TRƯ Ờ NG ĐẠ I HỌ C MỞ TP. HCM UNIVERSITE LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MMVCFB6 BÙI QUANG LỘ C 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 Reason for choosing this topic.6 The significance of this project.7 The structure of this project .3 CHAPTER 2 – LITERATURE REVIEW.1 Definition of strategy.2 The importance of strategy: .3 The components of strategy:.3 Functional level strategy .5 Strategy planning process .6 Tools and framework for environment analysis .2 Porter’s five force model. 17 CHAPTER 3 – SITUATIONAL ANALYSIS.2 Vietnam Cosmetic and Personal care market overview.3 Industry environment analysis .1 Barrier to entry .2 Power of buyer .3 Threat of substitute .5 SCC core capacity and competency .5 Summary of situational analysis. 41 CHAPTER 4 – STRATEGY RECOMMENDATION FOR SCC .1 SCC Vision and Mission .2 Business strategy options for SCC.
46 CHAPTER 5 - DETAILED ACTION PLANS .1 Financial forecast for 2014-2015 period .2 Budget for key investment for 2014.3 Key investments and activities .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. (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.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. 2 Last but not least, being a shareholder of SCC and recently appointed to the position of Director of Planning, I personally would like to formulate a clear business strategy for SCC’s sustainable success and development in the long run.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 and Unilever entering the market. Facing heavy marketing spending from competitors and not having an appropriate strategy in place, SCC experienced a reduction in market share, stagnant sales and low return on equity.
As a wake-up call, SCC Board requests for a complete review of SCC’s situation and recommendation of strategy to reinstate its industry leader position and to improve profitability.3 Project objectives The specific objectives of this project are set out as follows: • To analyze macro-economic 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 plans 1.4 Research methodology To address the problem statement, the project starts with review of literature in the field of strategic management with main focus on environment analysis and strategy formulation. Factual analysis of Vietnam macro environment, Vietnam cosmetics and 3 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.5 Data collection Primary data is collected directly from in-depth interviews with key personnel in SCC (Chairwoman, CEO, CFO, Sales Director and Department heads).
SCC financial and market research data are provided by Finance and Marketing department. Secondary data on cosmetics and personal industry are mainly extracted from Euro Monitor Vietnam 2012 reports. Macro level data are sourced from Vietnam General Statistics Office. Market share estimates are derived by compiling industry data and SCC actual figures.6 The significance of this project Through the process of strategy planning process, this paper aims prove the importance and usefulness of strategy planning to business in general and local SMEs in particular.
The structure of this paper intentionally lay outs the generic framework for local firms to apply. The structure of this paper can be used as the basis for comments, ideas and recommendation for enhancement. Promoting the implementing and embedding strategic planning discipline in local SMEs operation is also the aim of this paper.7 The structure of this project This project includes six chapters. Chapter 1 is Project overview.
This section sets out the project background and rationale Chapter 2 is Literature review. Theories in relation to strategic planning and management process are reviewed and serve as the overall framework for factual analysis in Chapter 3. 4 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 is translated into measurable financial plans and detailed action items.
Chapter 6 is Conclusion. This last chapter summarizes areas of management attention to ensure best outcome from strategy process. 5 CHAPTER 2 – LITERATURE REVIEW This chapter of the research aims to summarize the current academic knowledge on the subject of strategy. It also looks at developed tools and frameworks in strategic management.
Theories and frameworks will be utilized for actual analysis of SCC situation in subsequent chapter.1 Definition of strategy Strategy is becoming a popular topic on the table of discussion of any board or high level of management meeting. Rooted back in ancient Greek, strategy is defined as generalship - high level plan to help troop leaders achieve goals under uncertainty. Following this ancient definition of strategy, Steiner (1979), a key figure in the origin and development of strategic planning, indirectly defines strategy as a way one did to counter competitor actual or predicted moves. The definition of Steiner focuses on the importance of directional decisions to organizations.
In modern business management, several academics write about and define strategy. Johnson and Scholes (2006) define strategy as the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations. Mintzberg (1994) defines strategy as a pattern in stream of decisions. Mintzberg takes into account the nature of today business environment where technological advances can change market conditions very quickly; hence, strategy is emergent in nature as it is the product of initial intentions collides and accommodates with changing reality.
Tregoe and Zimmerman (1980) take the discussion further with the discussion on core business drivers such as products, markets, customers, locations etc. Despite the existence of multiple perspectives a business operation, only one can be the basis for strategy. It appears definitions differ on the outsets, all definitions does confirms the key components of a strategy - the predetermined targets, the pattern in decision making, 6 the process of planning resources and last but not least the business perspectives. The term strategy refers to a complex combination ideas, experiences, perceptions, and expectations that provide direction for actions in pursuit of particular ends.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 in circles. Clear objectives help a company to develop short-term and long-term growth plans that are very critical for sustained viability and success of a company. Financial and human resources will be better utilized and deployed to areas that need the most and help the company to established competitive advantage in the long run.