TABLE OF Contents

Abstract

The research investigates the cost of reputations, on both enterprises and

customers. In particular, we do a research on the cost of reputations in Vietnam market
between reputable oversea companies and Vietnamese customers. The research is divided
into three main parts in the body. The first part is aimed to analyze what costs renowned
foreign companies to maintain their reputations when entering Vietnam market. To
explain this matter, we come up with the investigation into what those companies have
been doing to occupy a certain market share and consumers’ belief in Vietnam. The
second part indentifies how reputations of reputable oversea companies cost Vietnamese
customers. To be more specific, we study what Vietnamese consumers has suffered in
return of owning a product from famous foreign manufacturers. The last part will provide
 Integrated Skills Group Assignment The Cost Of Reputations

some helpful precautions, recommendations and suggestions for both oversea

entrepreneurs and Vietnamese consumers.

The corpus of study consists of questionnaires about this topic which were given
to Vietnamese customers and distributors for foreign companies in Vietnam. The data,
afterward, will be analyzed based on the framework mentioned in the research questions.

Findings of the study include the following:

- To remain their reputations, renowned oversea companies has been
struggling to maintain the product quality, promotion as well as reducing
the prices.
- Customers are somehow suffering from unreasonable prices, cursory
advertisements or even poor quality products in order to possess a
reputable product.
- Via the collected information from a variety of resources, the paper
shows some recommendations for both oversea enterprises and
Vietnamese customers to be successful in their business transactions.

Background information
Nowadays, reputation is always considered one of the key points in business
transaction. Its benefits are entirely obvious to both vendors and purchasers. Reputations
help enterprises to obtain more success in every market. They also help customers to
show their high status and opulence. However, to earn such a beneficial thing as
reputation, everyone has to pay a certain price. On the side of enterprises, there are
various things such as product quality, marketing, business ethics and relations with
media… that are worthy of concern. On the other side, customers are likely to face
preoccupation about whether the price is reasonable and even whether the quality of the
products is corresponding with what they have been labeled. From whatever side’s point
of view, it has been clear that the cost of reputations is an essential factor which has to be

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considered carefully anytime business transaction takes place, especially when a business
enters a new market, and a customer faces the temptation of new luxurious brand name.

The 11th day of January, 2007 remarked the moment when Vietnam officially
joined WTO. This event was the big turning-point of the whole Vietnam economy. Since
then, lots of benefits as well as difficulties have been brought about, including the
competition from reputable oversea companies. Prestigious reputations give them a
certain advantages over Vietnamese ones. Nevertheless, the Vietnam economy is still on
its way to develop. Though never been on the United Nations list of “least developed
countries”, poverty is still a matter worth worrying in Vietnam. Therefore, Vietnamese
tends to think that spending a huge bunch on a product is a waste of money. However, the
small gap between foreign and domestic products’ market share has been narrowed
considerably, and is supposed to change more dramatically through the period of
development and fluctuation. Prestigious oversea companies are standing at the threshold
of breaking into Vietnam market, possessing every possibility to use their reputations to
compete and defeat local brands. On the other hand, Vietnamese customers also have
every right to possess a product from eminent manufacturers. The underlying matters are
whether enterprises can accept the cost to maintain their reputations there, and whether
consumers there are willing to follow the call of the luxurious reputations at any cost.

Introduction
1. Rationale:

Brand reputation is how your business is perceived through the eyes of your
customers, suppliers, employees and other interested parties, such as your bank manager
or a potential investor.

The reputation cost represents the cost that enterprises spend on business
activities such as hiring skilled staff, advertising or marketing products, etc to achieve
their prestige. Reputation cost also refers to the cost that customers have to pay in
exchange of renowned products. The greatest benefit of any enterprise is reputation and

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perceived value among consumers. Therefore, companies have been trying their best to
establish the value of their brand in every marketplace. However, the more they try to
raise their reputation, the bigger amount of cost they have to deal with. Entrepreneurs
consequently want the reputation costs to be as small as possible in order to avoid
damaging their budgets, while keeping their prestige maintained. As much as customers
want to possess reputable products, they are also afraid of the fact that reputation will
probably cost them not only money but also incorrect decisions in purchasing any
product.

In this research, we will investigate the cost that reputations bring about toward
enterprises and customers, especially reputable oversea companies in Vietnam and
Vietnamese customers. In particular, the research focuses on three main issues:

• How do reputations cost renowned oversea enterprises in Vietnam?

• How do reputations cost Vietnamese customers?
• Precautions, recommendations and suggestions for reputable foreign brands in
Vietnam and for Vietnamese customers in their business transactions.

2. Scope of study:

Reputation is a big topic taking time to accomplish all of its aspect. Therefore, the
focused issue is narrowed to aim at finding out about reputation costs, particularly how
reputations cost reputable oversea enterprises in Vietnam as well as Vietnamese
customers.
Due to limited time, this paper only deals with a moderate number of Vietnamese
customers and distributors for foreign companies in Vietnam.

3. Literature review:

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 Integrated Skills Group Assignment The Cost Of Reputations

More and more researches are demonstrating the numerous costs of the reputation.
Nowadays, there are a great number of companies consider Vietnam their potential
market. Breaking into the market of Vietnam when this country is still at the dawn of
open market economy, they know exactly their advantages over local businesses.
Obviously, the biggest advantage of all is reputation. They make all efforts to broaden
their reputations, in order to attract more and more Vietnamese customers.

• Firstly, the enterprises are willing to spend a great deal of time and money on
advertising and image researching. For instance:

- For around $ 100,000, Factiva Company can plow through a database

that includes 10,000 mainstream media sources from 150 countries and
14 million blogs.
- Cost of sales on total cost of six months of 2009 of Tien Tien company
(distributer of dairy products by Mead Johnson Company imports) rose
to 85%, including marketing costs – advertising, increased 42.7%
compared to 21.2% of 2008.

• Secondly, the entrepreneurs particularly concentrate on improving customer

service. For example:

- Since entering Vietnamese market, Calvin Klein often sale off their
items, sometimes 20%, or 30%, especially 50% at the end of 2009 to
welcome New Year 2010.
- Prudential, which is said to be the most potential insurance brand with
40% market share, is famous for excellent customer service such as
sending gifts at some special days, rising the benefits of customers
(10,25% per year(2010)), giving loans with low interest rate (1,04 – 1,58
% per month).

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• Last but not least, the reputable oversea brand names keep on improving
their image by doing charity works. This is considered a winning point when
doing business in a country with lots of existing social problems like Vietnam.
Some examples can specify this matter:

- Kotex yearly holds examination for the Vietnamese female and give the
rewards for more than 1000 best students.
- Honda is known as the biggest company who often give scholarships for
poor students with high results ($3000/person).

METHODOLOGY
1. Research questions:

Within the scope mentioned before, the study concentrates on raising three main
questions:
1) How do reputations cost renowned oversea enterprises in Vietnam?
2) How do reputations cost Vietnamese customers?
3) Precautions, recommendations and suggestions for reputable foreign brands in
Vietnam and for Vietnamese customers in their business transactions.

2. Method of collecting data:

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Collecting good information related to the topic is argued to be one of the most
significant stages. In this paper, we make all efforts to find out two main types of data:
the primary data and the secondary data.

Primary data is the information we got from the questionnaire survey about how
reputations cost renowned oversea enterprises in Vietnam and how they cost Vietnamese
customers. Approximately 40 people were attracted by our survey. They are students,
housewives, staffs of some companies and distributors.

On the other hand, to make the study more specific and informative, we used data
from other sources such as Internet, books and newspapers… which was called secondary
data. These sources supply more updated and wider range of information which can not
be collected from primary data.

Result and discussion

In this section, the findings based on the results of the questionnaire and research
will be presented following three main parts: How do reputations cost renowned oversea
enterprises in Vietnam, how do reputations cost Vietnamese customers and precautions,
recommendations and suggestions for reputable foreign brands in Vietnam and for
Vietnamese customers in their business transactions.

1. How do reputations cost renowned oversea enterprises in

Vietnam?
Breaking into Vietnam market does not require renowned oversea enterprises to
spend a lot on building and maintaining their reputation. Vietnamese customers are not

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really picky, especially when it comes to reputable foreign brands. Products which are
highly rated in the developing countries around the world are already presumed to satisfy
Vietnamese customers’ needs; therefore their manufacturers do not necessarily customize
their products in Vietnam market. That, however, does not mean they can put aside
Vietnamese customers’ requirements for an oversea products.

Question 1 : In your opinion, what

kind of product has higher quality?

23%

77%

Oversea Domestic

As much as they admire the foreign brands, Vietnamese customers also set very high
expectations on foreign products. Our research indicated that 77% of Vietnamese
consumers believe that products from foreign companies have higher quality than local
ones. As a result, if an oversea enterprise cannot meet customers’ demand, they will
suffer from lousy reputation that spreads quickly throughout the country. Bad news has
wings, especially in Vietnam, where people are tend to believe in personal
recommendations and hearsay more than any advertisements. That is something oversea
entrepreneurs should beware if they plan to decrease their product qualities due to the
disregard of a small country’s consumers.

Renowned oversea enterprises do not seem to concentrate on advertising their

products either, as the advertising industry in Vietnam is already a mess. Many eminent
brands have not offered any ads on Vietnamese TV, such as Calvin Klein, The Body

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Shop, or Converse shoes. Their business is to do well in the developed countries, and
make sure those news are spread enough to reach every kind of Vietnamese consumers,
then there they have Vietnamese consumers do free-marketing for their products.
According to our survey, over 63% of people asked care about the preeminence of
oversea products more than how they are advertised (surveyed on question 4). On the
other side, instead of self-promote their products, foreign enterprises has to invest their
money on building luxurious showrooms to suit their stature, and avoid letting their
products become old-fashioned. Oral advertisement is all about trend, and it means if you
fail to create a trend, then you will fail in doing business. Apple has been doing the
exactly right thing for years. Though Vietnam has just been listed as one of the countries
using Apple products in April 2010, Vietnamese people, especially the youth, has gone
crazy over Apple products years before, and recommended this eminent brand to
everyone they meet. By the ahead-of-the-time innovations, Apple has quickly built their
reputation as a symbol of progress, modernity and fashion, and it makes everyone in the
world want to own their products. Obviously, Vietnamese is not an exception.

Though benefitting from reputation, the biggest problem that occurred to

prestigious oversea companies is the price.

Question 2 : What do you care most

about the products you purchase?

22%

41% Price
Quality
Reputation

37%

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Our survey showed that the supposition above is entirely true. Vietnamese customers
mostly care about the price (41%), then quality (37%), and only 22% prioritize
reputation. That said, in a pre-developing country like Vietnam, an exorbitant price is
really a gigantic disadvantage. Though spending less on advertising products, oversea
companies are still under the pressure of exchange difference. Consequently, it is
absolutely hard to lower the prices to the point of suiting every pocket. Since original
products cost more than they can afford, Vietnamese consumers come up with the
solution of using secondhand, copycat or me-too products. This is obviously a disaster for
renowned companies, as those products can easily be mingled with original ones by
counterfeiters and destroy their reputations severely. Struggling with counterfeiting and
facing the dander of losing customers to local companies due to higher prices, some
reputable companies decided to take risk by violating business ethics in order to decrease
the prices. Certainly, it is not a smart thing to do. Though not many people in Vietnam
pay attention to such internal business activities as how enterprises manage their
business, treat their employees, or do charity work, they still concern about morality and
the interests of fellow-citizen. Take Vedan for example: its industrial waste water was
discharged into Thi Vai River in order to reduce production cost. After this fact had been
discovered, it was strongly criticized and its products were boycotted by the Vietnamese
consumers. Vedan’s long time reputations, consequently, are notorious ever since, and it
can by no means be easy for them to shake this off. All of the above has proved one
thing. It is true that Vietnamese customers are not really picky, but it is also true that they
are really demanding. They are always in favor of a product with high quality,
fashionableness, trustworthy brand name, and reasonable price. To maintain reputations
in this small country is not as easy as falling off a log. It is, indeed, so much harder than
expected.

2. How do reputations cost Vietnamese customers?

The findings based on the results of the questionnaire reveal a great impact of
renowned brands’ reputations on Vietnamese customers.

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Reputable companies entered the market of Vietnam years ago. Their reputations
cost Vietnamese customers so much in return and change the consuming habit of citizens
there as well. No more do a lot of Vietnamese customers want to use their current goods.

Question 3 : What will be your best

choice among a luxurious oversea
product, a domestic item and a me-too
item?
1%

Oversea
48% Domestic
51%
Me-too

In the research, when being asked “What will be your best choice among a luxurious
oversea product, a domestic item and a me-too item?”, there is a small diversity between
the options of reputable oversea product (48%) and domestic product (51%). That means
since the appearance of reputable oversea brands, there have already been a large number
of customers who would prefer using renowned products and quit purchasing domestic
ones.

Another data given is the evidence for the superiority of prestigious brands. To
the question “Why do you want to purchase prestigious oversea products?”, 63%
Vietnamese customers surveyed said that they would like to purchase renowned products
to find out how good they are, while 26 % admit they are manipulated by interesting
advertisement, and 9% say that using oversea products is their own favorite. Only 2 %
are willing to pay for these products due to reasonable price.

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Question 4 : Why do you want to

purchase prestigious oversea
products?

2%
9%
Resonable price
Favorite 26%
Advertisement
Preeminence 63%

There are some techniques applied excellently by reputable companies to attract

customers and make them give up their current habit. Vietnamese customers are deluded
to believe that the qualities of reputable brands are the best due to the unquestioning
belief on the choices of consumers in developed countries. As a result, a strong opinion
about the product is shaped among Vietnamese customers that “Whatever from foreign
countries (except for China) is better than that in Vietnam”.
Accidentally, Vietnamese customers are manipulated to pay the cost of
reputations. In order to use reputable goods, they have to accept high prices, cursory
advertisements or even poor quality products. A clear example can be seen in the case of
Honda motor company. The Heads’ belief in Honda’s reputations as well as customers’
faith leads to the increase in selling price of each motorbike. There is an obvious diversity
between selling price and fixed price. However, customers are made to accept that
injustice because of its reputations, without recognizing another fact that the quality of
Honda motors in Vietnam is no longer the same. As customers fail to tell truths from lies
in rumors and oral advertisements, companies offer themselves the freedom of doing
business irresponsibly. Recently, L’Oreal cosmetic company has been discovered that
there is lead in some types of lipstick which can cause cancer. Hence, the cost from
reputations that customers have to deal with is of no small value.

3. Precautions, recommendations and suggestions:

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 Integrated Skills Group Assignment The Cost Of Reputations

After researching into reputation costs, some advices are given out to help
reputable enterprises achieve more success in business activities and provide Vietnamese
customers some useful consuming orientations.

Taking advantages of reputations has it own limit. If a prestigious brand crosses

that limit, it will ruin its reputation. Therefore, reputable companies should concern about
the way they operate business activities to avoid ruining their prestige and minimize
reputation costs such as keeping the price reasonable, assuring quality of products and
improving customer service.

Though products from reputable brands are always famous for its high quality,
beautiful design and a symbol of high social status, the prices of theirs are not really
reasonable, and even their qualities can be not really corresponding to what they have
been labeled. Therefore, before purchasing any items, whether they are from reputable
oversea brands or new domestic ones, the first thing wise customers had better do is
studying the quality and the price of the products thoroughly. If the price is out of reach,
using high-quality Vietnamese goods is recommended.

Conclusion

1. Major findings:

In this paper, we have studied how reputations cost renowned oversea enterprises
in Vietnam and how they cost Vietnamese customers. Throughout the study, the answers
to the research questions have been figured out. It showed that prestigious foreign
companies, when entering Vietnam market, also face major problems to maintain their
reputations. In order to keep customers’ belief, they have to concern about conserving
product quality, staying fashionable and most importantly, coming up with more
reasonable prices. The study also indicated that though Vietnamese customers are very
demanding, more and more of them are affected by current trend and popular belief on
reputable oversea brand names. The fact that the number of consumers purchasing

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luxurious products keeps increasing also help us to figure out how living standard in
Vietnam has been rising year by year, and that the Vietnam economy is on the impetus of
keeping pace with developed countries, particularly in WTO, and generally in the world.

2. Suggestions for further research:

The cost of reputations is a matter worthy of considering in every business

transaction. Due to the time, knowledge and research scale limits, we could only mention
about the impacts of reputation costs on renowned oversea enterprises in Vietnam and on
Vietnamese customers, as well as providing some precautions, recommendations and
suggestions for them when taking part in business. This study can be extended to the
impacts of reputation costs on domestic companies and newly-started business as well.
On the scope of this research, we hope that the paper, to some extent, can contribute to
the understanding of reputation costs in business transaction. Any comments for the
paper will be highly appreciated.

QUESTIONAIRE

Topic: The cost of reputations

Q1: In your opinion, what kind of product has higher quality?

o Oversea product (77%)

o Domestic product (23%)

Q2: What do you care most about the products you purchase?

o Price (41%)
o Quality (37%)

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o Reputation (22%)

Q3: What will be your best choice among a luxurious oversea product, a domestic item
and a me-too item?

o Oversea (48%)
o Domestic (51%)
o Me-too (1%)

Q4: Why do you want to purchase prestigious oversea products?

o Preeminence (63 %)
o Advertisement (26%)
o Favorite (9%)
o Reasonable price (2%)

Reference
1. The 2009 market report of Industry and Trade Bureau.

2. Phillip Kotler, Gary Amstrong. (2009). Principles of Marketing: Global Edition.

3. What price reputation?

http://www.businessweek.com/magazine/content/07_28/b4042050.htm

4. Examples from:
http://www.prudential.com.vn/
http://www.bktphcm.net/diem-tin/ban-tin-bach-khoa/458-hon-40000-usd-danh-tang-
cho-sv-nhan-hb-honda-yes.html

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http://www.hanoimoi.com.vn/forumdetail/chinh_tri/29347/1001-n7919-sinh-
2734327907c-trao-h7885c-b7893ng-kotex-vi-n7919-sinh-tai-n259ng-vi7879t-
nam.htm
http://vietbao.vn/Kinh-te/Chi-phi-quang-cao-day-gia-sua-len-cao/11142691/87/
https://home.americanexpress.com/
http://vnexpress.net/GL/Home/
http://dantri.com.vn/
http://tintuc.xalo.vn/

5. Results from the questionaire survey.

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