VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

Do Thu Hang
DEVELOPING DISTRIBUTION CHANNELS FOR VIET TINH ANH
JOINT STOCK COMPANY TO BOOST THE SALES OF THE
IMPORTED LEGO TOYS

Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr. Nguyen Thi Phi Nga

Hanoi – 2011


TABLE OF CONTENTS
ACKNOWLEDGEMENT ................................................................................. i
ABSTRACT ...................................................................................................... ii
TÓM TẮT ........................................................................................................ iv
TABLE OF CONTENTS ................................................................................. vi
LIST OF ABBREVIATIONS .......................................................................... ix
LIST OF TABLES, FIGURES AND PICTURES ............................................ x
INTRODUCTION ............................................................................................. 1
1. Significance of the Topic .............................................................................. 1
2. Literature Review .......................................................................................... 1
3. Objectives of the Thesis ................................................................................ 3
4. Scope of the Thesis ....................................................................................... 4
5. Research questions ........................................................................................ 4

2.3. Assessing the effectiveness of the imported LEGO toy distribution
channel ......................................................................................................... 57
2.3.1. The effectiveness of the whole channel ....................................... 57
2.3.2. The effectiveness of each member in the channel ....................... 58
2.4. An analysis of the affecting factors to the effectiveness of the LEGO
toy distribution channel ............................................................................... 59
2.4.1. Objective factors .......................................................................... 59
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2.4.2. Subjective factors ......................................................................... 62
CHAPTER 3: SOLUTIONS TO DEVELOP DISTRIBUTION CHANNELS
FOR VIET TINH ANH JSC TO BOOST THE SALES OF THE
IMPORTED LEGO TOYS ............................................................................ 64
3.1. Business objective and business strategies of Viet Tinh Anh JSC in
the coming years .......................................................................................... 64
3.1.1. Business objectives and business strategies of the company ....... 64
3.2. Suggestions to develop distribution channels for Viet Tinh Anh Joint
Stock Company ............................................................................................ 66
3.2.1. Strategic solutions ........................................................................ 66
3.2.2. Specific solutions ......................................................................... 69
CONCLUSION ............................................................................................... 74
REFERENCES ................................................................................................ 76
APPENDIX ..................................................................................................... 78

viii


LIST OF ABBREVIATIONS
CEO


Table 2.4

Revenue of direct shops in 2009 and expectation in 2010

Table 2.5

Sales on intermediaries

Table 2.6

Increase of revenue of retailers and consignments, 2009-10

Table 2.7

Number of intermediaries 2007-09

Table 2.8

Indicator to assess performance of retailer and consignment of
Viet Tinh Anh JSC in 2009

Table 2.9
Table 3.1

Level of education of human resource in Viet Tinh Anh
Current and expected number of retailers and consignments of
Viet Tinh Anh JSC

FIGURE


Picture 2.4

LEGO Golden Day

Picture 2.5

Fashion Contest for Barbie Doll promoted by Phuong Nga

Picture 3.1

Advertisement of LEGO Club in Viet Nam

Picture 3.2

Management team of Viet Tinh Anh JSC

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INTRODUCTION
1. Significance of the Topic
Marketing plays an important role in business activities of enterprises,
especially in the harshly competitive market. Comes to marketing, people
refers directly to the 4 Ps or marketing mix which are the typical features of
marketing activities. Besides, the managing the distribution channels also
plays an important role in the success of the company. However, the job of
managing the distribution channels have not received proper attention of the
many company‘s owners.
Viet Tinh Anh Joint Stock Company, the exclusive distributor of

how to reduce channel conflicts, the importance of stock management and
distribution fulfillment to run a business efficiently, internet marketing
distribution, and multi—channel retail integration.
The global outlook series on Distribution Channel Research provides a
collection of statistical anecdotes, market briefs, and concise summaries of
research findings. The report offers a bird‘s eye view of the structure of the
distribution channel system, and the changing trends dotting its landscape.
Discussion on the global market is lined up with concise primers on major
distribution channel markets, such as, Agricultural Sector, Retail Banking,
Insurance Sector, and Mutual Funds. The reader stands to gain an
understanding of market fundamentals, and learn the truth behind multichanneling trends in the developed markets, and the simple math underlying
the correlation between product performances, effective product penetration,
and gap analysis and locating the customer market, among others. The report
highlights recent mergers, acquisitions, and other noteworthy corporate
developments. The retailing/distribution landscape in the US is quantitatively
analyzed, and annotated with 46 market data rich tables that portray the
prevalent retailing practices and distribution infrastructure scenario in select
industries such as Cosmetics (Fragrances, Hair Care, Health & Beauty Aids),
Office Products, Consumer Food & Beverage Products, Individual Life
Insurance, Lamps, Table Linens, Home Textiles, Wall Décor, FashionLicensed Merchandise, and Over-the-Counter Drugs, among others. Other
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briefly discussed and statistically illustrated regional markets include France,
Italy, UK, China, and India. Also included is an indexed, easy-to-refer, factfinder directory listing the addresses, and contact details of 2,281 companies
worldwide.
In Vietnam, there have been also many researches on marketing as well
as distribution channels because of the developing business atmosphere
recently. Especially, MA Ngo Quoc Hung finished a master thesis on
distribution channel ―The development of distribution channels of gold and

on studying the distribution channels of Viet Tinh Anh JSC for LEGO toys in
the recent years with the limited area of the Northern provinces (mainly in
Hanoi and Hai Phong).
5. Research questions
- What is distribution channel and its role in marketing?
- How does Viet Tinh Anh JSC operate its distribution channels?
- How to improve Viet Tinh Anh's distribution channel to increase its
profit?

6. Research Methodology
To reach the above objectives, the current thesis use the traditional research
methodology which starting with the background of channel distribution and
then the situation of the distribution of Viet Tinh Anh case to find the
application lessons for the company to improve the effectiveness of this
action in the future. Most of the analysed documents in this curent reseach
were collected through the secondary data

7. Expected Results
- Giving an overview of the main characteristics of high-end toy market
in big cities in Vietnam.
- Finding out strong points and weak points of the operating and
managing the LEGO toy distribution channels of Viet Tinh Anh JSC.
- Suggesting solutions to improve the distribution channels for Viet Tinh
Anh SJC to boost the sales of the imported LEGO toys.

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8. Structure of the Study
INTRODUCTION

A given business may have multiple distribution channels.
( />
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Figure 1.1: Ideal types of distribution channels
(Source: )

From the three definitions above, we can see a general definition for
distribution channel: It is a bridge to connect a company‘s product or ser vice
to the end-users. The distribution channels deliver flows of products or
service from the companies.

1.1.1.2. Structure of a distribution channel
In order to organize and manage a distribution channel effectively, it is
necessary to understand thoroughly the structures of it. Each company builds

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up the distribution channel structure suitably with the strength and advantages
that the company has. In general, the normative distribution channel structure
is defined as ―that set of institutions, which, in the long run, and under
conditions of competition and low barriers to entry, constitutes the channel
for some product in a given spatial context. It is comprised of a group that
could create greater profit or more consumer satisfaction per dollar of
product cost.‖ (Coughlan, et al., 1996)
Also according to Coughlan, et al. (1996), there are three key members
of a channel: manufacturers, intermediaries (wholesale, retail and specialized),
and end-users (business customers or consumers). The presence or absence of

(3) M

W

R

(4) M

A

W

M: Manufacturer

A: Agency

R: Retailer

C: Consumer

C
R

C

W: Wholesaler

Figure 1.2: Distribution channel structures
(Source: Distribution Channel Management; Truong Dinh Chien,
National Economic University Press, Hanoi)

The more fragmented the retail system, the more expensive it is for a
firm to make contact with each individual retailer. Imagine a firm that sells
toothpaste in a country where there are 50,000 small retailers. To sell directly
to the retailers, the firm would have to build a huge sales force. This would be
very expensive, particularly since each sales call would yield a very small
order. But suppose there are 50 wholesalers in the country who supply
retailers not only with toothpaste but also with all other personal care and
household products. Because these wholesalers carry a wide range of
products, they get bigger orders with each sales call, making it worthwhile for
them to deal directly with the retailers. Accordingly, it makes economic sense
for the firm to sell to the wholesalers and the wholesalers to deal with the
retailers.
Because of such factors, countries with fragmented retail systems also
tend to have long channels of distribution. The classic example is Japan,
where there are often two or three layers of wholesalers between the firm and
retail outlets. In countries such as Great Britain, Germany, and the United
States where the retail system is far more concentrated, channels are much

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shorter. When the retail sector is very concentrated, it makes sense for the
firm to deal directly with retailers, cutting out wholesalers. A relatively small
sales force is required to deal with a concentrated retail sector, and the orders
generated from each sales call can be large. Such circumstances tend to
prevail in the United States, where large food companies sell directly to
supermarkets rather than going through wholesale distributors.
Distribution channels can be described as being either short or long. A
short channel involves few intermediaries. A long channel, on the other hand,
involves many intermediaries working in succession to move goods from

Wal-Mart or Sears. The producer-wholesaler-retailer-consumer channel is
another common distribution channel in consumer marketing.

Business-to-Business Channels
B2B distribution channels facilitate the flow of goods from a producer
to an organizational customer. Generally, B2B channels parallel consumer
channels in that they may be direct or indirect. The simplest indirect channel
in industrial markets occurs when the single intermediary—a merchant
wholesaler referred to as an industrial distributor rather than a retailer—buys
products from a manufacturer and sells them to business customers. Direct
channels are more common to business-to-business markets because B2B
marketing often means selling high-dollar, high-profit items to a market made
up of only a few customers. In such markets, it pays for a company to develop
its own sales force and sell directly to customers at a lower cost than if it used
intermediaries.

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Figure 1.3: Typical Channels in Business-to-Business (B2B) Markets
(Source: )

Channels for Services
Because services are intangible, there is no need to worry about storage,
transportation, and the other functions of physical distribution. In most cases,
the service travels directly from the producer to the customer. Some services,
however, do need an intermediary, often called an agent, who helps the
parties complete the transaction. Examples include insurance agents,
stockbrokers, and travel agents.


large and complex markets. With each new channel, the company expands its
sales and market coverage and gains opportunities to tailor its products to the
specific needs of diverse customers. Multichannel distribution systems,
however, are harder to control, and they generate conflict as more channels
compete for customers and sales.
Vertical Marketing Systems
A vertical marketing system (VMS) is a distribution channel structure
in which producers, wholesalers, and retailers act as a unified system. One
channel member owns the others, has contracts with them, or has so much
power that they all cooperate. A conventional distribution channel consists
of one or more independent producers, wholesalers, and retailers. A vertical
marketing system, on the other hand, provides a way to resolve the channel
conflict that can occur in a conventional distribution channel where channel
members are separate businesses seeking to maximize their own profits—
even at the expense sometimes of the system as a whole. The VMS can be
dominated by the producer, wholesaler, or retailer. There are three major
types of vertical marketing systems: corporate, contractual, and administered.

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Figure 1.5: A Conventional Marketing Channel
Versus A Vertical Marketing System
(Source: )

A corporate VMS is a vertical marketing system that combines
successive stages of production and distribution under single ownership—
channel leadership is established through common ownership. A little-known
Italian eyewear maker, Luxottica, sells its many famous eyewear brands—
including Giorgio, Armani, Yves Saint Laurent, and Ray-Ban—through the

ownership utility. They make products available when, where, and in the sizes
and quantities that customers want. Distribution channels provide a number of
logistics or physical distribution functions that increase the efficiency of the
flow of goods from producer to customer. Distribution channels create
efficiencies by reducing the number of transactions necessary for goods to
flow from many different manufacturers to large numbers of customers. This
occurs in two ways. The first is called breaking bulk. Wholesalers and
retailers purchase large quantities of goods from manufacturers but sell only
one or a few at a time to many different customers. Second, channel
intermediaries reduce the number of transactions by creating assortments—
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providing a variety of products in one location—so that customers can
conveniently buy many different items from one seller at one time. Channels
are efficient. The transportation and storage of goods is another type of
physical distribution function. Retailers and other channel members move the
goods from the production site to other locations where they are held until
they are wanted by customers. Channel intermediaries also perform a number
of facilitating functions, functions that make the purchase process easier for
customers and manufacturers. Intermediaries often provide customer services
such as offering credit to buyers and accepting customer returns. Customer
services are oftentimes more important in B2B markets in which customers
purchase larger quantities of higher-priced products.
Some wholesalers and retailers assist the manufacturer by providing
repair and maintenance service for products they handle. Channel members
also perform a risk-taking function. If a retailer buys a product from a
manufacturer and it doesn‘t sell, it is ―stuck‖ with the item and will lose
money. Last, channel members perform a variety of communication and
transaction functions. Wholesalers buy products to make them available for

which aims to create an optimum distribution structure to meet the firm or
organization‘s conditions and targets. The firm or organization has to make a
wise decision on distribution in terms of scope and types of distribution
channels with a view to bringing products to end-users as fast and effectively
as possible.
Some companies use distribution channels operation to gather
information about new channels or examine the current channels further.
Others consider the distribution channels operation as distribution channels
selection. In general, operating or tailoring distribution channels relates to all
activities that help create new distribution channels in which there was no
existing distribution channel before and/or improve existing distribution
channels. Distribution channels operation is a collection of decisions which
identify distribution channels‘ factors including members, supplemental
organizations, working relations among the channel‘s system.

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