerings.
• Shakeout: Shakeout is about what happens to the number of competitors in the
industry. To make it easier to imagine, we see that when the technology was new, a

few entrepreneurs or businesses bravely experimented. As the market started to
grow and take off, many other players joined in when they saw the market
opportunity. It's common to see stiff competition, a lot of players, and chaos as
businesses pull out or merge and buy together. This disturbance can be quite severe
until there is only one (winner-only market) or a few competitors left.
• Disruption: The emergent phase begins with disruption the introduction of new
technology or product concept. This happens when the previous technology or
innovation changes no longer fit the trend, demand of consumers on the market.
Classic examples would be the introduction of horseless carriages (i.e.,
automobiles) into the vehicle market, the word processor into the typewriter
market, and big-box store concepts in the retail sector. More recent examples
include the advent of digital media players pioneered by Rio and others (and later
Apple with the iPod) in the market for personal transportable music.
In the Vinamilk case, the 3 transitory inflection points mentioned before are the marks for
the 3 phases that can be different in timing in each phase.

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Figure 3. CLC 3 phases table
Depending on the nature of each industry, the timing for the 3 phases oscillates. In dairy
products, the demand for new changes is not heavily addressed. For an enterprise like
Vinamilk, since the company first emerged in 1976 till the 2010s that it applied new
technology, installed advanced equipment and modern machines to all of its factories,

later on, released 100% Organic milk in 2016. Judging by the explosive breakthrough in
human technology revolving around manufacturing process, digital aspect, machinery…
The total cycle of 3 phases in the Vinamilk industry is around 6 to 10 years, depending on
the development pace of new technology. Now, that time period begins to be shortened in
2020 when new ideas and technologies are adopted:
• Advancements in Milking: The average dairy farm in BC uses a vacuum system to
milk its cows. Vacuums are contained within individual milk machines in a parlor.
This system allows for multiple cows to be milked at a time. Milk machines are
made of soft rubber or silicone, which ensures the comfort of cows during milking.
• Herd Health and Cow Comfort: Most dairy farms in BC utilize the advanced
technology to maintain herd health and milk production. Farmers can now manage
production and animal health with computers and cell phone apps. In addition,
every cow in BC is outfitted with a Radio Frequency Identification (RFID) tag to
keep track of its origin and current whereabouts.
• Supercooling’s technology: Transporting fresh products internationally is a
challenge for many global dairy companies. In 2019, major European dairy
cooperative Arla began testing a new natural, preservative-free technology to
enable this international movement of goods using a new technique. Arla9s
8supercooling9 tool enables fresh products to travel long distances by ship.
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• Flavor advancements: One example is US-based Synergy Flavors Inc9s taste
solution 8Dairy by Nature9, developed to address the needs of dairy and plantbased applications alike. The solution claims to provide the means to cleanly build

back the creaminess of full-fat dairy and mask undesirable off-notes in plant-based
alternatives.
*Italian milk market:
• Milk is equal to 10.3% of the total value of agricultural production in Italy.
• Italy is very deficient in milk. It lacks 20% of its needs, it must buy on the
European spot market.
• The European Commission adopted in July 2013 a decision declaring it
incompatible with the common market aid in the form of deferred payment granted
by Italy to its milk producers.
• They are indebted to the Italian State for the amount of milk levy that it had paid
on their behalf to the budget of the European Union.
*The environment in Italy that include Vinamilk potential threats are:
• Arborea: Latte Arborea, or Cooperativa 3A, is now the main hub of the dairy
industry of Sardinia.
• Brimi: Brimi Fresh milk comes exclusively from the mountain farms of South
Tyrol and is treated with care. Fresh milk is available as whole or skimmed milk
with 1.6% fat.
• Granarolo: Italian food group Granarolo, leading Italian milk with 7
manufacturing plants and 1,000 milk producers.
• Parmalat: Parmalat is an Italian company specialized in the field of dairy products,
owned by the French company Lactalis.
• Sano: Fattoria Latte Sano is located in the nature reserve of the Roman coast in
Italy.
• Sterilgarda: Sterilgarda, created in 1969, is a leader in UHT milk in Italy.
2.2. ANALYSIS OF INTERNATIONAL BUSINESS STRATEGY OF VINAMILK
2.2.1. Patterns of Internationalization
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Foreign Direct Investment

Figure 4. Patterns of Internationalization
Based on research and study in Internationalization, the milk industry is considered the
kind of product that is not suitable for long transport distances. In this case, the total
distance from Ho Chi Minh (Vietnam) port to Genoa (Italy) is 7994 nautical miles, and
with the standard speed average being around 17 knots, then the travel time will be 19.6
days. Without proper maintenance, products might lose their quality and worse when it
gets spoiled while in the transportation process. Since Vinamilk's goal is to expand its
product range to Italy, so foreign direct investment is also not suitable for the case
because it requires Vinamilk to engage in buying a local business or greenfield. Although
expanding the product range to a new market is a potential benefit for Vinamilk, it's not a
guaranteed success for Vietnam dairy leading companies. When Vinamilk fails to find
profit in Italy, the cost of acquiring a new business or planting its own factory will be
tremendously lost. With exporting and foreign direct investment is out of the picture, the
remaining option is licensing and alliances.
To dive deeper into licensing and alliances, the first thing to do is to understand them well.
L&A means when a firm authorizes a host-country firm to make and sell its products in
exchange for a royalty or other form of profit-sharing. The choice of L&A with an Italian
local partner also brings advantages to Vinamilk:
• High potential for local cost or production cost in Vinamilk favor.
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• Local business partners provide political influence (reputation) and knowledge of
the local tastes.
• Low transit costs/tariffs.
Overall, the choice of partner with Italy local business is an ideal test for Vinamilk to see
if it can make a profit from the market and if the case when Vinamilk failed, the money
lost and effort won9t be too much for it to handle.
2.2.2. Analysis of international business strategy of Vietnam Dairy Products Joint
Stock Company (Vinamilk) in the Italian market
2.2.2.1. SWOT ANALYSIS

OPPORTUNITIES
1.
The
Italian
government supports
and provides free
information related
to
market
opportunities, tax,
legal
framework,
operating costs, and

incentives available.

STRENGTHS
1. Strong brand, large
market share.
2. Advanced technologies in
farming
and
product
production.
3. Advanced production line,
the leadership has good
management capacity.
4.
Diversified
product
portfolio and competitive
prices.
5.
Experienced
in
internationalization (SouthEast Asia, New Zealand…).
6. High-quality products and
has been certificated.
7. Experienced product
research and marketing
team, experienced engineer
team in dairy products.
S/O Strategy
1. Take advantage of brand

reputation, legitimate, and
marketing
leadership
management to access the
Italian taste. (S1, S3, S6, O1,
O2)
2. Produce high quality
product perspectives of
Italian consumers. (S2, S6,

WEAKNESSES
1. Quality concerns impacting
Vinamilk brand.
2. Still dependent on raw
materials imported (70% of total
raw materials input), which
makes Vinamilk depends on the
milk supply-demand relationship
of the world.
3. The import of raw materials
from abroad causes Vinamilk
revenue to be significantly
affected by the domestic and
foreign economies.

W/O Strategy
1. Take preparations in raw
materials by importing more
cow-breeds and be more secure
in supply for the Italian market.

(W2, W3, O2)
2. Using marketing approach for
Italian consumers to have better
understanding
of
Vinamilk
product quality and open
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2. The high demand
for milk of Italian
people shows a huge
potential for market
growth
for
Vinamilk.
3. Tax incentives.
4. Potential
for
future profit and
greenfield projects.

O1)

potential chances (W1, O4)
3. Develop quality products
by advanced production
technology of international
quality to promote export of
dairy products (S3, S5, O4).
4. Diversify dairy products
to meet increasing consumer
demand. (S4, S7, O4)

THREATS
1.
Increasing
demand leads to
shortage and rise in
alternative products.
2. WTO accession:
increased
competition
and
potential rivals.
3. The large local
dairy
businesses'
pressure is heavy to
face against.
4. The dairy industry
is
a
sensitive

industry that directly
affects the health of
consumers.

S/T Strategy
W/T Strategy
1. Take advantage of strong 1. Actively source raw materials,
brand names and extensive develop dairy projects to gain
distribution networks to competitive advantages in price
capture milk market share and material sources (W1, W3,
(S1, S2, S7, S3, T2,).
T2, T3).
2. Create trust and reputation 2. Promote marketing activities
among consumers
with to increase brand positioning to
modern and advanced milk consumers (W2, T2, T3).
production technology (S2,
S6, T4).
3. Invest in research and
development to diversify
products
and
increase
business
competitiveness
(S4, S7, T2, T3).
4. Using quality and
certificated products
to
consumers' health to assure

healthy trust issues. (S2, S6,
T4)
Table 1. SWOT Analysis of Vinamilk Company

2.2.2.2. PESTL ANALYSIS
• Political
Italian politics takes place within the framework of a parliamentary government, a
democratic republic and a multi-party system: the Italian system is based on Roman law,
this means that the Italian government is divided into the House of Representatives, with
630 members and the Republican Senate with 315 members. Today, the chairman of the
board is Matteo Renzi, chairman of the 2014 Council of Ministers under the Democratic
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Party. The government imposes a personal tax rate of up to 43%, Italy imposes a low tax on agricultural products such as wheat, dairy products, meats, and textiles.
➢ VAT: For different categories of goods: 2% (wood, natural cork), 4% (frogs, fish,
crustacean and shellfish, fresh milk for food consumption, packaged for retail and
milk products, plants and parts of plants, vegetables, and edible plants, fruit, spices,
cereals, algae, oil of olive, cider, wine vinegar, raw tobacco, and raw flax).
➢ Tariff: Italy is a member of the EU Custom Union. As a member of the European
Union, goods can circulate freely between member states. While the principle of
free movement of goods applies within member states of the Customs Union, the
Common Custom Tariff applies to the import of goods from third countries,
enabling the application of uniform customs duties, whichever member state is the

country of destination. Based on the attributes of Vinamilk product it can be listed
in these categories:
Code
0401
04012011
04012099
04015039
0402
04021019
04022118
04022919

Product
Milk & cream, not concentrated
or sweetened
Fat content 1-3%, in immediate
packings of <=2 litres
Fat content 3-6%, in immediate
packings of >2 litres
Fat content 21-45%, in immediate
packings of >2 litres
Milk&cream, concentrated or
sweetened
In solid forms, unsweetened, fat
content <=1.5%, in immediate
packings >2.5kg
In solid forms, unsweetened, fat
content 1.5%-27%, in immediate
packings >2.5kg
In solid forms, sweetened, fat

content 1.5%-27%, in immediate
packings >2.5kg

EU tariff

UK tariff rate

€18.8/100kg

15GBP/100kg

€21.8/100kg

18GBP/100kg

€109.1/100kg

91GBP/100kg

€118.8/100kg

99GBP/100kg

€130.4/100kg

109GBP/100kg

€1.31/kg of lactic 1.1
material
+ GBP/kg/lactic

matter
+
€16.8/100kg
14GBP/100kg
Figure 5. EU dairy tariff

(Source: AHDB analysis based on HMRC trade figures obtained via IHS Maritime & Trade Global Trade
Atlas®, EU Commission)
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• Economical
Vietnam9s development over the past 30 years has been remarkable. Between 2002 and
2018, GDP per capita increased by 2.7 times, reaching over US$2,700 in 2019, and more
than 45 million people were lifted out of poverty. Poverty rates declined sharply from
over 70 percent to below 6 percent (US$3.2/day PPP). The vast majority of Vietnam9s
remaining poor – 86 percent –are ethnic minorities. Given its deep integration with the
global economy, the Vietnamese economy has been hit by the ongoing COVID-19
pandemic but has shown remarkable resilience. GDP grew by 2.9% in 2020. It was one
of the few countries in the world to do so, but the crisis also left a lasting impact on
households, with 45% of households reporting lower household income in January 2021
than in January 2020. Vietnam9s economy is set to grow 6.6 percent in 2021 on the back
of successful control of COVID-19 infections, strong performance by export-oriented
manufacturing, and robust recovery in domestic demand.

Italy is the world9s ninth largest economy. Its economic structure relies mainly on
services and manufacturing. The services sector accounts for almost three-quarters of total
GDP and employs around 65% of the country9s total employed people. Italy suffers from
political instability, economic stagnation, and a lack of structural reforms. Prior to the
2008 financial crisis, the country was already idling in low gear. In fact, Italy grew an
average of 1.2% between 2001 and 2007. The global crisis had a deteriorating effect on
the already fragile Italian economy. After a period of hardship, analysts believe that Italy's
activity should keep a healthy pace of growth in 2022, reaching pre-pandemic levels
within the year, following a likely rebound in 2021. As private consumption recovers,
fixed investment should catch up to meet renewed demand, while EU funds will further
support the economy.
• Social
The Coronavirus (COVID-19) pandemic has increased the habit of consuming breakfast
at home, which has boosted milk sales in 2020. As people shift to working smart and
learning remotely, time and the appetite for milk at home increase.
Health concerns and expanded availability support goat milk sales growth.
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Goat milk, long forgotten and always overshadowed by cow's milk, in part because of its
rich flavor, has recently returned to the top. Over the past decade, goat milk production
and retail sales, as well as present value, have been growing steadily and healthily.
• Technological
The development of processing technology into preservation in the world.

Technological advances can be transferred more easily between countries.
Technology in Vietnam's dairy industry is still limited, so it depends on imported
technology at a very high cost.
• Legal
On April 19th, 2017, Italy announced an entry into force of mandatory labeling. It
concerns:
➢ All types of milk: cow, buffalo, sheep, goat, donkey, and other animal origins.
➢ Pre-packed dairy products for human consumption: milk and cream; yogurt;
buttermilk; whey; butter and other fat derived from milk; cheeses, dairy products,
and curds; long-life sterilized milk, long-life UHT milk.
➢ Indication of ingredients origin is compulsory only for domestic producers. In the
Vinamilk and Auricchio alliance case, it9s only mandatory for the combined
product to show origin of the cheese ingredient.
*Importing goods into Italy requires the following documents:
➢ Commercial Invoice: 3 copies are required. There is no specified invoice template.
Must include the contents standing behind: loading date, name and address of
buyer and seller, full and accurate description of the goods, country of origin,
symbols, numbers, type of goods, name of vessel, port of loading and unloading,
HS classification of goods...
➢ Certificate of Origin: issued by the local Trade Commission.
➢ Bill of lading must include the following contents:
❖ Description of goods
❖ Owner's name
❖ Vessels
❖ Country of origin
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❖ Port of loading and unloading
❖ All details of goods markings
❖ Name of person to be notified when goods arrive at the port
Depending on the terms of delivery, the importer may require a set of bills of lading by
sea to carry out customs clearance procedures when the goods arrive at the port of
discharge.
➢ Insurance policy: Requires 2 copies (1 original and 1 copy)
➢ Packing slip: Not required for full containers, but for those retail containers, when
doing customs clearance procedures, a packing slip must be attached.
➢ Special Certificate:
❖ The certificate must be written in the language of the importing country, a
paper fax certification is not accepted.
❖ Live plants and seeds require a quarantine certificate issued by the country of
origin.
❖ Live animals, fish, shellfish or chilled meat, lard, raw or dried hides, wool, and
hair must have a medical certificate issued by the Competent Authority in the
COO.
❖ When imported into Italy, animals of the cattle breed must be accompanied by
a medical certificate certifying that these animals are free of diseases (hoof and
mouth diseases, or infectious diseases of cattle)
Import license:
Import permits are issued with a limited list of categories published by the Italian
Ministry of Foreign Trade. License validity depends on many different factors. Items may
be accepted if special conditions are met.
2.2.2.3. PORTER’S FIVE FORCES ANALYSIS
• Rivalry among existing competitors

With the characteristic of the dairy industry, it is influenced by many large multinational
enterprises and companies in the world and fierce competition. Technological barriers,
investment capital, and initial investment costs of the dairy industry are very high, so
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when a company wants to withdraw from the dairy market, it will face difficulties in
recovering investment capital such as machines, machinery and equipment.
➢ Parmalat S.p.A: Parmalat S.p.A. has been controlled by the Lactalis Group since
July 15, 2011. The Parmalat Group is a global player in the production and
distribution of foods that are essential for everyday wellness: milk, dairy products
(yogurt, cream based sauces, desserts and cheese) and fruit beverages, which
generated revenues of more than 6.6 billion euros in 2017. More than 26,000
people work at Parmalat's facilities in Europe, the Americas, Africa and Australia.
➢ Granarolo S.p.A: Granarolo S.p.A. is a food company in Italy, founded in 1957
and based in Bologna. It operates in the fresh milk and dairy-cheese sector (milk,
yoghurt, desserts, fresh cream and long-life cream, fresh and aged cheeses, and
milk-based baby food), dry pasta, deli meats and vegetable foods. Granarolo's
shareholders are located right across Italy as are the Group's 12 plants in the
country, distributed in such a way that the average distance between the stables and
the plants is about an hour.
➢ Sterilgarda Alimenti SpA: Sterilgarda was born in 1969. It is a producer of dairy
products (milk, microfiltered milk, cream, mascarpone, whipping cream, desserts,
yogurt) and juice and squeezed fruits. In the early 1990s, the company developed

the new desert in parts, based on a blend of panna cotta and UHT-derived fruit
blends, replacing much of consumer demand for products. yogurt products.
Potential competitors of the joint venture company in Italy also include companies
specializing in the production of substitute products such as cereal flour, functional foods,
dairy products, etc. in Vietnam, Italy, or the industrial sector multinational company
globally. Once potential competitors enter the dairy market, they will also be very
potential and strong enough competitors in the future.
• Threat of new entrants
Due to the development plan of Vietnam's dairy industry, the state has policies to
welcome small businesses and create conditions for them to develop such as investment
conditions, application of new technologies with high quality. As a result, long-standing
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businesses will be under a lot of pressure in the domestic market. These favorable
conditions will also be a launching pad for new businesses in the international market.
About the international competitors: Besides Vinamilk, others also favor entry into the
Italian market when the quotas are lifted. When lowering barriers, competition will be
more intense, importing countries will be free to choose where there is a more
competitive dairy industry to import goods. At that time, the situation will certainly be
more favorable for countries with full competitiveness to capture more market shares that
were previously owned by other countries. Countries that have production and export
potential with advanced technology, are proactive in raw materials and accessories, have
supporting industries for development, and are fully concerned by the government, will

take advantage of this opportunity to develop.
• Threat of substitute products
The pressure on new products in this industry is not much, due to the characteristics of
milk as an essential nutritional supplement. However, there will be competition among
products in the industry for market share, such as soy milk or cereal beverage products,
cocoa, etc. which may reduce the market share of dairy products.
• Bargaining power of suppliers
The resources of material for agriculture business are from products of farm produce.
Respectively, products in the dairy industry are the output of cow milk. Vietnam main
aspect lies in agricultural activities, but Vietnam still imports more than 70% raw powder
milk and about 84% unprocessed fresh milk from developed countries such as New
Zealand, the USA, Australia, Netherlands, Poland, Denmark, France…so the milk
industry is facing the risk of price fluctuation and exchange rate changes. Vietnam
continued to increase the number of cow milk so it is forecasted that milk production in
2017 will climb 25.7% compared to 2012. And the government imposes a slow tariff for
milk import so it can reduce the burden for the dairy enterprises. Although the entry for
milk import has been broadened, it would also emphasize the dependency of domestic
companies in Vietnam on foreign suppliers. Among those domestic dairy companies,
Vinamilk is the company that ensures that all raw fresh milk is supplied from domestic
and the company is trying to expand the area raising cow cattle through importing quality
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cow breed but VNM 100% of raw powder milk still relies on imports. Therefore, the risk

for the power of suppliers is considerable.
Another material for Vinamilk's new product is cheese, from the Italian business partner
Auricchio. The number one cheese producer in Italy has an impact as a supplier for VNM.
Through an alliance relationship with Auricchio, Vinamilk can assure the Italy supplier
power won't have a negative effect on them.
• Bargaining power of buyers
According to statistics, the overall milk production of 11.5 million tons by 91.1% cattle,
6.6% sheep, 1.2% buffalo, and 1.1% goat, which means that the bargaining power of
buyers for cow milk is low since the switching cost for similar products is high. Italy's
milk market consists of various brand names: Arborea, Brimi Fresh milk, Granarolo,
Parmalat, Fattoria Latte Sano, and Sterilgarda. The buyers' power lies in the choices they
have in milk brands in the Italian market. Vinamilk products need to be different in
comparison to other competitors so that VNM can have a foothold to compete with others.
2.2.3. Strategic objectives when Vinamilk enters the Italian market
Milk is a fairly popular commodity in Vietnam, from young to old everyone has a need to
use dairy products. There are many businesses that choose milk as a product for them to
produce and trade. That means that foreign businesses also export imported dairy
products to Vietnam. Therefore, the dairy market in Vietnam is extremely diverse in
terms of quality, design, and price. Vinamilk's competitiveness with domestic and foreign
dairy companies is quite fierce. Therefore, Vinamilk decided to participate in
international business activities with the following objectives:
Increase international sales: Vinamilk expands the export of its products to foreign
countries to expand its scope micro-market and diversify business activities in new
markets where customers from other cultures will also have a better receptiveness to
products to increase sales.
Creating prestige and image in the international market: This is something all businesses
and companies aspire to because it is an important factor determining sustainable
development corporate sustainability. And of course, when creating prestige and image in
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the international market, Vinamilk has a solid springboard to go further in developing its
career.
Dispersing business risks: When Vinamilk has many markets and many business
activities, when 1 market, 1 field, or 1 product is weakened, it will not have a serious
impact on the development of the company.
Effectively exploiting comparative benefits to achieve maximum economic efficiency for
Vinamilk as well as for Vietnam and the world dairy industry in general.
Develop abundant material areas, improve production quality, control input to the output
supply chain.
2.2.3.1. Market penetration method
Vinamilk has chosen the form of collaboration to penetrate the Italian market through
alliance strategy. The operation will import dairy products from Vinamilk, which will be
marketed and distributed in the Italian market through Auricchio Company - the largest
producer of provolone cheese in Italy.
2.2.3.2. Content of strategy implementation
The main content is to release the new milk product line that combines the unique taste of
Vinamilk UHT milk and the classic cheese taste. The result is a new yet familiar drink
that can surprise and attract Italian attention is what VNM aims for. In order to do that,
first Vinamilk must contact Auricchio and offer the collaboration chance. To show
goodwill, Vinamilk CEO will visit Auricchio's headquarters and meet the director of
Auricchio to conclude and sign the discussed terms of the alliance contract.
2.2.3.3. Business partner information
Auricchio is the world leader in the manufacture of Provolone, as well as the producer of

several other great kinds of cheese of the Italian tradition, including mozzarella and
Taleggio, Gorgonzola, mild and aged Pecorino, Parmigiano Reggiano, and Pecorino
Romano. Exported to more than 60 countries including Europe, North America, Latam,
Australia, UAE, China, and Japan.
2.2.3.4. Product development
*PRODUCTION: To produce fresh milk and cheese Auricchio Vinamilk products will
include 3 processes:
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• Importing Auricchio cheese to Vietnam.
Taking advantage of Auricchio Italy's long-standing cheese recipe, Vietnam will directly
import cheese from Auricchio's joint venture company in Italy, with the quantity of 1 Full
Container Load.
• Milk processing at VNM factory
The cheese will be transported to the milk factory in Binh Duong - one of 13 Vinamilk's
dairy factories. The highlight of Vinamilk's factories is not only in terms of capacity and
output but also in the way this enterprise applies 4.0 technology, meeting many standards
such as ISO 9001, FSSC 22000, ISO 17025. The machine also has special certifications
such as Halal, European Organic, FDA (USA), Chinese standards for international
business expansion. Here, Auricchio cheese will be calculated with the appropriate
content to mix with Vinamilk's pasteurized fresh milk. Auricchio Vinamilk cheese fresh
milk will be packed and put in a paper milk box in the form of 1 liter.
• Export to Italy market

Auricchio Vinamilk cheese fresh milk products will be exported to the Italian market in
quantity.
*PRODUCT
• Product describes
Auricchio Vinamilk cheese fresh milk product is a combination of high nutritional value,
full of protein, fat, sugar, vitamins, and minerals to help the body grow, stay healthy and
prevent disease.
80%
Vinamilk fresh milk
15%
Auricchio
71.6 kcal
Energy
3,6g
Fat
3,0g
Protein
6,8g
Carbohydrate
110mg
Calcium
90mg
Phosphorus
7,6mcg
Selenium
250IU
Vitamin A
165IU
Vitamin D3
Table 2. Nutritional information per 100ml (contents below are indicative only)

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• Packaging
Auricchio Vinamilk cheese fresh milk will be packed in paper boxes.
The box design consists of an outer layer of paperboard and plastic, followed by a
polyethylene layer and an ultra-thin aluminum foil inner layer that resists the effects of air
and light. Helps preserve the vitamin components in milk.
➢ Capacity: 1 liter
➢ Specification: carton of 12 boxes x 1 liter (actual volume: 12 liters)
• Price
According to the survey, the average price of fresh milk in Italy ranges from 1.50 to 2.50
euros per liter, and Vinamilk's products cost about 1.15 euros per 1 liter. In conclusion, it
has a competitive price advantage when it comes to the Italian market in the first period of
time.
• Distribution
*Italy supermarket
To move closer to the goal of developing the brand of fresh milk and cheese, Auricchio
Vinamilk will be distributed in almost all leading retail supermarket channels in Italy:
➢ Conad: Conad is the leading food retailer in Italy in 2020, with a 14.8 percent of
market share. closely followed by the cooperative Coop Italia, which had a share
of approximately 13 percent.
➢ Carrefour: Carrefour Italia, with a turnover of 4.66 billion euro (2020), operates
throughout Italy with over 1,450 stores divided into Carrefour Hypermarkets,

Carrefour Market, Carrefour Express, and Cash and Carry (Docks Market and
GrossIper).
➢ Esselunga: Esselunga is Italy's largest supermarket chain, with more than three
hundred shopping centers located across the country. It has a reputation as one of
the cheapest supermarkets in Italy, and its online shopping site allows you to buy
everything from food and household items to clothes and furniture - all without
leaving your sofa. Esselunga has pioneered online shopping in Italy with its wide
range of products from fresh food to homemade organic goods.
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➢ Lidl: Lidl Italia S.R.L. operates supermarkets. The Company supplies frozen food,
fresh fruits, beverages, baked, meat, general groceries, clothes, and other useful
products in low and popular price ranges. Lidl Italia serves customers in Italy.
*Website
Products will be officially posted on the company's own website channel at:
/>* Auricchio Stores
VNM products will also be present in Auricchio stores across Italy and the sale will be
under partnership management.
2.3. ANALYSIS OF STAKEHOLDER STRATEGY
Stakeholders related to Vinamilk's alliance with the Italian enterprise Auricchio, include:
• For Italian customers
According to Italian culture, people often need to be polite, polite, and have polite
gestures. This shows the behavioral capacity of each person or simply a good expression

of personal style. What others think is very important and your actions should reflect
appropriately. Besides, in Italy, it is believed that in addition to loyalty to family, friends,
and neighbors, correct behavior will contribute to the beauty and order of the world. This
belief is evident among Italians living in the southern region. Italians have great respect
for the rich and the elderly. There are not many high-ranking women in Italian companies
and government agencies. Women may be highly respected by Italian men, but not to the
extent that they can achieve the same recognition of competence or power as men. The
Italian communication style tends to use long words that are eloquent, expressive, and
easy to express emotions. The Roman Catholic Church still has a great influence on all
aspects of Italian life. Relationships between family, friends, and neighbors are especially
important for people living in the southern region of Italy. Respect and pride in yourself
are important points in Italian culture. Therefore, it is never advisable to offend the
personal pride of Italians as well as that of their families, the city in which they live, or
their friends. Italians are generally receptive to constructive criticism or new ideas and
concepts but don't be too blunt.
• For Communities in Italy
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