Free Sample: Bargaining power of suppliers paper example for writing essay

Bargaining power of suppliers - Essay Example

Trung Nguyen Corporation was established in 1996 by young talented entrepreneurs, their target is to introduce the authentic Vietnamese coffee to the world. Ten years after the established day, Trung Nguyen has become a famous trade mark in domestic and foreign market. At present, Trung Nguyen is a strong corporation with 6 subsidiary companies. It also owns nearly 1000 franchised coffee shops which commit to keep the original coffee flavor in any Trung Nguyen coffee shops. Trung Nguyen makes a plan to expand the trade mark in Europe.

To penetrate into this market, Trung Nguyen confront with a lot of obstacles. That’s also an opportunity and challenge for Trung Nguyen. Determining the market structure is a very important thing for every enterprise to take part in a market environment. If the companies have a right identification about the market structure, they will determine clearly what they should do. The area of economics which is most relevant to us looks at how the businesses and consumers behave in the markets. The most important thing for an individual business or consumer is the number of rivals there are in the market.

For example, if there is only a company produces sport bicycle in the city, the company will have a lot of power in setting the price, the customers may come to the company even if the prices are a bit high. The market structure is categorized into six namely perfect competition, monopoly, monopsony, oligopoly, duopoly, and monopolistic competition. In this part, we only concern about four markets including perfect competition, monopoly, monopsony, and oligopoly in order to bring out the deviation from the model of perfect competition that Trung Nguyen engages in.

In the market, there are more and more new cafibrands such as Metrang cafi, Dak Glay cafi , LamDong cafi?? , and a lot of small sole trader producing cafe. The appearances of new competitors make the coffee market share smaller. Especially, there is a participation of Nestle’ cafi?? which dominates over half the world’s instant coffee market. When the coffee market share is broken into pieces, the profit of Trung Nguyen will decrease also. The much more appearances of new competitors also affect the image of Trung Nguyen coffee. For example, the customers will spend more time to focus on the new products to find the new feature or flavors.

New products always attract the curiousness of the customers. The new ones often have some new ideas to attract the attention from customers, so Trung Nguyen has to create a distinctive feature compared to other brands. In recent years, beside the normal coffee, Vietnamese customers are familiar with using instant coffee can. There are some substitute product that can affect Trung Nguyen’s sale volume and profit such as: Birdy instant coffee, VIP instant coffee (Tan Hiep Phat Corporation), Nestle’ instant coffee. Instead of buying a cup of coffee or packets of instant coffee, the consumers can buy chocolate milk which has a similar flavor.

In the market at present, there are some milk producing corporations which are specializing in chocolate milk namely Vinamilk, Nutifood, Dutch lady… Secondly, cacao also has some similar functions which stimulate the sense and taste of the customers. Milo is the most popular cacao beverage in Vietnam, so this product is actually the threat of Trung Nguyen coffee. Trung Nguyen marketing department has makes a lot of adverting campaign to expand its brand, always launch the new product lines to attract the attention of customers. Trung Nguyen also notes detail on each product to show all of the best of the product.

The target market of Trung Nguyen is Vietnam. Vietnamese people income is just at an average level, so the purchasing power is not high. Vietnamese people tend to bargain when they buying something. They are always suspicious about the correlation between price and quality of product. Moreover, there are a lot of coffee brand in the market, each brand name has a particular price, flavor; so the customers have to think carefully before choosing the best one. To serve this point, Trung Nguyen has launched three type of product for all status in society including premium products, intermediate products, and universal products.