Business strategy for SaiGon cosmetics corporation

TRƯỜNG ĐẠI HỌC MỞ TP. HCM UNIVERSITE LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MMVCFB6 BÙI QUANG LỘC BUSINESS STRATEGY FOR SAIGON COSMETICS CORPORATION MASTER PROJECT MASTER IN MANAGEMENT (PART-TIME) Ho Chi Minh City (2014) Declaration I declare that all material presented in this research is my own work, or fully and specifically acknowledged wherever adapted from other sources. I understand that if at any time it is shown that I have significantly misrepresented material presented in this research, any degree or credits awarded to me on the basis of that material may be revoked. Student’s Signature: Date: Acknowledgement I would like to express my special appreciation and thanks to my instructor Professor Dr. NGUYEN MINH HA, you have been providing lots of guidance and help for me. I would like to thank you for encouraging my research. Your questions and comments greatly help me to complete this research A special thanks to my family. Words cannot express how grateful I am to my father and my mother for all the encouragement and of the sacrifices that you’ve made on my behalf. Last but not least, I would like express appreciation to my beloved wife PHUONG who spent sleepless nights with and was always my support in the moments when there was no one to answer my queries. Instructor’s Comments TABLE OF CONTENTS CHAPTER 1 – PROJECT OVERVIEW 1 1.1 Reason for choosing this topic 1 1.2 Problem statement 2 1.3 Project objectives 2 1.4 Research methodology 2 1.5 Data collection 3 1.6 The significance of this project 3 1.7 The structure of this project 3 CHAPTER 2 – LITERATURE REVIEW 5 2.1 Definition of strategy 5 2.2 The importance of strategy: 6 2.3 The components of strategy: 6 2.4 Strategy hierarchy 7 2.4.1 Corporate Strategy 7 2.4.2 Business Strategy 8 2.4.3 Functional level strategy 11 2.5 Strategy planning process 12 2.6 Tools and framework for environment analysis 14 2.6.1 PEST analysis 14 2.6.2 Porter’s five force model 15 2.6.3 SWOT analysis 16 2.6.4 TOWS 17 CHAPTER 3 – SITUATIONAL ANALYSIS 20 3.1 Vietnam situation 20 3.1.1 Political situation 20 3.1.2 Economy 20 3.1.3 Social factors 23 3.1.4 Technology 25 3.2 Vietnam Cosmetic and Personal care market overview 25 3.2.1 Fragrances (Perfume) 26 3.2.2 Hair care 27 3.3 Industry environment analysis 28 3.3.1 Barrier to entry 28 3.3.2 Power of buyer 29 3.3.3 Threat of substitute 30 3.3.4 Rivalry 31 3.4 Internal analysis 33 3.4.1 Business activities 33 3.4.2 Management analysis 35 3.4.3 Business performance 35 3.4.4 Marketing performance 38 3.4.5 SCC core capacity and competency 41 3.5 Summary of situational analysis 41 CHAPTER 4 – STRATEGY RECOMMENDATION FOR SCC 44 4.1 SCC Vision and Mission 44 4.1.1 Vision: 44 4.1.2 Mission 44 4.1.3 Objectives 44 4.2 Business strategy options for SCC 45 4.3 Strategy choice 46 CHAPTER 5 - DETAILED ACTION PLANS 48 5.1 Financial forecast for 2014-2015 period 48 5.2 Budget for key investment for 2014 49 5.3 Key investments and activities 49 CHAPTER 6 - CONCLUSION 54 6.1 Conclusion 54 6.2 Recommendation 54 LIST OF ABBREVIATIONS GSO: Vietnam General Statistics Office FMCG: Fast moving consumer goods GT: General Trade MT: Modern Trade PEST: Political, Economic, Social and Technological SCC: Saigon Cosmetics Corporation SME: Small and Medium Enterprises SWOT: Strength, Weakness, Opportunity and Threat TOWS: Thread, Opportunity, Weakness and Strength LIST OF TABLES Table 2-1 Summary of tools used in environmental analysis 14 Table 2-2 TOWS matrix - strategic alternatives 19 Table 3-1 Vietnam income distribution by Urban and Rural 24 Table 3-2 Vietnam cosmetics and personal care market size 26 Table 3-3 Vietnam fragrance sub-category market value 27 Table 3-4 Vietnam import tax for cosmetics and personal care products 29 Table 3-5 Revenue contribution of SCC top brands 34 Table 3-6 SCC market research outcomes in 2012 39 Table 3-7 SWOT table for SCC 41 Table 4-1 Mapping TOWS alternatives to Porter's generic strategy 46 Table 5-1 Business plan for 2014 and 2015 48 LIST OF FIGURES Figure 2-1 Porter's generic strategy 9 Figure 2-2 Strategy planning process 12 Figure 3-1 Vietnam GDP Growth overtime 21 Figure 3-2 Vietnam inflation rate over time 22 Figure 3-3 Vietnam population over time 23 Figure 3-4 Vietnam population demographics 24 Figure 3-5 Vietnam GDP per capita 30 Figure 3-6 Global cosmetics industry market growth, YOY (2003–2012) 31 Figure 3-7: SCC Corporate structure 34 Figure 3-8 SCC revenue and growth rate over time 36 Figure 3-9 SCC efficiency indicators 37 1 CHAPTER 1 – PROJECT OVERVIEW 1.1 Reason for choosing this topic Vietnam economy sees the highest growth rate since early 2000s with Bilateral Trade Agreement between the USA and Vietnam in 2000 and WTO membership in 2006. Vietnam’s average GDP growth from 2000 to 2006 exceeded 5 percent per year and peaked at 8.5 percent in 2007, translating to a total GDP of USD 60.9 billion in dollar term. GDP growth has been slowed down since 2007 due to global economic crisis and intrinsic problems of the economy, high reliance of the economy on the construction booming and credit growth. Vietnam ended 2013 with a GDP growth of 5.42%. (GSO data) Coming together with enormous economic growth, domestic business sector has been facing increasing completion from large global players backed up with enormous resources on their own home ground. As per data from Vietnam Foreign Investment Agency (FIA), total new foreign direct investment (FDI) commitment to Vietnam reached $21.6 billion in 2013, up 54.5 per cent year-on-year. The FDI disbursement in 2013 witnessed a strong recovery with an increase of 9.9 per cent, reaching $11.5 billion, versus a decline of 4.9 per cent in 2012. More than 90% of Vietnamese businesses are small and medium enterprises (SME), accounting for 40% of GDP. Vietnamese SMEs are struggling to compete with global and regional players due to lack of management expertise, small scale and simple technology. ( http://fia.mpi.gov.vn/) Saigon Cosmetics Corporation (SCC), as a local SME, was also impacted by the increasing competition. SCC experience a period of three from 2009 to 2011 with flat revenue line and rapid declining marketing share. This project aims to put a real case study through the framework of strategy formation process. By doing so, the project would like to prove that there is a viable business strategy for SCC in particular and for local Vietnamese SMEs in general even in a highly competitive environment. [...]... of businesses, ensuring that the businesses are successful over the long-term, developing business units, and sometimes ensuring that each business is compatible with others in the portfolio 2.4.2 Business Strategy Business strategy is the coordination of resources and more about developing and sustaining a competitive advantage for the goods and services that are produced (Dess and Miller 1993) Business. .. are limited Strategy formation provides direction and priority for resource deployment to archive firm’s goal and objectives 2.4 Strategy hierarchy Strategy can be divided into three types There is a hierarchy of strategy which is a nesting of one strategy within another so that they complement and support one another 2.4.1 Corporate Strategy Dess and Miller (1993) stated that corporate strategy as... across business units, and using business units to complement other corporate business activities Management Practices - Corporations decide how business units are to be governed: through direct corporate intervention (centralization) or through more or less autonomous government (decentralization) that relies on persuasion and rewards Corporations are responsible for creating value through their businesses... and industry environment for SCC products with focus on personal care and personal fragrance market • To analyze SCC conditions and the market where it operates to gain an understanding of the SCC strengths, weaknesses, market opportunities and threats • To develop alternative strategies and recommend a suitable business strategy for Saigon Cosmetics Corporation with detailed business plan and action... experiences, perceptions, and expectations that provide direction for actions in pursuit of particular ends 2.2 The importance of strategy: Strategy is crucial to the company performance as it sets out the direction for the company to move forward and priority in term of resources allocation Ross and Kami (2011) said that without a strategy, an organization is like a ship without a rudder, going around... Director of Planning, I personally would like to formulate a clear business strategy for SCC’s sustainable success and development in the long run 1.2 Problem statement SCC was one of Vietnam leading cosmetics and personal care companies with 10% of market share back in 2000 For the period from 2000 to 2006, Vietnam’s joining WTO open up the opportunities for global FMCG players such as Procter and Gamble... corporation, the types of businesses in which the corporation should be involved, and the way in which businesses will be integrated and managed Competitive Contact - defining where in the corporation competition is to be localized Managing Activities and Business Interrelationships: Corporate strategy seeks to develop synergies by sharing and coordinating staff and other resources across business units, investing... focus on environment analysis and strategy formulation Factual analysis of Vietnam macro environment, Vietnam cosmetics and personal care industry and SCC’s situations followed tools and frameworks in strategic planning The project closely follows the concepts Porter’s force model together with the translation of outcome data into Heinz’s TOWS matrix for strategy formulation 1.5 Data collection Primary... framework for factual analysis in Chapter 3 Chapter 3 is Situational analysis Theoretical frameworks are put into practice Real data from macro economy, industry and SCC actual performance are analyzed and summarized into SWOT matrix Chapter 4 is Strategy recommendation for SCC SWOT outcomes are put through TOWS situational analysis for final strategy recommendation Chapter 5 is Detailed action plan Strategy. .. various businesses and product lines Corporate strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses Corporate level strategy is concerned with: Reach - defining the issues that are corporate responsibilities; these might include identifying the overall goals of the corporation, . Definition of strategy 5 2.2 The importance of strategy: 6 2.3 The components of strategy: 6 2.4 Strategy hierarchy 7 2.4.1 Corporate Strategy 7 2.4.2 Business Strategy 8 2.4.3 Functional level strategy. and threats. • To develop alternative strategies and recommend a suitable business strategy for Saigon Cosmetics Corporation with detailed business plan and action plans 1.4 Research methodology To address. 41 CHAPTER 4 – STRATEGY RECOMMENDATION FOR SCC 44 4.1 SCC Vision and Mission 44 4.1.1 Vision: 44 4.1.2 Mission 44 4.1.3 Objectives 44 4.2 Business strategy options for SCC 45 4.3 Strategy choice