News for the Hospitality Executive
|© by Dietmar Kielnhofer Ph.D, Ho Chi
Minh City, July 2007
The tourist industry in Vietnam is still in its infancy.
Vietnam is, euphemistically called, an “Emerging Market” that depends largely on foreign investment for its prosperity. The long-term future of the Vietnamese tourism industry is linked to the sustainable management and developments of its products – in this case its tourist assets and unique factor conditions. Within this context, sustainability means achieving growth in a manner that provides the visitor with a meaningful experience, without causing an adverse impact on the country’s resources and social fabric. Price sensitivities, image building, effective marketing and the management of the diverse interests of all stakeholders in the industry area are all vital components of sustainability. It is no secret that foreign investment can do wonders for an economy from creating jobs to transferring technology and knowledge, to raising labor and product standards. In order to achieve this, an international marketing strategy needs to be developed to position Vietnam successfully in the global tourism arena and earn foreign currency to repay its mounting debt.
Vietnam is one of the fastest growing tourist markets in the world, with an annual average growth forecast of 8.7% in 2007 and beyond - the second strongest growth after China in South East Asia.1 In the first quarter of 2007, more than 700,000 international visitors came to Ho Chi Minh City, an increase of 11.5% compared with the same period one a year ago. All international hotels have been fully occupied, running at 80% or more of total capacity. Although room prices have increased between 20 to 35%, supply has been unable to meet demand. According to the HCM City Tourism Department, a shortage of more than 4,000 rooms is estimated for this year. As demand is forecasted to increase by 50% annually, the shortage will be 14,500 rooms by 2010, mainly in the four and five star segment. Vietnam's Ministry of Tourism reports that the country needs an additional 15,000 to 20,000 four or five star hotel rooms from now until 2010 in order to meet the surging demand. The Vietnam National Administration of Tourism has proposed major cities and tourism centers nationwide to allocate land for luring projects on building luxury hotels and resorts. It is also calling for localities, organizations and enterprises to upgrade their guesthouses or mini-hotels into star-rated hotels. VNAT's Hotel Department reported that the country has only 90 four and five star hotels with over 15,000 rooms, accounting for 1% of the country's total hotel number and 9% of the total room number.
Vietnam needs to develop a coherent, aggressive, growth driven, marketing oriented tourism strategy to attract more foreign visitors. To determine the correct positioning of Vietnam, whether to pursue a niche positioning or a focused, quantitative high volume, low cost driven strategy, will be a key strategic objective. Vietnam needs to critically analyze and determine its key strategic assets and find out why it does not have the same amount of tourists than comparatively other destinations in South East Asia -despite excellent inherited factor conditions. What are the strategic (natural characteristics) assets Vietnam has at its disposal and how to competitively position them vis-à-vis Thailand, Singapore, Indonesia, mainly Bali, and to a lesser extend Cambodia.
These Asian nations have a similar geopolitical and socio-economic composition –notwithstanding, culture and macro-climate that is essential to its long-term success. Vietnamhas to specify its competitors and how it benchmarks itself within that competitive set? The government is aware that its country specific - revenue generating assets it has inherited aremainly the beach destinations of Danang and Nha Trang as well as the historical and culturallydiverse destinations such as Hoi An, the ancient Imperial city of Hue and Halong bay. Thesenatural assets have to be placed under the jurisdiction of the Ministry of Tourism for futuregenerations to see.
The aim of this research paper is furthermore indicative of the government’s ability to create a sustainable value proposition and minimize existing income inequalities. What are Vietnam’s specific factor conditions and how effectively does the government promote these assets to attract tourists? What concrete measures does Vietnam undertake to design a long-term successful competitive strategy to position itself as a key player in the socio-economic and politically fragile, ever changing political environment of South East Asia? The ultimate goal is to obtain sustainable competitive advantage by providing greater value to customers through differentiation. Tourism in Vietnam has to be understood from a microeconomics, South East Asian perspective, before looking at it through the prism of a global viewpoint. Vietnam needs to pursue a niche positioning in order to create differentiation and thereby reaping above average profits, as an attractive tourist destination. The intention of this paper is to provide a strategic framework for the government to assess their strengths and weaknesses and develop a corresponding action plan by critically asking; what are the strategic and tactical objectives that need to be achieved. What are the strategic options the government has to pursue? Is it a “Resource Based” approach or is the “Environmental Fit” model that suits Vietnam best? Or is it a combination of both?
Capitalizing on Vietnams Tourism Assets and its Unique Factor Endowments
2Travel and Tourism is one of the world's largest industries. It is responsible for 200 million jobs, more than 10% of gross domestic product around the globe and is forecast to grow by 4.5% a year over the next decade. A study by the World Tourism Organization (WTO) indicates that a world free of crisis would witness annual tourism growth of four percent and hit WTO's target of 1.5 billion tourists by the year 2020, with Asia providing the engine of growth. The travel and tourism industry is a key foreign currency earner for Vietnam and accounted in excess of ten percent of GDP in the past. The tourism industry became Vietnam's third largest foreign currency earner, and was accounting for over 7% of GDP.
Vietnams Attractions and Opportunities: A Question of Branding the Right Assets
The National Tourism Authority is currently developing a distinctive brand identity for Vietnam. In order for Vietnam to position itself in a highly competitive global environment it needs to clearly define its objectives and goals of what it wants to achieve as far as positioning and target marketing is concerned. Recent government talk evolves about positioning Vietnam as a "Boutique" destination that draws on its core cultural and geographic assets and brand themes from its patrimony of heritage and nature; all in the context of a secure, peaceful destination in a friendly welcoming environment for high yield visitors.
The implications of this positioning require Vietnam to define its principle products; the intrinsic value proposition why people should come to Vietnam. It needs to identify its main markets and engage in a meaningful target marketing exercise, and above all, strive for "Positioning of Excellence" in all of its endeavors. Part of its positioning statement simply means that Vietnam's attractions and key messages will be product and image based rather then location based. Vietnam is targeting Western and Asian tourists simultaneously to emotionally satisfy their diverse needs and wants by clearly differentiating its tourist sites. Without doubt, the most important argument in Vietnam's favor, as a future draw to western tourists, is the country's commitment, both to further developing its well-known tourist sites and identifying and developing sites that have not yet been featured in package tours. Given the success Vietnam has had in branding Halong Bay as one of the world's premier unmissable sites, the potential for the development of lesser-known sites should also not be underestimated. Halong Bay and Hoi An for example, on the UNESCO list of World Heritage Sites, can compete perfectly as a stand alone destination per see and compete with the likes of the Taj Mahal, Angkor Wat in Cambodia and Machu Picchu in Peru.
Niche Marketing And The Future Of Adventure And Eco-Tourism: Promoting Uniqueness And Differentiation
Looking through the prism life cycle planning, Vietnam's tourism industry is still in the growing stage and has still a long way to go optimizing its earning potential from tourism. The combination of lush rain forests, tropical beaches lends itself to position Vietnam as an ideal ECO destination. To compete with Thailand, the Philippines or Malaysia and create another successful beach destination would be sub-optimizing of marketing dollars and efforts as these nations are well entrenched in their present positioning. It is about changing the mind share of consumers and being perceived as different. Achieve clear, long-term sustainable competitive advantage, can only by designing a business model that pursues a strategy of differentiation. The strategy becomes thus a marketing strategy based on design and deliberate planning rather then by accident. With the perpetual shift of demographics, consumer behavior and spending habits have also changed. The aging baby booming generation has the highest disposable income of all generations. However as they are getting older their vacation preferences shift from a typical beach holiday, to a vacation that is culturally and intellectually rewarding. A permanent suntan was part of being hip and trendy, now trends are shifting to a more placid culturally interacting vacation that enriches body mind and soul. Being environmentally friendly and showing the appropriate behavior is the latest trend among politically correct vacationers. Having seen all the "cool" beaches of the world from Waikiki in Hawaii to Bali, Tahiti and Zanzibar the latest trend becomes adventure and ECO tourism. Vietnam is in an excellent position to highlight its assets primarily in the Mekong delta and the inhospitable area of Sapa on the border to China.
With tourists becoming more aware of the negative consequences of tourism, eco-tourism is one of the fastest growing global tourist products. Its earnings rising from $12 billion in 1989 to up to $50 billion in 2000, when it generated an estimated 10 - 15% of world travel spend.
Vietnam is predestined and blessed with a variety of factor endowments unique to its location - from a geographical, historical and cultural perspective. Holiday seekers associate Vietnam with the lime stone formation of Halong bay and Hoi An that are listed on UNESCO's protected world heritage sites. With its bio-diversity, a unique place to explore the colorful corals and underwater fauna and flora -indigenous only in this part of the world.
Eco and adventure tourism is emerging as a new worldwide trend where Vietnam is in an ideal position to make its presence felt. Vietnam, with its long and colorful history is predestined to become a leader in inter-regional cluster marketing by setting the benchmark for other nations to follow. Forming a strategic alliance with, for instance, Thailand, Laos and Cambodia, Vietnam will be in a powerful position to create a regional tourism brand where all stakeholders benefit. This type of "strategic cross border marketing" needs to be embraced by all parties in order to create a new destination in itself. It is at that level where the inter-dependence of nations and their dual purpose of national cross promotion and regional brand building becomes a strategic option. Harnessing the power of this specific region by offering service, rate and price parity -at every level of the service spectrum -whenever an interaction with a consumer occurs. By carving thus out a niche in the international tourist arena for itself, Vietnam is in a formidable position to successfully market its heritage.
The "Resource Based Approach" To Marketing Tourist Assets vs. The "Environmental Fit" Model
This is a very important question that warrants further, in-depth analysis, as its outcome determines the future ability of Vietnam's government to increase its income from the tourism segment. What are the strategic choices available for decision makers, and what is the best method to identify its available resources? Management literature that deals with strategic and business management refers to positioning strategies based on the resource availability or environmental fit strategies - depending on which school of thought one wants to follow and what are the particular circumstances. The challenge with academic language dealing with strategic management, in particular with competitive advantage and positioning is, that it compels marketing executives to adopt the "Environmental Fit" approach or the "Resource Based" approach. This dichotomy literally forces, largely unwarranted, managers to adopt the either or approach and thus automatically narrows the alternatives for further strategic options. Both strategic approaches have the potential to build upon each other. Hence, there is compatibility between the resource-based view and the environmental fit model as a potential source to gain competitive advantage over other nations. There is no empirical evidence that both strategies cannot build (coexist) upon each other and evolve gradually over time into the next stage. Like product life cycles, nations have to continually reinvent themselves to maintain their competitive advantage and stay abreast of market dynamics. A tourist market in particular is never static but subject to perpetual activity as the market dynamics and variables are always changing. The equivocality of that concept has to be challenged and closely scrutinized -not for its authority, but for the complimentary function it can provide. The scholastical perception of the resource based view and the environmental fit model needs thus be reexamined for their compatibility. Consequently this unilateral perception is not in the interest of strategic management as in practice - as proven throughout this thesis -is that a complementary view is perfectly feasible on a macro economic level. In the case of Vietnam, it is evident that it needs to follow, primarily, a resource based strategy due to factor specific conditions that are unique to this country and cannot be changed before altering its strategy, and adopting, the environmental fit approach to optimize its position. By capitalizing on its unique factor conditions, Vietnam will thus be in an excellent position to capitalize on its assets in the long-term. Once it reached that level of critical mass, it needed to morph into new revenue generating ventures to sustain its competitive advantage in South East Asia and not loosing market share to other nations in its vicinity.
Vietnam is for obvious reasons not in a position to change its tourist assets but it has opportunities to augment its income by adding special features to its existing tourist sites. Michael Porter in his groundbreaking book "The Competitive Advantage of Nations"3 argues that a company, in this case Vietnam, needs to follow one of his prescript strategies to succeed. That statement is potentially prejudiced as it restricts creative thinking and prevents decision makers from lateral thinking and explores other opportunities. This convergent thinking process -as opposed to a more divergent process, is thus narrowing the strategic options. The conventional Bain/Mason paradigm of Industrial Organization, on which Porter built most of his work that became known as the "Structure-Conduct-Performance Paradigm" is hence not only applicable to traditional business models but also leads to the same results in conventional, structural nation building processes to enhance a nations competitive advantage. The4 basic conceptual framework of the premise of the "environmental fit" model claims that a firm, in this case Vietnam, must continually adapt its mix of internal strengths and weaknesses to the opportunities and threats of its external environment.
Questioning the Long-Term Economic Viability of Pursuing a Resource Based Dependency Model
Vietnam needs to diversify its economy in a combination of labor-intensive manufacturing industries and high tech industries for export within North Asia, primary Japan and Korea as well as Australia and to a lesser extent Europe. During the currency meltdown in Asia in 1997/8, mainly in Thailand and Indonesia, where many banks and other financial institutions defaulted on Dollar denominated loan payments, (other reasons where the high gearing ratios and absence of sufficient collateral), had other industries to boost its competitiveness mostly in the timber and garment industry to increase their export competitiveness and thus reduce the account deficit apart from restoring international confidence in their currencies. The sudden depreciation of their currencies relative to European currencies and the US Dollar attracted also massive amount of tourists from Europe who perceived the favorable exchange rate as a bargain. Jordan does not have that luxury; it literally depends solely on tourism to survive. The parallels drawn from this example may not be hundred percent justified however; it indicates the susceptibility of a developing nation's economy to diversify sufficiently at an early stage and not being exposed to economical and political instability. The viability of this economic business model needs to be constantly re-examined for its long-term sustainability. Fortunately, Vietnam is in an excellent position vis-à-vis its principle competitors, mainly Thailand and Malaysia as it not only has a well-diversified and buoyant economy, but it is free of political and socio - economic disruptions.
Identifying and Assessing Demand Conditions
Adopting the resource-based strategy of positioning Vietnam's factor endowments enables the country to create its own demand conditions by adopting a two-pronged strategy. Whilst we like to think that, the market is consistently evolving or morphing into a new state of being, the fact is that customer perceptions are changing faster than economies and industries can adapt to their new needs and wants. The average Asian customer became more sophisticated then ever before, and at the same time became more adventurous.
The top ten favorite tourist destinations have not actually changed very much over recent years. The desire to get away has become a characteristic of modern society and most Europeans consider an annual summer holiday an essential physiological and psychological right in their own way, rather than a luxury. The top five tourist destinations for Europeans are still France, Spain, Greece, Turkey and Italy; with new "hot destinations" changing virtually every year. For 2003, it was Mexico, Dubai, Bulgaria and Croatia. Moreover, by the end of 2007 China is expected to claim the coveted number one tourist destination in the world. With political turmoil in neighboring Thailand permeating every level of society and a strong bullish economy at home, Vietnam is now in an excellent position to capitalize on these favorable circumstances and begin promoting itself as the new "Must see Destination". What is still missing is clear identification of new feeder markets that have been neglected in the past -for instance Russia and the former states of the USSR. These newly developed markets function on a complementary basis to the already existing market. The critical success factor however is identifying the right cultural niche in attracting these markets and, thereby optimizing the return on public relations and marketing expenditure.
Successful marketers understand it cannot be all things to all people - trying to satisfy everybody thereby sub-optimizing its efforts and underselling its tourist assets and products. Nations, and Vietnam is no exception, are culturally and geographically too diversified to adopt one strategy to meet all the inherent needs and demands of consumers; in this case holiday seekers. The backlash of anti Saudi sentiment in the western world heralded a windfall in revenue to other destinations that project a more Muslim friendly image. 5Malaysia for instance, earned over U$6 billion in 2001 from Tourism. Lebanon, Egypt and UAE observe record arrivals of Saudi nationals as they feel they are more welcomed in these destinations than in the west. The earning potential, from a macro tourism perspective, has not yet been understood as the sensitivity of the political situation precedes the economical urgency unfortunately. What is required is an even distribution of marketing budget to key markets and new emerging markets in eastern Europe and selected nations in Asia that were identified in the past as potential markets. In a time of crisis - as well as opportunities, -all available resources ought to be allocated to the most promising target markets and have it equally distributed -or at least to these nations that contribute the largest tourist shares.
In the age of globalization and a borderless world, government decisions must reflect a fundamental understanding of how consumers react to political instability - a case in point is Thailand that shows a decline of 20% of corporate travelers in the aftermath of last years coup d'etat. International interdependence and integration is now more important then ever before. In a time where borders shrink - or even become nonexistent -where commercial goods are traded on the Internet and transcend borders, international travelers demand (and justifiable expect) a flawless travel experience without hassles. By having a narrow perspective, focusing too much on internal problems instead of having a wider regional outlook, Vietnam needs to focus to attract a sufficient amount of international tourists with high spending power. It is all about global thinking and acting locally and positioning Vietnam as a destination capitalising on its unique French legacy, unspoiled beaches and a cultures heritage that dates back 100 of years.
Growth Opportunities in the Service Sector
Over the past five years, Vietnam economy showed continued growth with the average growth rate of 7.7% per year, GPI per capita has increased from $450 in 2001 to $720 in 2006. The political and economic stability, a revised legal system and the recent entry of Vietnam to WTO have been important factors that help improve the investment environment for the business circles in and beyond the country. Vietnam has a population of 85 million among which 45 million (53% population) are under the working age and most of them are young and under 35. Within the market services sector, employment trends in the sector wholesale and retail trade, restaurants and hotels have been erratic, which almost doubled in terms of employment relative to the total from 9.8% in 1987 to 19.5% in 2000. Agriculture accounts for 20.1% whilst industry accounts for 41.8% and the service industry accounts for 38.1% of GDP contribution. Different industries have significantly different occupational or skill profiles and, therefore, the structural movements over recent decades have given rise to fundamental changes in the occupational/skill mix of the employed workforce. While the influence of sectoral change has been dominant, occupational profiles per se have also been evolving within industries. This is particularly true of managerial and professional activities, which have assumed greater importance within enterprises across all sectors. Service related activities have also become relatively more important. In contrast, the extent of manual activities (particularly those that are unskilled) has been in decline. Irrespective which benchmark is used, to measure economic activity and growth patterns of employment sectors, the service sector shows the most promising growth results for the past two decades. This is attributed largely due to the lack of employment opportunities in other industries coupled with a combination of conspicuous absence of high-tech industry and poor educational standards that leave school leavers unprepared for the ever-demanding working environment. With the service sector growing rapidly in importance, it became clear that further steps would have to be taken to encourage growth. It is consequently of interest to the government to encourage local and international developers to invest in Vietnam's buoyant economy.
From an economic standpoint, unemployment represents the under-utilization of one of the economy's main resources, labor. Socially, unemployment is associated with an array of problems, not least a lower standard of living, a possible rise in the incidence of poverty and concurrently lower self-esteem for the unemployed. With unemployment of approximately 2% Vietnams' thriving commercial industry is severely disadvantaged to achieve double digit growth as lack of qualified labor makes it impossible to growth faster. The government needs to determine what its long-term labor policy is: To employ cheap unqualified labor for the sake of employing them, irrespective of productivity and performance, and get them off the street (a short-term tactic commonly applied in countries with abundance of labor in Egypt, Indonesia, Pakistan and Bangladesh would fall into that category. The situation in these countries is further compounded by lack of access to state-of-the-art technology. The alternative is to invest in vocational training, focus on quality education, and gradually diversify from an agricultural driven society to become an industrial export driven society. This strategy will improve short-term productivity and output per factory. A qualified work force that is competent to operate machinery and other high-tech machinery has to be the core objective of the government. . If the current trend continues unabated, it will have catastrophic consequences on the macroeconomic performance of Vietnam, as demographics will inevitable change and shift the balance of responsibility increasingly to younger workers An unviable alternative with grave socio-economic ramifications is to employ qualified professional technicians and industrial scientists and improve productivity levels but continue to leave scores of people unemployed. Focus on continuing economic growth, particularly labor and skill-intensive productive activities is imperative.
Then, the education system need to be reformed to compete with international standards and last but not least training systems and vocational schooling at all levels need to be created in order to enhance the quality of skills required by the labor market in growth sectors. The increase in enrolment rates in all stages of education and training suggest that people are responding to the divergence in the unemployment rates induced by the skill-biased technological change, by seeking to improve their skills and education levels. Philip Kotler in his book "The Marketing of Nations" argues that technology improves productivity but may reduce the number of jobs. The growth in GDP and unemployment in many countries indicates that employment has consistently lagged behind economic growth. This phenomenon, called jobless growth is witness in both industrial and developing countries. 6Between 1973 and 1987, employment in countries like France, Germany and the UK actually fell, even though they had respectable GDP growth rates. Three quarters of the rise in output in these countries came from increases in total productivity, with the rest from increased capital investment - without creating new jobs. Perhaps the most important reason for Vietnam's impressive record of accomplishment in human development over the past few years has been the country's sustained effort to educate all of its citizens, males and females alike. What is evident from the previous findings is that the quality of basic education in Vietnam is not internationally competitive. That corroborates the findings that in order to become commercially competitive the school curriculum, respective syllabus, needs to be modified to reflect the changing demands on the working environment.
The Knowledge Society: Education to Compete for the Future
The effect of low quality at the basic education level may be detrimental for future development, especially in the context of productivity and globalization, where the main engine for job creation is based more than before on capital mobility seeking an efficient and competitive labor force around the world. The most common reasons cited for the persistent high unemployment rate among Jordan's youth include lack of job training, an education system that focuses on increasing knowledge and does not equip graduates with analytical and problem solving capabilities, and social attitudes that consider some jobs to be shameful or inferior. In a crowded labor market, young people with low or intermediate levels of qualification compete for jobs with somewhat older candidates who have higher levels of qualification, work experience, or both. Young people leaving school with inadequate qualifications are heavily disadvantaged in the labor market and their labor market prospects have deteriorated over the 1990s, as the kingdom's employers have favored an educated workforce. The educational system in Jordan produces an unacceptable number of poorly qualified early school leavers, ill equipped to compete in the labor market, although it should be acknowledged that the numbers of such poorly qualified school leavers have fallen substantially over the past decade. What is required is a curriculum that moves away from arts subject and focuses heavily on science subjects such as Mathematics, Physics, Engineering, Chemistry and decision-making and problem solving skills. Education and generally having access to a pool of well-educated people and work force is a key strategic advantage for a nation to remain competitive.
This section has identified Vietnam's young population as being particularly disadvantaged in the ever-demanding labor market. Given changes over time in the demand for labor, resulting in a general upgrading of positions, as well as extended educational participation among younger labor market entrants, educational attainment and a compatible skills have become the most significant labor market currency to remain competitive. Accordingly, young people entering the labor market with inadequate qualifications are marginalized and have no chance of succeeding.
This group cannot be expected to share in the fruits of rapid growth without extensive and effective intervention by the state to enhance their skills and thus their capacity to compete in the labor market. Efforts to increase the supply of vocational skills and training have to be seen in the context of the increased participation rates in post-secondary and university education during the late 1980s and early 1990s, which were concentrated in academic studies. To redress this academic bias, Vietnam ought to strengthen upper secondary and post-secondary vocational studies, create or reinforce apprenticeship-style training, and increase the capacity for advanced technical studies by developing tertiary-level polytechnic institutions. There is too much emphasis on rote learning and memorization and the price one has to pay is a diminished ability to reason or engage in analysis based upon general principles. A major thrust of new policy initiatives is to make the education system more flexible and responsive to the emerging needs of the economy and create a learning environment where teamwork and innovation are emphasized.
The Competitive Environment in South East Asia: A Question of Industry Rivalry and Structural Reforms
Rivalry, in this context, has to be seen from a broader intra regional, South East Asian perspective where various nations competed for the same market segments. That high level of stakeholder concentration has two consequences. First, it adds pressure on the government to develop competitive strategies to secure a sustainable competitive advantage -which is, under the current economic circumstances difficult to achieve. And secondly, the intensity of price wars lowers profit margins to a level were tour operators and hotel companies operate at break even or even less, all in anticipation that the economy and business will gradually improve and restore healthy margins. Most of the surveyed nations have similar or complementary factor conditions that are appealing to a broad spectrum of consumers. The situation in South East Asia is further compounded that this region has almost similar geographic and cultural conditions without any clear discernable difference - although idiosyncrasies do exist on a macro level. Without a clear product differentiation, in this case natural endowments, it is difficult to achieve long-term sustainable competitive advantage. Vietnam along with Thailand is in the most powerful position to obtain the competitive advantage due to factor specific advantages in their countries. In addition to the intense rivalry prevailing in this region, already a high concentration of tour operators who function as suppliers and intermediaries to hotels, drive down profits margins further. Some of these tour operators in Thailand have overcome this dire situation by backward and forward integration managing their own charter, tour operators supply lines and hotels to achieve a certain level of independence and control their own commercial destiny. Those tour operators that successfully backward and forward integrated their operation have generally managed their value chain to the best of their advantage. Tourism trends in Asia are in principle characterized by regional political stability (or instability) and general safety perceptions.
Economic Challenges and the Creation of Wealth
Marketing of nations is all about outperforming competition, satisfying customers and the gaining of market share. "Successful" marketing of nations is strategic and requires a long-term perspective, it is measured is exceeding guest expectation and quantified by increasing tourist arrivals and a high return ratio. The loss of market share of one nation should, ideally, be the gain of another nation, that notion and the underpinning concept of the zero-sum game, lies at the heart of strategic marketing to attain sustainable competitive advantage. An environment of perfect competition does in reality not exist as all participants have different variables to consider - unique to their core competencies and location. The figure corroborates the long held view that for every direct employee in the hotel and tourism industry, 2.5 more people indirectly are employed in associated industries, such as food vendors, suppliers, tour guides etc. During the course of the research for this paper, it became evident that the service sector is key to the success of Vietnam's economic progress. The government's share of tourism related expenditure stands at 10.1%. Whilst these achievements are undoubtedly impressive, it will be interesting to see how Vietnam compares economically with its imminent neighbors with similar geo-political and geographic characteristics. With GDP real growth of over 7% and unemployment of 2% the economy is in a precarious state of overheating. Inflation is at 9% and the danger of increasing further is on the horizon and might erode purchasing power further.
Marketing and the Government in a World of Globalization
In order for the government to succeed in its marketing endeavors to successfully, position Vietnam in the competitive environment of the South East Asia it is imperative to encourage risk taking and bold decision making, to promote an entrepreneurial spirit among the business community and promote innovative, groundbreaking ideas that will lead to long-term sustainable growth of GDP per capita. That "out of the box" mentality and thinking process will set Vietnam apart from its neighboring countries that have all the same aspirations. The conventional, customer focused philosophy of marketing is not only about market segments, targeting the right clientele, finding new distribution channels, the positioning of products and product life cycles. It is also not (only) about identifying affluent customers and selling products for healthy profits margins. This traditional "marketing concept" has undoubtedly its validity for industrial and commercial consumer products. Marketing of nations is more complex and requires a fundamentally different understanding of cultural habits and peculiarities of people. Marketing became an overlapping multi functional, very diverse field that has impacts on sales, demographics and human resources, sociology and economics. Government policies play a big role in marketing by influencing, and de facto, shaping market conditions by creating an environment of stability and peace, encourage capital, and labor-intensive investment opportunities.
To become an industrial country by 2020 officially became one of Vietnam's most important development tasks during the 8th Party Congress held in 1996. This paper starts with the discussion if Vietnam will be able to achieve, by 2020, GDP per capita $1,800 as high as Thailand's of 1995. Although there is no evidence obtained, this paper assumes that Vietnamese policy makers at that time had used Thailand's development level as an indictor. It might not be unrealistic assumption, because the year of the eighth Party Congress was just after Vietnam officially joined ASEAN (1995). This paper argues that, for sustainable growth to become an industrial country by 2020, Vietnam needs to strengthen capacity of manufacturing sector. In order to do so, role of FDI is vital. Secondly. This paper suggests that high expectation form FDI, which Vietnam is presently enjoying, might not last long unless some bottlenecks and problems they perceive are removed. It is obvious that Vietnam needs something more attractive than inexpensive labor for its future growth. One answer is high quality labor to serve for FDI sector. High quality labor can attract more FDI because they produce higher value added, which offset increasing labor cost. "High quality" does not simply mean speed and accuracy in their work. It also includes their capacity to take more functions, such as R & D. Another possibility is creation of more preferable business environment for FDI. As noted above, infrastructure and legal environment are two big concerns for the Japanese investors, and these are the areas the Vietnamese authorities are presently tackling hard for improvement. One possible scenario is to create 'industrial clusters' or 'value chains' develop manufacturing sector is to attract FDI. FDI can fill the gap of low investment capital, generate employment, and bring advanced technology to the local industries. Recently, Vietnam has already demonstrated its high potential for attracting FDI. FDI inflows have been rapidly increasing since 2003, and in 2006 Vietnam recorded its highest value of FDI registration in its history (10 billion USD). It is no doubt that WTO entry, officially achieved in January 11, 2008, is the crucial factor. Manufacturing goods can also reproduce further values, being used for producing other goods.
Moreover, manufacturing sector has 'backward linkage effect' in the process of its development. 'Backward linkage effect' of manufacturing sector mean that the creation of one unit of demand of one manufacturing good induces more than one unit of demand in 'backward' industries, i.e. materials, parts, components etc., generating labor needs and technical upgrading in these industries. Manufacturing sector is fast growing area in Vietnam, but still accounts for as small as 20% of GDP. One may suppose this task is feasible for the country where over 8% GDP growth had been achieved in 2005 and 2006. However, to maintain high growth for another 10 years or more will be a big challenge. The recent history shows us that Southeast Asian countries have marked high growth rate since the early 1980s, but it was only Singapore that had achieved over 8% growth for more than consecutive 15 years. Vietnam must make further efforts to maintain long-term high growth. However, Vietnam's export still relies dominantly on natural resources and raw materials which are prone to international price fluctuations, and also low value added light industry products which face tough competition with other developing countries.
If businesses have a corporate and social responsibility to make profits then governments have an economic responsibility to project a free market oriented economy without interventionism, create economic alignments and strategic alliances by adopting a global policy of interdependence. The long-term responsibility of any leader, whether in a non-profit organization or in the private sector, are the creation of wealth and work towards equalization and a fair distribution of income and wealth. Investments will only materialize with government projecting sound policies that safeguard the investment of Multi National Companies. The creation of a conducive, healthy business environment should be the ultimate goal of governments in the age of globalization and free markets. Market forces only, without interference of any political body, should determine the correct value of exchange rates. It is hence of paramount importance to understand the inherited raison d'etre of the decision-making process from a historical context. Marketers must possess a flawless deep understanding of the political and socio-economic conditions of a nation before developing a successful marketing plan. Michael Porter argues in his book 8"The Competitive Advantage of Nations" that a nation can create new advanced factor endowments such as skilled labor, a strong technology and knowledge base, government support and culture; this has certainly its validity in the fierce competitive tourism environment of the South East East. As simple and logic as this statement sounds it is not always heeded as personal interests precede over the wider interest of the community at large. The government's role is to be a facilitator, ensure performance of all enterprises and compliance to environmental standards. They have a responsibility to dismantle internal barriers that obstruct competition, encourage FDI, promote cooperation and ultimately ensure their national interests are protected against competitor nations. Parallel to that, ministries have a duty towards their foreign visitors that a fully functional infrastructure is in place and provide a secure environment. International customers expect language competencies in their interactions with service personnel, elementary infrastructure such as street and traffic lights that work, a competent police force, a luggage conveyer belt that delivers the luggage and a public transportation network that connect the major cities.
Building and Leveraging the Brand Vietnam
The ultimate question for marketers is what is the value proposition of a product? The answer to that question leads to correct brand positioning. Consumer product companies call it their most valuable intangible asset. Classical examples are Coca Cola and Microsoft with limited disposable assets to convert to cash but invaluable brand power. What is the value of the brand Vietnam? How does one measure brand value of Nations? How is brand value measured in the intangible environment of measuring competitiveness of nations? Whilst it seems to be relatively easy to determine the market capitalization or general valuation of a public listed company in the world of fast moving consumer products in terms of units sold or total revenue generated, the same methodology to measure brand power cannot be applied in promoting nations and consequently determining its positioning strategy. Is it measured in terms of room nights sold, or tourist arrivals or tourist receipts or growth in the service sector? The pertinence of this question is undoubtedly of paramount importance in consumer marketing but it is very difficult, if not impossible, to answer conclusively in promoting nations where many intangible factors are a vital ingredient that determines the value proposition. It is difficult -if not impossible to measure factor conditions of one nation and compare them objectively to another as the intrinsic values and motives of tourists are not rationally measurable why they visit one nation over another one. Singapore and Bermuda are a case in point. They have a very high brand recognition and subsequent brand value (partly) due to political stability, a competitively, well educated and homogenous workforce, and investment laws that are attractive to the banking and insurance industry. Having access to unspoiled beaches and almost all year round sunshine facilitates decision making to open business in these locations. High brand valuation justifies increasing marketing investments, which in return encourages more international investors to follow suit. Thus, a positive investment cycle begins. Vietnam has developed over the past years sufficient in-dept knowledge to develop a minimum threshold competence level to compete with Thailand and Malaysia for market share.
To successfully position Vietnam among its competitors, the relevant tourist authorities must embark on a positioning strategy to move from a reactionary marketing approach to a pro-active approach. Without using clichés, it is not sufficient to respond to consumer demands once they are already in the country - hence this reactionary approach to engender and awaken a desire in international travelers to visit Vietnam is insufficient. A pro-active approach will reach newmarkets and strengthen the brand equity among international tourist. In its positioning and brandbuilding process, Vietnam reached only the elementary stage. Like companies who are in thebusiness of promoting consumer products who have a commercial obligation to develop a brandand exploit it through its life cycles, Vietnam needs to develop a corresponding brand strategythat supports the various life cycles and maximizes its return.
Nations, apart from a few exceptions such as Thailand and Egypt, have never fathomed thatconcept completely that advertising, marketing and awareness creation needs to change corresponding to demographics, consumer behavior and a change in taste of a nation as it evolves economically, socially and politically. Consumers become saturated and easily bored with seeing always the same pictures and brochures. New catalogues with new pictures need to be designed along with cutting-edge web offerings with high-resolution pictures. The entire point of sales experience at trade fairs and exhibitions has to be redesigned to create a new experience, elicit emotions and projecting new trends. To develop and nurture the “Brand Vietnam” is the most beguiling and eliterian task of marketers. Vietnam has still a reputation as a virgin destination that is perceived as relatively inexpensive – compared to Thailand.
The question that needs to be answered is twofold: Does Vietnam want to become a cheap charter destination to attract large quantities of tourists at lower rates – a strategy successfully pursued by Indonesia, and the Philippines and thereby tarnish its image, or does Vietnam want to pursue a quality driven niche positioning concentrating on high yield customer and attracting the top tier consumers with a high disposable income – a strategy successfully pursued by Singapore, Thailand and Hong Kong? Attempts are made to promote, respectively create, the “Boutique Brand Vietnam” and focus on high-end market segments is certainly a step in the right direction. By consciously targeting this quality market segment above average returns will be achieved as these tourists typically spend more money on accommodation, food and beverage and other associated services.
1 The Saigon Times No. 18, April 28, 2007 page 14
2 International Herald Tribune, October 24, 2003, A blueprint for the New Tourism, by Roger Collis
3 The Competitive Advantage of Nations by Michael Porter,
1990 The MacMillan Press Ltd.
5 Arab News, Investment Scene, Monday, November 18, 2002
6 The Marketing of Nations by Philip Kotler et al, Problem Plaguing Nations, The Job Shortage Problem
7 Scenario for Vietnam’s Development towards 2020 by Shozo Sakata, Institute of Developing Economies, VEF, Paper presented at the international conference Vietnam: Modernization and Regional Integration, HCM City April 2007
8 The Competitive Advantage of Nations, Michael Porter, London. The MacMillan Press Ltd.
|Also See:||What's In a Hotel Brand Nowadays? Dietmar Kielnhofer, General Manager, Le Meridien Nirwana Golf and Spa Resort, Bali / March 2007|