BM5401-REGIONAL STUDIES

Module tutor: Todd Endres

Student name: Nguyen Tien Dung

Student ID: UoG0105

Assignment 2: Individual standard written (essay) of 1500 words.

Assignment due date: 28th April 2019

Submitted date: 28th April 2019

(word count:
Contents
Executive summary: ............................................................................................................................................ 2
Introduction: .......................................................................................................................................................... 3
General information of both countries in grocery retail sector. ..................................................................... 3
Japan’s grocery retail: ..................................................................................................................................... 3
Vietnam’s grocery retail................................................................................................................................... 4
Comparison using PESTEL analysis: ............................................................................................................... 5
Social aspect: ................................................................................................................................................... 5
Technological aspects: .................................................................................................................................... 6
Comparison using Porter diamond model: ....................................................................................................... 7
Firm Strategy Structure and Rivalry .............................................................................................................. 7
Recommendation: ................................................................................................................................................ 7
Conclusion: ........................................................................................................................................................... 8
References:........................................................................................................................................................... 9

Executive summary:

Note that retail sales of groceries in both Vietnam and Japan. Japan is a country that

has developed remarkable retail channels, on the other hand, the Vietnamese market

is largely occupied by traditional retail channels.

In order to better understand the retail industry in both markets, companies must

analyze the essentials based on PESTLE and Porter's diamond, but this report

focuses only on the most notable factors. PESTLE only focuses on social and

technology aspects, while Porter's diamond will focus on firm strategy structure and

rivalry only.This report will have 6 parts including the background of this report,

general information of both grocery retail in both countries, the comparison using

PESTLE and Porter’s diamond in specific area, recommendation for retail firm in both

Japan and Vietnam, then the last one is conclusion

Introduction:

Grocery retailing is considered to be a remarkable point in most countries, this sector

contributes greatly to economic growth in each country, especially in food retail.

Japan ranks fourth in the world in terms of economy, and second in Asia. However, in

terms of grocery retail, Japan is a country heavily dependent on imports of goods

from other countries, not because of that this country does not have highlights in the

food retail industry. Thanks to technologies have been applied to retail channels, but

also this country has a variety of large retail companies that not only operate all over

the country but also expand to other potential markets. Otherwise, Vietnam is just an

emerging country with growing market. Vietnam does not have much retail channels

which operating worldwide, and technology is still very weak. The background of

grocery retail industry will be presented and discussed. After that, he Porter’s

diamond model and PESTEL analysis will be applied to make comparison in the

natures of each market within selected aspects. Then, this report will suggest some

recommendation which can be seen as advises for both country.

General information of both countries in grocery retail sector.

Japan’s grocery retail:

According to Agriculture and Agri-Food Canada (2016) provided that japan’s grocery

retail sales occupied approximately 30 percent of total retail market as well as

experienced a slight increase by compounded annual growth rate (CAGR) 0.8

percent in sum of 1,16 percent from 2010 to 2015. Food and beverage sales
accounted for 65 percent which follow the American convention system of separating

retail into Food and beverage, GM, clothing & apparel (IMRG). To be more specific,

grocery retail in japan operating throughout difference retailer such as supermarkets,

convenience stores, general merchandise stores (GMS) are the most remarkable

categories, in which convenience stores occupied 14.2 percent of market share with

67.2 billions dollar sale revenues in 2017. Supermarket contributed 337.0 billions

dollar in sale revenue, and held 71.1 percent of market share in 2017. About the GMS,

this category owned 5.2 percent of market share and the sale revenue was 25.5

billion dollar also in 2017 (Sumio Thomas Aoki 2018).

Vietnam’s grocery retail

According to EVBN (2018) pointed out that retail industry in Vietnam is divided into

two traditional retail and modern retail. In details, Vietnam’s grocery retail, especially

in food and beverage sector is still dominated by small traditional retailer, in this case

is wet market, local trader, Ben Thanh market as an example. Ha Phuong (2017)

provided that traditional market occupied almost 80 percent of the total fast moving

consumer goods. To be more specific, traditional grocery retail reached 67.331

millions dollar in 2017, with the huge number of traditional outlets was 658,005.

However, the modern grocery retail has experienced a faster growth rate than

traditional retail, the average growth rate CAGR sales of modern retailers approached

14.6 percent in the past five years from 2013 to 2017, compare 9.5 percent of

traditional grocery retailer. About the number of modern retail outlets was 3,272 in

total of three categories which are convenience stores, Hypermarket, supermarket

(Kiet Vo, Megan Francic 2018).

Comparison using PESTEL analysis:

According to Rugman and etc (2017) provided the definition for PEST analysis that

“this is to map out particular competitive environments or investment contexts for

firms at the regional or national level, compare country conditions, and build future

scenarios to understand short-term and long-term threats and opportunities”. PEST

analysis is divided into political, economic, social or social-culture, and technological.

PEST can be expanded to PESTLE by including legal and environment factors

Social aspect:

There are different factors that affect grocery retail in term of social aspect such as

demographic, age, income. On the one hand, Japan’s retail should consider about

demographic, according to Josh (2009) “Demographics might not be at the top of an

entrepreneur's day-to-day worry list but it's a factor they ignore at their own peril”. In

fact, Japan is known as the second largest country with the highest number of elderly

people in the world with 27.87 percent of people aged 65 and over, meanwhile the

age in labor only accounts for 9.64 percent for group of 15-24 years and 3.5 percent

for group 25-54 years (Indexmundi 2018). In details, Japan grocery retailers

dissemble young people because of the large seniors population, according to

eurofresh distribution (2016) stated that “With such a large senior market, Japan’s

youth segment is often overlooked”. This reason lead to change in food trend in

Japan, usually people tend to buy healthy and functional food, in recent year there

have been a strong growth about 13 percent in home meal replacements and frozen
product increasing 3.3 percent per year.On the other hand, Vietnam is one of the

countries with a young population, age from 15-24 years occupied 16.23 percent, and

45.56 percent in 25-54 years (Indexmundi 2018), along with the awareness of

protecting the health of young people, they will choose organic food or prepare meal

with fresh ingredients. Moreover, young people will use cheap foods instead of

expensive and branded foods because they can hardly accumulate their money to

increase assets.

Technological aspects:

Japan is considered to be the most innovative technology, with much more

development than other countries in Asia. However, the government in Japan began

to face with the lack of labour force rely on elder population will affect retail sector

(Akiko Katayama 2019). The Ministry of Economy, Trade and Industry (METI) applied

“project to promote automation in retail industry with Radio-Frequency Identification

(RFID) technology” (Akiko Katayama 2019). Moreover, there are a lot of vending

machines are used in Japan, according to Harrison Jacob (2017) provided that “At

slightly over 5 million nationwide, Japan has the highest density of vending machines

worldwide”. In contrast to Vietnam, the country is still technologically developing, but

only in recent years have retail technologies evolved with brands such as shopee,

Grab, Foody, Lazad. The technology is applied only in developed cities, not

expanded throughout the country, which mean countryside people won’t have chance

to reach modern retail. According to Vietnam news (2019) pointed out retail sector

require company to innovative in order to serve people well

Comparison using Porter diamond model:

According to B2U (2018) stated that Porter’s diamond is also considered as national

competitive advantage theory, in this diamond type framework concentrate on

explaining why industries within nation are operating internationally, meanwhile

others might not.

Firm Strategy Structure and Rivalry

Domestic competition between company is a way to international rivalry, because it

force company to develop its strength and unique abilities. A good example is the

competition between 7-eleven versus Vinmart+. According to Phuong (2017, quoted

in Viet Nam retail magazine, 2017) proves that “7-Eleven is considered as the most

successful convenience store chain in the world history with more than 60,000 stores

in about 20 countries 46 and territories”. However, this company not equal to

Vinmart+ ( belongs toVingroup enterprise), this company now has more than 1,000

stores nationwide and plans to open 10,000 stores over the next 10 years (Phuong

(2017, quoted in Viet Nam retail magazine, 2017)). Moreover, Vingroup has now

enjoy great advantage from a contract with Shop&Go which Shop&Go sole to

Vingroup for one dollar (Saigoneer 2019).

Recommendation:

As a developing market, Vietnam attracts a lot of foreign investors, which will turn

Vietnam into a piece of cake between domestic and foreign companies, which are
domestic retailers, they should keep market share for yourself based on knowledge of

Vietnam marke

Retail businesses in the two countries should pay attention to changes in population

or taste of many consumers, thereby changing to fit and survive long in the market

With the strong increase in internet users and the development of technology in

recent years, Vietnam has become an attraction for technology-intensive retail

industries. Vietnamese retailers should apply technologies such as payment via

e-wallet. Moreover, they should cooperate with online sales platforms such as

Shopee, Lazada, and Foody to optimize sales channels.

Last but not least, Vietnamese retailers should develop to compete with other

retailers looking at the domestic market in order to keep market share. For

example, Walmart the retailer from the US is planning to entry to Vietnam retail

market.

Conclusion:

In conclusion, in this report will shows the information about grocery retail, especially

in food retail, then a comparison using PESTLE and Porter’s diamond to evaluated
the retail market in both countries Japan and Vietnam, from there, companies can find

out some situation exist among these countries in order to develop and innovate.

Overall, retail in Vietnam is still hard to match with Japan’s retail.

References:

Agriculture and Agri-Food Canada (2016) Modern Grocery Retailing in Japan. [online]
Available at:
http://www.agr.gc.ca/eng/industry-markets-and-trade/international-agri-food-market-i
ntelligence/reports/modern-grocery-retailing-in-japan/?id=1460464699419 (Accessed
at 24 April.2019).

Akiko Katayama (201) Japa9n Aims To Automate All Convenience Stores By 2025
With A New RFID Technology [online] Available at:
https://www.forbes.com/sites/akikokatayama/2019/02/26/japan-aims-to-automate-all-
convenience-stores-by-2025-with-a-new-rfid-technology/#a6380a8745b6 (Accessed
at 26 April.2019).

B2U (2018). Porter’s Diamond Model: Why Some Nations Are Competitive And
Others Are Not. available at:
https://www.business-to-you.com/porter-diamond-model/.(Accessed: 24 April 2019).

Collinson,S, Narula, R, Rugman, A (2017) International business, 7th ed. Pearson

education, pp. 479.

EVBN (2018) Vietnam’s distribution and retail channels. [pdf]. [online] Available at:
http://www.ukabc.org.uk/wp-content/uploads/2018/09/EVBN-Report-Retail-Final-Rep
ort.compressed.pdf (Accessed at 25 April.2019).

eurofresh distribution (2016) Insights into food retailing in Japan [online] Available at:
https://www.eurofresh-distribution.com/news/insights-food-retailing-japan (Accessed
at 26 April.2019).

Harrison Jacob (2017) Japan's vending machines tell you a lot about the country's
culture. [online] Available at:
https://www.businessinsider.com/why-so-many-vending-machines-in-japan-2017-1
(Accessed at 26 April.2019).
Ha Phuong (2017) Traditional markets winning retail battle with supermarkets in Vietnam
[online] Available at:
https://e.vnexpress.net/news/business/data-speaks/traditional-markets-winning-retail-battle-with
-supermarkets-in-vietnam-3612293.html (Accessed at 25 April. 2019).

IMRG Japan’s retail landscape [online] Available at:

https://www.imrg.org/japan-retail-landscape/ (Accessed at 24 April.2019).

Indexmundi (2018) Japan demographic profile 2018 [online] Available at:

https://www.indexmundi.com/japan/demographics_profile.html (Accessed at 26
April.2019).

Indexmundi (2018) Vietnam demographic profile 2018 [online] Available at:

https://www.indexmundi.com/vietnam/demographics_profile.html (Accessed at 26
April.2019).

Kiet Vo, Megan Francic (2018) Vietnam Retail Foods Sector Report 2018. [pdf] USDA
Foreign agriculture service [online] Available at:
https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Hanoi_
Vietnam_11-13-2018.pdf (Accessed at 25 April. 2019).

Sumio Thomas Aoki (2018) Japan Retail Food Sector. [pdf] USDA Foreign agriculture
service [online] Available at:
https://gain.fas.usda.gov/Recent%20GAIN%20Publications/Retail%20Foods_Tokyo
%20ATO_Japan_6-22-2018.pdf (Accessed at 25 April.2019).

Josh (2009) Why Demographics Are Crucial to Your Business [online] Available at:
https://www.inc.com/news/articles/2009/12/customer-demographics.html (Accessed
at 26 April.2019).

Vietnam news (2019) Technology reshaping VN retail sector [online] Available at:
https://vietnamnews.vn/economy/506630/technology-reshaping-vn-retail-sector.html
#woOcupUBwedD4g7c.97 (Accessed at 26 April 2019).
Phuong (2017) Analysis of retail market in Vietnam. [pdf] [online] Available at
https://www.theseus.fi/bitstream/handle/10024/127500/Nguyen_Phuong.pdf?sequen
ce=1 (Accessed at 26 April.2019)

Saigoneer (2019) Singaporean Convenience Store Chain Shop & Go Sold to

Vingroup for One Dollar. [online] Available at:
https://saigoneer.com/vietnam-news/16095-singaporean-convenience-store-chain-sh
op-go-sold-to-vingroup-for-one-dollar (Accessed at 26 April.2019).