International Market Research in Vietnam for Australian Firms

Introduction

In an increasingly globalized marketplace, it is vitally important for enterprises of all types to have reliable and timely information concerning the markets in which they compete. Moreover, for companies seeking to expand their operations into foreign countries, obtaining market research data is absolutely essential. Things have changed from years past, and many companies may be tempted to use the vast array of market data readily available on the internet or through domestic sources such as university and public libraries or trade journals. Furthermore, many countries seeking additional foreign investment have established trade offices that provide prospective investors with market-related data free of charge.

Nevertheless, it is reasonable to assume that obtaining real-world, real-time information about a particular country — especially in developing nations where corruption, piracy, or other illegal trade practices are rampant but might not be readily discernible from an outsider's perspective — will play a crucial role in an international venture. To this end, this paper provides a critical review of the peer-reviewed and scholarly literature to determine the best approach to conducting market research in emerging economies such as Vietnam, including whether to use an Australian or locally based research firm to conduct market research for a given product or service. A summary of the research and salient findings are provided in the conclusion.

According to Oxford University Press's Dictionary of Business (1996), marketing research can be defined as:

"The systematic collection and analysis of data to resolve problems concerning marketing, undertaken to reduce the risk of inappropriate marketing activity. Data is almost always collected from a sample of the target market, by such methods as observation, interviews, and audit of shop sales. Interviews are the most common technique, and can be carried out face-to-face, by telephone, or by post. When the results have been analysed (usually by computer), recommendations regarding the original problem can be made. Market research, which is often used synonymously with the preferred term 'marketing research,' is also sometimes used to refer to techniques with the restricted objective of discovering the size of the market for a particular brand or product." (p. 313)

Today, businesses have a number of options available when conducting market research in other countries, but some approaches are more appropriate than others, depending on what information is needed, what product or service is involved, and what in-house resources are available. Some authorities suggest that almost every company can benefit from some level of marketing research for their various products or services. In this regard, Duboff and Spaeth (2000) report that "what's needed to take companies to the next level before the competition gets there is the ability to strategically anticipate what's coming while continuing to efficiently manage the business on a day-to-day basis" (p. 16). There are an increasing number of market research firms that specialize in international analyses, and many companies are already using these services to good effect. According to Gerbetz and Scalea (2001), "Among corporations who hire professional services firms for strategic planning, the skills of consultants are much more important than the reputation of the firm. The majority of executives interviewed said they would be more likely to hire a professional services firm with people possessing the global business credential" (p. 65).

The importance of recent trends in international marketing research is also reflected in the development of new research areas concerning market globalization and collaborative business arrangements, including in-country strategic alliances (Brewer & Rugman 2001). According to these authors, "These trends have imparted added importance to research in international marketing, but it is not clear how research in the field has coped with this broadened responsibility in a fast-changing environment. Past reviews of international marketing research highlighted deficiencies of the discipline in two aspects: that international marketing research was fragmentary and exploratory without a strong theoretical framework, and that it lacked the methodological rigor compared to the generic (or domestic) research in marketing" (Brewer & Rugman 2001, p. 458).

General Market Research Considerations

While there are proven approaches for domestic or international market research, the question of whether to conduct such research in-house or outsource it to a third-party provider in the host country does not have an easy answer, as a number of factors must be taken into account. For example, if a company outsources its market research needs to an in-country provider, there may be fundamental communication issues that adversely affect the value of that research. According to a study by Scipione (1995), descriptive words and phrases can play a crucial role in creating magnitude or value impressions in the minds of those who read market research reports and then make business decisions based on them. "This finding is made all the more important by the related finding that those persons who only read (but do not write) research reports tend to have many different word-value perceptions than those persons who write (and usually also read) research reports" (Scipione 1995, p. 36).

This means that absent a native speaker of the commissioning company's language, managers run a real risk of paying for market research data they will not be able to use effectively — or at all. Furthermore, Wilkinson (2006) reports that "the market-based view posits that a market-knowledge gap exists between home country firms, which lack specific resources and capabilities needed in particular overseas markets, and host country firms, which possess those resources and capabilities because of their knowledge about local market conditions" (p. 99).

This information gap can be overcome by ensuring that in-house marketing staff have the requisite linguistic capability — there is a small contingent of Vietnamese expatriates living in Australia that could be used for this purpose — or by establishing strategic partnerships with entities already operating in the host country. This gap can also decrease over time as the exporter learns more about the host-country market (Wilkinson 2006). Many companies, however, may not have the luxury of learning about a host country gradually and will need to understand their potential customers — who they are, what they want and need, and how they routinely go about getting it — from the outset.

According to Morey and Nelson (1995), when effectively performed, market research represents an excellent business tool for gaining the insights needed to achieve organizational goals: "Market research is a formalized process for collecting and analyzing information. It gives the opinions of all persons equal weight and visibility, not just those of the most vocal and persistent. It also prevents the bias of hearing what one wants to hear. The confidentiality of the process enables persons to express their true feelings" (p. 35). In many ways, conducting timely and effective market research is both a science and an art, but some companies either fail to conduct such research or fail to act on findings when research is completed (Duboff & Spaeth 2000).

In their book Market Research Matters: Tools and Techniques for Aligning Your Business, Duboff and Spaeth (2000) report that market research is an essential first step, but not the end of the line — something must be done with the findings: "Not only does an enterprise need to embrace the possibility of continual change, but also the marketing researcher has to be able to employ the tools and communicate their results effectively" (p. 13). This level of communication is clearly facilitated when the market research is conducted by the company itself rather than by a third-party provider in the host country, but this does not mean that one approach is universally superior, since every situation is unique.

Some general considerations can help a company's leadership determine which approach to use. As Duboff and Spaeth (2000) note, "Understanding the recent past and present is necessary — though not sufficient — to researching the future. You need a stable foothold and insight into the dynamics of the marketplace from which to be able to peer effectively into the future.... Marketing research can provide real value by helping to provide the radar that will alert the enterprise to perils — and opportunities — ahead" (pp. 3–13).

Proponents of market research maintain that such activities help ensure companies remain consumer-oriented. According to Fuglsang and Sundbo (2002), the value of market research depends on the type of service or product involved and the intended destination country. "In practice," they note, "this means that new products are more successful if they are designed to satisfy a perceived need than if they are designed simply to take advantage of a new technology. The approach taken by many companies with regard to market research is that if sufficient research is undertaken the chances of failure are reduced" (p. 115).

According to Fletcher and Smith (2004), the introduction of various technological innovations and a proliferation of international consumer data have produced the following trends in market research:

Market research is moving away from its roots as a discipline detached from the business decision-making process and is now more actively engaged with decision-facilitation. This shift has required new methodological thinking — a "holistic" analysis approach that provides clients with a rounded view of what all their qualitative and quantitative marketing evidence is saying. The new approach also requires analytical frameworks that combine hard market research data with prior management knowledge and intuition. These frameworks must be disciplined: intuitive thought can be powerful, but it can also be wrong. The holistic approach to data analysis therefore needs to be based on rigorous evaluation of prior management knowledge, as well as drawing on conventional data analysis methods (Fletcher & Smith 2004).

While these trends suggest that most companies are increasingly recognizing the importance of effective and timely market research before entering a given market, the country involved and the type of product or service may affect the decision of whether to acquire this data in-house or outsource it to a domestic provider in the destination country.

Market Research in Emerging Nations and Vietnam

Emerging countries such as Vietnam enjoy an abundance of natural resources amenable to development for tourist purposes, and there has been a significant move on the part of many Asian nations to encourage additional trade in recent years (Ghimire 2001). According to Ghimire (2001), "Developing countries considered they had a 'comparative advantage' vis-à-vis the industrialized world as they possessed exceptional tourist resources and attractions, such as warm and sunny weather, attractive beaches, unique wildlife and tropical forests and exotic or authentic cultures" (p. 99). As a result, emerging nations such as Vietnam have sought to encourage additional foreign investment through: (a) identification and development of new tourism-related sites, (b) promotion and marketing of diversified tourism products, (c) enactment of favourable labour laws, and (d) provision of subsidized credits and tax exemptions to foreign investors (Ghimire 2001).

These initiatives, however, have only served to reinforce existing disparities between Western and Asian nations, a trend exacerbated by the Asian financial crisis in the early 1990s. Ghimire (2001) emphasizes that "privileged tourist groups, coming mainly from the industrialized countries in the North, tended to respond more to the economic and political circumstances in their respective countries than to needs in Southern countries. In particular, developing countries possessed little capital, technology and know-how to develop tourism. Instead, this situation reinforced 'dependency' relationships with industrialized countries" (p. 99). Despite these challenges, the fact that Vietnam has enacted favourable labour laws and provides subsidized credits and tax exemptions for foreign investors means that the time is ripe, and Australian companies that take advantage of these opportunities will be well situated to reap the benefits in the years to come — if they approach their market entry correctly.

According to Fields, Gunther, Katahira, and Wind (2000), significant attention has been paid to market research in the emerging Asian marketplace in recent years, with important findings for Western nations seeking to expand operations there:

"Today, marketing is moving from the periphery to the center. Marketing expertise, once an afterthought, is now a central strategic necessity in rapidly changing Japanese and Asian markets. The practice of branding and segmentation, pricing, new product development, advertising, and marketing research have undergone fundamental transformations. These changes have tremendous implications for the critical success factors in entering Japanese and Asian markets." (p. 128)

Australian firms seeking to extend their market into Vietnam have options when it comes to conducting market research, but emerging nations may have special considerations that could go unnoticed without insider assistance from people who are in-country and knowledgeable. Eckerman (2005) emphasizes that market research is an absolute necessity for companies seeking to gain market share through exports, and identifies a number of benefits to be derived from effective and timely research of an emerging nation, including:

Effective market research provides companies with insight into the target market's economy, political risks, credit terms, and recommended payment methods. Companies can find out which currency they are likely to invoice in. They can establish the market size and likely product demand, identify the location and number of customers or outlets, and even establish the creditworthiness of potential customers. Market research also helps companies determine who their competitors are and what makes them successful, revealing the quality and prices of competitive products already being sold in the target market. Companies need to know if there are technical standards to be met, as well as packing and packaging requirements, particularly in relation to labelling regulations. Before exporting, companies should identify the most effective distribution channels and methods — agents, distributors, and wholesalers. Companies also need to be aware of any tariff or import restrictions, including duties, quotas, and taxes on imported goods, knowledge of which is essential for realistic pricing (Eckerman 2005).

Some basic facts about Vietnam and its consumers are useful to consider at this point. Two authorities on Vietnamese culture, society, and markets describe today's urban Vietnam as follows:

"Street culture in the cities of Vietnam is one in which street vendors carrying baskets of fresh produce from their farms jostle with young men in crisp, white, business shirts rushing to their offices, where cyclos carry groups of students loudly communicating on their mobile phones, where the pavement noodle shops double as internet cafes and the latest glimmering paintjob on a motorbike is being admired by a group of savvy young consumers. The streets in urban Vietnam are predominantly youth-focused, reflecting the demographic situation in which well over half of the population is under 16 years old. However, it is not so much the age of people that marks the cities as being forward-focused and energetically engaged in the future, but the technologies, music, fashion and leisure activities which symbolise a population urgently acquiring the emblems of modernity." (Drummond & Thomas 2003, p. 1)

While this thirst for modernity may not be as pronounced as some commissioning companies in the West might hope, the Vietnam market is dynamic and its economy is growing — and even that is changing quickly. Drummond and Thomas (2003) cite "the slowly increasing levels of wealth" and "the gradual freeing up of state control over the activities of the populace" as indications of these trends (p. 1).

According to U.S. government analysts, Vietnam is a densely populated, developing country that in the last 30 years has managed to recover from the devastation caused by decades of war, the loss of financial support from the former Soviet Bloc, and the rigidities of a centrally planned economy (Vietnam 2006). Furthermore, the country's leadership has attempted to implement badly needed structural reforms to modernize the economy and produce more competitive, export-driven industries. Vietnam's membership in the ASEAN Free Trade Area (AFTA) and its entry into the U.S.–Vietnam Bilateral Trade Agreement in December 2001 have resulted in even more rapid changes in its trade and economic conditions (Vietnam 2006). Exports to the United States from Vietnam doubled in 2002 and doubled again in 2003 (Vietnam 2006).

In addition, Vietnam has continued to seek accession to the World Trade Organization, an initiative that would provide the country with a number of benefits, including allowing Vietnam to take advantage of the phase-out of the Agreement on Textiles and Clothing, which eliminated quotas on textiles and clothing for WTO partners on 1 January 2005. Vietnam remains committed to facilitating job creation to maintain pace with its high population growth rate; high levels of inflation, however, have caused Vietnamese authorities to tighten monetary and fiscal policies (Vietnam 2006).

From Eckerman's (2005) perspective, it may be useful — perhaps even essential — to employ a market researcher familiar with the country: "Never underestimate the importance of cultural differences. Before spending money on literature and support materials, you should seek the advice of a professional with knowledge of the market as the requirement for translations; the use of certain colours or even the wrong sized paper in some countries may mean the difference between success and failure" (p. 66). Notwithstanding cultural and social differences between Vietnam and Australia, the people of Vietnam are, in many respects, much like consumers in any market.

According to Pham and Tran-Nam (2002), "In a market economy, the customer is king, who should be respected by all successful sellers. Domestic customers are usually less demanding than foreign customers, but that does not mean that producers can afford to ignore and underestimate domestic demand" (p. 202). Fletcher and Smith (2004) emphasize that ethnocentric views or misperceptions on the part of the commissioning company may adversely affect its ability to conduct effective analyses: "Another common problem in successfully undertaking a market research study is the fact that the project may not have been set up based on a full and detailed understanding of the 'customer's world'.... A failure to do this could mean that the analyst will accurately analyse the data in front of them, but will still never truly get to grips with what customers really think" (p. 45). Likewise, it is essential for commissioning companies to keep in mind that consumers in emerging nations seek out products and services that offer them the best value for their money:

"Producers should understand that domestic consumers want to trade their hard-earned money for goods of quality at a reasonable price, and not keep afloat bad producers. That is a principle that foreign businesspeople have mastered when looking at the market with 78 million Vietnamese, all of whom want to buy durable goods at competitive prices. Regardless of trade barriers, local consumers see that foreign goods are more attractive than domestic goods in terms of quality and prices." (Pham & Tran-Nam 2002, p. 202)

Conclusion

The research was clear in showing that the Socialist Republic of Vietnam is well situated today to become a major player in the Southeast Asian marketplace, as well as becoming an economic powerhouse in the near future. Understanding this emerging market represents a vital first step for companies seeking to expand their operations there, but the research also showed that there are fundamental constraints to engaging third-party domestic providers for this purpose. Nevertheless, because every situation is unique, it remains incumbent on the commissioning company to recognize when one approach is superior to another, and to use whatever market research data is developed with the above-described constraints firmly in mind.