International Business Management 3I.INTRODUCTION It is estimated that the Vietnamese cosmetic market is worth 2.35 billion USD in 2018, of which domestic brands account for 10% with a f
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HCMC UNIVERSITY OF TECHNOLOGY
ASSIGNMENT REPORT
International Business Management
Lecturer: Đậu Xuân Trường
Class: CC02
GROUP 5 Group member
Phan Phúc Phi-1752410
Đỗ Tuấn Khang -2052122
Bùi Đức Khang -1952756
Võ Đặng Anh Thư-1952484
Đỗ Quốc Khánh-1952070
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Catalog
I.INTRODUCTION 2
II.BACKGROUND 3
III.MARKET EVALUATION 3
1:General factors 3
2:Social factors and their influences on lifestyle and business 4
3/ Economic factors: 4
4/ Political and legal factors: 7
IV.STRATEGIC PLANNING 9
1:Industry analysis 9
2:Competitive environment 9
3: Labor 10
4: Supply chain 11
5: Financial system 12
V.MARKET ENTRY ISSUES 12
1:Rules and regulations 12
2: Brand equity 13
VI.TARGET MARKET AND POSITIONING 13
1: Target market 13
2: Positioning 13
VII.INTERNATIONALIZATION STRATEGY 13
VIII.MARKET ENTRY STRATEGY 14
IX.INTERNATIONAL BUSINESS FUNCTION STRATEGIES 14
X.WHAT MAKES COCOON VIETNAM UNIQUE AMONG OTHER COSMETIC BRANDS? 16
XI: CONCLUSION 16
XIII: REFERENCE 17
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I.INTRODUCTION
It is estimated that the Vietnamese cosmetic market is worth 2.35 billion USD in 2018, of which domestic brands account for 10% with a few brands of Saigon, Thorakao, etc about imported brands and products such as Korea (35%), Singapore (15%), Japan (11%), France (6%), US (6%), according to UN-Comtrade data
Cocoon is one of the top pure Vietnamese products in the cosmetic industry After many years of development in Vietnam, Cocoon wants to develop in foreign markets and Korea
is the country of their choice.In this report will propose a plan for the company to be able
to successfully expand into new markets
II.BACKGROUND
The Cocoon Original Vietnam is a natural vegan Vietnamese cosmetic brand.Cocoon belongs to Nature Story Cosmetic LTD( limited liability company ) represented by Mr Nguyen Ngoc Bao Cocoon products are completely natural and are committed to not testing on animals 6 years ago, Cocoon officially launched to users with two main
products: squash extract and pomelo peel extract, which specializes in treating acne and fading dark spots At this time, Cocoon began to receive a lot of acceptance from
consumers But not stopping there, after 3 years of investment in research and product improvement, Cocoon has officially returned and successfully conquered Vietnamese consumers in a new professional look with outstanding quality On 9/2020, Cocoon was certified “not tested on animals and vegan” by the global animal welfare organization PETA In 11/2020, Cocoon officially became the first Vietnamese brand to be approved by The Leaping Bunny program of Cruelty-Free International – one of the most famous programs to ensure the production process is not tested on animals, in its commitment to not testing on animals
III.MARKET EVALUATION
1:General factors
First we consider 3 countries: South Korea, Australia and Japan Below are some
cosmetics industry data in 2020 for those 3 countries:
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Average spending on
From those criteria we can see that South Korea is the most potential market for our products to grow One more factor is that the distance from Vietnam to Korea is nearer than 2 other countries so the transportation cost from Vietnam to South Korea is cheaper That’s all the reasons why we chose South Korea to enter the market
2:Social factors and their influences on lifestyle and business
- Koreans live very optimistically, unlike the melancholy Korean films we often see, you will see very interesting and funny personalities of Koreans That is the lifestyle of
enjoyment, Korean society today is modern and life is much more comfortable than before, Koreans live more liberally, wear more beautiful makeup They think that being more beautiful will be more successful in life
- Korean consumers are not loyal to brands, they tend to be tech-savvy and concerned with brand names As a matter of fact, more than 98% of South Korean households access the World Wide Web daily and over 85% of the Korean population owns a smartphone Online shopping is very democratized The use of the internet also makes it possible to search for information on a product before picking it up in a store Social networks are used to explore, review products and buy Influencers and testers of known products are influential in consumer decision making Consumers are increasingly less attracted to domestic products while purchases of foreign products are growing
- Though influenced by other Asian cultures, Korean art has always managed to maintain a uniquely Korean quality, namely a tranquil and relaxed attitude, quite distinct from the elaborate and massive forms of China or the highly delicate style of Japanese art
- In Korea, the importance of a relationship can be expressed through gift giving which is always welcomed Gifts should always be wrapped nicely in red or yellow paper, as these are royal colors Building relationships is an essential part of doing business in Korea Relationships are developed through informal social gatherings and generally involve a considerable amount of eating and drinking Such gatherings also present the opportunity for both sides to discuss business in more relaxed and friendly surroundings, including over dinner
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3/ Economic factors:
- Population
+ Actual count: about 51.32 million people
+ Age distribution:
+ Average age of the Korean: 44 – 44.5 years old
+ Density of population: 528 people per square kilometer
+ Target age group of customers: 15-35-year-old age group
+ Urban people portion: over 81% country population
+ “Natural” is not only a trend in the cosmetic industry for years recently but also a major core value of products of Cocoon
In population factor, all the data shows that Korea is a market which has more potential for development than Vietnam based on the demand factor of 2 markets Cocoon
organization focuses on the 15-35-year-old age group of citizens The real size of the target Korea market is 36.8 million people As a small and newbie brand, 4% is a dream goal to achieve for Cocoon
- Income
+ GDP: 1.660 trillion USD
+ GDP per capita: 32,346 USD
+ Family income: 19,081.079 USD
+ The average income of Korea is about 3,158 USD / month (top highest average salary in Asia)
+ Consumption expenditure by product category in 2020 show that spending in “health” products almost reached 7%, which is an impressive rate for the cosmetic industry though
it is not a priority of a country
Table 1 Consumption expenditure of Korean by product category in 2020
Housing, water, electricity, gas, and other 20.01
Trang 6Food and non-alcoholic beverages 16.01
Miscellaneous goods and services 14.19
Furnishings, households’ equipment, and
routine maintenance of the house
3.59
Alcoholic beverages, tobacco, and
narcotics
2.52
According to the data above, the buying power of the South Koreans is high that people can easily afford types of products with high price Moreover, an impressive portion of Health - care products gives a detailed look of how influential cosmetics products affect people's expenditure pattern
- Infrastructure: Transportation & Communication system has been developing rapidly
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+ The Infrastructure in South Korea is estimated to grow at a CAGR of approximately 6% during the forecast period
+ South Korea’s infrastructure quality has ranked highly (6 out of 140 in 2018, 8 out of
137 in 2017)
+ South Korea is provided by extensive networks of railways, highways, bus routes, ferry services and air routes that traverse the country It is also important to mention that the aviation and marine transport in Korea is the fifth (to sixth) largest industry in the world, with the Incheon Airport classified as the second-best airport for international freight while the Busan Port regarded as one of the best container ports in the world
- Inflation rates
+ Due to the increase of oil and gas price, Bank of Korea informs that the inflation rate in the first half of 2022 was 3.1%, which can surpass the expected average rate of 3% Moreover, the inflation in consumer price growth rate in Oct 2021 was 3.2% compared to the same period in the previous year, which is the highest growth rate ever since 2012 In Jan 2022, the inflation in consumer price rate growth rate was 3.6% and was higher than average number 3% for 4 months straight from Jan to April 2022 The solution was made
in Jan that the government will consider raising the interest rate to proactive control the inflation According to the fact that, it will be a hard financial problem for a brand-new foreign company like Cocoon to integrate In contrast, the growth rate of GDP of South Korea in 2021 experienced a stunning figure with 4%, which means that there is also an opportunity for the company to develop
- Trade freedom under the RCEP
+ Under the RCEP, the Republic of Korea will get the largest free trade ever opening lots
of opportunities for economic growth
+ South Korea can join in a market of 2.2 billion people, with enormous partners like China, Japan, Australia, New Zealand, …, with a combined economic size of $26.2 trillion, or 30% of the world’s GDP
- Restrictions under the RCEP
+ Lack of rules of protection of environment and workers
+ Tariff reduction is not as large as CPTPP which also includes 7 RCEP members
+ Just empower China’s economic situation, also RCEP is the first regional multilateral trade agreement of China, regional value chains of China will be strengthened, thereby increasing RCEP members’ ability to reap the benefits of integration
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- Legislations, regulations, special rules about marketing and labeling of products under the RCEP
+ The RCEP brings opportunities to South Korea in many fields in FTA There is a
wonderful sign that the marketing department and labeling are going to be boosted for development More products can be known, especially cosmetics one due to an enormous market result of the RCEP Additionally, there will be a reduction in labeling standards of products so goods can be easily accessed into foreign markets
- Tariffs, quotas and other restrictions of exports and imports of goods and services under the RCEP
+ Tariff reduction is 90% of the tariff on goods traded between signatories within 20 years
of the agreement coming into effect However, the level of tariff elimination between Korea and Japan will remain at 83% because of the existing FTAs between these two Therefore, exports and imports of goods and services have a step forward in
developments
+ There is no particular quotas of exports and imports of goods and services in the RCEP
- Intellectual property rights under the RCEP
+ Under the RCEP, it raises standards of IP protection and enforcement across all RCEP countries
+ Joining multilateral IP agreement RCEP makes ratifying many of these treaties
mandatory for member countries like the WIPO Copyright Treaty, the WIPO
Performances and Phonograms Treaty, the Paris Convention for the Protection on
Industrial Property, and more
+ Digital Access to information The agreement stipulates that every member country must construct or have available accessible online databases containing information on
trademark applications and registrations Publicly accessible IP databases will help
businesses make more informed decisions and reduce market access barriers for MSMEs + Digital Platforms to Register Intellectual Property RCEP mandates that countries make digital platforms for filing patents, trademarks, and industrial designs available Any denial to approve the application must be supported by written rationale, as well as an option to appeal the decision In addition, interested parties must be given the option to object to a trademark, patent, or Geographic Indication This simplifies and speeds up
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registering IP with the appropriate authorities
+ Protection of Domain Names In the RCEP, countries must have a procedure for settling disputes over internet domain names modeled after the Internet Corporation for Assigned Names and Numbers system This requires RCEP countries to establish dispute resolution mechanisms that are fair and time-efficient while allowing for such disputes to be settled
by the courts with appropriate remedies where justified
+ Enhanced Border Measures According to the RCEP, countries must have processes in place that allow IP owners to request that authorities confiscate suspected counterfeit or pirated items at the country's border If no infringement is discovered, the goods may be freed or ordered destroyed by the authorized authorities
+ Renewed Efforts Against Piracy and Counterfeiting The RCEP mandates that countries offer civil and criminal consequences for unscrupulous actors who attempt to profit from copyright or trademark counterfeiting For commercial-scale IP infringement, a copyright owner may commence civil proceedings and request criminal prosecution under the RCEP
IV.STRATEGIC PLANNING
1:Industry analysis
In 2020, the market size of the cosmetics industry in South Korea amounted to around 7.6 trillion South Korean won Figures saw a marked drop from the previous year As K-beauty products gained global popularity, the production and exports of Korean cosmetic products had significantly grown from 2014 to 2019
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South Korean won)
2:Competitive environment
The South Korean cosmetics industry has been dominated by local products Based on sales revenue, the leading domestic companies were LG Household & Health Care and the Amore Pacific Group In addition, Korean consumers are purchasing more products directly from overseas markets Customers can now buy foreign brands at the same prices
as in the U.S., and an increasing number of brands are offering overseas shipping services
In 2020, overseas direct purchases represented more than $3.7 billion, up 19.4 percent from the previous year
3: Labor
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Figure: South Korea labor force from Feb 2021 to Feb 2022
Figure: Labor wage in South Korea from 2014-2021
A rugged, mountainous land with few natural resources, Korea's most valuable commodity
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an advantage to reduce the cost of manufacturing and easier entry into the workforce allow a new foreign business to compete with local businesses Beside that, labor is being increasingly recognized for its intelligence, ability to learn, literacy and capacity for hard work It has one of the world's highest-educated labour forces among OECD countries
4: Supply chain
Figure: Global supply chain management system
South Korea has a strong infrastructure with a lot of paved roads, strong
telecommunications, landline subscriptions making it easier to connect and support its manufacturing supply chain and shipping Additionally, the government encourages investment in manufacturing technologies, especially for high-tech and automotive industries Beside that, Korea also enjoys a reputation for excellence in cosmetics and high-end skin care products However, the inflation rate of Korea stays high hovering near
a decade for about 2.5% compared to previous year which is the fastest pace of price rising since 2011 and a sharper increase than projected by the BOK
5: Financial system