Figure 2-2 Strategy planning process ...12Figure 3-1 Vietnam GDP Growth overtime .... • To develop alternative strategies and recommend a suitable business strategyfor Saigon Cosmetics C
Reason for choosing this topic
Vietnam's economy recorded its strongest growth since the early 2000s, helped by the Bilateral Trade Agreement with the United States in 2000 and WTO membership in 2006 Between 2000 and 2006, average GDP growth stayed above 5% per year, peaking at 8.5% in 2007 and reaching a total GDP of about USD 60.9 billion Growth slowed after 2007 amid the global financial crisis and structural challenges, including heavy reliance on construction-led expansion and rapid credit growth By 2013, Vietnam posted GDP growth of 5.42% (GSO data).
Vietnam's economy has grown rapidly, but domestic businesses now face intensified competition from well-resourced global players on home soil According to the Vietnam Foreign Investment Agency (FIA), total new foreign direct investment (FDI) commitments reached $21.6 billion in 2013, up 54.5% year over year, while FDI disbursement rose 9.9% to $11.5 billion after a 2012 decline of 4.9% More than 90% of Vietnamese firms are small and medium enterprises (SMEs), accounting for about 40% of GDP Vietnamese SMEs struggle to compete with global and regional players due to limited management expertise, small-scale operations, and relatively simple technology.
Saigon Cosmetics Corporation (SCC), a local Vietnamese SME, faced intensified competition that produced a flat revenue trajectory and a rapid decline in market share from 2009 to 2011 This project presents SCC as a real case study analyzed through the strategy formation process, illustrating how a structured approach can uncover viable options for growth The goal is to prove that a practical business strategy exists for SCC and, more broadly, for local Vietnamese SMEs operating in highly competitive environments. -**Support Pollinations.AI:** -🌸 **Ad** 🌸Powered by Pollinations.AI free text APIs [Support our mission](https://pollinations.ai/redirect/kofi) to keep AI accessible for everyone.
As a shareholder of SCC and the newly appointed Director of Planning, I am focused on shaping a clear, forward-looking business strategy that drives SCC’s sustainable success and long-term development This plan will align shareholder interests with our strengths, set measurable goals, and guide prudent resource allocation to sustain growth over time.
Problem statement
SCC was one of Vietnam's leading cosmetics and personal care companies, commanding about 10% of the market share in 2000 From 2000 to 2006, Vietnam's accession to the World Trade Organization opened opportunities for global FMCG players, with brands such as Procter & Gamble and Unilever entering the Vietnamese 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.
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
Research methodology
This project begins with a comprehensive literature review in strategic management, concentrating on environment analysis and the formulation of competitive strategies It then presents a factual diagnostics of the Vietnam macro environment, the Vietnam cosmetics and personal care sector, and SCC’s current position, employing established strategic planning tools The methodology integrates Porter’s Five Forces with the translation of the resulting data into Heinz Weihrich’s TOWS matrix to guide strategic choices By linking environmental scanning with scenario-based strategy development, the work aims to produce actionable recommendations for SCC within the Vietnamese market context.
Data collection
Primary data are collected directly through in-depth interviews with SCC's key personnel, including the Chairwoman, CEO, CFO, Sales Director, and department heads Financial and market research data for SCC are provided by the Finance and Marketing departments.
Secondary data on the cosmetics and personal care industry are primarily drawn from Euromonitor Vietnam 2012 reports Macro-level data are sourced from the Vietnam General Statistics Office, while market share estimates are derived by compiling industry data with SCC actual figures.
The significance of this project
This paper examines the strategic planning process to demonstrate its value and usefulness for businesses in general, with a focus on local SMEs It offers a generic framework that local firms can apply, which can also serve as a basis for feedback, ideas, and recommendations to enhance their strategies A primary aim is to promote the implementation and embedding of strategic planning discipline within local SME operations, helping these businesses become more resilient, competitive, and better prepared for growth.
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.
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.
LITERATURE REVIEW
Definition of strategy
Strategy has become a central topic in boardrooms and among senior management Originating in ancient Greece, strategy is framed as generalship—a high‑level plan to help leaders achieve goals under uncertainty Following that lineage, Steiner (1979), a foundational figure in the development of strategic planning, defines strategy as how an organization counters competitors' actual or anticipated moves His perspective emphasizes the importance of directional decisions in guiding organizational action.
In modern business management, academics examine how strategy is defined and applied Johnson and Scholes (2006) define strategy as the long-term direction and scope of an organization, designed to achieve advantage by configuring resources within a challenging environment to meet market needs and fulfill stakeholder expectations.
Strategy is a pattern in a stream of decisions, reflecting how today’s fast-changing business environment—driven by rapid technological advances—reshapes markets and makes strategy emergent as initial intentions collide with evolving reality Building on this, Tregoe and Zimmerman emphasize core business drivers—products, markets, customers, and locations—as the essential levers that ground strategic choices Although multiple perspectives inform a business operation, only one coherent basis should underpin the strategy to align decisions with a clear strategic focus.
Definitions of strategy vary, but they converge on several core components: predetermined targets, a pattern of decision-making, the process of resource planning, and a clear business perspective Strategy is a complex blend of ideas, experiences, perceptions, and expectations that provides direction for actions aimed at achieving particular ends.
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
Without a strategy, an organization is like a ship without a rudder, going around in circles Clear objectives help a company develop short-term and long-term growth plans that are critical for sustained viability and success When objectives are defined, financial and human resources can be better utilized and deployed to the areas that need them most, building a long-term competitive advantage Urwick (1956) observed that nothing kills morale faster and more completely than leaders who do not know their own minds.
The components of strategy
Strategy comprises defining scope, goals and objectives, and resources deployment via developing strategies and setting policy guidelines Next they will be introduced in details (Quinn & Ghoshal 1999).
An organization's strategic scope defines the industries, products, and market segments it targets, and its breadth determines the depth of analysis and data required in the strategic planning process This scope shapes how far management looks when crafting strategy, with broader scopes demanding more comprehensive information At the same time, the strategic scope mirrors management's view of the firm's purpose and mission, anchoring the strategy in the organization's intended role and framing the perspective from which strategic choices are evaluated.
Goals and objectives translate a high-level vision into concrete targets such as revenue growth, return on investment (ROI), and market share that can be tracked over time Measurable objectives are critical for evaluating the implementation of any strategy, providing clear benchmarks for progress and accountability Rather than relying on broad mission statements, strategy effectiveness should be assessed with quantifiable indicators and key performance metrics to enable data-driven decision making.
- Resource deployments: Resources, financial or human, are limited Strategy formation provides direction and priority for resource deployment to archive firm’s goal andobjectives.
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.
Dess and Miller (1993) define corporate strategy as a company’s overall direction, shaped by its attitude toward growth and by how it manages its various businesses and product lines Fundamentally, corporate strategy is about selecting the businesses in which the company should compete and developing and coordinating its portfolio of businesses At the corporate level, strategy focuses on the choice of businesses and the organization and alignment of the portfolio to drive coherent growth and performance.
- Reach - defining the issues that are corporate responsibilities; these might include identifying the overall goals of the 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 financial resources across business units, and using business units to complement other corporate business activities.
Management practices in corporations revolve around how business units are governed, with a choice between centralized control through direct corporate intervention and decentralized governance that grants varying degrees of autonomy to unit leaders In centralized models, top-down oversight coordinates strategy and resource allocation to ensure consistency and alignment, while decentralized models rely on persuasion and rewards to motivate local performance and respond to market realities The governance approach—whether centralized or decentralized—shapes decision speed, accountability, and overall organizational effectiveness.
Corporations create value by actively managing their portfolio of businesses, steering long-term success through the deliberate development of individual business units, and ensuring these units fit together to produce portfolio synergy By prioritizing strategic growth, optimizing resource allocation, and aligning the units for complementary performance, the organization sustains value creation across its entire portfolio over time.
Business strategy is about coordinating resources to develop and sustain a competitive advantage for the goods and services a company produces (Dess and Miller 1993) The strategy formulation phase focuses on defining objectives, assessing the external environment and internal capabilities, evaluating strategic options, and aligning resources and activities to implement the chosen path.
- Position the business against rivals
- Anticipating changes in demand and technologies and adjusting the strategy to accommodate them
- Influencing the nature of competition through strategic actions such as vertical integration and through political actions such as lobbying.
Porter (1986) identified three generic business-level strategies for achieving competitive advantage and defending against the pressures of the Five Forces: Cost Leadership, Differentiation, and Focus He then subdivided Focus into two approaches: Cost Focus and Differentiation Focus, depending on whether a firm aims for the lowest-cost position within a narrow market or seeks customized differentiation for a specific segment.
Stonehouse and Snowdon (2007) summarize the strategy as achieving cost leadership: the firm must become the lowest-cost producer of its product or service to earn above-average profits even when prices are at or near the industry average For this approach to work, the target customer base must be price-sensitive and reward efficiency with value, making margins possible through cost reductions, scale economies, and streamlined operations rather than premium pricing.
To achieve the lowest price and sustained profitability, a firm must operate with a cost base lower than its competitors This cost advantage can be built through economies of scale, high asset turnover, proprietary technology, and preferential access to key raw materials, enabling price leadership while maintaining healthy margins and market share.
Customer loyalty can be a problem under a cost leadership strategy, as price-sensitive customers may switch to lower-priced products This approach can also create the perception of low quality, making it harder for the firm to reposition toward a differentiation strategy or to upgrade its brand position.
Differentiation means offering unique products and services across key dimensions—design, brand image, customer service, and technology—that buyers in the market highly value A differentiation strategy works best when the target segment is not price-sensitive and the market is competitive or saturated, and when customers have very specific, underserved needs that the firm can meet This approach relies on the firm’s distinctive resources and capabilities to deliver solutions that are difficult to imitate, and successful differentiation is rewarded with a premium price for the unique value delivered.
Differentiation strategy will require the following conditions to be a success:
- Good research, development and innovation.
- Ability to deliver high-quality products or services.
- Effective sales and marketing so that the differentiation factors are well communicated and appreciated by customers.
Organizations following differentiation strategy need to be agile with new product development processes Competitors can attack using Focus Differentiation strategies in different market segments.
The Focus Strategy or Strategic Scope
A focus strategy targets a specific market segment, enabling a company to develop either uniquely low-cost or highly tailored products for that segment’s technology needs This approach defines a tightly described competitive scope, with competition based on either cost leadership or differentiation By narrowing its focus, the firm concentrates on a small number of niche markets where customer needs are highly specialized, and the focus strategy itself comprises two variants.
Cost focus targets a narrow market where a firm seeks a cost advantage within its chosen segment, while differentiation focus targets the same narrow market with differentiated products and services tailored to that segment The segment must have buyers with unusual needs, or its production and delivery system must differ from those used for other segments In practice, cost focus exploits differences in cost behavior across segments, whereas differentiation focus takes advantage of the unique needs of buyers in the targeted segment.
Porter argues that a firm should pursue only one competitive strategy at a time, because the costs of differentiation will erode the advantages of a low-cost position Standardized products that achieve economies of scale may lower costs but do not deliver real differentiation, undermining the value of a differentiated approach As a result, cost leadership and differentiation are naturally at odds, making it difficult to sustain both strategies simultaneously.
Porter’s rationalization (1986) has been challenged by researchers who argue that the most successful firms resolve the “dilemma of opposites” by blending cost leadership with differentiation, a view supported by Fuller and Stopford (1992) Contemporary studies show that firms can prosper by adopting a hybrid strategy that combines low-cost advantages with differentiated offerings Citing Davis (1984, as cited by Prajogo 2007, p 74), firms pursuing a hybrid approach outperform those relying on a single generic strategy In volatile markets and rapidly changing conditions, business agility and responsiveness become critical to survival, and the optimal mix of cost leadership and differentiation should be adjusted according to market and competitive conditions, prioritizing each generic strategy to the extent warranted.
Strategy planning process
Today’s global marketplace is defined by unprecedented pace of change, with time and distance shrinking thanks to the explosive growth of the internet and telecommunications Strategic planning is no longer the exclusive domain of the largest firms; it is a necessity for every company's survival and long-term success The strategic planning process is illustrated in the figure below.
Source:http://www.soopertutorials.com/
Mission and vision setting constitutes the initial step in the strategic planning process Bart and Hupfer (2004) describe the mission statement as a noble cause to which the enterprise commits, suggesting that when this purpose is realized, the external world becomes not only better but perhaps truly great The mission statement embodies the organization’s purpose and changes only when the organization’s fundamental purpose shifts (Schwartz & Cohn, 2002) It also serves as the foundation for the vision statement.
A vision statement is a forward-looking description of an organization’s ideal future state, offering a clear guide for strategic direction The typically large gap between the current state and this envisioned future fuels firm-wide motivation to close it To move toward the vision, organizations must establish detailed, measurable objectives over time, creating a concrete roadmap that aligns teams and resources, tracks progress, and sustains momentum.
Environment analysis is the second step of the process and involves a review of the situation in which the firm operates This analysis can be broadly classified into three levels: macro, industry, and firm level Macro and industry level analyses identify the firm’s opportunities and threats, while the firm-level review identifies its strengths and weaknesses.
Strategy formulation is the third step in the process It yields a clear set of recommendations supported by justification, with the aim of creating sustainable competitive advantages that drive organizational success A good recommendation effectively solves the stated problems, is practical and implementable given the available resources, feasible within a reasonable timeframe, cost-efficient, minimally disruptive, and acceptable to key stakeholders in the organization.
Strategy implementation is the fourth step in turning plans into action to achieve goals A strategic plan outlines a business's goals and actions in a written document, but it will remain ineffective without proper implementation Implementing the plan is what actually translates strategy into results Research indicates that strategy implementation, rather than strategy formulation alone, is a key requirement for superior business performance (Holman 1999; Flood, Dromgoole, Carroll & Gordon 2000; Kaplan & Norton 2000:1) Leadership and change management are two key aspects of strategy implementation.
Evaluation and control complete the full strategic management cycle rather than marking its end Managing the strategic plan is a continuous, dynamic process because a single change in any element of the plan or operating environment can necessitate adjustments to the overall strategy Therefore, organizations should routinely revisit the process to stay adaptable and ensure ongoing alignment with goals.
Tools and framework for environment analysis
To support environment review, the following frameworks are normally utilized.
Table 2-1 Summary of tools used in environmental analysis
Analysis scope Description Tools Outcome
Macro level Social and economic perspective
PEST analysis Opportunities and threats
Micro level Industry and firm level perspective
Consolidation Putting macro and micro analysis outcome in a four quadrant matrix
Situational analysis, opportunities and threats are matched with firm’sweakness and strength
PEST analysis is a framework for examining macro-environmental factors—Political, Economic, Social, and Technological—that influence an organization’s strategy It is used in the environmental scanning phase of the strategic planning process to identify external opportunities and threats The technique traces back to Aguilar (1976), who described the predecessor ETPS—Economic, Technological, Political, and Social environment—and the modern PEST model evolved from that foundation to focus on Political, Economic, Social, and Technological factors.
Political factors determine the degree of government intervention in the economy, shaping how policies such as tax policy, labor law, environmental regulation, trade restrictions, and tariffs affect markets and business decisions Political stability matters for investment and growth, while governments decide which goods and services to provide or restrict, distinguishing merit goods from demerit goods (merit bads) In addition, public policy and spending influence core national outcomes—health, education, and infrastructure—demonstrating the government's broad role in a nation's development.
Key economic factors—economic growth, interest rates, exchange rates, and the inflation rate—shape how businesses operate and make strategic decisions These factors affect costs, demand, and overall competitiveness, with higher interest rates raising the cost of capital and potentially slowing expansion, while favorable exchange rates can lower export costs and influence the supply and price of imported goods Inflation also affects purchasing power and input costs, influencing budgeting and risk management for firms.
Social factors include cultural dynamics along with health consciousness, population growth rate, age distribution, career attitudes, and an emphasis on safety Trends in these factors influence the demand for a company’s products and shape how the company operates For example, an aging population may create a smaller and less-willing workforce, which can raise labor costs To adapt to these social trends, companies often revise management strategies—such as recruiting older workers, building age-diverse talent pipelines, and adjusting training and retention practices to leverage mature experience.
Technological factors include R&D activity, automation, technology incentives, and the rate of technological change, and they collectively shape barriers to entry, determine the minimum efficient production level, and influence outsourcing decisions These shifts can affect costs, quality, and the pace of innovation, ultimately altering competitive dynamics By tracking these factors, firms can anticipate cost implications, improve product quality, and seize opportunities created by rapid technological advancement.
This model is a framework for industry analysis and business strategy development.
Rooted in industrial organization (IO) economics, the five forces framework analyzes how rivalry among existing firms, the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, and the threat of substitute products or services shape a market’s competitive intensity This intensity determines market attractiveness, defined as the overall profitability potential of the industry By evaluating these forces, businesses can understand why some markets offer higher profitability and strategic opportunities than others.
An unattractive industry is one in which the combined pressure of the five forces erodes profitability for all firms When these forces are especially intense, the market edges toward pure competition, where profits are driven down to normal levels for every player (Porter, 2008).
Three of Porter's five forces refer to competition from external sources, horizontal competition forces and the remainders two are internal threats, vertical competition forces (Porter, 2008) The five forces include:
Porter’s Five Forces analysis forms one component of the broader Porter strategic model, which also encompasses the value chain and the generic strategies for competitive positioning Given limited access to data, the scope of this paper is restricted to the five-forces framework, focusing on how industry structure and competitive dynamics—such as supplier power, buyer power, competitive rivalry, the threat of new entrants, and the threat of substitutes—influence profitability and strategic choices.
SWOT analysis is a structured planning method used to evaluate a project or business venture by identifying its strengths, weaknesses, opportunities, and threats The origin of SWOT is debated: some trace it to Albert Humphrey’s Stanford research project in the 1950s–1960s, while others credit early work by Harvard Business School Policy Unit professors George Albert Smith Jr and C Roland Christensen in the 1950s, with Kenneth Andrews later refining its usage and application.
SWOT analysis is a strategic framework that can be applied to a product, place, industry, or person It starts by clearly specifying the objective of the venture or project and then identifying the internal strengths and weaknesses and the external opportunities and threats that affect the ability to achieve that objective By mapping these internal and external factors—favorable and unfavorable—you gain a clear view of how to leverage strengths, shore up weaknesses, capitalize on opportunities, and mitigate threats, guiding informed, outcome-focused decisions.
Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization.
• Strengths: characteristics of the business that give it an advantage over others
• Weaknesses: are characteristics that place the business at a disadvantage relative to others
• Opportunities: elements that the project could exploit to its advantage
• Threats: elements in the environment that could cause trouble for the business or project
SWOT analysis is frequently cited as a fast route to an agreed strategy Dyson (2004) notes that while SWOT can help generate new strategic initiatives, a robust strategic development process also requires substantial analysis and testing of those initiatives before adoption Testing should be conducted against all developed scenarios where they exist, and a financial evaluation is advisable, if not mandatory.
The TOWS Matrix, introduced by Weihrich in 1982, is a strategic framework that has since been widely used for research and strategy formulation around the world Its elements align with SWOT analysis, comprising strengths, weaknesses, opportunities, and threats, showing that the core components of TOWS are not new.
TOWS analysis systematically pairs external threats and opportunities with internal weaknesses and strengths to reveal strategic options By cross-linking opportunities with strengths and mitigating weaknesses, it helps a company capitalize on favorable external factors while reducing exposure to risks, translating situational insights into actionable strategies that strengthen competitive advantage.
There are four basic strategies depending on the dominance of the factors in the external environment and within internal company situations:
An SO situation occurs when a company possesses strong internal strengths and abundant external opportunities, making the maxi-maxi strategy the natural path By leveraging dominant capabilities to capitalize on favorable opportunities, the firm pursues aggressive expansion and diversified development across markets, products, and geographies The aim is to maximize growth by aligning core strengths with external opportunities, resulting in robust expansion and a diversified development portfolio.
WO situation (Weakness–Opportunity) mini-maxi strategy: In this scenario, a company is more vulnerable due to internal weaknesses, but the external environment offers significant opportunities The mini-maxi approach should leverage these opportunities to overcome weaknesses by implementing targeted actions that reduce vulnerabilities and correct organizational gaps, aligning opportunity exploitation with weakness remediation to strengthen competitive position and drive growth.
SITUATIONAL ANALYSIS
Vietnam situation
Vietnam's political landscape remains relatively stable, with the Communist Party of Vietnam (CPV) maintaining firm control over power The National Congress serves as the supreme party organ and meets every five years, where delegates decide top leadership and set the country's major policy priorities CPV leadership is dominated by senior bureaucrats, guiding governance and policy direction Simultaneously, Vietnamese society is evolving toward a more educated urban middle class, while rural populations become increasingly assertive and vocal.
On the diplomatic stage, Vietnam has engaged in international integration more proactively It continued to strengthen ties with the West, and particularly with the United States High-level exchanges in recent years have bolstered Vietnamese-US diplomatic relations.
Vietnam political stability is classified as moderate risk with an index of 4.3, 2 points increased from 2007 index Vietnam has the most stable indicators compared with other countries in the regions (http://viewswire.eiu.com/).
From 2000 to 2013, Vietnam’s GDP growth averaged 6.2 percent, peaking at 8.5 percent in December 2007 and dipping to 3.1 percent in March 2009 The global financial crisis of 2008-2009 hit Vietnam’s economy, and the 2009–2010 period marked the first decline in GDP growth after a decade of strong expansion In 2013, the economy showed continued recovery, with 3Q2013 GDP rising 5.54 percent year over year, and full-year GDP growth was expected to be around 5.5 percent, according to the Vietnam General Statistics Office.
Figure 3-1 Vietnam GDP Growth overtime
Vietnam's government has been credited with an effective inflation policy that pushed the consumer price index (CPI) below 10% in the first three quarters of 2013 By contrast, inflation exceeded 20% in 2009 and 2011 due to the global economic crisis, a spike that prompted notable changes in consumer behavior In the wake of these shocks, households became more price-sensitive and savings-oriented, adjusting spending toward essential goods and making cost-conscious choices.
• Switching to traditional trade channel (wet market) for lower prices
• Cut down spending on luxury items (fashion, electrics, etc.)
Figure 3-2 Vietnam inflation rate over time
Since 2012, the Vietnam dong (VND) has remained relatively stable against major currencies, reflecting government efforts to stabilize the economy Historically, the dong has devalued against the US dollar by about 10–15 percent each year, but recent trends show stabilization as economic growth slows and import demand declines This shift indicates that slower domestic growth and lower imports are contributing to a steadier VND in the currency market.
Vietnam's stable political environment underpins sustained economic growth, driving higher disposable income for Vietnamese households As purchasing power increases, consumer spending expands across goods and services, with cosmetics in particular seeing notable growth.
Beyond income growth, inflation stability boosts consumer spending by strengthening consumer confidence, providing a solid foundation for continued cosmetics industry growth in the coming years.
Figure 3-3 Vietnam population over time
Vietnam, with a population of about 90 million, exhibits a near-perfect pyramid in its age structure, indicating a youthful nation Approximately 80% are under 40, and about 72% of this younger group are under 24, creating a prominent youth bulge This demographic pattern is accompanied by a relatively thin older generation, a legacy of the 20th‑century conflicts that limited population growth among older cohorts.
60, which represents only 8% of Vietnam's total population Compared to other Asian nations, Vietnam has the youngest demographic profile (Source:http://www.indexmundi.com/vietnam/)
Vietnam's income distribution shows a stark urban–rural divide: 20% of the urban population is in the A+ income band, while only 2% of the rural population reaches that level Overall, more than 80% of people fall within the C to F income bands, highlighting the concentration of higher incomes in urban areas These data come from AC Nielsen's Pocket Reference Book (2013).
Table 3-1 Vietnam income distribution by Urban and Rural
HIB: household income band - A: VND 15 million+; B: VND 7.5-14.9million; C: VND 4.5-7.4 million; D: VND3-4.4 million; E-F: VND 0-2.9 million
Vietnam's large, youthful, and rising-income population creates a major growth opportunity for SCC in the cosmetics market Global integration, particularly in fashion and beauty trends, accelerates Vietnamese consumers' spending on cosmetics, driving sustained demand for skincare, makeup, and beauty products.
Personal care manufacturing ranges from simple processes like mixing and filling to the more complex production seen in cosmetics In Vietnam, FMCG personal care products are typically introduced by foreign firms such as Unilever, Procter & Gamble, and Original Equipment Manufacturers (OEMs) A key factor in this sector is a rigorous quality‑control system aligned with international standards like ISO and GMP In contrast, cosmetics manufacturing is more R&D‑intensive and technically demanding, with production usually centered on filling using imported semi-finished ingredients.
Vietnam Cosmetic and Personal care market overview
The cosmetics and personal care industry covers multiple categories, including baby products, bath and shower, color cosmetics, deodorants and depilatories, fragrances, hair care, men's grooming, oral care, skin care, and sun care, according to Euro Monitor (2012).
Euro Monitor's 2012 Vietnam report shows that cosmetics and personal care posted strong value growth across all categories despite the two economic crises and high inflation in 2008 and 2011 Demand was fueled by rising consumer awareness of beauty and personal appearance and improving living standards The beauty and personal care market is expected to maintain healthy growth, though at a slower pace Vietnam's per-capita spending on cosmetics and personal care is about USD 8 per year, well below neighboring markets such as China (USD 20), Hong Kong (USD 35), Korea (USD 40), and Thailand (USD 22) In the wake of the crises, consumers have become more selective, favoring good-quality products at reasonable prices to preserve disposable income and increase savings rather than chasing premium brands.
Table 3-2 Vietnam cosmetics and personal care market size
Source: Euro Monitor Report - Vietnam Cosmetics and Personal Care Market, 2012
The market is dominated by international players, with Unilever and P&G together accounting for about 42% of the market Foreign brands exert a strong presence, accounting for roughly 90% of the market thanks to their global brands and substantial marketing budgets, while the remaining 10% is shared by several local players, each holding around 1%.
For the purpose of this paper, the two categories - fragrances and hair care, are studied in detailed SCC revenue contribution from these two categories accounts for 90% of total sales.
In 2011, Vietnam fragrances growth was 25% in value terms, recorded at VND512 billion Consumers use more and more fragrances as a daily routine as opposed to occasional usage for special events For the forecast period of 2012-2015, this category growth is around 7% per annum, nearly doubles industry average growth.Mass fragrances accounts for the majority of the category in term of volume due to wide availability and reasonable prices Premium fragrances however recorded higher growth rate This could be explained by the fact that more people became familiar with premium fragrances and associated fragrances with social status and characteristics.
Table 3-3 Vietnam fragrance sub-category market value.
Source: Euro Monitor Report - Vietnam Cosmetics and Personal Care Market, 2012
The market is dominated by two foreign names, Oriflammes and Avon, accounting for 32% of market share SCC is ranked third in this category with just above 10% share In mass sub-category, which is 60% of category value, SCC accounts for nearly 20% value share In 2013, Avon stopped its operation in several countries including Vietnam This creates opportunity for market share growth opportunity for all players (Data source: Euro Monitor 2012 Report).
Counterfeit fragrances and cosmetics challenge brands across the sector, hitting premium labels hardest while mass-market sub-categories see less impact due to slimmer margins Consumers struggle to tell genuine products from fakes, which dampens confidence in premium fragrances in Vietnam As a result, many locals opt to purchase similar products from overseas, reducing fragrance revenue and deterring international brands from entering the Vietnamese market.
Vietnam's hair care market expanded by 12% in current value terms in 2011, reaching VND 3.1 trillion, with growth driven by non-traditional segments such as styling agents, perms and relaxants, and salon hair care in a saturated market Procter & Gamble retained its leading position with a 34% value share, followed by Unilever at 27% The market is forecast to grow at a steady 2% CAGR from 2012 to 2015, according to Euro Monitor (2012).
In the hair care market, international brands tend to outperform domestic brands due to stronger brand images, eye-catching packaging, and aggressive marketing campaigns that boost visibility and consumer appeal As a result, products from foreign companies often capture larger market shares, while domestic brands gradually lose ground over time.
SCC's hair care brand Fresh accounts for a mere 0.5% of the herbal shampoo category and is positioned in the niche segment of herbal formulations The dominant brand in this niche is Sunsilk from Unilever Sunsilk's marketing strategy has recently moved away from herbal messaging toward endorsements and testimonials from hair care professionals.
Vietnam’s cosmetics market shows substantial growth potential as per‑capita spending remains low but disposable income rises, and SCC currently accounts for a small share of the market To capitalize on this opportunity, SCC must overcome key headwinds—intense competition from larger players and the burden of counterfeit and low‑quality products Strengthening product quality, ensuring authenticity, and differentiating through innovation and targeted marketing will be essential for SCC to expand its market share in Vietnam’s expanding cosmetics sector.
Vietnam's cosmetics and personal care products are subject to increasing regulatory oversight focused on quality control, with the Ministry of Health as the governing authority under Circular 06/2011/TT-BYT The latest regulation requires all cosmetic and personal care manufacturers to implement Good Manufacturing Practice (GMP) starting April 2011, reflecting the government's effort to fulfill its WTO commitments.
GMP certification poses a significant challenge for small manufacturers, creating a natural barrier to entry in the industry Attaining GMP compliance typically requires an investment of about USD 1-2 million for the site, its processes, and personnel This level of cost is unaffordable for a majority of small and medium manufacturers, and as a result, only about 20% of manufacturers currently meet GMP certification requirements.
Vietnam’s market is highly crowded, with major international brands backed by substantial marketing budgets across all categories Local brands tend to be long-established—either from before the economy opened or as niche players Launching a new brand to compete directly with these incumbents requires extensive marketing activity, which translates into a significant financial investment.
Import tax imposed on personal care and cosmetics products from various markets from 2012-2014 can be summarized in the following table:
Table 3-4 Vietnam import tax for cosmetics and personal care products
Source:www.customs.gov.vn
Vietnam's manufacturing rate is trending toward the lower end of the range, and under the current tax regime, local manufacturers face intensified competition not only from global players that have established plants in Vietnam, but also from imported products and ASEAN regional competitors.
Regulatory tightening by government agencies is elevating barriers to entry, making the industry more controlled and consolidated This environment benefits SCC, as stricter oversight reduces the market share of counterfeit products and drives out smaller players who compete primarily on price, enabling SCC to capture a larger share of a cleaner, more legitimate market.
Internal analysis
SCC is one of the leading local cosmetics and personal care manufacturers; however, the company lacks a clear business strategy, with its direction defined by a simple revenue-growth target that lacks a transparent rationale and identifiable underlying drivers.
SCC, established in 1975 as a 100% state-owned company and privatized in 2001, specializes in manufacturing and distributing perfumes and personal care products, with a focus on shampoo Before 2004, production occurred in multiple small workshops with limited facilities and equipment In 2004, SCC inaugurated a comprehensive manufacturing plant with integrated production lines for perfumes and personal care products The plant earned ISO certification in 2003 and GMP certification in 2013.
SCC operates with a simple, flat corporate structure in which all department heads report directly to the General Director A seven-member board of management oversees the strategic direction of the company As of 2012, SCC employed a total of 288 people.
Source: Information provided by SCC Human Resources Department
SCC's product portfolio combines personal care items—such as shampoo, conditioner, and shower gel—with a range of perfumes Perfumes account for nearly 80% of revenue, while the remaining 20% comes mainly from hair care The brand's key lines include Saigon, Cindy, Miss Saigon Elegance, Miss Vietnam (fragrance), and Fresh (hair care).
Table 3-5 Revenue contribution of SCC top brands
Source: Data provided by SCC Sales Admin Department
SCC generates revenue from domestic sales and exports Domestically, revenue comes through three main channels—general trade, modern trade, and premium retail—representing about 80% of SCC's annual revenue, with general trade contributing 75% and modern trade and premium retail each contributing 12.5% SCC products are exported directly to international partners, with key markets including Cambodia, China, and the Philippines.
SCC's production facilities are positioned to drive revenue expansion beyond designed capacity, with the plant currently operating at about 50% of its design As a leading player with a sizable market share in the mass and masstige fragrance market, the company benefits from strong supplier support, including favorable pricing and active R&D knowledge transfer, reinforcing its competitive edge and growth potential.
Originating as a state-owned enterprise, SCC's management is centralized at the top, with strategy and objective setting for both corporate and functional levels lacking formal discipline and thorough execution The absence of clear objectives and proper restraints on managerial authority leads to a weak competitive mindset, and managers' decisions are typically short-term and unscientific rather than based on systematic analysis.
Facing fierce competition and declining market share after Vietnam joined the WTO and the arrival of global players, SCC invested in key personnel with strong industry background and functional-level management experience to address issues and improve performance This strategic move has yielded improvements in SCC’s performance during the period, but progress was limited by change resistance and the lack of a firm-wide integrated objective system.
SCC business growth started to be impact by competition since 2006 For period from
From 2007 to 2010, cumulative growth was negative one percent, even as the industry expanded at 10–20% annually, causing SCC’s market share to decline to roughly one third of its 2006 position Revenue growth in 2011 came from clearly defined objectives for each distribution channel, while 2012 growth was driven by the launch of a new product.
Figure 3-8 SCC revenue and growth rate over time
Source: SCC audited financial reports
Table 3.6 summarizes key efficiency indicators over the years, showing operating costs hovering around 10%, higher than the industry average of 7% The marketing expense trend relative to sales reveals inefficiency in 2010 and 2011, when increased marketing spend did not translate into revenue growth, with marketing cost efficiency rebounding in 2011 In 2012, SCC reported revenue per staff of USD 22,000, well below the industry norm of USD 50,000 and far short of the industry best indicator of USD 80,000.
Poor outcomes in key efficiency indicators and flat investment returns in the 2012 performance have driven a comprehensive review of the SCC strategy to restore alignment between objectives and execution and to deliver the enterprise’s long-term goals The evaluation will pinpoint gaps, recalibrate priorities, and ensure that the strategic plan supports sustainable, long-term value creation for the organization By tightening the link between performance metrics and strategic actions, SCC can realign with its enterprise-wide vision and set a clear trajectory for sustainable growth.
Source: SCC audited financial reports; Employee statistics from HR Department
SCC financials are strong with almost no bank borrowing and surplus of cash on hand In 2011 and 2012, optimal working capital management has been key priority.
In 2012, while delivering revenue growth, SCC successfully changes its domestic debtor policy from 30 day on credit to cash payment.
SCC shows profitable and sound overall financial performance, but key indicators—market share, operational efficiency, and return on investment—point to areas that need improvement; if these issues are not addressed, SCC’s long-term sustainability and profitability could be at risk The company also preserves a moderately strong financial position, underpinned by a robust equity base and a solid cash position, which together create a natural buffer against external shocks and internal restructuring.
Operating expenses % Selleing expenses %Operating profit /Equity Revenue USD/employee
With a long-standing market presence and strong R&D capabilities, SCC's products and brands are its core assets Sales are supported by an established distribution network covering General Trade, Modern Trade, Key Accounts, and Export markets, ensuring broad channel reach Promotions are primarily trade discounts, while SCC maintains limited above-the-line activities and consumer promotion campaigns.
SCC offers a diverse product portfolio that includes perfume, soaps, shampoo, shower gel, hand wash, air spray and glass spray, with revenue concentrated in a few key categories and brands The company owns 31 brands, of which the top seven account for nearly 80% of total revenue Perfume and shampoos are the main revenue drivers, together representing about 90% of SCC's total revenue Perfume products are segmented into mass, masstige and premium tiers, reflecting SCC's multi‑tier market strategy.
SCC products achieve high quality due to a combination of carefully sourced raw materials, rigorous R&D, and a strong quality-control process The key inputs, including fragrance and surfactants, are predominantly imported from renowned suppliers such as Givaudan, Firmenich, and DKSH This sourcing strategy supports consistent performance and reliability across SCC’s portfolio, contributing to a longer product lifecycle with an average age of more than five years.
Summary of situational analysis
Implications of the Vietnam market environment and the Vietnam Cosmetics Personal Care industry for SCC’s operations, combined with the findings from SCC’s internal analysis, are integrated to form the ensuing SWOT table The synthesis shows how Vietnam’s market dynamics, industry trends, and internal capabilities shape SCC’s strengths and weaknesses while highlighting the opportunities and threats present for the cosmetics and personal care sector.
Table 3-7 SWOT table for SCC
• Industry growth potential is supported by sound and strong underlying drivers – large population base (ranked 14 th in the world), perfect demographic
• Preferential important tax regime for ASEAN countries create opportunities for regional players to enter the market via import and setting up either their own
(young and working), stable political situation; positive economic growth and improved living standards.
• Growth potential is also supported with Vietnam low per capital spending on cosmetics and personal care, compared with regional countries.
• High barrier to entry as the industry is becoming more regulated in term of quality control standards and increasing consumer education and awareness of product quality and counterfeit products.
• Consolidation of international player’s operations around the world creates opportunities for penetration into premium perfume market. distribution networks or alliance with existing local distributing firm.
• The industry is highly competitive The competition from global corporation is very high given their huge marketing budget and activities.
• On the mass market segment, strong competition is from illegally-smuggled branded counterfeit products that detriment the growth of all products in the industry due to losing customer confidence.
• SCC products are well regarded by consumers for high and stable quality
• SCC products have very strong brand awareness Despite limited marketing activities, SCC
• Centralized management decision making Limited firm wide strategy and objectives management discipline across level of management. products are well accepted and recognized by consumers.
• Comprehensive production facilities which meets regulatory requirements in term of quality management.
• Strong strategic alliance with international suppliers in term of
• Relatively strong financials with cash surplus and no bank borrowing.
• Established distribution network across Vietnam, covering traditional trade and modern trade.
• Limited marketing capability and budget There is a lack of marketing focus and investment for key products but homogeneous investment across all brand and products.
• Under utilization of distribution network
STRATEGY RECOMMENDATION FOR SCC
SCC Vision and Mission
SCC would like to become a leading perfume and personal care company in Vietnam with strong commitment to high product quality and affordable prices.
To achieve high and sustainable business growth from core business activities and deliver strong returns on investment.
Specific objectives for SCC are set as below:
To drive business development, SCC aims for growth rates that outpace the industry, ensuring market share is maintained or strengthened Specifically, perfume revenue growth is targeted at 15% for 2014 and 2015, double the perfume category growth of 7%, while personal care products are targeted at 8% revenue growth, double the overall industry growth of 4%.
- SCC must yield improved profitability and returns on shareholder investments This objective is benchmarked against operating expenses ratio with gradual improvement toward industry average of 7% in 2015.
With the aspiration of revenue growth higher than industry average, in the long run, by 2020, SCC aspires to achieve 30% share of fragrance market and 5% share of herbal shampoo.
Business strategy options for SCC
Extending the SWOT analysis into the TOWS matrix reveals alternative strategic options for SCC by aligning internal strengths and weaknesses with external opportunities and threats, enabling a thorough exploration of all viable directions The TOWS mapping surfaces actionable strategy alternatives that can be compared and refined to ensure no option is overlooked These alternatives are then cross-mapped with Porter’s three generic strategies to validate and reaffirm SCC’s strategic direction and strengthen its competitive positioning.
Strengths and Opportunities combination: This alternative is to utilize company strengths in manufacturing perfume to benefits from the market opportunities
- Increase penetration into the premium perfume to quickly capture the gap in markets share from Avon via developing premium products and expansion of premium retail outlets.
- Increase penetration in mass and masstige market by deep customer understanding via market research and introduce new products or enhance existing products.
Strength and threats combination: This alternative is to use company strength to reduce the impact of external threats.
To drive revenue growth and expand market share, we will increase marketing investment for our key brands and products This funding will come from the company's existing cash reserves and can also be mobilized by leveraging our strong financial position to secure bank borrowing.
Weakness and opportunities combination: This alternative aims to fix company weakness to gasp market opportunities
Strengthening marketing capability is essential to unlock the full potential of our brands and products This improvement can be achieved by investing in talent to build an in-house marketing team or by outsourcing marketing activities as needed Marketing investments should be grounded in real market data, with forecasted and measurable return on investment to guide decisions and track performance.
- Improving company efficiency by setting clear and integrated objectives for operational functions This is turns help company product competitive in term of pricing or improved cash flow.
Weakness and threats combination: this alternatives looks at plan to defense company weakness from market threats.
- Strictly focusing on mass and masstige perfume market and herbal shampoo niche market This will help the company to avoid direct completion with big companies.
Strategy choice
The following matrix is the outcomes of mapping strategy alternatives derived TOWS analysis andPorter’s three genericstrategies:
Table 4-1 Mapping TOWS alternatives to Porter's generic strategy
Porter’s Generic Strategy TOWS strategy alternatives
Broad differentiation S-T: Increasing marketing spending to directly compete with all players in hair care and perfume
Differentiation S-O: Focus on perfume category
W-O: Focus investment in key brands
W-T: Focus on mass and masstige perfume products and herbal shampoo
One of the outcomes recommends a broad differentiation strategy for SCC To implement this, SCC would need to ramp up its marketing activities to directly compete with the internal brands of global players such as Unilever and P&G Vietnam However, this option is risky given SCC’s smaller financial scale compared with large multinational corporations that enjoy stronger financial backing and long-established research and development facilities.
All remaining options align with a Narrow Focusing Strategy for SCC, outlining a plan to leverage strengths and improve weaknesses to capture market opportunities and avoid direct competition with larger players By concentrating on SCC’s strengths—its leading position in the fragrance market, particularly in the mass and masstige segments, and its very high brand awareness—SCC can differentiate itself in targeted channels Avon’s exit from Vietnam creates a clear market opportunity, representing more than 10% of the beauty and fragrance market that SCC can target, while the herbal shampoo segment remains open to growth as consumers increasingly prefer natural ingredients Leveraging these two advantages, SCC should focus its efforts on strengthening fragrance leadership in mass-market outlets and expanding natural, herbal hair care offerings to seize the evolving opportunity set and drive sustainable growth.
• Higher penetration to the perfume market, especially mass and masstige,
• Develop and penetrate further into hair care mass segment via the herbal shampoo niche
SCC should focus on product quality differentiation as the core strategy, with product extensions beyond perfume and shampoo considered only if they reinforce its core competencies—such as a luxury fragranced shower gel that clearly differentiates the brand At the same time, improving operational efficiency is essential and can be achieved by introducing a corporate governance framework that empowers employees and rewards high performance This recommendation rests on the premise that strong differentiation in premium segments combined with effective governance and incentives drives sustainable growth and competitive advantage.
- SCC has its own production facility with strong quality management process. Product quality is further enhanced by alliance with reputable suppliers.
- SCC research and development is well established Local customer insights are infused with global R&D knowledge base from partners.
- SCC have strong distribution network the spread across the country This helps distributing SCC products to the market and consumer effectively.
DETAILED ACTION PLANS
Financial forecast for 2014-2015 period
Table 5-1 Business plan for 2014 and 2015
Lower estimated sales growth in 2013 due to low focus on core activities SCC focus in 2013 was to exit and spin off non-core operations and improvement of internal processes.
Revenue budget for 2014 and 2015 is based on category-specific growth rates, with perfume and personal care (chiefly shampoo) driving the gains To maintain and expand market share, each product’s growth rate is set above the industry forecast for the period, as shown in Tables 3-2 and 3-3.
Key operating indicator is operating expense as percentage of revenue Over the course of 2014-2015, the objective is to bring down the ratio to industry standard of around 7% Specific operating profit figures are set for the period Operating profit growth rate is set higher than revenue growth to ensure improving returns on investment and shareholder equity
Budget for key investment for 2014
A budget of USD500 thousands is sought and approved for key activities in 2014 to ensure the set objectives for 2014 and 2015 are achieved Details of each activity and share of overall investment is explained in the next section.
Key investments and activities
Area Activity / Investment Cost Outcome
Marketing Investment in marketing director: The personnel will be in charge of building internal marketing functions and setting up standard marketing process across all brands and products.
This senior personel is in charge of developing and planning marketing activities based on research data and rationales.
USD60,000 1.Revenue growth: this is to ensure SCC achieve high revenue growth target.
Operational efficiency in marketing relies on data-driven decisions grounded in proven research, with investments measured by their returns Marketing ROI and the effectiveness of each investment will be tracked, analyzed, and expected to improve over time.
Product Comprehensive review of existing brand positioning to identify:
- Natural change in brand position (due impact of time)
- Depicting target customer profiles with detailed understanding of customers habbits.
- Potential market segments that can be penetrate to drive sales revenue
With a USD 100,000 revenue target, this initiative focuses on revenue growth driven by a review that ensures the SCC product fundamentals are well understood Marketing activities will be built around these fundamentals to sharpen messaging and improve market alignment Consequently, SCC will be able to identify untouched market segments for future product development, unlocking new opportunities for growth.
Distribution Expansion of premium retail outlets:
SCC currently has 6 premium retail outlets, locating in Ho Chi Minh (6) and Hanoi (2) Investment plan for 04 more premium outlets is to be developed and reviewed
With an investment of USD 160,000, revenue growth will be driven by expanding premium retail outlets to achieve higher market penetration in Ho Chi Minh City and Hanoi, while considering opportunities to broaden reach to other major Vietnamese cities, including Da Nang, Hai Phong, and Can Tho.
Da Nang, Can Tho, Hai Phong and Binh Duong Potential revenue gain from additional outlets is estimated at USD400,000.
2 Driving profit growth: premium retails outlets will drive higher sales of high margin products, improving SCC overall profit margins
1 Perfumes: SCC products do not cover market segments from 17 to 25 and 25 to
30 years of age Given Vietnam demographic, successfully capturing the mentioned segment will be key revenue driver and form the basis for sustainable growth.
2 Shampoo: Extending current herbal shampoo brand, which is currently solely based on saponin extracts Natural ingredient extracts that could be used for line extension is Grapefruit, Coconut and Avocado.
3 Shower gel: Fragranced shower gel is to be launched as a line extension to current Perfume Brand Cindy Key product differentiation is on its long lasting and
Projected revenue growth of USD 150,000 is expected to be driven by new products for SCC, with development disciplined around SCC’s identified key focus areas to ensure sustainable growth The luxury fragrance line is positioned as a full-body care set designed to enhance personal indulgence.
Training and coaching for functional managers on strategy planning process at functional unit level.
Develop comprehensive integrated performance based rewards system;
Change management framework must also be introduced to drive staffs engagement and enthusiasm.
Allocating USD 20,000 is critical to ensuring the success of SCC's corporate strategy The strategy process should not stop at the corporate level; it must be a discipline embedded across every function of the company to drive alignment, coherence, and execution.
Corporate strategy and objects must be translated into functional strategy and objections via the same process.