International Journal of Advanced Educational Research

International Journal of Advanced Educational Research

ISSN: 2455-6157; Impact Factor: RJIF 5.12
Received: 29-05-2020; Accepted: 16-06-2020; Published: 01-07-2020
www.educationjournal.org
Volume 5; Issue 4; 2020; Page No. 01-05

Analysis of AEON's market penetration strategy in Vietnam FMCG industry

Nguyen Hoang Tien1, Ha Van Dung2, Rewel Jiminez Santural Jose3, Bui Xuan Bien4, Nguyen Thi Hoang Oanh5,
Nguyen Thanh Vu6
1
Saigon International University, Vietnam
2
Ho Chi Minh City Banking University, Vietnam
3
Saigon International University, Vietnam
4
Finance and Banking University in Hanoi, Vietnam
5
Thu Dau Mot University, Vietnam
6
Nguyen Tat Thanh University, Vietnam

Abstract
AEON is a Japanese corporation that penetrated the Vietnamese market in the field of fast-moving consumer goods. AEON
has successfully and quickly opened its business branches in two major cities of Vietnam, Hanoi and Ho Chi Minh City. With
the business strategy on commercial premises with a large area, with the size of investment capital and advantages of
management capacity, few domestic enterprises can match and compete with AEON in the same way. This article will provide
useful assessment results for large foreign corporations to consider whether to penetrate the Vietnamese market in this way
and it entails potential opportunities and risks.

Keywords: AEON, penetration strategy, FMCG industry, Vietnam

1. Introduction decrease chart as well as the fast or slow destination of

The process of entering international markets is also the FMCG also depends on its own advantages and strategic
process of multinational companies seeking to exploit their direction of the businesses. With 70% of the population
competitive advantages. The first reason a company wishes aged 15-64, the total expenditure of Vietnamese people is
to enter the international market is to protect itself from the expected to reach approximately 173 billion USD by 2020.
risks and instability of the domestic business cycle by A third of the middle-class population by 2020 with an
establishing overseas businesses, this is the form of income level increasing by 8.8% / year, with the forecast of
diversifying international business activities. The second FMCG increasing by 20% / year is an attraction for many
reason is to capture and conquer the growing markets in the businesses to focus on developing products, in which high-
world. For example, as many MNCs choose the US market class products are considered as a driving force in the race
as the target market because of the large US population and to win market share. Vietnam is considered as one of the
high per capita income. The third reason is to respond to dynamic and attractive retail markets in Asia and around the
growing competition from outside competitors and to world. The trend of market opening under bilateral and
protect its market share in the world market, using the multilateral free trade agreement commitments together
strategy: “Pursuing competitors to: winning market share with the increasing participation of big retailers in the world
from competitors; warning competitors that if they attack on in Vietnam has been creating opportunities, Major
the domestic market, they will be similarly retaliated in their challenges for domestic enterprises. According to a 2014
home countries. The fourth reason comes from the research on the development of rural retail markets by the
motivation to reduce costs by placing the business close to Ministry of Industry and Trade, rural areas are considered as
customers so MNC can reduce transportation costs, respond a potential market for businesses to develop a large-scale
to customer tastes and use cheap resources. The fifth reason and diversified goods distribution system while improving
is to overcome the tariff barriers. For example: MNC business efficiency. At the same time, there is a close link
produces directly in North American free trade area (USA, between rural and urban consumer retail markets, but the
Canada and Mexico) then transports goods to North rural consumer retail market is overshadowed by the urban
American countries without any barrier if manufacturing market due to the ongoing urbanization process. Therefore,
elsewhere encounters very high taxes, strict import quotas. the retail market in consumer goods in urban areas will
The sixth reason is to take advantage of the technical and promote the development of rural markets through “back to
technological advantages by producing goods directly the countryside” activities of distributors and retailers in
abroad instead of allowing others to do so through the urban areas (Tien, 2012; Tien, 2013).
licensing of technology. That maybe the big risk is creating Subhashini Kaul (2005) concludes that consumers are
potential competitors [1, 3]. satisfied with high quality retail outlets. Service quality is
The Fast-Moving Consumer Goods (FMCG) market in considered as a measure of increasing value to consumers.
Vietnam is forecast to continue to grow at an average rate of Velitchka D. Kaltcheva and Barton A. Weitz (2006)
about 20% per year until 2025. However, the increase and determine the influence of environmental factors directly on

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consumers created by the internal and external environments 2.3. The Global Strategy
of goods that stimulate consumers’ shopping behavior. Multinational companies (MNC) expand overseas markets
Numerous studies have demonstrated that for every 5% of based on standardization and competitive costs; Value is
customer retention rates will give an increase of 25%-95% created based on product design for the global market and
in profit (Reichheld, 1996; Reichheld & Sasser, 1990; Chi & the most effective production and marketing. The scale of
Qu, 2007). Therefore, we decided to study how successfully production and distribution of products has been improved,
AEON, such a large and dominant foreign corporation facilitating investment in development and reducing costs
enters Vietnam FMCG market. very positively; but difficult to meet local needs. This
strategy is featured by (Tien & Ngoc, 2019, 2019a, 2019b;
2. Theoretical framework Tien, 2019):
2.1. The International Strategy - Link SBU in many countries to share cheap resources,
International business strategy means the product is emphasizing the guarantee of economic profit scale.
manufactured in the domestic market and marketed in other - Standardize global products to maximize profits by
countries with the minimum adjustment required by other exploiting scale, regional strategic location.
localities. This strategy is under less pressure to reduce costs - Not trying to meet local market demands.
and the pressure of local requirements (because production - Suitable for industrial products.
is primarily localized). However, it is highly sensitive to The strategic goal is to pursue a low-cost strategy globally
exchange rate risks and political risks. This strategy is to support the aggressive pricing strategy in the world.
featured by (Tien & Ngoc, 2019, 2019a, 2019b; Tien, 2019): Distribute some key and supportive activities such as
- Turning domestic position into competitive advantage. production, marketing, and R&D in some of the most
Value is created by moving the core of competition from the favorable positions on the global scale (outsource). The only
country to abroad where competitors cannot develop, limitation is that it is not suitable in markets that need high
respond, or maintain. adaptation (Tien, 2017; Tien & Anh, 2017; Tien, 2015;
- Often follow the same pattern when expanding foreign Tien, 2012a).
markets
- Focusing on product development functions such as R&D 2.4. The Multi-domestic Strategy
in the country, manufacturing products according to local In this strategy, business decisions and activities are broken
market demand. down by business unit by country. This strategy has a high
- Establish production and marketing departments in key customer base but limits the exploitation of economic scale,
regions and countries where they do international business. learning process and coordinating information. This strategy
- Head office strictly controls marketing strategies and is featured by (Tien & Ngoc, 2019, 2019a, 2019b; Tien,
product lines. 2019):
- International activity ranked second after the market in the - Focusing on competition in each market. Benefit by
country offering customers a product that meets the tastes of
The only limitation of this strategy is that it may miss different national markets, resulting in increased product
opportunities in local markets. value in the local national market and pushing up product
prices.
2.2. The Transnational Strategy - High level of decentralization to the locality (proximity to
This is a strategy that MNC seeks to achieve global location and culture).
efficiency and respond locally, sharing the common mission - Value created by empowering the local manager to adapt
of M NC but having activities that change according to local to the local cultural and legal economic environment.
requirements (standardizing where possible, adapting where - Suitable when there are many branches in countries and
appropriate). Obligatory). Choosing an optimal location the pressure to reduce costs is not large.
cannot guarantee that the quality and cost of those inputs - Suitable for consumer products.
will also be optimal. Transfer of experience can be a core The only restriction of this strategy is the high cost in host
resource of competitive advantage, but experience cannot be countries, and the need to transfer knowledge in high-tech
transferred automatically. This strategy is featured by (Tien industries.
& Ngoc, 2019, 2019a, 2019b; Tien, 2019):
- Competitive advantage can be developed in any operating 2.5. Overview of the FMCG market in Vietnam
unit of MNC. FMCG products are fast-selling and relatively low-cost
- Achieving low cost based on regional economy, products. Examples include unstable household goods such
economies of scale, effective learning as well as as packaged foods, beverages, toiletries, over-the-counter
differentiated products for customers in different areas. medicines, and other consumer goods.
- Product lines and skills can be transferred between units in Many fast-moving consumer goods have a short shelf life,
MNC, focusing on promoting the development of skills at due to high consumer demand or as a result of rapid
global learning institutions. degradation. Some FMCGs, such as meat, fruits, vegetables,
- Value created by innovation reinforces and exchanges dairy products and baked goods are very perishable. Other
ideas, products and processes. goods, such as prepackaged foods, soft drinks, candies and
Implementation of this strategy is difficult because local toiletries have a high turnover rate. Sales are sometimes
response increases costs. Two trends need to be avoided are: affected by vacation or seasonal time and also by discounts
focusing the firm's activities too much on a central location, offered.
increasing the level of local adaptability across too many Packaging is very important to FMCG. In order to succeed
different locations. in the dynamic and innovative FMCG segment, a company
must not only get to know consumers, brands and logistics,

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but also have a proper understanding of packaging and management and business activities such as modern trade
product promotion. Packaging must be both hygienic and centers, general department stores and supermarkets. This is
attractive to customers. Logistics and distribution systems considered the AEON’s main business direction. In
often require secondary and tertiary packaging to maximize addition, AEON also conducts other business activities
efficiency. Packaging or packaging protects the product and related to import, export, trade and research. Along with the
extends shelf life and provides product information to establishment of the company, AEON is also officially
consumers. awarded investment licenses for two major projects:
Profit margins on FMCG products may be relatively small, - Investment certificate of October 7, 2011 for AEON - Tan
but they are often sold in large quantities; therefore, the Phu Celadon Shopping Center in Ho Chi Minh City,
accumulated profits on such products can be significant. scheduled to open in January 2014.
According to BASES, 84% of professionals working for - Investment certificate of May 25, 2012 for AEON - Binh
fast-moving consumer goods are under more pressure to Duong Canary Shopping Center in Binh Duong, scheduled
quickly bring new products to market than they were five or to open in October 2014.
ten years ago. With this in mind, 47% of those surveyed Over the past 29 years, AEON Group has established and
admitted that product testing was most affected when the operated many business branches in Japan and in many
shelf life was accelerated. countries such as Malaysia, Thailand, Hong Kong, China,
The growth of the internet in the last quarter century and the Vietnam, Indonesia, Laos, Myanmar, Kazakhstan, South
rise of the brand community phenomenon have contributed Korea, Philippines, India and Cambodia. In addition to
greatly to the demand for FMCG. For example, according to expanding its business network and gaining experience
the internet data of Germany's AGOF research group, 73% throughout its operations, AEON Group has received
of the German population is online. In addition, 83.7% of numerous awards and honors for its outstanding business
internet users claimed to use the web to search for activities. The most recent title received by the International
information and 68.3% to shop online. However, most Trade Center Council was awarded to AEON Lake Town - a
FMCG products are not ordered online because most commercial center located in Koshigaya, Japan. AEON
consumers choose the convenience of stores that are really Lake Town has won both awards: Award for Sustainable
close to home for the products in this category. Business Model and Gold Award in the Advanced Business
Model category and developing a new retail center with an
3.Research results and discussion area of more than 500,000 square feet of retail space.
3.1. About AEON corporation Development of shopping centers.
AEON is currently one of the largest retail trade groups in AEON is currently very active on the path of developing
the world with 179 joint ventures inside and outside Japan. Shopping Centers based on the criteria of harmonizing with
Established in 1758, with a history spanning over 250 years, the surrounding community not only in Japan but also in
AEON Group is one of the oldest retailers in Japan. During other countries. We have been striving to improve the
its operation, AEON Group maintains an unaltered quality of our services and facilities in response to changes
commitment to always set the criteria of "Customer first". over time, the environment as well as the increasingly
The basic principle of AEON Group is towards a diverse needs of our customers.
prosperous, stable and peaceful society through retail In Vietnam, under the model of the most advanced shopping
activities. With that responsibility, AEON Group has gained center, AEON offers customers an integrated shopping mall,
customers' trust as well as expanded business activities not where customers have an enjoyable and fun shopping
only in Japan but also in other countries in Asia for a long experience, especially enjoy relaxing moments with family,
time. relatives and friends benefiting from a variety of
AEON officially started operating in Vietnam in 2009 in the entertainment and culinary activities.
form of Representative Office (December 1, 2009 - July 10,
2012). October 7, 2011: Approved by Ho Chi Minh City 3.2. SWOT analysis of AEON Group's market
People's Committee, AEON Vietnam Co., Ltd. was formally penetration strategy in Vietnam
established investing in construction, organization,

Table 1
Strengths (S)
+ Experience in operating and managing retail
systems
+ AEON- Japan brand is known by consumers
+ Large facilities are invested
+ Professional trained staff Weaknesses (W)
+ Diverse product structure + High prices for imported products
+ Quality goods comply with Japanese + Frequent overload, slow payment
SWOT standards + The distribution and supply
+ Services for families shopping, playing, system is limited
choosing model Mori + Small market share
+ New retail model (one stop complex mall) + Slow development of chain stores
+ General events (including big promotions)
organized by Aeon for tenants
+ Location AEON commercial center is
located far from the city center
+ Affordable and high-end product price

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segment
Opportunities (O)
+ Vietnam joined the WTO, expanded integration
+ Consumer demand of people is increasing
Aeon expanded nationwide Improve distribution and supply
+ The retail market is growing
Join new markets by brand systems
+ The economic growth of the country
+ Customers like the new
+ Vietnam market has a rapid growth
Threats (T)
+ The competition is getting fiercer
+ Shopping habits of consumers
Improve services to build long-term Beware of competitors' changes
+ Economic crisis
relationships between businesses and when offering a better service
+ Supply of goods from supermarkets
customers Provide large space to store many
+ Barriers on customs procedures and mechanisms,
Maintain a lower price product items
import and export
+ The exchange rate and interest rates of banks in
Vietnam fluctuate, affecting directly to businesses

3.3. Marketing Mix Strategy spread evenly from low to high. But in general, in the first
Product phase of joining the Vietnamese market, prices of Aeon's
AEON General Merchandise Store with 16,000 m2 of sales products were still higher than those of the market because
area, providing more than 12,000 daily essentials, meeting the main source of goods at this time was imported goods
all shopping needs of customers. From food items, daily from abroad. Knowing the weaknesses and the reason why,
consumption in the supermarket area, to fashion stalls for after a few months of operation, Aeon has strengthened its
adults and children, as well as household items that meet association with Vietnamese manufacturers to offer Aeon's
change. In the rental area of AEON Mall's booth, it can be own branded products at prices suitable to product quality as
divided into 5 large areas to meet all customer needs: well as the people's needs and pockets. Thereby, AEON has
 Fashion clothing area, with international fashion implemented a flexible price strategy to change product
brands. structure and market situation.
 Specialized sales area, providing daily consumer
products, electronics, home furnishings. Place
 Food area with the largest area in Ho Chi Minh City The ground is always a big challenge for shopping centers
includes: restaurant, fast food, food-court. and AEON has advocated choosing for itself a "prime
 Play area includes: children's play area, cinema. location" in its own opinion. Here are some of AEON’s
 Service area with beauty care centers. placement features:
 Large area, located in potential urban areas.
In the early stage of entering Vietnam, AEON mainly sells  Not to disadvantage away from the city center, AEON
food products and consumer goods imported from Thailand, creates every opportunity for customers to access and
Malaysia and Japan, the proportion of domestic goods is shop at their shopping centers in many different ways:
still low. After that, AEON will cooperate with domestic  Spacious parking for both cars and special motorbikes
suppliers to develop products under AEON's own order, with no parking fee.
Topvalu's own brand. AEON's current flagship products are  Placing signs within a 5km radius for customers to
food items, most notably fast food processed and consumed easily identify the location.
by Aeon during the day. The characteristics of this type of  Building private bus routes for people who need
product are diverse in types and cheaper than similar shopping in AEON.
products in the market to attract as well as create brand
awareness to target customers who are young household. Promotion
Products that make AEON different are entertainment AEON has invested in extremely aggressive promotion both
services, beauty care services such as beauty salon, fitness before and after entering the Vietnamese market. Specifically,
areas, etc. Another special feature of AEON is that the the simultaneous implementation of the program on all aspects
seating system is located everywhere AEON encourages such as the press, social community and culture.
customers to take time to visit the entire shopping center, so
AEON also provides a place for customers to rest. In form of advertising costs a lot, so the company only focuses on
addition, AEON also provides phone chargers for visitors using it at the beginning stage when the new company goes into
operation. The later stages will subside and move on to other
and computer systems to search the product catalog. With a
advertising activities. The main purpose is for customers to
diverse product strategy and constantly changing according
know the AEON brand.
to consumer needs as well as exclusive competitive tion activities are needed to stimulate
advantages from services, Aeon not only meets all shopping consumer demand and increase customers' purchasing power.
needs of consumers but also providing additional Some types of promotions that the company will use:
entertainment services that no other commercial center in + Frequent discount programs.
Vietnam can provide to this day. + Distributing loyalty cards to customers and loyal customers.
Price + Lucky draw.
AEON's pricing strategy always goes hand in hand and
constantly changes according to the product strategy. + Organizing cultural and sports events, celebrations.
Therefore, the prices of products are quite diverse, tends to + Release publications introducing the company and products
that the company is selling.

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+ Implement charitable activities such as supporting families in widely to consumers.

difficult circumstances, contributing to building schools, - Continue to promote research and diversify products to
kindergartens. increase competitiveness.
+ Opening scholarships, encouraging studying and giving gifts - Always update the market information to promptly adapt to
to disadvantaged pupils and students. fluctuations.
+ Building gratitude houses, taking care of Vietnamese mothers - Vietnam's legal system is incomplete, requiring businesses to
for a lifetime. manage brand well.
+ Organizing consulting sessions, product introduction to help - The instability of the macro economy requires businesses to
customers have more information about the product, and these quickly come up with reasonable strategies to adapt promptly.
activities will also contribute to the demand orientation, - Expanding the "one-stop" shopping center, businesses should
stimulate customers' purchasing power. increase their experience and meet the changing needs of local
+ Organizing events (events) such as childhood festivals, world customers.
day without cavities, inauguration or starting a project with the
witness of senior leaders, launching new items with the 5. References
appearance of the famous artists participating in introducing 1. Address of aeon mall in Vietnam
products, organizing trial use (drinking, eating, going to try, <https://duanromanplaza.vn/dia-chi-trung-tam-thuong-
etc.) for customers but not yet selling products, making mai-aeon-mall-tai-viet-nam/>. [Access date: November 8,
customers' demands increase and more and more want products 2019].
or that service right away. 2. Aeon formation history <https://www.aeon.com.vn/lich-
su-hinh-thanh/. > [Access date: November 8, 2019].
3.4. Discussion 3. Ministry of Industry and Trade (2014), Developing the
In fact, with a strong promotion strategy, AEON has achieved retail market for consumer goods in rural Vietnam
initial success, attracting both customers and media, thereby 4. <http://ir.inflibnet.ac.in:8080/jspui/bitstream/10603/24521
increasing the brand awareness and coverage on the national 3/8/ch%202.pdf> [Access date: November 8, 2019].
market by: 5. Larke R., Causton M. (2005) Japan: A Modern Retail
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stages as well as increasing customer satisfaction. Palgrave Macmillan, London
 Creating trust as well as reputation in the hearts of 6. Tien, N. H., & Ngoc, N. M. (2019), Comparative Analysis
customers with a modern professional image and of Advantages and Disadvantages of the Modes of
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4. Conclusion and recommendation 7. Tien, N. H., & Ngoc, N. M. (2019a), Coping with
4.1. Conclusion Challenges and Taking Opportunities in International
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- Invest capital in marketing activities to promote the brand