BUSM3309 STRATEGIC MANAGEMENT

Term 2020A

Title of Assignment Assignment 1: Strategic Analysis (Individual)

Name and Student ID Hoang Vu Minh – S3609253

Location Ha Noi

Class Group G01 / G02 / G03

Lecturer Lan Do

Word Count
(Main content without the list of 1,500 words +- 10%
references, cover page, executive
summary, appendix, etc.)

IMPORTANT NOTICE: All students listed on this page declare that they have read and agree to the statement of authorship on
the next page.
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I. THE STRATEGIC CONTEXT OF Don Dien

Don Dien is a craft brand established in 2012 and legally registered in 2020, specialize in body care and living
space products that focus on awakening the user's senses, directing users to a state of balance to understand and
love themselves for encourage joy in life, thus, enjoy a humble and grateful life. Don Dien create products from
natural materials, original seasonal handmade with appreciation and attention. The core values of which Don Dien
directed to are: Balance / Simple / Flexibility / Creative.

Figure 1 The making of Don Dien products

Strategic management is the process of setting objectives, analyzing the internal organization and the competitive
environment, evaluating strategies and ensuring the strategies got rolled out across the organization (Kenton, 2021).
Before setting the objectives, pricing and implements, it is vital to analyze the internal and external environment.
Especially, lots of variables are included within macro-environment that beyond the control of the business while in
micro-environment there are forces, factors in a specific industry that can directly impact the ability of the business
to serve the clients (Bonnici, T 2015)

For a successful business, the company must be able to keep track and deal with the changes in the micro and
macro environments. As the Covid-19 pandemic has caused severe damages to the world economy, a cosmetic firm
like Don Dien also got directly hit by the market fluctuation. Therefore, a strategic report must be conducted as it is
a suitable solution for the company to react to their environment.
II. MACRO-ENVIRONMENT ANALYSIS

PESTEL analysis or PESTLE analysis (formerly known as PEST analysis) is a framework for analyzing and
monitoring Macro-environment factors which might have a deep impact on business performance, this tool is
especially useful for entering the market or start-up process. PESTEL stand for Political, Economic, Social,
Technological, Environmental, Legal factors. PESTEL provides a comprehensive list of influences on the possible
success or failure of strategies

Figure 2 PESTEL Framework (West et al 2010, 74)

1) Political-MEDIUM Impact

Firstly, “Vietnam is one of the more politically stable countries in South East Asia. The CPV is in control.
Alongside maintaining the one-party state system, safeguarding territorial integrity and maintaining social
order, its main aim is economic growth. Its aim is for Vietnam to become a middle-income country by 2025, an
upper-income country by 2030 and a developed, high-income country by 2045” (UK Department for International
Trade/UK Foreign, Commonwealth & Development Office, 2021). A stable political environment ensures the
chance of business growth as a firm do not have to worry much about the security of their invested assets nor an
unstable community to operate as Economic growth and political stability are deeply interconnected. The
uncertainty of an unstable political environment might reduce the investment and bring down the economic
development, a poor economy also may lead to political unrest and a collapsed government (HUSSAIN, 2014),
taking Myanmar recently coup making global investors pulling out as an example (Nguyen, 2021). Also, during a
VOV interview with Philippe Delalande – an economic and political researcher in French he said “Political
stability is one of the main factors that has helped Vietnam pursue its economic development policy. Since 1990,
most other regional countries, except Singapore, have experienced coup d’etats or political crises. Meanwhile,
Vietnam has achieved political stability – a factor that enables Vietnam to go ahead with its renewal process.’’
(Delalande, 2010)

Secondly, Vietnam regime orientation is socialism with a unique socialist-oriented market economy:

This help corrected many shortcomings of a free market economy with recent Vietnam’s containment of COVID-
19 successful prove State’s correct management (Vietnam’s market economy on right track, 2021)
 Figure 3 From CNBC report (Lee, 2021)

Thirdly, Vietnam has increasingly opened to global trade with 15 signed FTAs including the recently signed RCEP (Regional
Comprehensive Economic Partnership) – the largest FTA globally. On 1 st Jan 2021 The UK- Vietnam Free Trade Agreement
came into effect, this will result in companies benefits from reduced export and import tariffs overtimes to 99% by the time of
full implementation of the FTA, help Vietnam save £114 million on export (UK Department for International Trade/UK
Foreign, Commonwealth & Development Office, 2021).
 Figure 4 UK cosmetic market share (CTPA, n.d.)

According to the government resolution 41/NQ-CP 9 June 2015 on promoting the fight against smuggling, trade fraud and
counterfeiting, the cosmetic market, in general, is protected to create stable pricing policies and growing plan without worrying
much about brands reputation got ruined due to low quality of fake or replica products and the low cost offered by smuggling
seller, thus strengthen the belief of health protection for customers. Decree 93/2016/NĐ-CP about the conditions of
manufacturing cosmetic products stated that firm must satisfy the certification of operating manufacture facilities and the
qualifications for manufacturing cosmetic products, this help reduces the number of low qualities products on the market and
fewer competitors, it also helps cosmetic firms to set up a quality control over their business operation for ensuring the
professional services both in Vietnam and in another market as well, thus, in general, improving the business efficiency and
qualities.

 This help Don Dien access the European market with opportunities for business growth and increase the
size of business as “The growth of the United Kingdom cosmetics products market reflects the
augmentation of the overall European market” (Mordor Intelligence, n.d.). With stable political situation
and policies can help Don Dien expand safety in Vietnam
2) Economic-HIGH impact

Vietnam economy grew 2.9% in 2020 (Lee, 2021) with the inflation rate reduced from 3.52 in 2017 to 2.796 in 2019 and
poverty rates significantly decreased from 70% to below 6% over 45 million people can get rid of poverty (WB Vietnam Overview,
n.d.). Furthermore, FDI increase to 18.5% from last year on March 20 (VNexpress International, 2021) point out the high potential
for investments. The pattern of ownership in Vietnam cosmetic product is private since it has no state-owned firm also help
attract more investors because of having more independent decision
 Figure 5 Vietnam Inflation Rate forecast (Statista, 2021)

Statista Research Department,2020

Figure 6 Cosmetic Industry in Vietnam - FMCG business consultant, 2021

 This means that purchase power is increasing due to economic increase come with better living standards,
hence, more market promising and challenge for Don Dien but the more chances to expand. Also, with low
inflation rate means lower cost of importing and increasing productivity. However, Don Dien should also
be careful because “if inflation is low, it only takes a relatively small shock to tip the economy into
deflation” (ECB, 2020)
3) Social – HIGH impact
Low threat from terrorism (UK Department for International Trade/UK Foreign, Commonwealth & Development
Office, 2021), global population rank No.15 with 98,032,653 people as of Sunday, April 18, 2021 (world meters,
2021), a workforce of 56.542.499 people in 2020(WB,n.d.), in 2020 7.9% population older than 65 years old. 37.7
% of the population is urban (world meters, 2021) with a median age of 32.5 years.

World Education News & Reviews

Figure 7 Asia Plus Inc, 2021

Figure 8 Asia Plus Inc, 2021

Figure 9 Asia Plus Inc, 2021

Figure 10 Asia Plus Inc, 2021

 Figure 11 Asia Plus Inc, 2021

 Young and high educated population (Trines, 2021) plus the number of workforces is higher than those dependents
(Index Mundi, 2019) can be a source of high potential customers for the cosmetic market because of the young needs
to beautify and healthcare. Don Dien need to take care of these great opportunities for business expansion
4) Technological-Medium

According to CNN (Lazarus, 2021), In Viet Nam cosmetic industry divided into two ends of spectrums, while most overseas
brands prefer "sophisticated, science-based, well-designed, packaged and marketed products," some local brands prefer a
"plain, unrefined" formula. Both marketing through social media and online market platform, but targeted two different sectors
of customers as those who prefer mass cosmetic product often prefer cheaper and easy to buy on supermarket…etc and not
care much about handcraft while the others prefer the premium cosmetic product with nature ingredient come with more sense
of healthy and this type of customers is not hesitated to overcome the difficulty to buy products. These two styles seem not
going to colliding with each other, as Don Dien an example, during the company representative talk show they straightly
confirmed that their products will always serve in handcrafted. However, due to technological advancement in production, a firm
can lower the cost and buyer have better prices, quality might also get improvement
 Figure 12 Asia Plus Inc, 2021

Figure 13 Asia Plus Inc, 2021

 Since Don Dien prefer handcrafted services, the R&D expenditure of high-end brands would not much impact on the
handcrafted company, but might affect pricing strategies as mass-producing of premium products from high-end
brands may reduce their cost of manufacturing compared to Don Dien
 Firms like Don Dien is using Facebook as the main website and marketing channel, Don Dien can consider advertising
on more platforms such as movies websites or some cosmetic community groups for reaching out to more
customers. Also, the company should consider making content about the process of handcrafting the materials into
 the perfect product for inspirational and active customer sense of buying nature-made cosmetic, or video tutorial upon
how to use the cosmetic product in general for the brand to get viral and points out the differences in the use and
making of Don Dien products apart from others
5) Environmental-MEDIUM

The cosmetic market is eco-friendly, especially Green cosmetic brands often stationed in Sapa or Da Lat where fewer pollutions
can affect the materials. An example of this is Don Dien stationed in Da Lat or Skinlosophy in Sapa. However there still several
brands operating in cities like Sai Gon such as Coconut Religion, Herpes, The Queen, A Banker’s Secret, Stone Hill, The Organik
Shop, The Herbal Cup, Skinna.

According to Weather Online (Climate of the World: Vietnam | weatheronline.co.uk, 2021), Vietnam`s Climate is both tropical and
temperate zones, and The annual average temperature ranges from 22°C to 27°C year-round. There is no significant
temperature difference in southern Vietnam while North regions can be quite cold during winter and very hot during summer. In
the southern parts, the cold season occurs from November to April and the hot season from May to October while the Northern
parts have four distinct seasons.

 The cosmetic company can take advantages of climate differentiations for storing and growing material and
production
6) Legal -HIGH

According to the government resolution 41/NQ-CP 9 June 2015 on promoting the fight against smuggling, trade fraud and
counterfeiting, the cosmetic market, in general, is protected to create stable pricing policies and growing plan without worrying
much about brands reputation got ruined due to low quality of fake or replica products and the low cost offered by smuggling
seller, thus strengthen the belief of health protection for customers. Decree 93/2016/NĐ-CP about the conditions of
manufacturing cosmetic products stated that firm must satisfy the certification of operating manufacture facilities and the
qualifications for manufacturing cosmetic products, this help reduces the number of low qualities products on the market and
fewer competitors, it also helps cosmetic firms to set up a quality control over their business operation for ensuring the
professional services both in Vietnam and in another market as well, thus, in general, improving the business efficiency and
qualities.

Also, the administrative procedures in Vietnam are very cumbersome and slow

To start selling cosmetics products in Vietnam, your first step is to register your products then get government approval. Note
that the holder of the product registration is the only entity that can import the products to Vietnam. Vietnam follow ASEAN
Cosmetic Directive, as ASEAN cosmetic claims guidelines stated that cosmetic products cannot declare to be medicine or
curative means for treatment or replacing proper medicine, no overclaiming statement should be included with the products

You will need to submit the following documents for proceeding with your product registration in Vietnam, each item got
registered separately, the state fee is VND 500,000 per piece:

- Letter of Attorney from the manufacturer or brand owner (in English or Vietnamese), legalized by a Vietnamese
embassy abroad
- Recent Certificate of Free Sales (in English), must be legalized in the country of origin
- Business registration certificate
- Data for each product:
- Brand and product name
- List of variants or shades
- Product type
- Intended use
- Manufacturer information
- Full list of ingredients (full 100% percentage, International Nomenclature of Cosmetic Ingredients)
  Don Dien need to take care in operating within the legal system and strictly follow the decrees, resolutions for the
cosmetic market, especially it might affect the contract term or company legislation to operate in the market

III. MICRO-ENVIRONMENT ANALYSIS

a) Threat of entry & barriers to entry - HIGH

“The threat of entry is low when the barriers to entry are high and vice versa. Entrants must also consider the expected
retaliation from organisations already in the market.” (Thompson, A., Strickland, A., Gamble, J., 2007)

The cosmetic industry in Vietnam is a competitive market that attracts new players fighting to capture market shares, lead to a
profit drop of existing firms. Existing players usually have high economies of scales.

However, As the market is currently dominated by Korean Brands and another foreign firm, it is significant that new entrants
must be expected a retaliate strategies from the market upon them if they stand out from the rest of the market. Currently, when
entering the Cómetic market there are some barriers that new entrant will have to deal with:

- High-level Capital Investment required to establish producing setup

- Regulations are strict that no cosmetic product can replace or overclaimed as proper medicine for treatment, and
cosmetic market operate got controlled under resolutions and decrees such as resolution 41/NQ-CP 9 June 2015 and
Decree 93/2016/NĐ-CP
- Strong Brand identity: in any market brand recognition is vital, and the same situation in the Cosmetic industry but
benefits larger Brands the most. Major brands in the market are spending huge resources on marketing efforts and
gain some win over already with loyal customers of the brand. Many people choosing services based on brands that
have more population than the rest even if the less popular brands offer less fare and maybe better quality
- The shopping mall/emporium: Larger corporations gain more market power from this system due to they can offer
more options to the customer while reaching up the large number of people visiting these shopping mall/emporium for
a day.
- A report from HCMC Cosmetics Association (Vietnamnet global, 2019) points out that the domestic market is
controlled by foreign brands with 90% of market share: 30% of market revenue go to South Korean brands, EU brands
hold up to 23% of market shares, Japan followed with 17%, U.S 10% and Thailand 13% and the rest of market hold just
7%. This means that new entrants gaining market share and expected retaliation is also a moderate barrier
- Access to required materials for manufacturing input is not very hard
 The barrier to entry is low since some typical small brand like Don Dien can go different path to avoid colliding with
giant market leaders such as the focus on serving a specific group of the customer within a market sector
 Don Dien should try their best to create a separated value of their products to make its different from the rest of the
market, in this way Don Dien will less have to worry about the new entry to the market
b) The threat of substitutes - LOW

Two main substitutes are home remedies product and other home-made natural products such as herbs, oils for skincare and
other use. These products are mostly used in rural areas, some women even consider these substitutes as old fashioned or
even ineffective

 Switching cost and customers propensity to substitutes are low

 Don Dien need not worry much about this
c) The bargaining power of buyers-HIGH
 Rising competition and wide range of available products given by high power. They have no position in influencing product
pricing situation, thus, this makes companies find it difficult to maintain their long-term profitability. It may also force firm
pricing strategy to reduce products prices as a customer can switch brands easily

 Don Dien need to improving customer service and improving brands identity to against the bargaining power of buyers
d) The bargaining power of suppliers-LOW

A large number of suppliers and manufacturers, low differentiation of inputs. There is a threat of forwarding integration and a
certain switching cost exists. The low impact of inputs on cost and the low presence of substitutes. All result in the low
bargaining power of suppliers

 Don Dien should consider cost optimization for the input while ensuring quality
e) Rivalry between competitors-HIGH

High competition degree in the industry. Competitors including market leaders groups such as Korean brands and EU brands,
Japan, Thai and U.S to local brands. Many spas even have their products and there are many spas in big cities as Ha Noi and Sai
Gon. The market situation is supplied greater than the demand while the degree of differentiation just medium. Not many
differences amongst brands products, the exit barriers are so high.

 In order to take competition advantages Don Dien need to create a core value that separated from other competitors,
and customers must buy Don Dien products to have this unique experiences
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