The purpose of this research was to find an optimal strategy for VinhHao Mineral Water Corporation to enter the market of Malta, which was considered to be very potential. The report first provided the overview of Malta and the overview of VinhHaocompany as well as the business environment analysis. After several analyses on the nation, it suggested 6 different strategies for VinhHao to enter the market. The most optimal strategy was chosen by the multi-criteria decision matrix with specific recommendation.
VinhHao Mineral Water Corporation had a long history since found in 1928 with a source of quality water to exploit. In 1995, VinhHao became a corporation that had very strong reputation among drinks industry and Vietnamese brand names. The company has exported its products to many countries. The brand ViHaWa, which was only for pure water, was a new one of VinhHao. It would offer high quality products produced by modern imported equipment.
There were several reasons for VinhHao to export to Malta. Although the GDP of Malta was rather small, the GDP per capita of $24,600 (2008 est.) was very considerable. The country had favorable geographic location so it has become an international trading hub for many countries. That was also the reason why Malta was very open to import and export activities that hundreds of export-oriented manufacturing firms were operated in Malta and lots of import agencies were highly skilled. As an EU member, Malta also had several EU policies to follow. However, in general, imports were mostly unrestricted, especially no restriction for mineral water sector. The relatively low tariffs and incentives for FDI investments were attractive to exporters from many countries. Regarding fresh water, Malta belonged to top 10 countries with water scarcity and had to import 80% of its water. Malta had very substantial demand that predicted to be increased over following years. Moreover, the high-educated and skilled labor force of Malta also encouraged firm to enter the nation for further expansion.
There were six strategies to suggest to VinhHao Company to enter Malta: Exporting, Greenfield, Turnkey, Franchising, Joint-venture and Acquisition.
- Exporting: VinhHao could export products directly to Malta. Applying exporting, VinhHao would be able to avoid high investment capital and risk to learn the market. There were also several specific advantages of Malta in import/export field. However, there was existence of tariffs &VATs. Limited control over some value-add activities or fluctuation and transportation cost were also the issues of exporting.
- Greenfield: VinhHao would invest directly to Malta to build subsidiary. The benefits would be high control, operating rules establishment or 100% profits. However, they didn’t offset the disadvantages of very high cost & risk and slow execution time.
- Turnkey: VinhHao would set up a water production system for Maltese client and train their labor. By this way, the company would bear less cost & risk and short time to implement. However, there would be no long-term interest, create a new competitor while losing competitive advantage.
- Franchising: VinhHao had no franchising experience before, so it would be a adventurous trial to the company while it didn’t have an international brand name. The biggest consideration would go on very low risk and tariff avoidance of the strategy.
- Joint-venture: the company could develop a joint company with a Maltese company. This strategy allowed the company to bear less risk & less cost in comparison with Greenfield or acquisition. It also gave an advantage on quick access to the market. Conversely, there would be high risk of losing technology know-how and finding a qualified partner. Not to mention the conflict of different cultures.
- Acquisition: VinhHao would acquire a company in Malta to develop the business. The company could inherit the entire process of the acquired company and receive high incentives from the government law. The skilled labor force would be a good contribution to this strategy advantage. Nevertheless, bearing very high cost & risk was not easy for the company. In addition, there were direct ownership restrictions for non-resident company and conflict between cultures.
Among those strategies, Exporting was chosen as the most optimal strategy due to the result from Decision matrix (which contained 5 criterias: low risk, low capital requirement, short time to implement, high control and low transportation cost). The advantages of exporting strategy in terms of low risk, low capital requirement, short execution time and somehow high control have offset the disadvantage of high transportation cost. However, it was recommended that VinhHao should use this strategy for around 1 or 2 years before switching to another proper strategy for long-term expansion.
2. COUNTRY OVERVIEW
2.1 Geography location
Malta, a member ofEuropean Union, is an island located in the Mediterranean Sea, Southern Europe. There are five main islands in Malta: Malta, Gozo, Comino, Comminotto, and Filflawith. It is located 93km to the South of Sicily – Italy, 288km to the North East of Tunisia, 1,826km to the West of Gibraltar and 1,510km to the East of Alexandria – Egypt. Malta owns many bays with good harbors(Malta country specific information, 2008).
Source:Adapted from lib.utexas.edu, 2009
Geographic coordinates:35 50 N, 14 35 E
Area:316 sq km
Coastline:196.8 km (excludes 56.01 km for the island of Gozo)
Climate:Mediterranean; mild, rainy winters; hot, dry summers
Natural resources: Limestone, salt, arable land
Environment – current issues:Limited natural fresh water resources; increasing reliance on desalination.
2.2 Population
2.2.1 Malta Population
The majority of Malta population comes from Arabs, Italians and the British ethnic origin. However, the Roman Catholic person made up more than 60% participation and was among the highest rates in Europe.
In the early 20th century, Malta population increased, however, because of emigration, declined between 1957 and 1974. Since then, the population has risen gradually with the population growth rate 0.6% from 1998 and 2007, then, stood in 2007 with 408,900 citizens, includes about 3.5% made up by foreigners. According to the World Fact Book (CIA, 2009 est), current population has declined to 405,165 inhabitants. Also, under the Country Comparison Statistic (the US Bureau of the Census, 2009), currently in year 2009, Malta population is ranked 173th of the world with 0.4% of the annual average population growth rate.
Source: Adaptedfrom CIA World Fact Book, 2009 est.
Urbanization:urban population made up 94% of the total Malta population with 0.6 % annual rate of change. The industrial concentrated most in the city and the South of the island, whereas the tourism and agriculture concentrated on the North and Gozo Island.
Birth and death rate: There is 10.36births per thousand of people and ranked 198th compared to the world countries. On the other hand, the death rate is 8.38 and ranked 100th in the world.
Ethnic Group: Ancient of Maltese is Carthaginians and Phoenicians which has strong elements from the origin of Italia.
2.2.2 The Age Structure
Currently, there are 16.1% from 0-14years, 69.4% from 15-64years, and up to 14.5% with 65years plus (CIA, 2009 est).
Source:Adapted from CIA World Fact Book, 2009 est
Life expectancy at birth: is 79.44 years, includes 77.21 years for male and 81.8 years for female, ranked 29th compared to other countries.
According to EIU (2008), with 1300 people per sq km, Malta is one of the most populated density countries; therefore, there could be many pressures on the consideration of land and water resources.
2.3 Government
Malta National Flag Malta Coat of Arms
Source: Adapted from World Face Book, 2009
The Republic of Malta (or Malta in short) was independent from the UK on 21st December 1964 and became a Republic ten years later. In the present, Malta is under the leadership of President George ABELA and Prime Minister Lawrence GONZI with a four government parties system: Alliance for Social Justice, AzzjoniNazzjonaili, Malta Labor Party and Nationalist Party. Its capital, Valletta, is in the central-eastern area of Malta and is 6 hours after Vietnam.
President George ABELA Prime Minister Lawrence GONZI
Source: Adapted from World Face Book, 2009
The judiciary of Malta is independent with a total of four courts: Constitutional Court, Civil Court, Commercial Court and Criminal Court. Each court has a jury of nine people with judges appointed by the President. According to the Corruption Perception Index (2009), Malta’s corruption is the 45th of the world and 17th of the EU, which is a promising indicators for the explicitness of the government.
2.4 Economy
Joined Europion Union (EU) in 2004, Malta has increased its GDP through years (as shown in the graph). Although the GDP of Malta ranked 149th worldwide as well as contributed very small percentage (0.1%) to the EU GDP (Eurostats, 2008), its GDP per capita was $24,600 (2008, est.) – placed 52nd in comparison with other countries (CIA World Fact, 2008). This figured pointed out certain potential of Malta in purchasing power.
Source: Adapted from Wikipedia.org, 2009
Source: Adapted from World Fact Book, 2009
Another economic indicator should be looked at is GDP growth rate. The economic downturn has weakened all economic activities, struggling the nation’s real growth rate down to 2.3% (2008 est). Moreover, the real growth rate of Malta was the lowest among new members of EU-27, while the highest Romania scored 9.9% in 2008.
Source: Adapted from Wikipedia.org, 2009
Among 2008 GDP, Services occupied biggest composition of 58.78%, followed by Industry (20.65%). Other compositions were Public Administration – Defence – Compulsory Social security (6.75%), Education (5.88%) and Health – Social work (6.39%). Agriculture only took over a very small percentage of 1.54%.
Source: Adapting from State.gov, 2009
The Malta’s economy is highly dependent on service, foreign trade and manufacturing (especially electronics and pharmaceuticals) since the beginning of 1990s due to its limited domestic market. Major favorable resources are limestone, geographic location and productive labor force. The nation only produces limited of its food needs (20%) as well as had scarcity of fresh water suppliers and energy resources.
Policy of gradual economic liberalization and the accession into EU has allowed greater role for market mechanisms, supported foreign export and increased the outward orientation of the economy. The nation has favored sustainable increasing economic growth until the global economic downturn posed a strongly effect on its economy. In 2005, Malta joined Exchange Rate Mechanism II (ERM-II), heading its way to enter Euro Zone and adopted the Euro as official currency in 1 January 2008.
Tourism played an essential role in the economy due to its stable increase since late 1970s. The tourism, which accounted for roughly 30% of GDP (2008), even boosted thanks to the introduction of low-cost flights and cruise lines since 2007. The favorable panorama of the nation has also given an economic opportunity in terms of film production in recent years.
In addition, the manufacturing for high-value adds products such as electronics and pharmaceutical products has also taken big account for Malta’s economy. Mainly of which were semi-conductors that accounted for around 75% of exports.
Lately the labor force with high education and English speaking has been productive with service and manufacturing, keeping the unemployment rate at fairly low 6% (2008 est), ranking 74 worldwide (CIA World Fact, 2008).
2.5 Other information
2.5.1 Communication
According to Trust Earned Travel, 2009, Malta communication includes:
Telephones - main lines in use: 202,300 (2006)
Telephones - mobile cellular: 346,800 (2006)
Radio broadcast stations: AM 1, FM 18, shortwave 6 (1999)
Television broadcast stations: 5 (2006)
Internet hosts: 21,386 (2007)
Internet users: 127,200 (2005)
2.5.2 Transportation
According to Business Today (2009) Malta is similar to UK on left-driving. Due to quite small country’s area, Malta has no railroad and only one airport, Malta International Airport.
Road:
The total Maltese roadway is 2,227 km – 2,014 km paved and 213 km unpaved. The primary means of public transportation in the island are buses. It is cheap and high accessible to all places in the island. There are around 500 buses,most of them are privately owed. In a normal day, half of these will run in public transport network while the others serve tourism and school transportation.
Source: Adapted from Business today.com, 2006
Ports:
As an island country, ports play a crucial role in Malta’s economy. Malta’s ports include:
Source: Adapted from Business today.com, 2006
• Grand Harbour is located in Malta capital city, Valletta.
• MarsamxettHarbour is located in the Northern of Valletta.
Source: Adapted from Business today.com, 2006
• MarsaxlokkHarbour is in the south-northern of Malta.
2.5.3 Culture
Malta has a long history of foreign occupation; hence, their culture reflects various societies (Malta history and heritage, 2009)
Ancient Phoenicians: Malta had colonized by Phoenicians around 800 BC; hence there are traces in Maltese culture such as language and traditions. For instance, the Eye of Osiris is drawn in luzzu, traditional fishing boat from the Maltese Island. These eyes came from the modern survival of an ancient Phoenician custom present that present the god of protection against evil
The Eye of Osiris in Luzzu
Source: Adapted from maltaproducts.com, 2009
Romance: 98% of population in Malta is Catholic that has been brought by St. Paul. He was a Christian and was shipwrecked on Malta around A.D. 60. In addition, Malta had been under Roman Empire in 218 BC. Thus, the various traditions, proverbs and superstitions still exist in their culture of today.
Source: Adapted from maltaproducts.com, 2009
Arab invasion: Maltese and English are official languages in Malta. In particular, 100% of population in Malta speaks Maltese and only have 88% of speaking English. Maltese language has roots from Semitic under Arab rules in 9th and 10th centuries. The Arab invasion evidences are still present through the names of many Maltese towns and villages.
The Knights of St. John: in 1530, Malta was given to the Knights of the Sovereign Military by the Emperor of Spain. During the Knights ‘domination, Malta also referred to as the Golden Age with the flourishing of architectural and artistic embellishment; for instance Renaissance and Baroque in architecture. The foundation of University of Malta, which was established in Knights period, is one of the oldest universities in Europe
The city of Valletta, one of several built and fortified by the Knights of Malta
Source: Adapted from Malta history and heritage, 2009
The French: In 1798, Malta fell to Napoleon within 3 years. Malta culture was impacted significantly. For instance; French customs and expression in daily life language still exist; Constitution, a secondary school system, university system and a new Civil Code of law. In addition, the architecture was affected in particular Church style such as being robbed of gold, silver and precious art.
Source: Adapted from Arts and Architecture, 2008’
The British: British Empire controlled Malta from 1800 to 1964 and the culture, language and politics radical in Malta changes. That is the reason why English is common in island nowadays and is used in formal language. Furthermore, British rules still remain in material form such as mail collection boxes and phone boxes
Source: Adapted from Malta history and heritage, 2009
2.5.4 International Trade
Malta has been considered as a gateway between Europe and Africa for a long time, an advantageous position to facilitate international transaction (Ocraworldwide 2009). Besides, according to Encyclopedia of the Nations (2007), Malta’s economy depends intensively on international trade.
In 1998, the import value of Malta is around US$2.7 billion, 65% of which is from Europe countries. On the other hand, Maltese export value reaches to USD$1.8 billion in the same year, and 50% is delivered around Europe.
From 2004, with the support and benefits after joining European Union, Malta increases its transaction with other countries and with the purpose of improving the economy faster as well as providing enough goods for national consumption issues. As a consequence, in 2007, export goods value, including mainly machinery equipment, chemicals, and semi-manufactured goods and so on, increases dramatically to USD$3.238 billion. Besides, the import value also rises sharply to USD$4.541. The import goods are mainly food and beverage products and raw materials providing to improve its infrastructure. (MALTA/EU: Island seeks to pass off migrant 'burden', 2009)
Moreover,Oxford Economic Country Briefings (2009) stated that due to the needs of ameliorating the current infrastructure to adapt to the rapid growth of tourism industry, the government has offered concession tax to those investors or importers related to construction. Nevertheless, compared to 2006, the import and export rate both decreased slightly in 2007. One of the main reasons is the Maltese economic growth, which is “partly attributable to lower purchases of capital goods, reflected in the drop in investment and also owing to a sharp drawdown in inventories” (EIU ViewsWire 2007).
In sum, Malta is a potential location to export goods to, especially food and beverage as well as construction materials based on current demands. Moreover, tariff in Malta is quite ideal compared to others. However, carefully consideration and research before export is also necessary since there are many harsh existing competitors that can create great obstacles for newcomers, particularly some Europe countries such as France, England and so on.
3. ORGANIZATION PROFILE AND PRODUCT CHOSEN
3.1 Company
3.1.1 Company overview
VinhHao Mineral Water Corporation was found in 1928 under the name SocieùteùCivileD’Etudes Des Eaux Minerals De VinhHao. This establishment was used to exploit mineral water source since source’s quality was equal to France Vicky water. In 1995, VinhHao was restructured to become a corporation. Now it has a US automatic production line with capacity of 30 million liters per shift. (Company Profile, 2006)
3.1.2 Core business
VinhHao focuses on bottling mineral water near VinhHao mineral water source for domestic usage and export purpose.
3.1.3 Mission statement
“Aiming to produce healthy mineral water for customers with high quality automatic production line and mineral water source “
3.1.4 Achievements
In AC Nielsen top 500 famous brand in Vietnam in 2006
In top 100 Vietnamese strong brand judged by customers in 2006
Granted as “Hang Viet Nam chat luongcao” from 1997 - 2007
“Sao VangDat Viet” award in 2004 and 2006 judged by Young Vietnamese business association
Vietnamese gold cup in food
Vietnamese trusted and qualified award in 2006 granted by Vietnamese Ministry of Trade
3.1.5 Company structure
Hybrid structure: combined Functional and Geographic structure
3.1.6 Product overview
Overall, VinhHao is currently producing five different types of products, which mostly are mineral water and its related products like pure water and soft drink (Company Profile, 2006).
Mineral water with gas (medium mineral content)
Mineral water without gas (low mineral content)
Soft drink with mineral (high mineral content)
Pure water
Sprirulina seaweed
Skin nourishing pure water
One main difference that makes the products of VinhHao become unique in the market is that the water of the company has high mineral content which is certified as very good for the health of the consumers. There are many researches about the content and usage of VinhHao’s water had been carried out in the past by several scientists, their results were so good that up until now, VinhHao’s mineral water is still the only bottle water that is allowed to sell in Vietnam hospitals.
The mineral content in VinhHao products is included: calcium, magnesium, potassium, sodium, acid silic and bicarbonate. These minerals are said to be very good for consumer’s bones, teeth, muscle, and nervous system, provides energy, helps to stabilize the pH in the body and decrease the acid level in stomach. Therefore, the products of VinhHao are considered to stay in a different level than other pure water brands and as a consequence, the prices of them are usually much higher than the ordinary pure water.
3.2 The 4Ps
3.2.1 Product
a. Core benefit: pure water to fulfill basic physiological needs and to improve health.
b. Actual products:
- Brand name: a strong brand name that was already popular for over 70 years in Vietnam water & drink industry.
- Features: water is bottled by modern automation line imported from America. There are 3 kinds of bottled water to meet different needs of customers and for convenient use: 330ml, 550ml and 20l (picture).
Source: Adapted from photo. Easyvn.com
- Quality level: high quality that meets product qualification for safety and cleanliness as well as the guarantee from Pasteur medical institution. The company has won continuous prizes for Vietnamese High Quality Products.
- Packaging: for small products (330ml & 550ml) are packaged in box of 24 bottles for customers who purchase high quantity (see picture).
Source: Adapted from sieuthibep.com, 2009
c. Augmented product:
- Delivery: wide distribution system across regions of the country could provide delivery services to customers.
- After-sale service: the company has an official website, in which displays contacts such as phone, address and email of the company for customer service.
3.2.2 Price
VinhHao Company offers a wide variety of products to satisfy alternative needs of customers. Thus, the price is also different based on their size as well as the ingredients.
The product VinhHao Company chooses to export is Vihawa, a new pure water product with the cheapest price among VinhHao’s brands.
Converting into Euro currency, it might cost only about 1 Euro/bottle (20l), a quite affordable price for Maltese. However, due to the addition of logistic cost (transportation, import tariff, storage and so on), the final price of Vihawa sold at Malta will be higher. Specifically, 500ml bottle will cost 1 Euro per one and 20l bottle will be 2.5 Euro.
Product Price
1 Euro/bottle
(non-carbonated)
15 Euro/bottle
(Pure water)
Furthermore, since VinhHao is new in Malta market, we also need to apply some pricing strategies to get Maltese attention about our product:
• Time pricing: in the beginning, we will use sales off 20% campaign for Vihawa product (500ml and 20l) for the first 3 months in order to give Maltese a chance to try Vihawa. Moreover, in special occasion, we also provide promotion to Maltese customers. For example, in Valentine day, couples who buy two bottles of Vihawa can receive 10% discount as well as a rose.
• Discount and allowance pricing: customers who bought the whole Vihawa barrel (24 500ml bottles) will receive 10% discount compared to buy separate bottle. Besides, we also offer member program for who order Vihawa 20l bottle regularly (each 2 weeks). The distribution fee will be free and the price will be deducted to 2 Euro/bottle.
3.2.3 Place
Manufacturing location: 1A Highway, VĩnhHảo Commune- TuyPhong District - BìnhThuận Province
Distribution system:VinhHao Company sells products not only to domestic customers but also international customers from other countries such as US, Australian, Canada and Taiwan. Hence, the logistics department takes responsibility to distribution activities.
VinhHao Company was established in 1909 with high reputation and has a stable and widens distribution system in the domestic market. However, VinhHao has just broadened to the international market several years ago. Therefore, freight forwarding service and third party logistic are two effective methods to assist company in exporting products to other countries.
According to VinhHao products, water bottle is classified to beverage industry and the demand depends on the population. Therefore, VinhHao should focus on Malta Island because it has a capital and center cities with high population. There are main target markets:
Name Population Latitude/Longtidue
Birkirkara
21,676 35.897 / 14.461
Qormi
18,230 35.876 / 14.472
Mosta
17,789 35.909 / 14.426
Source: Adapted from geonames.org, 2008
As mentioned above, Malta has one air port and 3 main harbors. In consideration, the shipping mode is appropriate because it is cheaper than air mode and can carry a lot of containers. After researching, Malta Freeport as a free zone located in Marsaxlokk that is a major player on Mediterranean ocean. It is also a gate way to carry freight and cargo from European Union Trade, Middle Eastern and Asian. Hence, VinhHao can take advantages on not only strategic location but also free duty or reducing rates of tax and investment tax credits. Furthermore, Malta Freeport provides the warehousing activities with a high facility and diversifies services that include storage, packaging, labeling and so on. They have 6 general purpose warehouse and total is 2,400 square meter and each having 1,000 square meter of covered space. The entrances are 5 meter in width and 5.5 meter in height and got a BS EN ISO 9001:2000 certificated; thus, renting warehouse in Freeport is the right option for VinhHao (Malta Freeport: Warehousing, 2009)
Source: Adapted from maps.google.com, 2009
Malta is the small island over 300 km2 and the main mode of transport in Malta Island is road. After importing to Freeport, products will be transferred into trucks carrying straightly to distribute to all partners in 3 big cites. The total lead time is supposed to be 5 to 6 hours for each trip from port to partners
3.2.4 Promotion
a. VinhHao’s website
According to Busuttil, C (2004), Malta has ranked the high rate of people using the Internet at home (80% residents have a personal computer) among EU countries. Moreover, the VinhHao promotion objectives currently also aimed to advertising online. With the Online advertising, company believed that they can minimize the advertising costs compared to other media advertisement methods and another part of their budget they can use for helping the society. Therefore, using the Internet for advertising is prior choice for VinhHao to introduce their products into Malta, because of matching their principal objectives as well as satisfied Maltese’s.
Same as the company’s strategy, any promotions are implemented through Malta always provide the strong message- bringing the pure and healthy water for customers.
The main website has been established and used since 2006. Thus, it may benefits for the company to re-use its resource in the global for advertising. With the website, VinhHao can show out their bibliography, especially product news, promotions.
b. Link Building
According to Liquid Studios Ltd, one of the well-known E-online advertising companies in Malta, over 85% users of Internet use “Search Engines” to find the best products and services that fit for their demand. Thus, the company could build the back links to provide some interesting promotion information and images in other international and local Malta websites. It is enable customers to click on and link directly back VinhHao’s home page. Additionally, VinhHao’s “key word” research is put on the top of best page ranked websites- search engine like Google, Yahoo, and MSN which are a tool almost used by the Malta Internet users.
c. VinhHao Legendary- word of mouth
The brand name – VinhHao named under the well-known story about Huyen Tran’s princess. As a result, the nice story has created a nice image for VinhHao Company. As well, VinhHao’s image is honored to be as a symbol for Vietnam mineral water. Therefore, company could use this legendary to promote product. The benefit of it is not only introducing the VinhHao brand name to Maltese in particular, but also contributes to the Vietnam’s image and tourism.
d. Printed adverting
Because of cost saving, VinhHao selects slightly newspapers and magazines as a small part of their marketing campaign. This media type is the most closely and directly bring good impressions and images in customer’s minds. Additionally, according to Kilman, L (2008), number of people buy newspaper daily increased rapidly and + 20 % increasing in Malta in this year 2009. For that reason, VinhHao could post sometimes their message in local newspapers (eg: Sunday Times) to increase customer’s awareness.
e. Sales promotion
VinhHao could offer special promotion campaigns such as discounts prices for purchasing large amounts, buy 12 get 1 free, subscription-based products, or bring awards to home during special events (especially outside activities) in Malta. By doing this, it could stimulate product trial and purchase.
Source:Adapted from Events (2009)
f. Malta Charity Event Sponsors
Besides doing the business, Vinh Hao could participate in some charity events , eg, “Run for Charity” in Malta. Encourage employees register in these events or possible be a sponsor – providing water for volunteers to drink.
4. BUSINESS ENVIRONMENT
4.1 Business practice
4.1.1 Hofstede’s 4 dimensions
Source: Adapted from Hofstede, G, 2009
a. Power Distance Index (PDI)
PDI refers to the level of inequality that could be accepted in the society. Following by the chart description, Malta has a lower PDI score than Vietnam. It explained that Malta members viewed them as equal. Compared to the world, Malta scored at 56 (Culture Dimension, 2007) in somewhat in the middle on the culture scale. According to Malta Bureau of Democracy (2001), Malta residents are respected a human rights and they start to believe and accept on equal distribution equals, for example, there is not much barrier to report to the top of management or supervisors and employees are equal. Therefore, in order to do business well in Malta, building a flatter organization and focusing on teamwork is essential. Additionally, it’s necessary to involve many people in decision making process and make Malta employees feel their awareness and being respected.
Source: Adapted from Intercultural Sensitivity, 2007
b. Uncertainty Avoidance Index (UAI)
UAI refers to the level of how society members feel when any uncertain situation occurs. Compared to Vietnam, Malta has a higher score greatly in the sector. It means that Malta residents are likely involved and governed by rules, they need a clear structures as well as tasks and expectations, differences are especially avoidance because Malta employees pay attention on planning carefully and relies on rules and laws. According to Intercultural Sensitivity (2007), Malta is one of the top of the countries is high in UAI, as a result, the article also suggested that employees will be motivated by safety, security and strong formal regulations in working at Malta.
c. Individualism
In comparison between Vietnam and Malta, the result shows that Maltese culture gets a higher rate on Individualism (59). It means Maltese people expected to look after themselves and their family .On the contrary, Vietnamese culture is considered to be collectivism (20). Vietnamese people are integrated into strong, cohesive in team. It often leads to clash culture when doing business in Malta. Thus, Vietnamese enterprise should take into account to how to adapt with Malta culture in order to expand business.
d. Masculinity
According to the chart above, Malta (46) reaches higher rate than Vietnam (40) but both countries are femininity. This demonstrates that the roles of males and females in workplace and family are equal. It proved by GDI (gender- related development index) and GEM rate (gender empowerment measure) that measure whether women take part in economic and political life (Malta, 2009). Malta ranks 66th out of 155 countries. Consequently, VinhHao should not pay attention on how to treat and provide the fair environment between male and female in Malta.
4.1.2 Dos & Don’t
According to Culture of Malta (2009) and Business practices and etiquette in Malta, there are some dos and don’ts that VinhHao should consider carefully
Dos Don’ts
• Be punctual
• Attend mass on Sunday
• Talking about politics
• Wear dress codes in offices
• Make appointment some days before meeting
• Shake hands when being introduced to someone, when greeting and when leaving
• Exchange business cards at the end or the beginning of a business meeting, and by requested if it is a social event
• Business visits are best conducted between May and Octobers • Wear scanty dresses in other places rather than the beach
• Wear immodest dresses inside a church
• Hold hand between males in public places
• Veil if you are a woman
• Invite someone to your home for tea or dinner if you do not have a very good reasons for that
4.2 Social Condition
4.2.1 Labor force
According to the United Nation Database (2005), Malta labour force is 42.7% of the total population, made up about 173,000 employed people (CIA 2008, est). Additionally, under the survey (Camillari, I 2008), 11.1% of those are primarily working as their part-time jobs.
Source: Adapted from Malta with lowest employment rate in EU, 2008
Malta had the lowest female employment rate with 31.2% female adults (age 15-64) participation. Compared to male employment (68.8%), Malta has scored the higher rate than EU 27 average. With the statistics collected, Malta is the greatest male and female difference in EU.
The pie chart showed that the percentage of people working in Agriculture sector is the lowest percentage; producing only 20% food needs, as a result of limited fresh water supplies (CIA, 2009, est).
Source:Adapted from CIA, 2009
On the other hand, although the EU has brought many benefits to the freedom and movement of employment, Malta has strictly rules to control because of the historically highest unemployment rate. Thankfully, it is now not much problems, therefore the unemployment rate currently only made up 5.9% of total population. (CIA, 2009, est.). With this rate, Malta registered the lowest unemployment rate in EU and ranked 74th of the world.
Source:Adapted from CIA, 2009
4.2.2 Staff by Industry
In recent years, in accordance with National Statistic Office in Malta (2009), Malta employment in the Electricity, Gas and Water Supply industry is taken 6% includes in 79.6% male and 20.4% female with 40.3 average age in the employment rate.
Source: Adapted from Statistic Office in Malta, 2009
4.2.3 Education
a. Literacy
92.8% of total population that people from age 10 to over can read and write. Malta school life expectancy (from primary to territory) is 15 years for both male and female (CIA, 2005 est). With 5.1 % of GDP that expensed for the education, Malta stands up to the 65th of the world.
According to the National Office Statistic in Malta (2009), The Malta labour workforce has a high skilled and educated. The high proportion varies by people who speaking English and Italian. Additionally, the high education labour rate could be a good result of the coordination between industry and university, which ensures to provide a high workforce’s conditions and skill requirements.
b. Staff by Qualification
The major of population are all graduated a secondary level of education. Addition, 8% in the total of them get Master degree or above.
Source: Adapted from National Statistic Office in Malta, 2009
c. Staff by Occupation
The chart below showed the various jobs are taken by Maltese employed workers with the major is focused on Services, Shop and Sales workers. With creating a great advantage for selling products, especially, water supplies.
Source: Adapted from National Statistic Office in Malta, 2009
4.3 Economic Conditions
Due to the limited domestic market, the Malta’s economy is highly dependent on international trade (EIU ViewWires 2009). And according to CIA World Fact (2008), fresh water and energy resources are considered as scarcity in Malta. As a result, these lacks of resources highly relate to the manufacturing of other products. Hence, the needs of importing water as well as energy resources are unavoidable.
There are many problems occurred with water consumption in Malta. According to Knox (2008), the water is highly polluted. Besides, the management of water of Maltese government is not quite strict leads to several issues such as overproduction from aquifers, registered boreholes reach to 5000 with several numbers of unknown boreholes, limited recycling water and so on. All issues contributed to the current scarcity of water.
With this situation, Malta doesn’t have enough water for agriculture production and has to import commodities from other countries. In order to manage the water rationally, these commodities are converted into virtual water, a concept to illustrate the amount of water consumed in the manufacturing process of a given goods (Blue Plan Notes 2008). For instance, the Figure below illustrates how the imported virtual water linked to grain and bean imports in different countries in 2008.
Furthermore, Cremona (2009) stated that water price has doubled in recent years. Since the tap water is not as safe as it is said, people tend to buy bottled water with €0.50 per litre, which is 400 times higher than price of tap water. It can be a potential advantage for VinhHao when entering Malta market.
Besides, every year, the import rate is always higher than export rate as showed in the below graph.
Specifically, main import products in 2008 are listed below. It is easy to recognize that food import occupies 12% of all, which is quite high. It also means that the virtual water imported is pretty much.
Another aspect needs to be considered is the water production in Malta. In general, there are many ways to produce water in Malta such as groundwater, rain water, and desalinated sea water and so on. However, according to National Statistics Office (2004), from 2001 to 2003, the trend of using of groundwater decreased while pumping sea water to desalinate was preferred. And until 2008, 50% of water supply in Malta was desalinated water (Sapiano 2008).
Especially, the production of drinking water also decreased a lot due to the water lacking condition. As a result, the import of drinking water is a quite potential industry in Malta.
4.4 Finance
According to National Statistic office of Malta (2009), Maltese government has been very opened to financial foreign support by offering tax support, export incentives, few restrictions on foreign ownership, etc. As a result, they become a hot spot for FDI even in the current economic crisis. Malta attracted € 207.2 million FDI in the first six-month in 2009.
Banking system is a strong field in Malta as a result to support this trend. By joining the Organization for Economic Co-operation and Development agreement, Malta banking system has to follow EU regulations which enable a stable money market (EIU ViewsWire 2008). However, the main operations are on retail nature with two largest banks: Bank of Velletta and HSBC Bank Malta. Hence VinhHao must prepare fund before operating in Malta since Maltese banking scale is quite small. However, because of strong banking system, VinhHao can easily transfer fund from outside to Malta.
Malta has a small security market with only 18 stocks listed which is regulated under Financial Markets Act. Although it is a tiny market, Malta Stock Exchange Index was around 3,324 in December 2009 which was around 6 times higher than Vina Index at the same time (Malta Stock exchange 2009). Hence, it required more fund for companies if they want to enter Maltese market by acquisition or similar method.
Euro, Maltese currency, has appreciated from US dollar from 1.26 to 1.54 USD (2008) and USD also appreciates from VND. This trend ensures that investing in Malta will be safe in case of exchange rate fluctuation. In addition, inflation rate in Malta was quite stable and closed to EU average. However, in 2009, it increased to 4.3% - 2.3% higher than EU average. This resulted from increase in alcohol, tobacco, hotels and restaurants price. High inflation rate plus decrease in FDI show that financial condition in Malta is quite unstable and a careful financial plan need to prepare before entering market.
4.5 Regulations/ legal issues
According to the preliminary report of World Bank’s annual economic research this year, Malta is in the second most changed region (Eastern Europe & Central Asia) in term of regulations. These changes mostly aimed to make the business related rules more transparent and efficiently for both existing and newly open businesses. Moreover, other aspects like property rights and commercial dispute are also reconsidered so that they are fair to everyone and more effectively solved. So overall, it can be said that Malta is gradually becoming more open and welcome to do business.
Source: Adapted from Doing Business in Malta, 2009
For a foreign company like VinhHao to start selling its pure water to Malta, good news is that it can apply various different entry strategies without too many restrictions (PricewaterhouseCoopers 2009). Firstly, it is very easy to export products to Malta since generally the country does not put any laws to restrict importing. They almost allow all kinds of legal products to enter the country and even do not place any limitation in any volume-based quotas at all. The only problem here is that being a food-kind product (pure water), VIHAWA of VinhHao will be more carefully examined before the company can gain the importing license than other regular products. For a health related product like VIHAWA, four departments that is Agriculture, Police, Trade and Health will together consider the quality of the water and the company; only when they are sure that the product of VinhHao is safe for their people that the company is allowed to sell its water there.
Secondly, besides exporting, VinhHao Company can also apply other strategies like joint-venture or acquisition easily with the easy law of the country (PricewaterhouseCoopers 2009). As long as the act of these strategies do not create any monopoly position, do not prevent or remove any competition in the pure water market then there will be no problem for VinhHao at all.
Furthermore, it is easy and safe to access to the capital in Malta. A recent report from the World Economic Forum (cited in PricewaterhouseCoopers 2009) stated that the old banking system of Malta is the 10th soundest all over the world. Any company who can show a healthy equity and promising project financing to the bank can access to a wide range of financial services, like overdraft or term loans, in a very flexible and rapid manner. Moreover, being an official member of the EU, Malta applies a straightforward framework in recording loans and investments, therefore all parties who interested in doing business with the financial system in the country can be more secured as if doing with the EU standard.
Last regulatory concern for a company to do business in Malta but not least a problem is the tax system. As being described very thoroughly by the PricewaterhouseCoopers (2009), tax in Malta is simple and requires very little documentations. For a company of a non-EU member like Vietnam, VinhHao will be subjected to some import duties and VAT. Fortunately, it is very convenient for the company since it only needed to prepare a basic customs document that included detailed descriptions of the product provided and some other relevant information. This document is called “Single Administrative Document”. Even more convenient, there is no particular regulation that is related to bills or official agent, so that the company is very comfortable to choose its best strategy to work in the country.
4.6 Competitors
4.6.1 Direct competitors
VinhHao’s direct competitors are mineral water manufacturers and foreign mineral water brand name exporting to Malta. In addition, Malta Island population will be their target market.
Because Malta is lacking of fresh water resource; therefore, only 20% of water manufacturers in Malta and 80% is importing products from other countries such as Germane, China and so on. The water bottle is homogenous products; however, mineral water firms have conformity to EU standards in order to sell product to Malta. Hence, although there is a mushroom of foreign brands in Malta, the reason above contributes to decline the rivalry in mineral water industry; consequently, the rivalry in this industry is medium high and it is an oligopoly market. There are some direct competitors
Source: Adapted from List of brand in Malta, 2009
a. Manufacturers in Malta
Name Brand name Competitive advantages
General Soft Drinks Co. ltd
(General Soft Drinks: About us, 2009) Non-refillable PET bottles.
0.5Ltr package (12 bottles per pack).
2.0Ltr package (6 bottles per pack).
1 Ltr packages
• Local franchise of Coca-Cola
• Establish in 1952 with the long history
• Have a good relationship with the local community such as sponsor of the restoration of an ancient building in Malta
Company strategy:
• Directly manage with all customers such as home deliveries and distributing to retailers
• Deliver 24 hours and 7 days and complement 1600 cold drinks equipment on Maltese market
TessonsLimited
(TessonsLimited: Company profile, 2009) Packaging
6 X 2 Ltr.
6 X 1.5 Ltr.
12 X 0.5 Ltr.
• Established in 1993
• Operate in the bottling of mineral water (Bella mineral water), juices (Samba juices) and energy drinks (Spark Cola)
Company strategy:
• A first local company to adopt PET technology which can be recycled and friendly environment
• Distribution network has more than 1500 outlets in Maltese Island.
Eco Pure Premium Water Company Limited
(Company, 2009) Packaging
0.25 litre Glass - Still
0.50 litre PET - Still
1.5 litre PET - Still
2.0 litre PET - Still
2.5 litre PET - Still
Multi-packs:
0.5 litre PET bottle x 12-pack
1.5 litre PET bottle x 6-pack
2.0 litre PET bottle x 6-pack
2.5 litre PET bottle x 6-pack
18.9 litre containers and dispensers for home or office with various to choose from • Set up in 1995
• Is a subsidiary company of The Farsons Group Company
• Focus on a chemical and microbiological pure
• Concentrate on high quality of water to meet “Quality of Water Intended for Human Consumption certificate”
• Manufacturing process achieves ISO9001:2000 Quality Management System and HACCP (the Hazard Analysis and Critical Control Point) standards
Company strategy:
• Offers door-to-door delivery to homes and offices
• Provide many product lines to satisfy customer demand
Quintano Food
(Quintano Food: cooperate profile, 2009) Packaging
6 X 2 Ltr.
6 X 1.5 Ltr.
12 X 0.5 Ltr.
• Is subsidiary company of The Farsons Group Company
• Water has 0.002 % sodium that is ideal for a low sodium diet people.
Company strategy:
• Add lemon and peach flavor without sugars
• Target market: Maltese diet people and health conscious customers
• Marketing strategy: focuses on in store promotion, sponsorship and take part in Malta Food and Drink Fair
b. Mineral water exporter
According to List of Brand in Malta, 80% of Mineral water in Malta is imported. As the pie chart above, most importing water bottle products come from European countries especially from Italia, France and Greece. These countries also located in the Mediterranean Sea, Southern Europe and near to Malta and are member of European Union. Therefore, geographic location is the advantage to assist them in reduces the transportation fee in comparison to others. In exporting product to Malta, these countries have some benefits such as free import duty, reduce VAT tax and easily to transaction.
Source: Adapted from maps.google.com, 2009
4.6.2 Indirect competitors
Besides some direct competitors above, VinhHao encounters with some indirect competitors which are substitute products of water bottle in other beverages’ industry like alcoholic beverage, brewed beverage, carbonated beverage and fruit juice.
Alcoholic beverage: According to Life Style Survey in Malta (2007), 36% of Malta adult population consumes alcohol drinking. In Malta, average amount of bottles of beer weekly by type and sex is 5.4 and it is a highest consumption in alcohol beverage. This means beer is the favorite beverage in Malta. The local beer manufacturers of Malta have a strong competition with the high quality and competition not only in Malta but also exporting to various countries around the world. For example, Cisk Lager and Hopleaf Pale Ale are 2 popular with local brand name and have won many prestigious International Awards. Other alcoholic beverages are wine and Tots of spirits. Every week, 5 tots of spirits are consumed in Malta; meanwhile, the average amount of glasses of wine is only 4.2. Compared to beer, the market demand of Malta in 2008 was just only 100,000 tons and 70% amount of wine and spring were imported from other countries such as France, Italia, US and so on.
Brewed beverage: Tea and coffee are common drinks that were introduced into Malta under British occupations and gradually became part of local customs. Brog&Aquilina and CaffeCordina are notable leader of tea and coffee industry. Brog&Aquilina are importer and distributor with 65% of the market share in Malta. Meanwhile, CaffeCordina is one of Malta’s oldest coffee and first companies that have started a franchise Coffee Culture and sold 4,000 cups of coffee per day.
Carbonated beverage and fruit juice: According to the Drinks: Impact on health and on the environment (2009), the demand of fruit juices and soft drinks have increased sharply since 1980s. In addition, fruit juices have a fast growth because Maltese people consider fruit juices is a good source of certain vitamin and good for their health. In Malta, soft drink is the favor drink of young people especially children. Coca Cola and Farson Group manufacturers are leader of soft-drink market in Malta 2009.
4.7 SWOT Analysis
STRENGTHS WEAKNESSES
• A strong brand name with high reputation in Vietnam.
• Own production line and have sources of water (VinhHao, 2009) cost advantage.
• Have many experiences in exporting and trading with foreign countries (VinhHao, 2009).
• High quality products meet national standard (VinhHao, 2009).
• Offer various sizes of bottles for different demands. • Lack of experiences in doing business with Malta.
• Unknown by Maltese consumers take time and effort to penetrate into the market.
• Losing market share in Vietnam to other foreign firms.
• Not belong to EU losing some incentives.
OPPORTUNITIES THREATS
• A hub of international trade.
• Shortage of water supplies increasing demand for pure water.
• Many law incentives to attract FDI investment. The World Investment Report (2008) listed Malta 3rd worldwide on index performance and considers the nation as a “Front-runner” in FDI inward attraction potential (PWC, 2009) big advantage for foreign firms.
• Protection laws for trademark, patents, etc are available (PWC, 2009) protect the brand name ViHaWa.
• Imports are mostly free in the nation (PWC, 2009).
• Professionalism in doing import/export.
• High-educated workers and relatively cheap labor good for the company in case of factory investment. • Taxation, tariffs and other legal issues.
• Goods as foodstuff require special clearance procedure (PWC, 2009).
• Competition from other firms from EU nations may arise.
• Logistic costs fluctuation could affect prices and customer service.
5. GLOBAL COMPEATING STRATEGY
5.1: MULTI-CRITERIA DECISION MATRIX
After considering carefully among 6 strategies, we decided to pick 3 that we consider to be most suitable for current situation in Malta: Direct Exporting, Joint Venture and Acquisition.
Furthermore, we also come up with a Multi-criteria matrix comprising of 5 main criterias in order to evaluate and pick outthe final appropriate strategy to bringthe most benefitto VinhHaocompany:
CRITERIA WEIGHT REASONS
1 Low Risk 25% Risk of being damaged by unexpected factors is the fear of many firms, especially when they enter new market. Hence, VinhHao should try to reduce the risk as much as possible.
2 Low Capital Requirement 25% Calculate the amount of money carefully before setting up business in new market is quite important. VinhHao is not a big firm compared to other international company, thus, choosing strategy with low capital requirement but still bring good benefit is vital.
3 Short duration to implement 20% Shorten the time to enter and do business in new market might bring many advantages and save a certain amount of money for VinhHao.
4 High management control 20% The high control over the firm in new market plays crucial role to the success of the business.
5 Low cost of transportation 10% Adapting a strategy which can deliver product to the same destination with lower cost will save VinhHao a lot of money since transportation is indispensible part to VinhHao business.
Strategy Low Risk (.25) Low Capital requirement (.25) Short duration to implement (.2) High Management Control (.2) Low transportation cost (.1) Total
Exporting
9 (2.3) 8 (2) 8 (1.6) 8 (1.6) 4 (.4) 37 (7.9)
Joint Venture 7 (1.8) 6 (1.5) 6 (1.2) 6 (1.2) 7 (.7) 32 (6.4)
Acquisition 5 (1.3) 2 (.5) 2 (.4) 9 (1.8) 8 (.8) 26 (4.8)
Exporting:
Low risk:
The market of Malta is totally new to VinhHao, which means there could be many unexpected factors affect the company. When applying exporting strategy, VinhHao doesn’t have to worry about finding new resource providers for the production or the fee of building new factory. It will be very dangerous if after you spend a lot of money on the new factory in Malta, the business goes down. In that case, VinhHao would lose a lot. On the other hand, while the business is not running well, the company can withdraw out of the market more quickly compared to other 2 strategies. This is a big advantage of exporting that allows it points to be highest (9).
However, exporting strategy still has to deal with the most dangerous risk: losing goods in transportation process due to bad weather or pirates. Luckily, VinhHao always buys insurance for its goods, thus, when unexpected issues occur, VinhHao doesn’t have to suffer much.
Low capital requirement:
As mentioned above, since VinhHao doesn’t need to build new factory in Malta if applying Exporting strategy, the capital requirement is not as high as other 2 strategies, thus it’s graded 8. Both Acquisition & Joint venture require high capital investment to acquire physical business.
The highest cost VinhHao has to handle is transportation cost, including fee to deliver from Vietnam to Malta as well as to wholesalers and retailers in Malta. Besides, import tariff and warehouse cost should also be considered carefully in order to set appropriate price for VinhHao product.
Short time to implementation:
Because VinhHao doesn’t need to set up operation plant or distribution channel in Malta as well as acquiring physical business, the implementation of exporting strategy is considered to be shorter than others. The main sources consuming time for implementation are getting import certification, finding adequate shipping companies, agencies and clients in Malta to sell. Among these, import certificate as well as tariff may cost most time of implementing exporting. Hence, export is rated 8 for this criteria.
Acquisition & Joint-venture require a lot more time to do research and implement. It takes time to find a business to acquire or to cooperate with, especially in such unfamiliar market as Malta. Not to mention about many time-consuming procedures in the nation that the company has to get through.
High management control
Acquisition prevails 2 others in this criterion with 9 points due to its advantage while exporting with 8 points has limited control over some activities. Because everything is done in Vietnam, VinhHao can control the quality of water in production. In addition, control of transportation cost allows VinhHao to control selling price in Malta. In contrast, joint-venture must share power depending on percentage owning in company (6 points).
Low transportation cost:
Acquisition, thanks to its location, scored highest for the criteria (8) because water is produced in Malta so delivery cost is much lower compared to exporting. Exporting costs a lot more transportation fee due to the carrying of water from Vietnam to Malta. There are 9515km on airplane distance between Vietnam and Malta. This is even greater if using sea transportation which is the cheapest means of transportation for long distance that we intend to use. As a result, exporting only scored 4 for these criterias.
Source: Adapted from timeanddate.com 2009
5.2 RECOMMENDATION
Exporting strategy has scored highest among 3 strategies, and thus becomes the most optimal strategy to implement. Indeed, it has preceded others in most of important criterias such as low risk or low capital requirement. Look at the decision matrix, it’s obvious that the strengths of exporting strategy can compensate for its weakness, which is considered to be highest transportation cost. It is recommended that VinhHao should employ exporting strategy to enter the market, testing and experiencing the market before investing higher capital to Malta. In the first year, VinhHao should employ the expertise of import agency in Malta because they are familiar with the market to help us overcome the shortcoming of a new entrance, which is lack of understanding about the market. After that, it’s expected that VinhHao build an official office in Malta to have higher control over the exporting, build a distribution network and to employ agent as consultant.
However, exporting strategy is not the most optimal strategy to use for long-term period since firms usually switch to another strategy to fit with the new situation. After building a good base and gradually building up reputation over Maltese consumers, the criterias in the decision matrix will be changed significantly due to the new situation, which is not for new entrance anymore. Probably low risk, low capital requirement or short execution time is not as much important as entering period. This is the time VinhHao should invest more capital to build factory for production and to have more control over the implementation. That’s why Acquisition or Joint-venture could be a proper choice to consider.
TARIC Code & Duty Rates for Mineral water(Source:http://ec.europa.eu/taxation_customs/dds/cgi-bin/tarduty?Taric=2201101100&SimDate=20091231&Action=1&ProdLine=80&Country=MT/0046&Type=0&Action=1&YesNo=1&Indent=-1&Flag=1&Test=tarduty&Periodic=0&Download=0&Lang=EN&Description=yes)
Simulation date : 31/12/2009
TARIC code 2201101100
Country of origin/destination Malta - MT (046)
2201 Waters, including natural or artificial mineral waters and aerated waters, not containing added sugar or other sweetening matter nor flavoured; ice and snow
- 2201 10 Mineral waters and aerated waters
- - 2201 10 11 Natural mineral waters
- - - 2201 10 11 Not carbonated
- - - 2201 10 19 Other
No restrictions
5.3 SUPPORTED ARTICLES
Extract 1: Barlow, M & Clarke, T, 2002, ‘Who Owns Water?’ , The Nation, viewed 31 December 2009, http://www.thenation.com/docPrint.mhtml?i=20020902&s=barlow
Extract 2: Anderson, T & Landry, C, 2000, ‘Exporting water to the world’, ucowr, viewed 31 December 2009, < http://www.ucowr.siu.edu/updates/pdf/V118_A8.pdf>
Extract 3: Branch, A, 2000, ‘Export Practice and Management’,Thomson, 2end, Lon Don, UK, pg 343-344
6. FOREIGN MARKET ENTRIES
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