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Global marketing for ayur herbal cosmetics in vietnam

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  • 1. 2009 AYUR HERBAL COSMETICS SANTANU DAS KAVITA SARMA BHAVAN-MARSHALL INSTITUTE OF MANAGEMENT 1/20/2009
  • 2. AYUR HERBAL COSMETICS 2009 CONTENTS Topics covered Page Executive summary 2 Dilvinder Singh Narang’s interview 3 Company introduction 6 SWOT analysis 8 Critical analysis of environment 10 Entry mode strategy 13 Target market and positioning strategies 14 Strategy Implementation 16 Control Structure 18 Guidelines for implementation 20 Conclusion 21 Reference 22 1
  • 3. AYUR HERBAL COSMETICS 2009 EXECUTIVE SUMMARY We, Ayur, are a herbal cosmetics company which has become one of the most desired brands in India through continuous improvement in quality and 55 variants of products that enhance beauty with no ill-effects. Consumers get full value for their money when it comes to Ayur products. Ayur has been successful in the domestic market, India, and has been exporting to USA, Mauritius, Panama, West Indies, Nepal, Bangladesh, Thailand and South Africa. Our efforts to enter the global arena have encouraged us to next enter Vietnam which is a potential market. The plan proposed here is formulated after a thorough analysis of the economic, political, cultural, legal and geographical environment of Vietnam. Vietnam has the fastest growing economy and its government is stable. Also, the barriers to foreign entry into its market have been loosened to the extent that 100% FDI is possible. The people are enthusiastic, dynamic and international fashion trend oriented. The weather is hot and humid throughout the year making it necessary for the people to have sun care products at low and medium prices. Moreover, 60% of Vietnam‟s population is young aged below 25 years. Thus, there is demand for low and medium priced beauty products. After a thorough analysis of the cosmetics market, both competitive and consumer, we selected our target market to be the young (18-29 years) and middle-aged (30-45 years) Vietnamese population who demand for low and medium priced acne, moisturizing, oil- control and suncare products. We position ourselves initially as one roof solution to beauty problems with products 100% herbal which is symbolic to youth and radiance. In the long run our positioning will be oriented as becoming the „first choice‟ amongst those seeking genuine beauty. Ho Chi Minh City has been selected as the city of export due to is modern facilities of container loading. It is also a shopper‟s paradise with modern shopping centres and fun places. It is Vietnam‟s commercial hub which will make future expansions easy for Ayur. Ayur will be promoting itself using the gift promotion strategy which is the most common and best form in Vietnam. After the product makes the initial required market, newspaper advertisements and electronic media will be used through the importer‟s resources. The strategic plan here will give us a competitive edge as we are a 100% herbal cosmetics company in a market where imported cosmetics occupy 90% share. Exporting will reduce risks and investments thereby helping us to obtain low cost leadership The proposed plan requires enthusiasm, commitment and proper implementation and it will be a giant step towards making Ayur an international number one brand. Let the efforts be true to pave yet another path for greater success. 2
  • 4. AYUR HERBAL COSMETICS 2009 DILVINDER SINGH NARANG, AYUR HERBALS WRITTEN BY DARE THURSDAY, 01 JANUARY 2009 What started with meager Rs 5,000 in 1982 is now a Rs 150 crore company, and propelling fast towards the Rs 200 crore mark by the end of this year. Today, Ayur Herbals boasts of over 55 variants of hair, face, and skin care products, coupled with 2,000 distributors nationwide in the Rs 3,000 crore herbal cosmetic industry. Dilvinder Singh Narang, the entrepreneur behind Ayur Herbals, spoke to DARE about his entrepreneurial journey so far... Can you share with our readers the genesis of Ayur Herbals? Ayur Herbals came into being with one main motto — to make Indian women beautiful! Looking back, I think the journey has been very pleasant. Of course, there were a lot of hurdles en route. However, I have always faced all these hurdles with confidence, and ensured that we will always give the best to our customers. As for the genesis, I used to be a salesman in a company, back in 1982-83. It was during that job that I felt that there was tremendous scope in the business of cosmetics. I saw an opportunity lying vastly untapped. I believed I could do well in this industry so I took the leap and started Ayur Herbals, which is now a Rs 150 crore company. Did you always want to be in the field of cosmetics? I came from the field of electronics. I did give a shot to become a doctor as well. However, in those days getting into medical schools was extremely difficult. So I went ahead and studied cosmetology instead. This is where, you could say, my interest in cosmetics started. Dilvinder Singh Narang Ayur Herbals What was the biggest challenge that you faced in starting up? I would say it is something like this — the day a child is born, challenges start in the form of ensuring healthy growth, to provide good food, to educate, etc. Similarly, when I started up this company, there was no dearth of challenges that came my way. The thing with me is that I decided to take one step at a time. 3
  • 5. AYUR HERBAL COSMETICS 2009 The biggest challenge though was entry into the field of cosmetics. There were many established players already in the market. This led to a lot of questioning by the customers on the lines of: “Why pick your product over the others?” This problem was all the more aggravated as we did not have the kind of funds required for massive advertising and promotions. At this point we decided to route our products through beauty parlors, small cosmetic shops, etc. Eventually, the sales picked up a decent number and we started doing good business. Where did you get your early support from? My early support came from my parents and my siblings who gave me the confidence to start up. As for funding, my father gave me Rs 5,000 to start this business in 1982. Besides this, my parents also gave me our old house, where I started manufacturing products on a very small scale and then tried to sell them daily. Like mentioned earlier, we had to route our sales through beauty parlors and small cosmetic shops. Besides this, I would also say that I got a lot of support from the ladies using my products — many beauty contest winners, Mrs. Chawla, and more who helped me enter into the field of cosmetics. What was your first big success as an entrepreneur? My first success came after three years in 1985, when I introduced a nail polish remover, which at that time was an innovative product. The sheer simplicity of this product was that ladies just had to dip their fingers in a bowl full of this product to get rid of nail paint. This product helped me gain a lot of acceptance in the cosmetics market. After this, I introduced sugar-based hair removal wax, which again was a new concept and garnered huge success. Then I came out with an amla-shikhakai shampoo, which was basically a homemade product that we used ourselves — this product too was loved by customers. It is then that we came up with the brand name Ayur for our products. What would you say was a failure that you learned a lot from? There were many failures — which I would say was mostly bad luck. However, there was one failure that I learned a lot from. I had got this huge export order. We manufactured the whole order, which they cancelled on the day of shipment. We had to sell the whole batch of products in India slowly. 4
  • 6. AYUR HERBAL COSMETICS 2009 Who were your biggest critics? Everybody! By everybody I mean the shopkeepers and dealers, not the customers. When we started off, our products were looked upon skeptically and rejected more often than not. I had to hear rude statements such as “Kahan se utha ke laaya hai?” (Where have you picked this up from?). As our products were conceptually new in the market, rejections were flying in from all directions. Back then, nobody had used a black shampoo, or a sugar-based wax hair SUCCESS MANTRA removal cream, and so on. However, we kept going on and some Be sincere and true in dealers in the market gave us a chance. Once this happened, they whatever you choose to realized that the customers were liking our products — the quality, do as a business the price, etc. From a state of inertia to a small move, we had to be Believe in God. ever so persistent. With so many corporate giants in the field, how should an aspiring entrepreneur find success? One needs to come up with innovative concepts, good quality products at reasonable pricing to click with consumers. Of course, the big companies spend loads of money on advertising and promotions; also they have five- to ten-year plans figured out, etc. So for them it is not so difficult to maintain their market share. However, for aspiring entrepreneurs it is crucial to keep a watch on the current market trends, and they must start slowly. I cannot really say how to find success in this fiercely competitive market. But I would suggest that slow and steady wins the race. Can you tell our readers about market trends that you have seen for so long? Every day one sees new products coming into the market. And why shouldn‟t they? Every day is a good business day in this field of business. If you are wondering when it is a right time to introduce any product into the market, I would say, whenever you have the resources and product ready — just roll it out. As for gender break-ups, my products are used by both the genders, even though one would like to think of it as a mainly woman‟s brand. The fact of the matter is that the break-up is equally distributed. However, most of my customers come from a middle-class background. Things were different back in the old days. Twenty years back, women hesitated to go out of home. Nowadays, all of them are coming out — for work, for socializing, etc. When going out they all want to look good, feel good about themselves. Quite simply, they need cosmetics. Looking back how much was luck and how much was hard work? I believe all this success is God‟s blessing. Hard work has always been 100%, but then without Almighty‟s blessing, all this would not have materialized. 5
  • 7. AYUR HERBAL COSMETICS 2009 COMPANY Ayur is in Herbal Cosmetics business since 1985 and since its inception it has been a reflection of customer requirements. With an objective to become one roof solution for all beauty and cosmetic problems, Ayur provides a wide range of beauty cosmetics strictly prepared with herbal components so that you look great without bothering about any ill- effects on your skin and hair. Ayur ensures, always, that the consumer gets his value for money and this is the most prominent reason behind Ayur‟s successful establishment in domestic market and increasing impact in other countries. History History of the company spells the triumph of burning desire, courage to face the entire hardihood en route turning dreams into a reality and a lot of spadework, of course. At this time, Ayur has more than 55 variants in Hair, Skin & Face Care Products. But it all started with a single product- Hair Removing Wax. 1985 was the year when Ayur wore an identity of a company with a promise to enhance the beauty of Indian women and then, women across the world. Avid success of this single product fuelled this company to introduce Herbal Hair & Skin Care Products in the market. Very soon these products became „the first choice‟ amongst women seeking for genuine beauty products in the horde of chemical based beauty enhancing products. People Ayur‟s success story has been scripted by three ambitious brothers with exceptional expertise. The eldest brother, S.Raminder Singh Narang, is the Chairman of M/s Three-N-Products Pvt. Ltd. His expertise and dexterity has made Ayur a leading brand, to a great extent. The youngest brother, S.Manminder Singh, is the Managing Director of M/s Three-N- Products Pvt. Ltd. He may miss the ball while playing lawn tennis but he make sure not to miss a ball in business. The dynamic second brother, S.Dilvinder Singh, is the M.D. of R.D.M.Traders Pvt. Ltd. His far-sightedness, perseverance & spadework have helped the Company to achieve phenomenal success in such a short span of time. R&D Our research & development domain makes it sure to offer the quality products, no matter how much pain they go through for this, and they have no complaints for this. Ayur‟s independent R&D center is divided into different sections to test, receive and inform. Ayur is well-equipped with foreign advanced equipments to result in most efficient and quality products. 6
  • 8. AYUR HERBAL COSMETICS 2009 The R&D sphere consists of ample experience and strong ability of scientific research, always giving ways to new formulas and making imitations according to clients‟ requirements, controlling and improving manufacturing technological process. Ayur‟s R&D keeps close scientific research assistance with the expert dealing with chemistry and medicine. Exports Ayur, after establishing successfully in domestic market, now is in optimistic mood to repeat its success story across the International market. Presently, Ayur‟s Products are being exported to countries like USA, Mauritius, Panama, West Indies, Nepal, Bangladesh, Thailand and South Africa. With bursting zeal and practical approach Ayur Herbal Cosmetics wants to capitalize on „Business Partnership concept.‟ Ayur is always looking for partnerships around the world to promote its range of herbal products as the company firmly go with the line “together we grow, together we grow faster”. 7
  • 9. AYUR HERBAL COSMETICS 2009 SWOT ANLYSIS Wide variety of products: 55 variants in hair, skin & face care products New product launches expected soon Long term market presence; established in 1985 Products are strictly herbal and has no ill-effects Consumer gets value for money Ayur is looking for partnerships around the world to promote its range of herbal products Gender break-up of products is equally distributed Target market is concentrated to middle-class people Independent R&D center well equipped with foreign advanced equipments Products not well perceived by consumers initially Enhanced variety does not prove to be very effective Lack of advertisements and promotional ventures Lack of global presence although they are exporting to USA, Mauritius, Panama, West Indies, Nepal Bangladesh, Thailand & South Africa Cosmetics sale in Vietnam rising about 30% recently Foreign companies performing better than domestic ones Over 60% of population are under 25 years of age 3,260 km of extended coastline making it ideal for trade One of the fastest growing economies; annual GDP growth: 8.4% - 1990-97, 7.5% - 2000-06, 8.5% - 2007 During 2002-07 imports have increased by 25.5% per year and exports by 23.8% per year Asia accounts for 69.8% of the total FDI Sale of skin care products expected to grow at around 10-15% annually over the next three years Vietnam market is dominated by Korea – 30%, EU – 23%, Japan – 17%, Thailand – 13%, US – 10% and others – 7% Top brands: Estee Lauder, Clinique, Menard, Lancôme, Kose, Elizabeth Arden, Shiseido, Carita, DeBon and Nivea have become increasingly available Ponds, Sunsilk, Dove and Hazeline brands which are packaged in small containers and are affordable to a larger segment of the population Spending on cosmetics averages US$4/person/year Vietnamese cosmetics market is highly price sensitive and full of low- cost “knock-offs” Presently, the sale of cosmetics and beauty products is largely uncontrolled and is plagued by a wide range of fake, mislabeled, and smuggled products 8
  • 10. AYUR HERBAL COSMETICS 2009 Strengths The strengths of Ayur gives it an edge over its competitors as it has been a choice of many middle class Indian women over two decades now. The value provided by Ayur over the range of varied products has been the prominent reason behind its successful establishment in the domestic market and increasing impact in other countries. Establishing partnership in countries they export to with well established brands ensures knowledge sharing and experience. As for gender break-ups, the products are used by both the genders, even though one would like to think of it as a mainly woman‟s brand. Most customers come from a middle-class background which suggests that prices are affordable and reasonable for any slow developing country‟s population. Ayur has an independent R&D center well-equipped with foreign advanced equipments to result in most efficient and quality products. Weakness In the initial stages of its inception the products of Ayur were not perceived well by the customers. Although there is huge variety among the products the consumers feel the products are not much effective. They are conceived to be cheap. Lack of advertisements and other promotional ventures creates unawareness among consumers. Here the company gets beaten by its competitors. Although Ayur products have been exported to only one developed economy the USA and all the other countries are LDCs. It does not have a reach in the world‟s powerful economies revealing the fact that it lacks global presence. Opportunities Cosmetics sales in Vietnam have been rising about 30 percent per year for some years now. This has made Vietnam number three in the world in terms of potential for cosmetic sales, just behind China and India. While the potential is indeed enormous, domestic cosmetic sales are way behind that of foreign companies. Vietnamese employees respond to challenges well and fast, they are very committed to develop their country, themselves and the firms they are working for. Professionals are normally able to conduct business in at least one foreign language, with the importance of English growing continuously. Sales of skin care products are expected to grow at around 10-15 percent annually over the next three years, as this previously untapped market segment becomes cluttered with more and more foreign and domestic brands. Threats Presently, the sale of cosmetics and beauty products is largely uncontrolled and is plagued by a wide range of fake, mislabeled, and smuggled products. Because Vietnam is still a rural, agricultural country with a population that for the most part lives on far less than US$100 per month, spending on cosmetics averages US$4/person/year, far below that in the more developed countries in the region. The Vietnamese cosmetics market is highly price sensitive and full of low-cost “knock-offs”. 9
  • 11. AYUR HERBAL COSMETICS 2009 CRITICAL ANALYSIS OF THE ENVIRONMENT Demographic Analysis  Location : South-eastern Asia, bordering the Gulf of Thailand, Gulf of Tonkin, and South China Sea alongside China, Laos and Cambodia  Capital: Hanoi  Area: Total: 329,565 sq km, Land: 325,360 sq km, Water: 4,200 sq km  Coast line: 3,444 km (excluding islands)  Population: 88,185,000  Literacy: 90.3%  Languages spoken: The people of Vietnam speak Vietnamese as a native language. Various other languages are spoken by several minority groups in Vietnam. The most common of these are Tày, Mường, Khmer, Chinese, Nùng, and H'Mông.  Per capita income: $832  There are 54 ethnic groups, of which the largest are Kinh (or ethnic Vietnamese) (comprising 87.17% of the population), Tay, Thai, Muong, Chinese and Khmer. Viet Nam‟s literacy rate is over 90%. Close to 73% of the population live in rural areas, and over 60% of the population is under 25 years of age.  Religions: Buddhism-85%, Christianity-8%, Caodaism-3%, others-4%  Culture: The culture of Vietnam has been influenced by neighboring China. Due to Vietnam's long association with the south of China, one characteristic of Vietnamese culture is filial duty. Education and self-betterment are highly valued. Since the 1990s, Vietnam has seen a greater exposure to Southeast Asian, European and American culture and media.  Weather: Viet Nam is located in both tropical and temperate zones. The climate is tropical in Southern and Central Viet Nam, with a wet and a dry season, and warm and humid weather all year round. In the north, there are four seasons with a distinct winter. The average annual rainfall is around 223cm. The whole country is affected by a strong monsoon influence, with a considerable amount of sunshine and a high rate of rainfall and humidity.  Government type: Viet Nam is a socialist country operating under the leadership of the Communist Party. Political System of Vietnam  The National Assembly is the highest law-making body in the country. It comprises delegates who are elected for a five-year term from various strata of people and different ethnic groups from all around the country. The National Assembly is both the supreme state authority and the unique legislative body and has the power to promulgate and amend the Constitution and Laws. 10
  • 12. AYUR HERBAL COSMETICS 2009  Viet Nam has 59 provinces and 5 cities directly under central authority (including Hanoi, Ho Chi Minh City, Haiphong, Da Nang, and Can Tho). Economic Development  GDP measured at purchasing power parity: $261 billion  Real GDP growth (% growth): 8.44(2005), 8.23(2006), 8.48(2007), 6.30(2008)  Annual rates of inflation (% growth): 8.28(2005), 7.39(2006), 8.89(2007), 24(2008)  Consumer expenditure (US$ million): 48,032.91(2008)  Cosmetics and toiletries (VND billion): 8,281 (2009) Trade Systems  At present, Viet Nam has established diplomatic relations with 168 countries, and it has economic and trading relations with about 165 countries. Viet Nam joined the United Nations in 1977.  Viet Nam became an official member of the Association of South East Asian Nations (ASEAN) in 1995, and has concluded a cooperation agreement with the European Community. Relationships with multi-national financial institutions such as the World Bank (WB), the International Monetary Fund (IMF) and the Asian Development Bank (ADB) have been re-established. Viet Nam has been participating in the ASEAN Free Trade Area (“AFTA”) since 1996 and became a member of the Asia Pacific Economic Cooperation Forum (APEC) in 1998. Viet Nam became an official member of the World Trade Organization (WTO) on 11 January 2007. In January 2008, the country started a two year term as an elected non-permanent member of the UN Security Council.  A FTA is about to be signed between India and ASEAN in early 2009. When the India-ASEAN FTA is completed, the chance of economic cooperation between India and ASEAN members will grow considerably. Legal Aspects in a Cosmetics Business  In order to filter out low quality cosmetic product, the Vietnamese Government has imposed a series of legal measurements. These measurements are product registration, product testing, imposing tax, and advertising regulation.  Before the issuance of Circular No.06/2006/TT-BYT every cosmetic company needed the license issued by the Ministry of Health before importing cosmetics into Vietnam. However, since May 16, 2006 with the Circular No.06/2006/TT-BYT the cosmetic companies can freely import cosmetic products into Vietnam. Even though, during the custom processing companies are required to produce the original testing certificates for the imported cosmetics. The certificate must be issued by the producer. Once the products are imported, the cosmetic companies need to register their products with the Vietnam‟s Ministry of Health (MOH). The companies are requested to be responsible for their products‟ quality (Ministry of Health, 2006). The Ministry of Health requires 11
  • 13. AYUR HERBAL COSMETICS 2009 cosmetic importers to provide at least three samples of each new product in order to examine its safety. The product categorized as cosmetics which are required quality assurance by the Ministry of Health are skin creams, lotions, foams and epidermal ointments, skin powders, shampoos and conditioners, hair dyes, lipsticks, blushes, eyeliners and mascaras. (International Business Strategies, 2006) The taxation is another factor which directly affects the cosmetic importing into Vietnam. There are two types of tax: Import tax and Value Added Tax (VAT). The VAT for cosmetic is 10 percent which is the same with that of other commodities. In an attempt to reduce inflation rate, on August 3, 2007 the Vietnam‟s Ministry of Finance had issued two Decisions No. 69/2007/QĐ-BTC and No. 70/2007/QĐ-BTC to reduce cosmetic tax from 50 percent to 30 percent (Ha, 2007). Currently, Vietnam has four categories of tariff rates: 1. Normal Trade Relation (NTR)/ Most Favored Nation (MFN) rates that apply to all WTO Member countries; 2. Common Effective Preferential Tariff rates that apply to imports from ASEAN countries; 3. Preferential Tariff rates applied to China under the ASEAN-China Free Trade Area (ACFTA) and to South Korea under ASEAN-Korea Free Trade Area (AKFTA); 4. General tariff rates that apply to all other countries. (International Business Strategies, 2006)  Lastly, the regulation on cosmetic advertisement is another concern. The Vietnamese Government is strictly regulating the advertising activities. The purpose is to confirm that the advertisement‟s content is in line with product‟s quality. Therefore, all the advertising messages for pharmaceuticals, agri-chemicals, cosmetics and toiletries are to be registered and approved from the government before being broadcast. The content of advertising message is approved by the Ministry of Culture and Information. Thus we can see the strengths of Ayur and the opportunities in Vietnam go hand in hand thereby ensuring huge potential for the company in setting up a business. The economic, trade, financial, legal and political environment of Vietnam seems to have an open door for Ayur Herbal Cosmetics. 12
  • 14. AYUR HERBAL COSMETICS 2009 ENTRY MODE STRATEGY Current Scenario: Ayur, after establishing successfully in domestic market, now is in optimistic mood to repeat its success story across the International market. Presently, Ayur‟s products are being exported to countries like USA, Mauritius, Panama, West Indies, Nepal, Bangladesh, Thailand and South Africa. New proposition: Ayur has decided to extend its market to Vietnam by using exporting as an entry mode strategy. There are certain valid reasons behind selecting such a mode. Rationale of selection: "Vietnam, with a booming economy and fashion-conscious youth market, is Asia-Pacific's lesser-hyped beauty market prospect," said Diana Dobson from Euromonitor. The imported cosmetic products dominate approximately 95 percent of the whole market. Furthermore, local production of brand and non-brand cosmetic products is dramatically low compared with the level of imported beauty products. With local production in Vietnam being low and market domination by imported products Ayur has decided to enter the Vietnam cosmetics market through exporting. Some fairly new Vietnamese companies making brands like Miss Saigon and Thorakao spent plenty of money to acquire modern production lines using the latest technology but they find themselves unable to compete with imported cosmetics. This is because these brands have not yet built up a good reputation, locally-made products are fairly easy to copy, the local authorities are not acting to prevent the production and importation of fake cosmetics, and wholesalers and retailers are more than willing to buy and sell fake products to hapless customers. To develop a strong brand, a cosmetic company needs to make a product of consistent quality and it must be original. Domestic companies that make an original, quality product may be able to acquire a reputation over time and expand sales. Naturally, 'face' is very important to people and showing others that one is using a certain cosmetic is a way to create status for oneself. Using products of a well-known and respected brand lifts one up in the eyes of others. Local cosmetic producers have to deal with this reality. Competitive advantage:  Minimum risks and investment  Control over assets  Fast market entry  Can be used to maximize scale of operation  Quality control in the hands of manufacturer  Low cost leadership: Since Ayur products are low and medium priced, low cost leadership can be achieved. 13
  • 15. AYUR HERBAL COSMETICS 2009 TARGET MARKET AND POSITIONING STRATEGIES Among the emerging markets in Asia Pacific, Vietnam is a strong candidate. Although the size of the market in Vietnam is small the growth is the highest than in other country in Asia Pacific region (approx. 14-15%). "Vietnam, with a booming economy and fashion- conscious youth market, is Asia-Pacific's lesser- hyped beauty market prospect," said Diana Dobson from Euromonitor. (Cited in Montague-Jones, 2007) It is reported that approximately 90-95 percent of the market for international cosmetics products in Vietnam is centred on cosmopolitan areas of the country, for example, Ho Chi Minh City in the south and Hanoi in the north. “Ten years ago, fewer than 10 per cent of Vietnamese women use cosmetic and skincare product regularly, but today nearly 80 per cent do” (Vietnam News, 2006) “We have a lot of demanding young consumers who have been exposed more and more to international trends in fashion, and they have an insatiable appetite for foreign goods.” (Cited in Hazlett, 2006) Existing Vietnamese Cosmetic Market Y-Young aged consumers (18- 29 years), M-Middle aged consumers (30-45 years), O- Old and mature aged consumers (above 45 years) 14
  • 16. AYUR HERBAL COSMETICS 2009 Target Market Young (18-29 years) and middle-aged (30-45 years) Vietnamese population who demand for low and medium priced acne, moisturizing, oil-control and suncare products would be the target market for Ayur Herbal Cosmetics in Vietnam. This is because of the following reasons:  The low priced moisturizing products section is less competitive.  With 60% of population below 25 years of age there is huge potential in the low priced acne products market.  With average temperature ranging from 25-35 degree Celsius throughout the year and average humidity 60-80% there is demand for suncare and oil-control products. But lack of competition in the low priced products in this sector leaves some loose bricks for us. USP: 100% herbal cosmetics with no side/ill effects. Positioning  Low priced imported products  100% herbal with no ill effects  Symbolic to youth, radiance and freshness  One roof solution for all beauty and cosmetic problems  To become „the first choice‟ amongst those seeking for genuine beauty products in the horde of chemical based beauty enhancing products. 15
  • 17. AYUR HERBAL COSMETICS 2009 STRATEGY IMPLEMENTATION As mentioned in earlier the segments worth entering are (1) low price moisturizing, (2) low price acne products and (3) low-price, middle-price and high price suncare products. The marketing plan would be suggested in detail as product, price, place and promotion. Product The key to success is to find the product that really matter to customers. From our findings the desired benefits of the Vietnamese people are moisturizing, acne and suncare products. Therefore, Ayur would like to focus on them. In moisturizing product, the products would not be so thick or highly moist because Vietnam weather has high humidity. Instead, it would be light weight and easily absorbable by the skin. It would be in a form of gel or lotion, instead of cream, according to beauty experts. In acne products, the company would focus on the acne products suitable for oily and combination skin. It is because oily skin is acne prone skin and 50 per cent of Vietnamese women have those skin types (Swiss Business Hub ASEAN, 2006). In suncare products, the SPF or sunscreen protection would be high because of the warm weather in Vietnam due to its location in tropical area and exposure to high degree of sunlight. Furthermore, to differentiate from the competitors, Ayur would implement its unique selling proposition of pure herbal products. According to the cosmetic experts natural ingredients are preferred among Vietnamese consumer since it is believed to have low side effect. Price The price for moisturizing and acne products would be low. The low-price moisturizer products and low-price acne products are less competitive than in medium and high price. Moreover, for the two products the company would target the young consumers since they prefer low price and according to the cosmetic experts moisturizing and acne products are desired by the young. The price for suncare product can be low or medium since the competition is low in all ranges of price. The company can target young, middle or mature age. However, the suncare product for the young should be low price while in the middle or mature age should be medium or high priced. It is because the two latter groups associate high price with high quality and they are willing to pay for the high quality products. 16
  • 18. AYUR HERBAL COSMETICS 2009 Place Ayur Herbal Cosmetics will export to Vietnam through Ho Chi Minh City as it serves most of the major sea ports and now has modern container loading facilities. It is a also a shopper‟s paradise with trendy boutiques and modern shopping centers just steps away from traditional open air markets. The people of Ho Chi Minh City are fun loving and are more international fashion oriented. This city reveals the nations dynamic future. Since it is the commercial hub of the nation further expansion of business can be done easily. Promotion Ayur Herbal cosmetic company would emphasize on gift promotion since it is claimed to be most effective by the cosmetic experts. Additionally, as mentioned in the product part, skin care product would be highly effective as the users notice the visible improvement. It is because word of mouth is important in cosmetic product. With highly effective skin care product, the consumers will not only be satisfied with the product, but they will also “talk” about the products to their friends, colleagues and family and recommend them to use it. According to the research we have found out that colleague, friends and family members affects the Vietnamese consumers‟ purchasing decision in skin care products. The advertising channels of the importer/distributor shall be used. It will solely be under his control but also aligning Ayur‟s strategy. 17
  • 19. AYUR HERBAL COSMETICS 2009 CONTROL STRUCTURE The control process begins with the need to ensure profitability and success of a company‟s strategies. The control process for Ayur in the domestic market is remarkable. It has combined the synergies and always encouraged its staff to put in their total efforts. From the time of its inception it has seen a number of rough times and yet the proper measures and control has made it one of the most desired brands. Ayur would also monitor its success in Vietnam where it shall export its products. The process requires a proper understanding of the fact that though the quality is in our hands, the distribution and channelizing of products is under the importer-distributor‟s hands. The appropriate measures to monitor for Ayur will be ROI and steering controls (development, social responsibility, reach of promotional offers etc.). The control process will be established in the following manner:  Setting standards: Ayur will set latest international quality standards. It shall also set a target sales volume and revenue. Ayur will set a price control strategy by ensuring that the importer-distributor shall not manipulate the prices of products or restrict the quantity available for reasons of personal gains. The price control clause will be put down in the agreement between the importer and Ayur. For the control of importer activity and understanding the consumer satisfaction our website will have a feedback option wherein consumers can put in their valuable feedback.  Measuring actual performance: Actual performance measurement will be done through financial data from the importer. The reports sent by the importer will serve as the basis wherein we shall have data of volume sold and revenue collected, most selling products, consumer feedback on products through the importer, local needs and the segment(s) which is highly receptive to our products.  Comparing actual and planned performance: The comparison of actual results with planned results is the point of decision making. Ayur shall compare the actual profitability and financial turnover with the planned results. If it falls under the acceptable range then the company shall move ahead with the next strategic plan. The comparing of result will be done quarterly in the initial stage so as to have continuous profitability information and can take proactive actions.  Corrective actions: This is to be done in case Ayur‟s strategic exporting plan fails in Vietnam. In case of a failure of the plan Ayur will send a specialized team of experts to handle the same and to have insight into the conditions. The team shall assess the risks and benefits of continuation. The factors to be considered here are brand image, product effectiveness, repeat purchases, regional profits, demand for the products and scope of improvements in terms of quality and local adaptation. Thereafter, the contingency plan will be implemented with necessary suggestions from the expert team. 18
  • 20. AYUR HERBAL COSMETICS 2009 The use of Statistical Process Control (SPC) software will be done to have a better account and measurement of factors influencing business and future profitability. Contingency Plan If planned results are not achieved and a continuous failure is there then Ayur shall go forth with the following actions:  Assessing reasons for failure  Opting out of exporting  Taking over business in Vietnam as a single entity by setting up manufacturing units in Vietnam  Localization of products and making use of useful contacts already gathered  Taking over all the promotional activities by ourselves. Marketing department shall handle expert analysis and dealings with local advertising and media to promote products and give Ayur an acceptable face. 19
  • 21. AYUR HERBAL COSMETICS 2009 GUIDELINES FOR IMPLEMENTATIONS The strategic choices for the implementation of the 4 Ps as discussed earlier is framed out for business developments of Ayur Herbal Cosmetics in Vietnam. The 4Ps has been effectively chalked out for the most effective results. Initial targeting of Ho Chi Minh City will add to the benefits and would give Ayur a firm ground in Vietnam. But there are certain implications that we need to discuss. Product: We are targeting the market with acne, moisturizing, oil control and suncare products initially. This is mainly targeted to the young aged people. Although 60% of Vietnamese are young aged there are certain implications on their choices. They look forward to foreign brands. If Ayur is not able to identify with the brand identity and is not able to stand up to the competition with existing brands like L‟Oreal, Ponds etc. then we have to use our USP of 100% herbal cosmetics as the only weapon. We will be adapting to the local requirements of cosmetics and introduce a varied range of products that will help Vietnamese people to differentiate Ayur from its competitors and position Ayur as a necessary commodity. Price: Low priced products being the choice of the Vietnamese already gives Ayur an edge over its competitors. Not much of the competitors have a varied range of products in this category. Price changes have to be effectively monitored by our local distributers in Ho Chi Minh City. Place: Although Ho Cho Minh City has been selected as the starting market we still have Hanoi as another option. We are presently targeting cosmetics stores and supermarkets/hyper- markets. These are the places most visited by the middle class people and the young for their cosmetics shopping. Promotion: Advertisements through gift vouchers will recently be the main medium. Within short period when the product gets stabilized in the market then we will be going for newspapers and magazines as a medium of advertisement. Apart from these there are certain other implications that need to be taken care of.  Implementation tasks poorly aligned and defined from what is planned  Lack of coordination and communication between Ayur and the importer  Implementation is not given enough resources and attention  Implementation process poorly monitored. Future Plans  Expanding to other regions like Cambodia by setting up our own production plants in Vietnam  Associations with other major brands like L‟Oreal, Olay for sharing of knowledge, resources and expertise for global standards 20
  • 22. AYUR HERBAL COSMETICS 2009 CONCLUSION The exporting of products to Vietnam will give Ayur an insight into the market where international brands like L‟Oreal, Olay, and Ponds etc have well established dominance. The success of Ayur in Vietnam will bring in experience and knowledge of operating in a highly competitive environment. Also, the cost of production in Vietnam is lower than in India and Ayur can in future have production facilities in Vietnam and export to other countries. This shall be a cost reduction step. The FTA if signed in to take effect will be of greatest advantage for Ayur. It will have no barriers legally and politically to carry on trade with Vietnam. However, factors like lack of advanced transport and communication system between these two countries and lack of high tech machines and production facilities in Vietnam will be the major hindrances in the road to success. Thus Ayur is looking for a successful business in Vietnam which is also known as “the hidden charm”. 21
  • 23. AYUR HERBAL COSMETICS 2009 REFERENCES  Doing business in Vietnam -PWC  http://www.euromonitor.com/factfile.aspx?country=VN  http://www.cia.gov/library/publications/the-world-factbook/geos/vm.html  http://www.quickmba.com/strategy/global/marketentry/  http://www.ediplomat.com/np/cultural_etiquette/ce_vn.htm  http://www.vnbusinessnews.com/2008/12/vietnam-india-many-cooperation.html  http://luxurytravelvietnam.com/EN/Vietnam_tours/Attractions/hochiminh.htm  http://www.indochinacapital.com/index.php?l1=96&l2=100#ME_S  http://www.determan.net/Michele/mposition.htm  http://www.vietnamembassy.org.uk/climate.html  http://www.worldtravelguide.net/country/303/climate/South-East-Asia/Vietnam.html  http://www.allyoucanread.com/vietnam-newspapers/  Concepts in Strategic Management and Business Policy (Ninth Edition) by Thomas L. Wheelen and J. David Hunger 22

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