You would be looking at the String.Replace method. something like this. Since strings are immutable it returns a new string with your corrected value you would then need to assign it to the old string.
Module Module1
Sub Main()
Dim test As String = "The <field1> is mandatory"
Dim variable As String = "Employee Id"
test = test.Replace("<field1>", variable)
Console.WriteLine(test)
Console.ReadLine()
End Sub
End Module
You could also use the String.Format Method which uses composite formatting which will allow you to embed fields in your string then replace them with variables. something like this.
Dim test As String = "The {0} is a mandatory {1}"
Dim variable As String = "Employee Id"
Dim variable2 As String = "Field"
test = String.Format(test, variable, variable2)