MINISTRY OF EDUCATION & TRAINING UNIVERSITEÙ LIBRE DE BRUXELLES
HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BUSINESS SCHOOL

MBMM PROGRAM
TRAN HUU MINH
MARKETING PLAN FOR ELF GAZ SAIGON COMPANY
IN SELLING LPG AS FUEL TO TAXI MARKET
IN HO CHI MINH CITY
FINAL PROJECT
MASTER IN BUSINESS & MARKETING MANAGEMENT Tutor: Dr. NGUYEN DINH THO


ACKNOWLEDGEMENT This project is the result of contribution from many concerned organizations and
people. Therefore, I wish to express my gratitude to all concerned people and
organizations for their supports and assistance during preparation of this project.

Firstly, I would like to acknowledge and thank the Professors, Members,

1.1. Introduction of ELF GAZ SAIGON Company 3
1.2. The market share of ELF GAZ SAIGON Company 4
1.3. Brief on business situation of ELF GAZ SAIGON Company 5
1.4. Development orientation of ELF GAZ SAIGON 6PART 2. SITUATIONAL ANALYSIS 7

2.1. Overview of LPG used vehicle situation in Vietnam 7
2.2. Overview of taxi market in Ho Chi Minh city 8
2.3. Overview of Ho Chi Minh city 10
2.4. Environment, Politic, Law and regulations 11
2.5. Opportunities and threats on autogas domain 11
2.6. ELF GAZ SAIGON’s SWOT analysis 12
2.7. Competitors in autogas segment and substitute fuel 13PART 3. LPG AS FUEL FOR AUTOMOBILES AND ITS BENEFIT 15
3.1. What is LPG 15
3.2. Benefits of LPG 15
3.3. Evolution of Petrol and LPG selling price in 2006 18

PART 4. STRATEGY OF ELF GAZ SAIGON COMPANY 20

4.1. Marketing objective 20
4.2. Marketing strategy 20
4.3. Marketing mix 21

LIST OF APPENDIX

1. Sales volume of the three sectors of EGS in 2006
2. Market share of main LPG companies in South Vietnam
3. Retail selling price evolution of Petrol and LPG in 2006
4. Guideline used in the in-depth interview
5. Summary of the in-depth interview
6. The pricing formula
7. Illustration of the pricing formula
8. Explanation of Appendix 6 and 7
9. Evaluating methods for the project
10. Explanation of investment cost
11. Procedure of registration for circulating LPG fuel automobiles
12. Typical installation of auto – LPG station
13. Typical installation of auto – LPG station
14. Types of vehicle tanks put in automobiles
15. Scheme of bicarburetion equipment

ABBREVIATION

EGS : ELF GAZ SAI GON Company
LPG : Liquefied Petroleum Gas
CNG : Compressed Natural Gas
WTO : World Trade Organization
HCMC : Ho Chi Minh city
No Content Page
1 Sales volume of EGS for last 05 years 4
2 Retail selling price Evolution of petrol and LPG 18

EXECUTIVE SUMMARY OF THE FINAL PROJECT

ELF GAS SAIGON COMPANY (EGS), founded in 1991, a joint-venture
company, located in HCMC, South Vietnam, specializes in selling gas (LPG)
over the whole country, but mainly, in South Vietnam. It sells gas (LPG) to
domestic sector for cooking and in industrial sector for industrial applications as
ceramics, paint drying, metal smelting, glass, metallurgy etc.

The sales volume growth rate of EGS in some last years is sometimes negative
or unremarkable while the aggregate demand of LPG in Vietnam is more and
more increasing. Therefore, in order to protect and develop the business, EGS
Company must find out and target to some new markets in order to increase its
sales volume and its market share in Vietnam. One of the new and potential
markets in Vietnam in the future is autogas market. It means that EGS sells LPG
as fuel to automobiles market.

The objective of this final project is to make the marketing plan for EGS to
feasibly penetrate in selling LPG as fuel for the first 100 taxi fleet of only one
taxi company in HCMC with the minimum LPG consumption volume committed
by a taxi company in the five year contract term. In order to be successful in this
penetration, EGS has to provide its product with high quality and its package
services as per its different way as follows:


In sum, this project is not only to be the precedent step for penetrating in the
autogas market in HCMC, for increasing the sales volume of EGS but also to
partly participate environmental protection in HCMC in particular and in
Vietnam in general.

- 1 -

INTRODUCTION OF THE FINAL PROJECT

LPG used as fuel for both automobiles (autogas) and motorbikes is not a new
matter in Vietnam, but unpopular in Vietnam during last time because of some
reasons as lacking LPG distribution network, detailed legal framework, high cost
for conversion and uneasy psychology of people. So, to penetrate into the
autogas market in Vietnam with such current above mentioned conditions is
really difficult. In order to penetrate into this autogas market feasibly, there must
be gradual and appropriate marketing plan and this is the very objective of this
final project.

A. OBJECTIVE
The objective of this final project is to make the marketing plan for EGS to
feasibly penetrate in selling LPG as fuel for the first 100 taxi fleet of only one
taxi company in HCMC with the minimum LPG consumption volume committed
by a taxi company in the five year contract term . In order to be feasible in this
penetration, EGS has to provide its product with high quality and its package
services as per its different way.

B. SCOPE
• Period: The project of 05 years from the year 2008 to 2012
• Niche : The first 100 taxi fleet of only one taxi company in HCMC.


aspects provide the persuasive evidences concerning economical and
environmental benefit of using LPG as fuel for automobiles in stead of Petrol
and Diesel, which are the essential factors impacting people’s attitude on using
LPG as substitute fuel for petrol and diesel.

Part 4
: Strategy of ELF GAZ SAIGON Company
This Part covers marketing objective, marketing strategy, marketing program,
implementation and control of EGS concerning how to feasibly penetrate into the
taxi market as per EGS’s different way. - 3 -

PART 1. ELF GAZ SAIGON COMPANY’S DESCRIPTION

This Part covers the brief description about EGS ‘s type, operational scale, past,
current business situation and future business development orientation. This
section also mentions the reason why EGS has to find out more new segments for
its business development in the future.

1.1. INTRODUCTION OF FLF GAZ SAIGON COMPANY (EGS)

EGS, a joint-venture company between Total group (France) and HCMC
General Construction Material Company (Vietnam), located at quarter 5, Tan
Thuan Dong ward, Nha Be district, HCMC, Vietnam, founded in 1991, is the first
Company supplying LPG in Vietnam after 1975. EGS operates over the country,
but mainly, in South Vietnam. It supplies LPG in the three sectors:
• Domestic (for cooking): Selling LPG contained in 6kg, 12.5kg cylinders to
end users (households).

Sales volume
44,000
44,500
45,000
45,500
46,000
46,500
47,000
47,500
48,000
48,500
2002 2003 2004 2005 2006
Year
(Ton)
Sales volume (ton)

Source: Internal data

1
Estimated growth rate : 9% per year compared to the year 2005

- 5 -

1.3. BRIEF ON BUSINESS SITUATION OF EGS

Presently, there are 02 LPG sources providing LPG in Vietnam:
• Local LPG source is supplied by Petrovietnam (State-own company).
• Imported LPG source is imported from foreign countries.

The supplying capacity of local LPG source occupies around 30% of the

As shown above, the business growth rate of EGS during last time is sometimes
negative or unremarkable while the aggregate demand of LPG in Vietnam is
more and more increasing. Therefore, in order to protect and stably develop the
business, EGS must have a proper development strategy to increase its sales
volume and market share of the LPG market in Vietnam.

1.4. DEVELOPMENT ORIENTATION OF EGS

In order to protect and develop the business, EGS must have proper development
strategy to increase its sales volume and market share of the LPG market in
Vietnam. One of many ways to protect and develop its business is to re-segment
the market in order to find out the new potential segment
3
for its product and
services.
One of the new and potential segments for LPG supply in the future in Vietnam
is selling LPG as fuel for automobile market (autogas market), in which taxi in
HCM is considered as the promising segment. This is the new segment of EGS ‘s
development orientation in the future.

3

01
3 Da Nang city 25 0 01
4 Vung Tau city 0 0 01
Total 25 200 05
Source: Nguyen Tu- Dai Duong, htpp://www.tienphongonline.com.vn
: (Vietnamnet online dated 26/08/2006) 4
Son Lam, Sai Gon Giai Phong newspaper, 9/11/2005 - 8 -

2.2. OVERVIEW OF TAXI MARKET IN HO CHI MINH CITY
2.2.1. Market size (LPG consumption volume) of taxi market

The traffic density in HCMC is rather heavy with assorted vehicles from
motorcycles, motorbikes, cars , buses to light and heavy trucks etc in order to
satisfy traveling demand for people and to transport goods. Therefore, taxi is one
of indispensable means to satisfy this demand.

The taxi quantity in HCMC in some last years has been remarkably increased
from over
7,000 taxis in 2005
5
to over 10,000 taxis of 37 assorted taxi companies
operating around HCMC in 2007
6
under the names of Mai Linh (1,400 taxis)
5
V.H, vnexpress.net , 07/09/2005
6
Phương Thanh, “ Có chấn chỉnh được taxi dù”, Báo Tuổi Trẻ, thứ Bảy, 10

/03/ 2007
7
Báo Sài Gòn Tiếp Thò online, “Kiểm tra đâu, vi phạm đó”, 20/04/2007
8
Vinasun taxi Company, April, 2007
9
Nguyn Sa,VietNamNet, 11/04/2005
10
Vinasun taxi Company, April, 2007

- 9 -

With the above table, we have the petrol consumption volume per year of 10,000
taxis in HCMC is 66,000,000 liters, which is equivalent to 44,000,000 kg (44,000
tons) of LPG per year through the conversion below.
Table 4. Conversion from Petrol into LPG consumption volume
No Parameter Petrol consumption LPG consumption
1 Unit of measurement liter kg
2 Equivalent conversion
11
1,5 1
3 Fuel volume/year 66,000,000 44,000,000



2.3. OVERVIEW OF HOCHI MINH CITY

HCMC has an area of approximately 2,094 square kilometers and 24 districts
with the population of over eight million inhabitants (permanent and temporary
inhabitant). HCM city is considered as the economic, cultural, industrial center of
the whole country.

The city has looked for and adopted new economic development and
management models to replace the previous subsidy mechanism and become the
country’s largest economic hub. Since 1986, the annual average economic
growth is 10.3 percent. GDP per capita reached VND30 million (equivalent to
US$1,875) in 2006. The city has set targets of achieving an economic growth rate
of between 12.2-12.5 percent, increasing export growth by more than 15 percent
and generating 250,000 jobs in 2007
13
.

So far, 13 industrial and export processing zones in the city have attracted more
than US$2.2 billion in investment capital and generated tens of thousands of
jobs. The city has accelerated the integration process and boost economic growth
to become an industrial, service and scientific-technological centre in Southeast
Asia
14
.
In sum, with the above mentioned things, HCMC has favorable conditions for
trading business. 13

century.

2.5. OPPORTUNITIES AND THREATS ON AUTOGAS DOMAIN
2.5.1. Opportunities
With the above mentioned information, the opportunities for selling LPG to the
taxi segment is realistic through some main factors: 15
htpp://www.trade.hochiminhcity.gov.vn
16
htpp://www.hochiminhcity.gov.vn

- 12 -

• The autogas market has been shaped in Vietnam although its development
speed is limited and unpopular.

• With the integration of Vietnam in WTO, the increasing of gasoline selling
price in the coming time is unavoidable because the State step by step cut
down the subsidization. Therefore, the local petrol selling price will be based
on the international price. This means that using LPG as fuel for automobiles
is good solution for reducing the fuel cost proved in the Part 3 of this project.

• With mentioned LPG consumption volume, the taxi market in HCMC is
considered as the potential and promising market on autogas domain for LPG
companies in the future.

• HCMC has favorable conditions for business doing.


• No gasoline stations available in Vietnam.
• Not yet having technical experience on autogas segment.
Opportunity
• With the above mentioned concerns of Part 2, it is the right time for EGS to
plan and to deploy the project of selling LPG for this potential taxi market.
Threats
• Vietnamese people in general and taxi drivers in particular are not familiar
and not fully aware on effectiveness and efficiency of using LPG for vehicles.
• High imported duty rate for LPG converter kits and its accessories.
• Regulations of local authorities on taxi operation is unpredictable.

2.7. COMPETITORS IN AUTOGAS SEGMENT AND SUBSTITUTE FUEL
2.7.1. Main competitors
a. (Saigon) Petrolimex Gas Co., Ltd : Located in HCMC, one of four LPG
selling companies belonged to Petrolimex Gas Joint Stock Company in Vietnam.
Their advantages
• To already sell LPG for one available LPG dispensing pump installed and
located in the gasoline filling station of Petrolimex Fuel Company in HCMC.

- 14 -

• To have good relationship with Petrolimex Fuel Company which belongs to
the State and possesses 1.500 gasoline stations and its distributor system of
6,000 selling units over the country.
18
This is a good condition for them to
associate and to install the LPG dispensing pumps in these gasoline stations.
b. Petrovietnam Gas (PVG): The State-owned company
Their advantages
• They both process and trade some local products as LPG, CNG.


- 15 -

PART 3. LPG AS FUEL FOR AUTOMOBILES AND ITS BENEFIT

This Part covers three aspects of LPG including what is LPG; Benefit of LPG and
the evolution of Petrol and LPG selling price last time. These aspects provide the
persuasive evidences concerning benefit of using LPG as fuel for automobiles in
stead of Petrol and Diesel, which are the essential factors impacting people’s
attitude on using LPG as substitute fuel for petrol and diesel in the coming time.

3.1. WHAT IS LPG

LPG is the abbreviation of Liquefied Petroleum Gas. LPG is a mixture of
hydrocarbons which exists as a vapor under ambient conditions and can be
changed into liquid state by applying moderate pressure. Typical composition:
60-70% butane (C
4
H
10
) and 30-40% propane (C
3
H
8
). This is the clean and non-
polluted fuel. LPG is used in many domains as cooking, horticultural,
agricultural, heating, drying process, other industrial applications and autogas
(LPG is used as fuel for automobiles).

3.2. BENEFITS OF LPG

87% less ozone forming potential 60% less ozone forming potential
10% less Carbon Dioxide
Source: Seminar, 17
th
November, 2005, based on tests undertaken by Millbrook
Emissions Laboratories (UK) in 1998 and 1999.

3.2.2. Economical benefit
As mentioned in 2.4 of Part 2, the Decision No: 55/2007/ND-CP dated 06 April,
2007 of Vietnamese Prime Minister allowing gasoline stations who can decide
their retail selling price of gasoline based on market mechanism and under the
management of the State. This means that step by step the gasoline selling price
in Vietnam will not be subsidized any more. This is a good opportunity for