Biotech's quest to venture into the cosmetic industry demands considerable focus on creating a firm foundation within the territory. With the cosmetics industry being estimated at $445 billion (Sorvina, 2017). Biotech stands to gain substantially. With that same notion, Biotech stands to lose just as much if the proper variables aren't considered and implemented. Biotech, a $35 billion company, stands to make its presence known in an Asian market that will best benefit the needs of the upcoming manufacturing plant. This business strategy will produce the best possible strategy for Biotech's infiltration of the Asian market particularly within the territory of Vietnam.
Section II – Goals and Objectives
According to the company profile, Biotech has very distinct intentions for its growth and expansion. Biotech's growth plans include the plan for expansion to the Asian market within the next year, this includes the establishment of a new manufacturing, sales, and distribution facility. Biotech is focused on establishing itself within the Asian market. To match, Biotech is interested in having an advantage over their competitors in view and scope, thus creating an opportunity to gain market share; With the introduction of new products not yet available in North America and Europe, Biotech stands to gain substantially. With the want to develop its own line of cosmetic, there is also interest in utilizing natural ingredients.
The developed business strategy below is aimed at attaining five goals. These goals include, deciphering why Vietnam is worthy of Biotech's new manufacturing sales, and distribution facility, where the company can gain access to the raw materials that will benefit its new eco-friendly approach, which products can propel Biotech forward into lucrative returns within this market, what corporate structure would best suit this new international market, and what would be the best communication plan to create optimal communication amidst both domestic and the new location within the Asian market.
Considering why Vietnam is the perfect place for Biotech to establish its manufacturing, sales, and distribution facility, one of the necessary objectives would be the need to utilize the Vietnamese workforce. Taking advantage of the highly trained workforce offered by the Vietnamese market would be very beneficial. Fifteen-years-old individuals within the country have been found to be substantially more advanced in math and science (Rasmussen, 2018, para. 5). This is a demographic that was over 1\3 of the children in the United States or the United Kingdom (Rasmussen, 2018, para. 5). This suggests that Biotech will be able to load its workforce with highly intelligent individuals (Rasmussen, 2018, para. 5).
The corporate culture could stand to benefit from these highly intelligent individuals that know the market and are highly trained to deliver exactly what BioTech needs.
In retrospect, community programs that funnel Vietnamese children into Biotech's workforce could ensure that the local economy is boosted by steady work for this varied workforce. Vietnamese has begun to rewire its educational infrastructure. However, Biotech sponsoring the education of its workforce could very well have long term benefits.
The desire to develop and implement eco-friendly products that ultimately relieve Biotech of it detrimentally disruptive green print, would warrant utilization of the best ingredients and the best processes. Vietnam is a country that can hold Biotech accountable due to the fact that its government has recently prioritized eco-friendly practices with its very strict environmental regulations and protection laws on the manufacturing industry. The first factory to implement these operations was placed within the Ho Chi Minh City in 2016 (Sourcify, 2018, para. 7). It was equipped with solar panels that would provide an estimated 20 percent of the energy required for operations during dry seasons (Sourcify, 2018, para. 7). The foundation of an eco-friendly products would be an eco-friendly facility that is operable in this fashion. Since the industry is still growing, it has the potential to move in a sustainable direction with the help of outside investors and international brands.
Vietnam is also a great source for materials. According to an article entitled, "Exporting raw materials, Vietnam eats itself" experts believe that Vietnam should utilize its natural resources to lure foreign investments into the processing industries. This is contradictory however, due to the fact that Vietnamese suppliers are described as being less willing to work with startups and small businesses (Gronkvist, 2018, para. 11).
Biotech would be a prime candidate to benefit from these suggestions (Vietnamnet.vn, 2013). This is contradictory because While Vietnam is also a considerable option for outsourcing raw material there could possibly be time issues regarding relationships with outsourcing entities. When placing orders with Vietnamese suppliers, there is a need for a solid relationship built so that the supplier trust the company. The duration of time it would take to establish that trust is subjective and with Biotech aiming to have establishment within the next year, this wouldn't be ideal.
In ruling Vietnam out of the running for sourcing raw material, the next objective would be deciphering why the substitute in question, China is a necessary alternative. China is a great choice for sourcing raw material because it is actually the provider of nearly half of the global supply of the most critical raw materials (Liu, 2017, para. 3). These materials are essential to various industries and could ultimately be beneficial to Biotech and its efforts to great a successful cosmetic brand (Liu, 2017, para. 3). The country is the home of both natural and botanical resources. The strength of its firmly established and matured agricultural programs would ultimately support a sustainable supply that would likely be needed by Biotech (Yu, 2018, para. 4). The next objective would be establishing
Section III – Competitive Analysis
Biotech possesses a bevy of strengths as it embarks upon its journey into the cosmetics industry within the Asian market. Some of the most significant strengths as it pertains to Biotech are its already prevalent existence in competitive markets such as the United Kingdom and the United States. The company brings in $35 billion annually, so it is already a profitable entity within the cosmetic industry (Biotech Company Profile, 2018). It's power lies behind the companies already long withstanding legacy. Typically companies utilize international expansion as a means for gaining competitive advantage. The fact that Biotech has already established itself in multiple territories is a great stance moving forward (Van Rossum, 2017, para. 10).
Weaknesses could include the fact that Biotech has previously been limited to the previously mentioned markets. This weakness alone suggests that in establishing itself in the Asian market, it will broaden the scope for possible incoming revenue, much more substantial than now. International expansion could also result in the introduction into the perfect industry ecosystem that could boost everything from the companies perceived image, to its operations, and onward (Van Rossum, 2017, para. 11). Another weakness that presents itself is the current corporate culture of the company. As of now, the desire is that employees operate with the perspective of the consumer in mind. Without much adjustment or successful implementation of this perspective amidst all employees, the corporate culture is likely to maintain its consumer detached operation.
Opportunities are available for Biotech, especially in the Asian market. The expansion into the Asian market suggests that there is considerable opportunity to generate more revenue within a market that has already begun to demand Biotech's products within the region. Exporting from Vietnam is beneficial because they'd be taking advantage of a territory that offers consumer base full of young consumers typically around 29 years of age (The International Trade Administration, 2018, para. 4). According to a 2013 study conducted by the Boston Consulting Group, Vietnam stands to possess one of the fastest growing middle class consumer bases in the region (The International Trade Administration, 2018, para. 4). By 2020, Vietnam's middle class could actually double, surpassing 30 million consumers (The International Trade Administration, 2018, para. 4). This readily available consumer base would definitely boost profits, especially with it since the country is ranked amongst Asia's top 5 retail markets (The International Trade Administration, 2018, para. 4). Consumer confidence is among the highest in Asia, where more than 90% of residents in Ho Chi Minh City consider themselves to be part of the middle class (The International Trade Administration, 2018, para. 4).
Lastly, Biotech is subject to various threats. Threats that stand to effect Biotech include, Biotech tech is subject to experiencing setbacks depending on the fickle nature of the intended market. As of now, the Asian market demands these products, however there is no guarantee that demand will remain consistent. BioTech also stands to enter an industry in which competitors have already staked their territory.
In comparison to other country's, Vietnam's currency is significantly stable when considering how it will appreciate against the U.S. dollar (Rasmussen, 2018, para. 2). This stability is good because BioTech would be less concerned with the currency appreciating and as a result causing an influx of expenses in regard to exports (Pettinger, 2017). In the event that costs rose, this would affect pricing of products and eventually the demand of the product in the event the prices must rise. Vietnam is desperate for direct foreign investment and as a result, the country offers significant tax incentives that could benefit the establishment of this manufacturing plant (Rasmussen, 2018, para. 2). This works in Biotech's best interest economically, because the company would be expanding to a market that is set up to work with foreign entities.
Labor costs are significantly lower in Vietnam. In fact, the market labor rate accounts for 1\3 the labor rate of China (Rasmussen, 2018, para. 3). The workforce of Vietnam also offers a significantly competent labor force. The country has to invest in public education and as a result, this educational upside equates to 15 years old being substantially more advanced in math and science over say the United States or the United Kingdom (Rasmussen, 2018, para. 5).
As mentioned before, Vietnam is dedicated to the implementation of economic reforms, in an effort to attract foreign investment. Not to mention, Vietnam offers a variety of tax benefits that prove beneficial, however it is contingent on the location by which you set up shop. There is the free and industrial zones that offer exemptions on corporate income taxes (Guidecoq, 2017, para. 5). These exemptions are for up to six years (Guidecoq, 2017, para. 5). Also, exemptions could be placed on custom duties and VAT taxes (Guidecoq, 2017, para. 5).
Companies that classify as large manufacturing projects have the ability to apply for various preferential tax incentives for up to 15 years (Guidecoq, 2017, para. 5). Any developments amidst social sectors such as health and `education have access to four years of exemptions, as well as 50% tax reductions for the following fifth year (Guidecoq, 2017, para. 5). As mentioned above, labor costs are low within the country as well. With an average monthly wage of $210 a month, most of the countries young population, accounting for 1.128 million of the workforce, ensures that there is never a limit on a productive workforce, that doesn't take most of the budget (Guidecoq, 2017, para. 5).
Additionally, Prime Minister of Vietnam, Xuan Phuc suggests that the open economy that is present within the Vietnamese territory offers a trading flow of US$340 billion, 1.6 times its GDP, and has attracted total registered foreign direct investment (FDI) of US $300 billion in 2016 (PwC Viet Nam, 2017).” Not to mention the FDI sector is believed to amount to approximately 70% of the country's export turnover, which is equivalent to 22% of the country's GDP (PwC Viet Nam, 2017). The influx of millions of jobs offers this Biotech firm the opportunity to infiltrate the market (PwC Viet Nam, 2017). Aside from economic promise, with the promise of so many tax exemptions and an underdeveloped market, this company could save a lot. This continues to establish the premise of this being and economically and politically sound decision.
Porter's Five Forces Analysis
As it pertains to competitive rivalry, Vietnam is booming with an influx of newly established cosmetic brands. Biotech is a ready-established entity that has groundings in the United States and United Kingdom. This offers a significant advantage because the younger middle-class consumer base may be privy to trying brands they know re distributed to such territories. The younger middle-class consumer base also translates into a young and highly intelligent workforce that works in favor of the longevity available to Biotech.
Considering this workforce as the consumer base once more, it has been suggested that the Vietnam's middle-class population will expand significantly by the year 2020 (Hung, 2018, para. 4). The current millennial population accounts for 30% of the expected population of 33 million (Hung, 2018, para. 4). Considering the fact that Biotech stands to develop its own line of cosmetics that utilizes the natural ingredients, this market would receive Biotech's efforts better (Hung, 2018, para. 4). The millennial demographic is well-versed in beauty regimes that offer healthier and substantially higher quality products (Hung, 2018, para. 4). Vietnam is a territory this is more open to using new products. This comes at a rate that is much higher than in other Asian territories such as Thailand, Indonesia, the Philippines, or others within the Southeast Asian territory (Hung, 2018, para. 4).
Biotech's quest to venture into the cosmetic industry demands considerable focus on creating a firm foundation within the territory. The foundation has been implemented in establishing sufficient goals and objectives. The analysis of both Vietnam and China has established the understand which serves which purpose. In this phase of the business strategy, the division's corporate structure will be established, the product that will work best for Biotech's objective and a communication plan will be designed to ensure that this new division operates cohesively.
Description of the Organizational Structure and Culture
Currently Biotech has a geographical division structure. A functional structure is present within each division that revolves arounds production and sales (The Biotech Company Profile, 2018, para. 23). The R&D, HR, IT and Finance departments have previously been made up of small teams within each division as well (The Biotech Company Profile, 2018, para. 23). A functional structure functions with groupings within the organization based on individual business functions (Meyer, 2018, para.4). An example of this could manifest with a three-department system consisting of an HR component, a marketing component and a finance component (Meyer, 2018, para.4).
Due to the fact that Biotech is looking to establish its new manufacturing, sales, and distribution facility. With this in mind, Biotech would stand to create a corporate structure that supports the early stages of this company's establishment. The structure that best suits this stage within the beginning stages would be a project organizational structure (Chand, 2014, para. 5). A project organizational structure encompasses much focus on the objectives within the project (Chand, 2014, para. 5). This corporate structure offers a semblance of temporary resolve (Chand, 2014, para. 5). Teams of specialists concentrated on varied functional areas within the organization are put into place to prioritize the energies and resources needed to warrant the necessary results of the assigned project (Chand, 2014, para. 5).
A project organizational structure is valuable because is perfect for projects where goals are defined by specific goals and target dates (Chand, 2014, para. 6). The ideal timeframe for Biotech to establish its new manufacturing, sales, and distribution facility is within the next year. Biotech is new to the cosmetic industry within the Asian market which makes this transition one that is unfamiliar. Project organization structure works well with projects that involve a level of unfamiliarity within the organization (Chand, 2014, para. 6).
Within a project organizational structure, the primary staff within the organization are sourced from within the existing entities organization. In the case of Biotech that would be retaining key players, however they would be under the management of a project manager. Considering cultural considerations that will be discovered in moving forward, a project organizational structure would work well specifically within the Vietnamese territory because informal relationships between project manager and departmental managers (functional managers) are more important than what is described as a formal prescriptions of authority (Chand, 2014, para. 6).
Vietnamese custom of its employees demonstrates a different approach (Admin, 2017, para. 2). Customs of the domestic Biotech contradicts that of Vietnamese employees, who have a tendency to remain passive or considerably silent in situations where they have every right to express their disagreement (Admin, 2017, para. 2). Their go to is to keep their heads down and avoid conflict at all cost. On the other hand, disagreeing, speaking up, or challenging other ideas is welcomed in the foreign working style (Admin, 2017, para. 2). There are high possibilities of conflict arising thus this project establishes an organizational structure that will work cohesively.
Biotech should definitely utilize the workforce that is available within the Vietnamese market. A different market offers a different source of talent (Van Rossum, 2017, para. 7). The international labor force can be described as one that offers a plethora of advantages that include a hyper-productive workforce, advanced language skills, and a diverse educational background (Van Rossum, 2017, para. 7).
The organizational structure that would work contingent on the project organizational structure is as follows:
Regional Manufacturing Director
Within the primary department centered on establishment within the Vietnamese territory, the Regional Director of the Manufacturing division within the Vietnamese market would be focused on delegating the establishment of plant establishment as well as the establishment of relationships with Chinese suppliers. The project manager would play the role of ensuring the project manager is equipped to set things into motion to establish the foundation of this new plant within the Vietnamese territory.
Marketing & Sales Department
Director of Marketing and Sales
Product & Brand Marketing Manager
Market Researcher Administrative Assistant
The director of marketing and sales would ensure that the marketing division is in position to set the foundation for connecting with the middle-class consumer base that is ready within the Vietnamese territory. Utilizing members of the Vietnamese workforce offers a familiarity with cultural notes that will connect in a manner that gets products sold. The product and brand marketing manager would ensure that the products that are created by Biotech are appealing to this market.
Human Resources Department
Human Resources Director
The Human Resources Director will ensure that the human resources department is privy to what is needed of the Vietnamese workforce. Recruiting managers will be prompted to tap into the advanced and very savvy workforce available within this market.
Adhering to a Create (Adhocracy) corporate culture would work best in a territory where the workforce that is passive or considerably silent in situations where they have every right to express their disagreement (Admin, 2017, para. 2). Biotech can revitalize the Vietnamese workforce by offering a corporate culture that is demonstrative of an innovative and create work environment where employees and leaders collaborate in an effort to create the best results for the company (Tharp, n.d. para. 20-23).
Due to the fact that Biotech wants to retain its advantage over competitors within the cosmetic industry, the company can take advantage of the growing millennial demographic that is presence within this territory. Leading within this industry is vital to Biotech's success so capitalizing on the talents of its workforce could only work in the company's best interest (Tharp, n.d. para. 20-23). It could also re-establish a new corporate culture that positively evolves the engagement of Vietnamese employees and their subordinates.
Breakdown of Products and Services
Within the cosmetics world, this global industry makes up $445 billion (Sorvina, 2017). Within the Asian-Pacific market specifically, the cosmetic market is made of about $98.5 billion (Statista, 2018,). Vietnam accounts for $1.2 billion in 2017 (VIR, 2017).Biotech could stand to generate a sizable amount of revenue by strategically releasing the right products within its initial launch. After considerable perusal of the beauty market, there are a few products that Biotech should consider. Base products are the category of cosmetics that should be focused upon for Biotech's launch.
The modern cosmetic industry places much focuses on professional makeup artists and editorial and couture photography (Pennelli Faro Team, 2017, para. 9-12). The influence of makeup artist that are accessible through social media and sites such as Youtube, creates a demand amongst consumers that requires the same flawless results that they are accustomed to seeing these professional makeup artists manifest (Pennelli Faro Team, 2017, para. 9-12). The influence of makeup artist that are accessible through social media and sites such as Youtube. High Definition solutions are the increasing trend (Pennelli Faro Team, 2017, para. 9-12). The influence of makeup artist that are accessible through social media and sites such as Youtube (Pennelli Faro Team, 2017, para. 9-12). The influence of makeup artists that offer easily accessible makeup masterclasses through social media and sites such as Youtube (Pennelli Faro Team, 2017, para. 9-12). Base products include foundation, blushes and highlighters (Pennelli Faro Team, 2017 para. 9-12). In the recent boom of social media, the trend of utilizing highlighters has warranted great revenue (Pennelli Faro Team, 2017, para. 9-12). Base products make up majority of the cosmetic industry, foundation, primer, and concealers account for 34% of the $8.1 billion dollars that base products generate (The NPD Group, 2018, para.4-5). Mascara is also great option. In the year 2016, Cover Girl Lash Blast Volume was the second most purchased mascara brand in the United States with sales of about 45.3 million U.S. dollars (Statista, 2018, para. 2). Biotech will likely launch both a foundation line, which is a stable that will likely sell, and mascara, which is a contrary contender. Natural, eco-friendly, and high ingredients will be utilized to ensure eco-friendly variables are in play.
Biotech warrants a communication plan that will ensure that both domestic and international divisions are able to operate cohesively together. Biotech will have to rely heavily on technology due to the substantial distance between the domestic headquarters of Biotech and the plant within the Asian territory. Integrating technologies such as e-mailing, messaging, video conferencing, and document-sharing allows the expedited options for communication (Lumen, 2018, para 22). The act of implementing time frames by which communication is conducted ensures that there are no holds up as it pertains to the time difference between these two territories (Lumen, 2018, para 22). Weekly and bi-weekly correspondence would ensure that objects are implemented in a manner that is tailored to each week. What is meant by this, is that communication can ensure that outdated objectives are re-adjusted.
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