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Marketing Research of Vectren

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Marketing Research of Vectren
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Netra Shetty
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Marketing Research of Vectren - April 9th, 2011

Vectren Corporation NYSE: VVC is an energy holding company headquartered in Evansville, Indiana. The company provides gas and electricity to nearly one million customers in Indiana and Ohio. It is a Fortune 1000 company with $4.3 billion in assets.[1

Market Entry
Despite the opportunities in China’s market, foreign firms will find that China is not an easy market. American companies have to recognize the need for a special approach to a market with such a contrasting cultural, political and economic landscape. The most successful businesses in China are those that take the time to build strong relationships, become recognized in the industry, and develop products and services that cater to Chinese buyers.

Building good local relations are crucial to foreign firms seeking to provide ACE services in China. Forming a close relationship with a local partner can help you navigate the opaque regulatory system, as well as provide a strong local presence with local contacts.

Presently, most of China’s large projects need to go through an open tender system, and all the bids will be accepted on a competitive basis. The winning bidders and new venue owners will have a great deal of autonomy in deciding how to construct and operate the project and how to award this work. Getting established in China requires patience, commitment, and most of all, time. American firms may need several years to make a profit in China and will face stiff competition from local firms and from other foreign firms.

According to Ministry of Construction data, by the end of October 2006, there were 233 foreign design firms REGISTERED in China, not licensed under Decree 114. 139 foreign design firms were from Hong Kong, 25 from the U.S., 15 from Singapore, and 54 from different countries and regions. (Among these design firms, 207 foreign design firms were joint-ventures companies, 23 were wholly foreign owned enterprises (WFOEs), and 2 were joint-corporation companies.)

Market Issues & Obstacles
The main regulatory hurdles for entering the Chinese ACE market are Decrees 113 and 114. Decree 113 governs foreign construction firms, while Decree 114 governs engineering and design. In order to undertake construction or engineering and design work in China, foreign firms must establish a local presence, either a wholly foreign-owned enterprise (WFOE) or a Sino-foreign joint venture, and this Chinese legal entity must, after establishment, apply for either construction grade qualification or design grade qualification in a particular industry. This qualification determines the maximum value of projects that the construction enterprise may undertake.

Decree 113 carries a prohibitive registered capital requirement where obtaining Special Grade construction qualification (unlimited qualification to undertake projects of all types and values) requires US$38 million, while contractors without Special Grade qualification cannot undertake projects with a value greater than five times their registered capital (a firm would need $1 billion for a $5 billion project).

The Latin American cosmetics and toiletries market is still patchily undeveloped. Many consumers have limited access to branded products, due to an immature retail infrastructure, paving the way for direct selling, which is very popular. The counterfeit market, especially of perfumes, thrives due to lack of market regulation. As economies such as Brazil start to boom, normative retailing trends are emerging.

Extremely diverse markets still hold common trends
The cosmetics and toiletries market in Latin America is exceptionally diverse. A comparison between markets such as Brazil, with its consumer base of 192 million and a booming economy, with markets such as Bolivia, with nine million consumers whose economy is still strongly rural, is hard to make. This fragmentation of consumers is not merely at country level. Most markets are very diverse internally, for example Ecuador, whose consumer base is a patchwork of communities, including native Americans, people of colonial Spanish origin and the descendants of African slaves. Retailing habits are very different. Direct selling in Guatemala is poised to become the leading cosmetics and toiletries channel over the forecast period, while Argentina has become characterised by the spread of chained pharmacies.

However, there are several trends that are generally common to each market. The leading players are typically multinational producers such as Procter & Gamble or Colgate-Palmolive (although local producers are also present, typically at the low end of the market). Consumers throughout the region have been seeking to trade up, as local levels of disposable income have boomed over the review period and retail networks have improved. Consumer response to marketing has been very strong throughout Latin America, especially after multinationals poured money into the region, sensing the strong potential of a market that is still immature in large parts.

Market characterised by dynamic growth
Growth across the region has therefore been extremely positive – the Latin American cosmetics and toiletries market grew by 15% in 2007, compared to global growth of less than 6%, making it the most dynamic region in the world. This growth was largely underpinned by flourishing sales in Latin America's larger markets; cosmetics and toiletries sales improved by 13% in Brazil and by 17% in Argentina; Costa Rica saw growth of 12% while Venezuela saw exponential growth of 29% in 2007.

The development of these markets, in particular, has been driven by greatly improved economies, and the concurrent rise in disposable income. Venezuela, for example, enjoyed strong economic growth driven by high oil prices – the country is a key producer. In addition, the presidential election campaign and increased spending on social programmes improved the purchasing power of the lowest socio-economic groups. This trend has been repeated across the region – even the slowest growing market, Mexico, grew by 5% in 2007 as economic stability started to empower a far wider share of the consumer base.

Key products at variance
Patterns of consumer use across the region were only broadly similar – hair care, for example, was the largest product sector in value terms in the region, generating 27% of market value, but this varied from 15% in Costa Rica to 30% in Peru. Sales of hair care products in Brazil grew by 26% in 2007, compared to 3% in Chile. Regional trends were naturally distorted by patterns of use in large markets such as Brazil, Argentina and Mexico.

Last edited by netrashetty; April 9th, 2011 at 12:52 PM..
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