LINE CORPORATION

Table of Contents

I.Executive summary ....................................................................................................... 2

II.Introduction – LINE Friends: The business of sticker ................................................ 3
III.Competition to be faced in Vietnam ........................................................................... 4
1.Levels of product .................................................................................................................... 4
2.Type of product category ....................................................................................................... 4
3.Level of competition: .............................................................................................................. 5
4. The category attractiveness for the product to market in Vietnam: ..................................... 6
4.1 Aggregate category factors: ..................................................................................................... 6
4.2 Category factors ....................................................................................................................... 7
4.3 Environmental factors: ............................................................................................................. 7
IV.Customer analysis ....................................................................................................... 9
1.Customer analysis in Korea: .................................................................................................. 9
2.Identify the target segment in Vietnam. ............................................................................... 10
V.Market potential & Predicted sales forecast .............................................................. 12
1.Potential market ................................................................................................................... 12
2.Sale forecasting .................................................................................................................... 12
VI.Marketing strategy .................................................................................................... 16
1.Vision ................................................................................................................................... 16
2.Mission ................................................................................................................................. 16
3.Marketing Objectives ........................................................................................................... 16
4.Positioning ............................................................................................................................ 16
5.Marketing mix ...................................................................................................................... 17
VII.Conclusion ............................................................................................................... 19

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I.Executive summary

Currently, fears about toxic toys of unknown origin make parents looking for more
prestigious and high-end toy stores. Many unreliable stores import cheap, low-quality
toys from China for high profit margins because wholesale price of product from China
is seem to very low. Obviously, these toys can harm the health of consumers. In addition,
demand of customers for safe, well-deserved products has also increased when cheap
toys from China have many quality problems. Replacement for Chinese toys is toys
which imported from Korea, Japan, USA and Europe. The strong growth of the toy
market spurs an underground race between toy chain stores across the country. High-end
children's toys market is entering a period of strong growth due to high demand from
customers, especially in big cities. It can be said that the toy market in Vietnam still has a
lot of potential for development but increasingly requires a higher level of investment in
scale.

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II.Introduction – LINE Friends: The business of sticker
Starting as a business sticker communication application for mobile in Japan,
LINEFRIEND became Asia number one character as most authoritative award in
licensing business (Linefriend.com). In 2015, LINEFRIEND corporation established to
performed as a character brand and its purpose to provide character services and character
products that are valuable in real life. As the one of Asia’s most popular character sets,
Line Friend owns 44 stores in 11 countries and the brand offers over 5,000 products
include simple stationeries such as plush toys, slipper to travel product as pillow, suitcase,
school bag, clothes, and so forth (Diana Park, 2016). The company’s mission to offer
quality product with cute design for every one in all generation in the world to enjoy. The
statement from the company considers that LINEFRIEND have ready for its global
expansion, that cross international and barriers of cultural. (Will Jarvis, 2017)

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III.Competition to be faced in Vietnam
1.Levels of product
Core: Core products are features that are intangible. The basic benefit things that product
will bring to their customers when using it. This includes the physical properties. In this
case, Linefriend is a company that gives its customers the basic benefits of toys and
accessories related to LineFriends characters. These are products that meet the basic
needs of the user

Actual product: This is the tangible nature that gives the user. The characteristics that the
actual product involves are brand name, quality, packaging, design. Products that develop
from the core to the actual product will create a product competition. Products that differ
in quality, branding, and design will make a difference that will lead to competition in the
market for the same product. Linefriend is a well-known toy industry brand. Thus, its
brand creates a direct competitive value compared to other brands

Augmented product: And finally, when products have reached the final level of the
product, properties such as branding, the basic benefit will not matter anymore. When
your competitors are full of these qualities they sometimes do better. Therefore, the
product will consider other factors such as delivery and value added to customers. To
serve customers better as well as create competitive advantage for the company. The
mainstream company does not offer direct COD, but the companies that partner with
them have this service. Joint ventures with Liam's as Amazon or Linefriend's chain stores
in other countries have had to overcome weakness.

2.Type of product category

Linefriend is considered as a shopping product because it carries the following basic
properties.

The first reason to claim Linefriend is a shopping product is that the price of the product
is quite high compared to the toys in Vietnam. This is understandable because the living
standard as well as the Vietnamese economy is not good. The product of the linefriend is
of good quality and the price is consistent with that quality

The second reason is that Linefriend chooses to distribute selectively in some parts of the
world. They define their market niche as well as where the customer really needs their

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 product. Countries that Linefiend choose to distribute in Asia such as Malaysia, China,
Thailand. But Vietnam has not been directly selected

The third reason is that Linefriend chooses to differentiate his brand from his competitive
advantage to characters such as brown bears, cartoon characters who are creating other
trends.

The last reason is when customers buy their products. They will have the opportunity to
return the product because popular products can be bought back many times because of
different models.

3.Level of competition:
- Product form competition: Competitor's business is that other businesses offer a
product typically pursue the same market segment with same values. A narrow view of
competition include only cuddly toy of Line friend because it is featured product. These
competitors are domestic cuddly toys, cuddly toys imported from other countries and
fake products of Linefriend made in China.
- Product category competition: the competitors are based on those products with the
same features. Differ from product form competition, products of this level are very
diverse. In toy industry, instead of choosing cuddly toys from Line friend customer have
many choices such as Funny Land is a distributor of Barbie, Hotwheels and Disney
brands. My Kingdom franchise distributes LEGO toys, Siku, Moxie Girlz, K's Kids ...
Meanwhile, Petrosetco has the advantage of German toy brands such as BIG,
Fischertechnik, Teifoc.
- Generic competition: this level of competition is defined as competition among
products are different but satisfy the same customer need. So that a generic competition
for Line friend is any other things that potential customer can choose to entertain such as
video games, outdoor activities, play chess, etc.
- Budget competition includes all products and services that compete for the same
amount of money. As Brown teddy have price 30$, so everything else that’s 30$ is
budget competitor, for example Lancome Poeme perfume, T-Shirt with Embroidered text
of Zara or Jacquard-knit sweater of H&M.

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Figure 1 – Competition level of this industry

4. The category attractiveness for the product to market in Vietnam:

4.1 Aggregate category factors:

- Category size: According to recent market statistics, the toy market has a market size of
more than $ 5 billion a year, the chance of success is not small if the business steps are
appropriate. The toy market is considered to be a large market segment having a high
market potential.
- Market growth: At present, the market for strong growth is estimated to grow by 15-
20%. The market is still fragmented so distribution chains do not see each other as rivals,
instead the competition is the traditional distribution channels such as grocery stores,
retail. Distribution chains are shaping up to be a new consumer trend for middle-income

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 customers. Although the market is quite bustling when there are many businesses
involved, it is quite interesting that the size of the market to date is still an unknown but
fascinating.

4.2 Category factors

- Threat of new entrants: The current demand of customers using clearly originated toys
is rising very high. In Vietnam, prominent chains such as MyKingdom, FunnyLand, and
ToyLand are specialty stores. They all have their own strengths, so this is the threat of
new entrants like Line Friend because of the competition increasing fiercely. In addition,
domestic toys stores which have established for many years and have a certain position
on the market will also bring obstacle to Line friend. Because the threat of Line friend
into the product category is high so the attractiveness of the category is diminished.
- Bargaining power of buyers: High buyer bargaining power of buyers will be great if
Line Friend does not catch up with changes in market demand or when Line friend lacks
sufficient information about the market (inputs and outputs). Line friend must constantly
update and inform information about market demand because competitors will take
advantage of this weakness to launch more products with reasonable price.

- Bargaining power of suppliers: : Because suppliers of the toys industry do not have a
vital component, they dont have much bargaining power. The materials used in products
of Line Friend created by PP cotton. The material can be easily but the fact that Line
friend still depend on these materials because if suppliers increase the price, the profit of
the company will be affected.

- Pressure from Substitutes: The threat for substitutes in the toy industry is very strong.
Instead of buying Brown Bear and Cony Rabbit of Line Friend, customers can choose
another form of entertainment such as playing outdoor activities, go to the cinema.

4.3 Environmental factors:

- Technological factors: Technology has always been one of an important factor to

decide the success of a company. Thanks to the development of the Internet, consumers
are able to access the internet and get to know about Line friend. The increasing usage of

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 internet give Line friend advantage to expand their image to customer by using
marketing online methods.
- Political factors: Currently, government regulations of the toy industry in Vietnam
have not been finalized. The inspection of toxic toys, unclear origin still not strict. The
government needs to have a suitable investment policy for the toy industry, not just for
private individuals, some companies or private equity funds.
- Economic factors: Inflation will not change much due to the stable price of many
commodities, forecast inflation in 2017 about 2.5%. The macroeconomic situation
continues to be controlled stably and there are positive changes, which will be an
important basis for stabilizing the consumer price index.
- Social factors: Vietnam is a country with a young population structure with total
population of over 90 million people. Vietnam has about 22 million children aged 0-14,
accounting for 24% of the population, so it has been considered as a potential market for
the development of the toy industry. Vietnam's per capita income has also increased by
more than $ 2,300 in 2017.

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IV.Customer analysis

1.Customer analysis in Korea:

According to David A.Aaker (2013), it is said that customer analysis “can be usefully
partitioned Into an understanding of how the market segments, an analysis of customer
motivations, and an exploration of unmet needs.” The buyer’s characteristic of Line
Friends in Korea is:
• Age: 18 - 35 which is student, parents buy for children.
• Sex: There are many different products mainly for children and woman.
• Income: There are many product lines for the different segments, mainly focused on
income or low spending levels such as adolescents, students, and the high income
segment, stable income.
• Marriage: Customers may be single or married depending on the age and conditions.
• Occupation: There may be many different occupations such as students, office
workers…
Line Friends has many product lines for young generation such as: dolls and toys, digital
home applicances, accessories, travel / camping set, interior, kitchen, bathroom,
clothing…The brand is a variety of cotton products, designed more beautiful and
professional products in Korea. Raw materials are high quality materials, carefully
selected, durable, beautiful and no toxic substances. The high quality of the product
matches the market price for the teddy bear. The product of Line Friends is suitable with
style of young customer.

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 2.Identify the target segment in Vietnam.

Figure 2 - Vietnam population statistic by age in 2016 (CIA, 2016)

According to Central Intelligent Agency (2016), the population is showed by the

horizontal axis, with males shown on the left and females on the right. Vietnam's
population is expressed by age, gender. The old people in Vietnam is very low, but the
number of young people in the age of 20 – 34 is very high (near 5 million people).
Therefore, the age of target customers from 18 to 35 covers quite wide. Viet Nam's
population is a very young, with special focus on large cities. Vietnam is affected by the
economy, the ability of consumers to spend is limited, facing difficult economy, the
demand for gifts as well as teddy products has potential and not affected as much as other
sectors. The understanding and need to buy teddy is very high, young people like cute
products which have shape such as Cony and Brown.
With Line Friends, the brand “pays attention to make character products that are valuable
in real life. From the simple stationeries to living and travel products, there are 5000 Line
Friend products considered practicality and quality in addition to cute design”. Teddy
bear are the favorite gift of children, teenagers on the occasion of birthdays or holidays.
So on special occasions such as Valentine's Day, 8/3, International Children's Day ...
many teddy bears unknown origin sell rampant pavement is still "screaming" the high

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 price. Due to the busy work, most parents do not have enough time to learn as well as
choose the children's toys quality assurance.
Target audience of Line Friends is the age of 18 to 40. The volume of customers on the
internet is quite large and online often. They live in large cities such as Ho Chi Minh city,
Ha Noi, Da Nang, Nha Trang, Can Tho… With lower middle income, they can purchase
a gift of Line Friend for children, girlfriends, teenagers.

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V.Market potential & Predicted sales forecast
1.Potential market
LINE Friends has two distinct groups of customers, individuals and corporate customers:

Individual customers: According to what we have found in section 2 and 3, we found that
this is going to be a huge market and promising a potential market for the next 5 years.
VnExpress announce that toy industry has just reached 5 billion USD in the previous
year. Furthermore, it is continue growing by 15-20% in the next few years. And the
competitive advantage from Line friend, the product which related the cuddly character
and this is differentiate from the other products and few other brands can offer that type
of product in Vietnam. It could create the new trend of toy and attract many customers
who has known about Line or even have not known about Line before. Besides that,
target customers are defined to be in age of 18 to 40 and that is the other potential factor
which lead to the promising market. Because Vietnam is the country of young population
as we found in section 3 and especially the teenager and young generation they have the
high demand. LineFriends’ product could be a gift in some special occasion and holiday,
and the target customer would like to give their friend the special gift so that LineFriend
would be a good choice for them. Overall, basing on the market size, market growth and
demographic factor of customer we found that Vietnam is the potential market for
Linefriend now and for the next 5 years.

Corporate customers: Business customers are usually those who need to give gifts to
colleagues for the purpose of rewarding, or on special occasions as a congratulatory
message. In addition, these gifts are used to give important partners, guests at major
media events, corporate events in areas such as banks, health care, real estate, apartments,
hotels/ vacation resorts, and automobile dealerships, etc.
2.Sale forecasting

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Figure 3 - LINE Corporation's total revenue from 2nd quarter 2013 to 3rd quarter 2017 in billion yen (Statista 2017)

According to Jeff (2013), the first method using to estimate the sale forecast in the next
three years is linear approximation method. Linear approximation calculates a trend based
upon two sale history date point and those two points define a straight trend line that is
projected into the future. However, a long-range forecasts are leveraged by small changes
in just two date points.
Number of periods to include in regression is 3 quarter
Forecast calculation
Q4’2017 forecast: (42.5-38.9)/2 + 42.5= 44.3
Q1’2018 forecast: (42.5-38.9)/2 *2 + 42.5=46.1
Q2’2018 forecast: (42.5-38.9)/2*3+42.5=47.9

Simulated forecast calculation

Q1’2017 sales= (37.5-33.9)/2+37.5=39.3
Q2’2017 sales= (38.9-35.9)/2+38.9=40.4
Q3’2017 sales= (39.8-37.5)/2+39.8=40.95

Percent of accuracy

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 POA= (39.3+40.4+40.95)/ (38.9+39.8+42.5) *100=99.5462%
It means that the actual sales greater than the sale forecast.

Mean absolute deviation calculation

MAD= (|39.3-38.9| + |40.4-39.8| + |40.95-42.5| / 3 = 0.85

Sale forecast for the next 3 years

Q3’2018 forecast= 49.7

Q4’2018 forecast= 51.5
Q1’2019 forecast= 53.3
Q2’2019 forecast= 55.1
Q3’2019 forecast= 56.9
Q4’2019 forecast= 58.7
Q1’2020 forecast= 60.5
Q2’2020 forecast= 62.3
Q3’2020 forecast= 64.1
Q4’202 forecast= 65.9

This method depends on the historical sale of the Line in other countries, it could not be
accurate in Vietnam therefore, we plan to use the other forecast method for Vietnam
market.

There are some methods for new launch product which is depend on the gross profit
margin or cost, depend on the budget of consumer and the method that we are going to
use is top down sales forecasting method which is based on determining the total market
that exist for toy industry in Vietnam then we estimating our share of this market.

As we mention above in section 2, the market size in Vietnam is around 5 billion USD a
year, and we estimate that our first step is corner 1% of the market and make 50 million
USD in annual sales. Then if we can take 1% of the market in the first year then we
continue doing the forecast sale base on the historical sale of the first year. Otherwise, we

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 appraisal the sale of the first year and figure out what went wrong whether we are
overestimate or not then prepare for the next sale forecast.

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VI.Marketing strategy
1.Vision
The vision of LINE in Vietnam is to expand the target customers based on the LINE
Friends’ characters through LINE Apps to attract more and more people use the services
of LINE. According to Vietnamese people, cuddly animals or toys are only for children,
but in other countries, LINE Friends' characters are preferred by all customers, from
people who married, or couples, to group of friends. The goal is to build an integrated
LINE ecosystem with a diverse range of services in Vietnam.

2.Mission
The mission of the LINE Friends is to build on the existing research, combined with the
implementation of new research into the characteristics of Vietnamese consumers, to find
a market that truly fits the Vietnamese characteristics. In 5 years after entering, LINE
Friends must have a really strong position in Vietnam market. Create a basic information
system of Vietnam market, helping LINE expand into other business fields. The products
and services must exceed the expectations of our customers.

3.Marketing Objectives
Opened at least 10 stores in the two largest cities (Hanoi & Ho Chi Minh) in Vietnam in
the first five years.
Create a trend to increase the number of users LINE platform.
Decrease the marginal per customer acquisition costs by 8% per year.

4.Positioning
LINE Friends is positioning itself based on branding strategy as the characters who live in
LINE Apps called stickers that LINE offers for client use it when chatting with friends.
An interesting view was claimed by Melissa Palacios (Harry McCraken 2015), an owner
of Tora sticker, that was voted Best Sticker in the Universe by LINE users, ‘Stickers like
Cony and Brown are fun to use because they have a wide range of emotions, without
many limitations, anyone can see a little bit of themselves in them’. However, CEO of
LINE – Takeshi Idezawa admits that he does not realize the profit generated from
launching business commodities related to LINE characters, until he saw many goods be
printed Brown & Cony and be sold in stores in Taiwan, obviously these products are

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 smuggled or illegal. At that time, he started business in this field, LINE Friend store chain
began to appear. The image of LINE’s characters is more and more popular, as evidenced
by the significant increase in the number of LINE stores, and its penetration into large,
competitive markets. Typically LINE Friends had their first store in New York's Times
Square, indicating that the LINE Friends are claiming direct competition with Disney in
the field of well-known character images.

5.Marketing mix
The objective is to expand the number of LINE users through awareness and positive
attitudes to the characters of LINE. Marketing strategies will try to create customer
perceptions of products, develop customer base, and drive loyalty, significantly reducing
the cost of acquiring customers.

The advantages of LINE when penetrating to Vietnam or any market else are low initial
cost, LINE Friends 's policy is to find a partner and business cooperation in different
fields, with brand image is LINE characters. Therefore, the initial capital is very small,
cost only includes management and underground policies of doing business in Vietnam.
As Vietnam is a developing country, calling for foreign investment is indispensable for
development. The competitive advantage of LINE Friends stores is the unrelenting desire
for the highest quality product and service, it match with the growing consumer
expectations of the quality of a product. But, LINE will also face to price competition
from cheaper products in the same category or the product have designed the same LINE
characters without the acceptance from LINE, both of them have been imported mostly
from Guangzhou. The information from Mr. Dong Sang – an journalist from
NhipCauDauTu magazines (2017), according to the General Department of Customs of
China in 2016, the amount of goods and toys exported to Vietnam reached $ 170 million,
accounting for 80% of the toy supply is distributed throughout Vietnam. Let’s face it, this
market space is already crowded and a mediocre gift service is not going to fly, so LINE
Friends must have some sort of differentiating feature that lets it stand out. Example, at a
higher price, customers will enjoy more benefits, not just products. The accompanying
services can be free delivery, accrue points for membership cards accompany LINE
Apps, or free cleaning products for customer’s demand.
LINE Friends will seek to communicate the message with more efficient than the
traditional stores do. The most popular advertising method is still using the discount form

17
 for customers on special occasions during the year. In addition, larger stores will
implement another form of advertising on their website, and fanpage. However, LINE has
a huge advantage that its competitors do not have that is the list potential customer
through LINE Apps. According to the research from E-marketer (2016), there is 18%
Vietnamese install LINE as the messaging apps in their smartphones. This is a huge
customer base that LINE can get, when compared with the population of Vietnam is
about 93 million people (Tradingeconomics, n.d.). The banner ads will be built into the
LINE Apps application, and there is a direct shopping portal from LINE Apps, which
links directly to the LINE Friends ordering system.
For corporate customers, it is easier for LINE when it uses LINE Apps as an internal
business communication platform. LINE Friends will easily reach these customers, as
they are familiar with the LINE ecosystem of sticker characters. Also, with the group of
business customers do not have aware about LINE services, direct marketing and bidding
will be an essential approach to implementing the contract with this customer group.
The location of LINE Friends stores are obviously located in crowded areas such as the
main streets of the city, or major shopping centers.

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VII.Conclusion

Line friend has been existed in many countries such as US, Indonesia, Thailand, Korea
and Singapore. They have been successed in launching their product in these countries
whereas in vietnam Line apps has just been launched. Vietnamese people are interested in
character of this apps and using it for texting and sending messanger to their friend
through this apps. It created to good image in vietnam customer perception, moreover toy
industry is such a huge and potential market for their special product which related to Line
Friends characters. Young population is also an other advantages for their target customer.
Demographic factor and culture also support Line to launch their product into Vietnam.
However, Line friend have to launch their product before Disney or Marvel brand they
launch their product to Vietnam and they must be carefull with the unstable market in
Vietnam which overwhelming in fake product.

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