In this paper we will research the institutional and economic principles of holding varied market structures refering to different industry fight and societal cost and/or benefit. This paper is a qualitative survey of the Vietnamese market of dairy husbandmans and production as of 2008. The institutional scenes and the nature of Vietnamese diary market are presented with accent on the degree of houses ‘ fight and net income figures. The assorted types of market constructions will be discussed and the constituents are analyzed as standalone entities. The function of house attributes in issue – utilizing an original database incorporating elaborate firm-specific information, covering the Vietnamese dairy industry. The 2nd aim is to set up links between assorted aspects of productive efficiency and market construction. The 3rd aim is to analyze the effects of partial ordinance ( where merely a subset of houses is regulated ) on market construction and societal public assistance.

Concepts Summary

Theoretical constructs introduce us to four types of market construction, viz. Monopoly, Oligopoly, Monopolistic Competition and eventually Perfect Competition in the order of increasing competition, less merchandise distinction, increased industry competition. These market constructions are defined by cardinal factors:

Number and size of houses: If there are dominant house with big market portion per centum so it can put its ain monetary value and smaller house are monetary value taker.

Industry concentration

Technological and cost conditions

Demand conditions

Market Entry & A ; issue feasibleness

Merchandise ‘s distinction

Degree of monetary value control by houses. If the monetary value is raised, will the house lose sale by entire sum ( a horizontal elastic demand curve ) , or a big proportion ( elastic demand curve ) , or minimum measure ( inelastic demand curve ) ?

Market power gives firm the ability to put monetary values, since demand is slightly inelastic, monetary values can be raised and the house earns net income above absolutely competitory degree. In such instance, consumers ‘ benefits are diminished. Vice versa, if the consumers have market power so they can act upon the monetary values. ( SLOMAN, John, 2007 )

There is a concatenation of causality and effects arise from market construction to carry on of houses act uponing the houses ‘ public presentation, efficiency, and net income degree.

We can besides deduce partly the construction of the market by reaping information about houses ‘ behavior, pertinent to historical pricing informations, publicizing behaviour, R & A ; D, amalgamation & A ; acquisition activity. By analyzing the pro-forma balance sheet of publically traded house, we can find the house ‘s profitableness degree and the societal public assistance as determined by industry market construction.

About the market construction, manufacturers face different environments. Some manufacturers face a competitory or a monopolist market of inputs but selling their merchandises in a market construction such as monopoly, ( im ) perfect competition or monopolistic competition or different grades of oligopoly ; others can confront monopsony or oligopsony, combined with different constructions in ( some ) inputs ‘ markets. Any combination between Sellerss and purchasers is possible. Some industries face homogenous merchandises, that consumers ca n’t separate ; others face perfect replacement merchandises but different at the consumers ‘ point of position ( instance of industry of cigars ) . ( SLOMAN, John, 2007 )

So, market construction is of import because non merely by the differences we can separate between them, but because of the behaviours associated to each one and that can bring forth different perceptual experiences and actions between rivals, between consumers and between rivals and consumers. With this position in head, a inquiry comes up: which market constructions do truly be? Perfect competition and monopoly? Something between these two sorts of market constructions? What truly does intend the term progressive competition? Imperfect in the sense of competitory behaviour with market failures ( information failures, for case ) or progressive in the opposite sense of “ perfect ” competition? Could it be a mix of pure competition and monopoly? But, will such a market construction truly exist and how can we unite them in the existent universe? ( MANKIW, N. Gregory ) It ‘s non merely a inquiry of an homogenous good sold in an imperfect market, but the diverseness of conditions environing each manufacturer faced as monopolizer of his ain assortment. Monopolistic competition embodies elements of monopoly and perfect competition, presuming a great figure of Sellerss, such that the actions of one single manufacturer have no effects on his rivals. But it is related with monopoly and oligopoly with distinction, for the differentiated merchandise of each marketer has a demand curve with negative incline. We can see that the power of a manufacturer to distinguish a merchandise as portion of the competitory scheme. Therefore, the market nature is characterized both by the figure of houses and the merchandise distinction, where houses control merchandise ( differentiated ) monetary values, measures, merchandise quality, and, in this procedure, they use tools such as advertisement in consequence of differentiated production, trying to “ better ” sell his ain ( differentiated ) merchandise. There can be competition without the significance of pure competition ; in contrary to inactive equilibrium, leting the possibility of disequilibrium. In an industry with many manufacturers and little houses in relation to the market as a whole, selling differentiated replacements will make market power, in a manner that each rival can acquire some grade of control of his assortment monetary value in alliance with existent economic universe ‘s behaviour. However it may being a competitory behaviour, it gets both elements of free competition and monopoly. His work is non based in ( merely ) the house construction ; it ‘s related specially to the market construction. Each manufacturer in an industry has a monopoly of his ain assortment ; the industry does non needfully be a monopoly. It can be strong competition in this procedure, although built on different theoretical and empirical footing ( monopoly theory, but taking into history the interrelatednesss between groups of manufacturers ) . In this manner, pure competition eliminates “ portion of the image ” , non taking in history the monopoly elements presence. The market construction could be of an oligopoly construction, observing the common dependances between rivals ‘ actions, and the possibility of monopolistic competition with a figure of rivals sufficiently big, in a manner that the common dependances between rivals become irrelevant. Monopolistic elements are non simply the consequence of consumers ‘ irrational behaviour, because merchandises are assumed to be differentiated in several grades. The relation between monetary value and gross revenues to an single marketer depends on the market organisation in which he acts. If the merchandise is differentiated, with bigger monetary values in relation to his rivals, the single manufacturer will non lose all his gross revenues, because if some of his purchasers will travel to his rivals, besides some of his loyal clients will maintain purchasing his ( differentiated ) merchandise, for penchant motives. The single behaviour is, in general, affected by the actions and reactions of his rivals. The behaviour of single Sellerss ( and consumers ) is strongly interrelated: the behaviour of a house has of import effects on measures, monetary values and net incomes of the other houses. The single house does n’t command all the variables that affect its net income, so, it ‘s impossible the unconditioned ( free ) maximization of net incomes. ( HALL, Robert E. ) So, monetary value and merchandise are two cardinal variables in the competitory procedure towards equilibrium: monetary value equilibrium versus merchandise equilibrium, sing three possibilities: monetary value accommodation ( given merchandise ) , merchandise accommodation ( given monetary value ) and a 3rd manner, sing both monetary value and merchandise endogenous. This is a divergence from pure and perfect competition.

Industry analysis

Market Structure

o Number and size of houses.

Vietnam with a population of more than eighty six 1000000s serve as one of the fatest turning market for diary merchandises in South East Asia. Foreign diary trade names handiness provide stiff competition to the market and more picks for consumers. Predominating theories sing market construction would bespeak that consumers benefit from the competition as the monetary value for goods would take down, but it is surely non the instance. Finished milk merchandises in Vietnam have really stiff monetary values compared to those available in neighbouring Thailand, Hong Kong, Singapore. ( Milk monetary value are sky high – ( Gia sa»?a A‘ang a»Y . tren tra»?i ) )

Os Industry concentration: One big Vietnamese house Vinamilk and many smaller size, viing with foreign imported merchandises

o Technological and cost conditions.

o Demand conditions: Increasing demand, uninterrupted growing of market size & A ; range.

o Ease of entry and issue: Easy entry & A ; issue. In the long term it is executable to put up fabricating capacity in Vietnam.


The Structure-Conduct-Performance ( SCP ) Paradigm

o Pricing: Price received and dealing costs are of import factors for manufacturers in determinations about the market mercantile establishment ( s ) to be used. . Monetary value of milk is reciprocally related to market supply in peculiar season of the twelvemonth. Distributors tend to raise monetary value because it is marketing & A ; sale technique, Vietnamese consumers associate quality merchandises with high monetary values. It is non true index of market construction that there exists a collusion between distributer or a monopoly with price-setting mechanism exist. For case, Enfa A+ by Meadjohnson monetary value rise by 20.000 – 30.000VND/container.

International & A ; Domestic Price Comparison: Domestic monetary value for imported trade names are much higher than abroad or in adjacent states.

o Ad: Unit of measurement selling costs of large-scale commercial dairy endeavors are lower than those for small-scale endeavors. Vinamilk spend about 2million old ages /yr in old old ages for marketing support. However, as house rise monetary values in recent quarters, their selling cost as a per centum of gross lessenings, some by every bit much as 30 % .

O R & A ; D: Companies try to diversify with many merchandises lines.

o Merger activity: No M & A ; A activity in recent old ages.


o Profitableness: Quite high net income. That is a consequence of foreign trade names utilizing foreign labels to influence consumers through selling activity that their trade name is the best.

o Social public assistance: Consumers lose out presently because they have to pay more for same merchandises compared to abroad consumers ‘ buying. Government has no ordinance on price-setting.

Economic Mentality

Economic Environment

Vietnam ‘s extremely literate, low-wage work force have made the state a popular investing finish in Asia. Vietnam ‘s economic system expanded by 8.5 per centum in 2007, the fastest rate in 11 old ages. This emerging market, which launched market reforms two decennaries ago and joined the WTO in January 2007, has attracted a record US 20.3 billion dollars in investing promises.

Consumer Consumption

Consumption disbursement additions.

Regulatory and Pricing

Foreign imported milk & A ; diary merchandises

The National Committe is one of the two regulative organic structures responsible for implementing the prohibitions on monopoly understandings and maltreatment of a dominant market place, and has primary duty sing the facets of these prohibitions that touch straight on pricing issues – such as price-fixing, resale monetary value care and price-related maltreatments by dominant houses. Vietnamese ‘ State Administration of Industry & A ; Commerce is responsible for implementing most ( if non all ) other facets of the two prohibitions.

Diary manufacturers

The Vietnamese national manufacturers of diary merchandises are Vinamilk, Long Thanh Milk, Hanoi Milk, Elovi, Dutch Lady VN and so there are the smaller houses and diary bring forthing households.

Four-Firm Concentration Ratio

We calculate the market portions of the top four houses in the defined industry. Leting Si denote gross revenues for house I and ST denote entire industry gross revenues

Gross figure 2007 ( VND ) ( Vinamilk Quaterly Results Update 4QFY2007 )



Long Thanh






Dutch Lady VN





For the above informations value, we derive:

= 0.75 + 0.07 + 0.04 + 0.03 = 0.89

There is certain restriction with our computation of concentration steps, viz. : market definition ( we measure the houses ‘ concentration without respect to national or regional ) ; exclusion of foreign manufacturers and imported merchandises ; industry definition and merchandise categories are aggregated.

Herfindahl-Hirschman Index ( HHI )

The amount of the squared market portions of houses in a given industry, multiplied by 10,000: HHI = 10,000 i‚? S wi2, where Wisconsin = Si/ST. ( Herfindahl-Hirschman Index ( HHI ) Calculator )

Calculating HHI for the above information gives:

Diary Market

The Technology

Industries differ sing the engineering used to bring forth goods and services. Some industries are labour intensive ; some industries are capital intensive ; other industries use a combination of labour and capital. The function of information jobs, organisation, pricing, merchandise distinction, determination pickings, peculiar markets, competitory construction, proficient advancement and faces cost relationships. Monopolistic competition is portion of the competitory construction, although with peculiar specificities. Type of dairy processing used is influenced by the handiness of engineerings ( for storage, chilling, bulking ) , the size of the market, entree to manufacturers, entree to recognition and consumer penchant.

Underutilization of capacity in dairy processing industry exist due to miss of local supply, seasonal fluctuation in supply, little and scattered production units, hapless and seasonally unpassable roads, inappropriate conveyance

Merchandises variegation & A ; branding

As income and grade of urbanisation additions, more standardised dairy merchandises are marketed. Take Vinamilk for case, its merchandises portfolio include: Vinamilk, Dielac, Ridielac, V-fresh, cafe Moment, Concentrated milk “ Ongtho ”

How Vietnamese Consumers adapt to new merchandises cognition

More dairy selling activities are geared toward adult females and kids than work forces by manufacturers and retail bargainers,

Cost of natural stuffs – Concentrated Milk Powder

Regulations on monetary value, quality and system of payment in formal markets influence the determinations by small-scale husbandmans to sell milk in that market. In informal markets, market agents are competitory ; borders reflect costs non extra net incomes. In formal markets, borders may neglect to cover costs.


Therefore far, we have see that net income, instead than being an index of possible monopoly power, is, in fact, an built-in characteristic of the competitory procedure, playing an of import function in the dynamic procedure of competition, in which entrepreneurs reallocate resources in order to fulfill consumer demands. ( LAWRIWSKY, Michael L. ) market construction characterized by both competitory and monopoly elements, linked monopoly and pure competition theory, claiming that each manufacturer in the group has some monopoly power, although bounded by competition of other houses which produce utility trade goods. Being of competition even in fortunes non indistinguishable to those of pure competition and monopoly ( intermediate instances with both elements presence ) , and analyses selling costs, advertisement and inexplicit entropy in the pick procedure linked to the grade of distinction of merchandises analyze differentiated market constructions with merchandising costs and advertisement costs ( sing monetary value, merchandise and advertisement as cardinal variables in the procedure ) . Quality of merchandise and pick merchandise is portion of the house scheme. Vietnam diary industry is a mix of oligopoly and perfect competition. This paper addressed how houses pricing differ in diary industry. A theoretical account in which upstream houses can sell to clients straight and through mediators is examined. Consumers engage in clip devouring hunt for the best monetary value & A ; quality matching and price reduction hereafter returns while heterogenous mediators compete with each other and with the upstream houses ‘ direct gross revenues. The alone equilibrium is derived and the conditions when the upstream houses utilize both channels in analogue or either one entirely.

Table of Figures:

Figure 1. Market Share – Vietnam ‘s local journal manufacturers

Vinamilk histories for 75 % of diary production in Vietnam among Vietnamese manufacturers.

Figure 2. Vietnam ‘s natural stuffs import vs. local green goods

More than 70 % of natural stuffs for diary production & A ; packaging in Vietnam are imported, merely 28 % of natural milk is of Vietnamese beginning. Of those 70 % , 22 % is finished merchandises with foreign labels.

( Why milk monetary value in VN is high? ( Gia sa»?a cao: A?au la nguyen nhan? ) )

Figure 3. Vinamilk Quaterly consequences












Gross saless









Net incomes









Net border

13.4 %

13.1 %

10.7 %

11.1 %

11.3 %

14.1 %

7.7 %


Consequences ( US $ factory. ) ( Vinamilk Quaterly Results Update 4QFY2007 )

Index weight 6.71 %

Market cap VND23,837bn or USD 1.48bn