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Problems of stabilizing milk prices and suggested solutions

发布时间:2017-12-14
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Problems of stabilizing milk prices and suggested solutions

Introduction

Each year, Vietnam has a large fraction in the rate of malnourished children and approximately 1 million newborns. Therefore, milk is a wealth of nutrition source for the sake of health and development of Vietnamese. However, the price of milk products in Vietnam has an upward trend; consequently, milk becomes a luxurious item with millions poor families.

In this paper, several problems of milk prices in Vietnam will be discussed and a number of solutions to these problems will be suggested before they are evaluated to choose the optimal one.

Situation

As we can see from the line graph, the most striking rise is that an increase of about 30 percent in the price of milk powder in Vietnam from 2007 to 2009. The price of milk products in Vietnam has increase 30 times during the past 6 year, especially milk powder. Liquid milk has also been increasing an overwhelming 185 percent (Tran, 2013). As a result, stabilizing milk prices is the great concern of Vietnamese in several years.

vietstock.vn (2010)

Definition

Fresh milk is a kind of milk produced by dairy cows, pasteurized and most nutrients remain. Associate Professor, Doctor Nguyen (2015) defined that milk powder made by evaporating liquid milk to dryness. By drying milk, micronutrients which include calcium, phosphorus, acid amin, essential vitamin is declined considerably. Milk powder combines with the amount of water to form reconstituted milk, and it is definitely not better than fresh milk. In recent years, liquid milk is the highest consumed in Vietnam market which consists of two types: fresh milk and reconstituted milk made by imported milk powder.

Problems

In this part of the paper, I will present the problems caused by milk prices in recent years.

The first problem is that milk prices have been rising due to the dependence on foreign market. According to Tong (2015), there is twice as many the price of domestic fresh milk bought as the price of reconstituted milk. For instance, the prices of reconstituted milk had just around 6,000 VND compared with 13,000 VND per litre in the price of fresh milk produced by domestic farmers. In addition, fresh milk produced by Vietnamese farmers does not meet the need for domestic milk; hence, milk companies tend to import milk powder. Consequently, domestic milk prices was heavily influenced by input milk prices and foreign exchange, making Vietnamese milk market is not stable when input milk price fluctuated and Vietnam dong became devalued (Vu, 2012). Even though the price of imported milk powder has a downward trend from 2008 onwards along with the duty on imported milk were declined from 3 percent to 5 percent, the price of domestic milk is still remained or rised unclearly.

The second problem is that loose management of state agencies with milk market. Dairy producers have been making a big profit by importing milk powder for domestic processing and sale. According to the Thoi Bao Kinh Te newspaper (2009) reported that these companies have been cheating consumers by mislabeling of their reconstituted milk products as "pure fresh milk" ones. Although the quality of reconstituted milk is significantly lower than the pure fresh milk, it is sold at more expensive prices than the real fresh milk and local consumers have been paying fivefold basic price for buying these products (economic section, 2015).

The third problem is that lack of transparency in the prices of milk products. On the consumption side, Vietnamese consumers seem to interpret the higher prices as the superior quality. Many Vietnamese parents believed that milk products from well-known brands, more than nutrients, and the expensive price will support development of their child. Therefore, the race for raising milk prices have been continued by additional nutrients, advertising and promotional campaign. What is more, based on current law, advertising cost are not exceed ten percent; in contrast, many milk companies still pay higher than permit for advertising and sale promotion. As a result, there has been an increase from about 3 percent to barely more than 16 percent in the prices of milk. (Chi and Ngoc, 2014)

A big paradox that milk companies spend more than 1 billion dollars yearly for importing milk powder whereas fresh milk produced by domestic dairy farmer cannot be consume. The remarkable event that farmers from Tu Tra and Da Ron villages in Lam Dong province dumped tonnes of fresh milk because of restrictive purchase policy of the Dalat Milk in recent days (Nguyen, 2015). If Vietnamese fresh milk has a balance demand and supply, it partially lead to drop the price of milk as well increase the quality of milk products. In particular, milk prices in Vietnam will not depend on milk powder imported from other countries.

Solutions

Resolving these problems is urgently action because of legal interests of consumers. The following solutions can deal with these issues in Vietnam.

The first solution, Ministry of Finance introduced a law that bans on milk powder advertising for children under age 2 years effects on 1st, March, 2015. Because milk companies has been spending hundreds of billions of dong on advertising expenditure.

Another considerable solution is register price policy. Milk producers must publish clearly information about these products along with what causes milk prices to rise. Besides, state management agencies need to strictly control the prices of milk as well its quality on the market. These agencies should take responsibility for check the quality of products whether it like milk producers advertised, and learn how to Chinese government can manage milk prices. Currently, Chinese agencies are carrying out the noticeable policy that "anti monopoly control", regularize profits and manage milk prices so as to milk companies cannot out of their individual benefit. Chinese government has investigated and required the manufactures of milk to reduce milk prices successfully.

The third solution is that state agencies and milk companies both encourage farmer to increase the number of dairy farming by supporting capital, farming techniques and subsiding for domestic milk as well. The modern technology of Israel in husbandry, which is a closed produce process along with well-equipped machines, can create standardized pure fresh milk. Furthermore, dairy farmers need to have a plan for produce process as well cooperate with companies purchasing milk so as not to suffer loss. Besides, Vietnamese consumers should reject erroneous conception to choose the best milk products.

Evaluation

Among the solutions presented above, each has its own advantages and disadvantages.

The first solutions, which is minimize advertising expenditure is quite good because the milk companies will not include these fee to milk products costs; therefore, the price of milk can decrease. However, the cost of advertising just account for a small majority in the overall cost of milk productions, this solution seems to inadequate measure for long term price stabilization.

As for the second solution, which is register milk prices, the strengths of it are that consumers have not to overpay for milk products on the control list and prevent inflation. Nevertheless, this project is only feasible on paper because whether the government is able to inform timely and accurately the specific prices of hundreds distinct milk products. One of the weaknesses of this solution is that if production cost increased quickly, milk companies would have to decline the milk yield because they could not increase over ceiling price of the government. Consequently, milk producers would suffer loss and consumers could buy highest price so tình trạng cung không đủ cầu

The third solution, Vietnam's dairy development strategy is appreciated because not only it bring better benefit for both consumers and producers but also milk producers will not be under the influence of the prices imported milk powder in the world. If we can be apply high technology of Israel widely in Vietnam, the milk yield of dairy cows will enhance. As a result, consumers can buy milk products with high quality and low price, and these strategy will increase the income of Vietnamese farmers as well create more jobs.

Conclusion

Bibliography

Chí Hiếu, Ngọc Tuyên. (2014, 4 29). Vnexpress. Retrieved 4 4, 2015, from http://kinhdoanh.vnexpress.net/tin-tuc/hang-hoa/doanh-nghiep-sua-chi-vuot-hang-tram-ty-dong-quang-cao-2984904.html

economic section. (2015, 1 30). Tiền phong. Retrieved 3 19, 2015, from http://www.tienphong.vn/Kinh-Te/sua-the-gioi-giam-gia-sao-trong-nuoc-van-cao-817072.tpo

Manh, T. (2015, 1 5). Tuổi trẻ. Retrieved 3 20, 2015, from http://tuoitre.vn/tin/kinh-te/20150105/do-bo-sua-vi-nuoi-bo-tu-phat/694731.html

Nguyen, S. (2015, 1 16). The Saigon Times. Retrieved 3 18, 2015, from http://english.thesaigontimes.vn/39043/The-farmer’s-paradox.html

Trần, T. (2013, 8 11). Vietnamnet. Retrieved 4 5, 2015, from http://vietnamnet.vn/vn/kinh-te/135071/thi-truong-sua-het-tang-gia-den-nhiem-doc.html

Vietnam Business Forum. (2009, 7 17). Retrieved 3 19, 2015, from http://vccinews.com/news_detail.asp?news_id=17302

VÅ©, T. T. (2012). Thị trường sữa bá»™t trẻ em dÆ°á»›i sáu tuổi ở Việt Nam. Fulbright Economics Teaching Program.

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