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I. Introduction 1.1. Purpose of the report The aim of this report is to present the Vietnam bubble tea market based on the theoretical frameworks of market competition. Specifically, by analyzing the situations and problems of the market throughout the years, the paper will point out some main reasons behind the cases, then give several solutions to address the problems.
VIETNAM NATIONAL UNIVERSITY University of Languages and International Studies ENGLISH FOR ECONOMICS CASE STUDY: MARKET COMPETITION THE RISE AND FALL AND RESURRECTION OF BUBBLE TEA IN VIETNAM Lecturer: Cấn Thị Chang Duyên Name: Trần Ngọc Huyền Class: 19E8 Student ID: 19040461 Ha Noi - 2021 TABLE OF CONTENT I Introduction………………………………………………………… 1.1 Purposes……………………………………………………… 1.2 Background information……………………………………… II Conceptual background……………………………………………….3 III Analysis…………………………………………………………… 3.1 Situations, problems and reasons……………………………… 3.2 Solutions……………………………………………………… IV Conclusion………………………………………………………… V References…………………………………………………………… I Introduction 1.1 Purpose of the report The aim of this report is to present the Vietnam bubble tea market based on the theoretical frameworks of market competition Specifically, by analyzing the situations and problems of the market throughout the years, the paper will point out some main reasons behind the cases, then give several solutions to address the problems 1.2 Background information Bubble tea is a kind of beverage that originated in Taiwan in the early 1980’s These drinks It is usually cool, refreshing, sweet with tapioca balls laying on the bottom cups Having a pleasant taste, bubble tea soon became popular in most parts of East and Southeast Asia countries, especially in Vietnam in the 2000s Since being introduced to Vietnam, the bubble tea market has been subject to considerable fluctuation However, in recent years, people witnessed the revival of this market with a dizzying increase of milk tea shops across the country II Conceptual background It is essential for us to understand some theoretical framework and define key concepts related to the case Firstly, according to market competition is rivalry in which sellers of homogenous products or services try to achieve revenue, profit and market share growth (Carnrite, 2021) Secondly, it can be seen that the bubble tea market operates in monopolistic competition where many firms selling the products are similar but not identical (Division of English for special purposes, 2020) There are three main features of monopolistic competition: many sellers, product differentiation and low entry barriers (Division of English for special purposes, 2020) The market for bubble tea, for example, has numerous shops in Vietnam such as Ding tea, Phuc Long, Koi, etc The product differentiation is expressed through the difference in flavour, toppings of cups of milk tea from different firms Finally, the low entry barriers allow the firms to freely exit and enter the market without restrictions, which make it easy for people to start a milk tea shop III Analysis 3.1 Current situations, problems and reasons behind them of milk tea market According to the Dan Tri newspaper, milk tea was probably introduced in Vietnam around the 2000s On the market at that time, most milk tea businesses were just small and spontaneous in the form of street carts or shops with a few plastic chairs for customers The sales management process was sketchy and unprofessional Moreover, the milk tea products were unbranded with simple flavours including chocolate, mint, fruits The reason behind this was that bubble tea was a new market, leading to the inexperience in management and business However, due to its low price (about 10.000 - 15.000 VND) and deliciousness, bubble tea still became a fever among adolescents; Besides the high demand, the huge profit also contributed to the development of bubble tea during the 2000s According to an analysis by Vietnamnet newspaper, it only cost about 30.000 40.000 VND per of milk tea powder and 15.000 - 17.000 VND per pack of bubble, which could make about 20 cups of milk tea Including other costs, the estimated original price of a milk tea cup was less than 3.000 VND Therefore, the sellers can make double or even triple profits (VTC, 2013) The bubble tea market experienced a strong growth but soon became unpopular in late 2009 because of the rumors related to the origins of ingredients The number of consumers suddenly decreased, which led to the shrink of milk tea markets (VTC, 2013) The milk tea market continued to decline until 2013 when Ding Tea, a large milk tea brand, was introduced in Vietnam From 2013 to 2019, this market was prosperous with numerous famous brands such as Goongcha, Royaltea, Goky, etc It is estimated that there are more than 1,500 bubble tea businesses in Vietnam, with over 100 different brands (The Rise and Fall and Resurrection of Bubble Tea in Vietnam, 2017) Moreover, a survey by the market research company Q&Me shows that 73% of the respondents said that they recognized bubble tea Besides the quantity, the quality of bubble tea shops also improved with professional management processes and product differences The first reason for the boom of the bubble tea market is increasing demand, especially among youth According to Vnexpress newspaper, the survey of 210 Gen Z in Ha Noi and Ho Chi Minh found 81 percent of interviewers saying milk tea shops were their favorite hangouts (Nguyen, 2019) Another reason behind the irresistible lures of this market is the high profits According to Nguyen Phi Van, executive director of Retail & Franchise Asia, entrepreneurs can earn up to 40 percent of profits on each cup of milk tea Due to the outbreak of Covid 19, the milk tea market in Vietnam shows a sign of slowing down Many milk tea brands had to relocate or return the rental space The Alley brand, for example, had to close five shops in HCM city during Covid 19 pandemic (Anh, 2021) However, this situation promoted the form of selling milk tea online, which made the milk tea market stable again As a survey by Garb, a food delivery company, during the social distancing period in Ho Chi Minh City, the company's preliminary statistics show that milk tea is the most ordered dish on the app (Vu, 2021) Although people are optimistic about the future of the milk tea business at present, owners of milk tea shops have to encounter fierce market competition due to low entry barriers Moreover, the increase in franchise fee and health consciousness of consumers are expected to reduce the profit of the milk tea market 3.2 Solutions for problems of milk tea market In the face of the fact that the fierce competition among bubble tea companies may hurt small and medium businesses, the Government has introduced the law on competition for not only the bubble tea market but also for all domestic markets The law is responsible for controlling the act that causes the restriction of the competition Besides, it also protects the legitimate business rights of enterprises from unfair competition According to the Article 118 of Vietnam Competition Law, the violations can result in fines of up to 10% of the total revenue of the enterprise in the previous years (“Luat canh tranh (Viet Nam),” 2021) Besides, it is important to prevent ignoring the consumers' health of businesses, so that the bubble tea market is able to develop in a sustainable way Therefore, the Government has not only promulgated the law on food hygiene and safety but also collaborated with mass media companies such as VTC, VTV, VnExpress to report and sanction the violations IV Conclusion The milk tea business is expected to grow strongly and bring huge profits for investors in the near future However, the potential customers of this industry are young people who have constantly changing consumption habits This requires businesses to have a suitable strategy and high flexibility to survive in a highly competitive market as bubble tea V Reference lists Anh H (2021, May 24) Thị trường trà sữa Việt Nam trước tác động Covid-19 Kinh tế & Đồ uống https://kinhtedouong.vn/thi-truong-tra-sua-vietnam-truoc-tac-dong-cua-covid-19-75377.html Carnrite, J (2021, September 21) What is Competition in Marketing? Definition & Types [Slides] Study.Com https://study.com/academy/lesson/what-is-competition-in-marketingdefinition-types-quiz.html Dân Trí (2018, August 17) Hành trình trà sữa tạo dấu ấn lịng teen Việt Báo điện tử Dân Trí.https://dantri.com.vn/doi-song/hanh-trinh-tra-suatao-dau-an-trong-long-teen-viet-20180817073851754.htm Division of English for special purposes (2020) English for economics Division of English for special purposes: Selective compilation for internal use Luật cạnh tranh (Việt Nam) (2021, November 21) In Wikipedia https://vi.wikipedia.org/wiki/Lu%E1%BA%ADt_c%E1%BA %A1nh_tranh_(Vi%E1%BB%87t_Nam) Nguyen, D (2019, February 1) Generation Z motivates Vietnamese entrepreneurs to open bubble tea shops VnExpress International – Latest News, Business, Travel and Analysis from Vietnam https://e.vnexpress.net/news/business/economy/generation-z-motivatesvietnamese-entrepreneurs-to-open-bubble-tea-shops-3872358.html The rise and fall and resurrection of bubble tea in Vietnam (2017, November 6) Nhan Dan Online - VietNam Nhân Dân Newspaper Retrieved April 11, 2021, from https://en.nhandan.vn/_mobile_vietnam_blogs/item/5619402-the-rise-and-fall %E2%80%A6-and-resurrection-of-bubble-tea-in-vietnam.html? PageSpeed=noscript VTC (2013, March 19) Trà sữa trân châu: Tàn đời tin độc hại Vietnamnet Retrieved April 11, 2021, from https://vietnamnet.vn/vn/kinhdoanh/tra-sua-tran-chau-tan-doi-vi-tin-doc-hai-113509.html Vu, P (2021, July 2) TP.HCM bùng phát dịch Covid-19: Trà sữa chân người Sài Gòn đặt nhiều app Báo Thanh Niên https://thanhnien.vn/tp-hcm-bung-phat-dich-covid-19-tra-sua-la-chan-ai-khinguoi-sai-gon-dat-nhieu-nhat-tren-app-post1084610.html