Assignment task: Can you please read the whole essay, and based on PEST analysis, please answer the question below?
QUESTION: Provide the benefits, costs and risks of investing in the country, given your PEST analysis and skincare industry, and your client's business.
Political
According to the 1992 constitution the Communist Party of Vietnam maintains its position, in both the state and society (Youngblood Coleman, 2020a). As a one-party state, Vietnam is governed by the Communist Party with influence from the People's Army of Vietnam within the system (United States Institute of Peace 2022). This structure highlights the role played by the Communist Party in shaping and guiding the nation's affairs as outlined in the framework. The authoritative position of the Communist Party is further emphasized by the role of the People's Army, in Vietnam's landscape underscoring their centrality in governing and making strategic decisions for the country. According to the United States Department of State, Vietnam is known for its stable political and security conditions as the country functions under a single party state. While protests and civil unrest are not common, occasional demonstrations may occur in response to perceived or real environmental, labor or political injustices. The political landscape is characterized by the government's rejection of political changes similar to those seen in other communist countries. The Vietnamese Communist Party (VCP) maintains a hold on both the people and the political process highlighting its enduring influence and control (World Geography, 2023). The presidency in Vietnam is determined through a five-year term, with the president elected by the National Assembly from among its members (Youngblood-Coleman, 2020b). The key governmental powers, in contrast to the Communist Party, are vested in the executive agencies, particularly the offices of the president and the prime minister. Notably, many members of these offices also hold positions on the party's Central Committee, emphasizing the interconnection of political roles (Youngblood-Coleman, 2020a). In a constitutional revision in 1992, the collective Council of State, previously serving as the standing committee of the parliament, was abolished. It was replaced by the office of the president, who is elected by the National Assembly and serves as the head of state, commander of the armed forces, and chairman of the Council on National Defense and Security (Youngblood-Coleman, 2020a). This restructuring reinforces the central role of the president in Vietnam's political system, reflecting a concentration of key leadership functions.
Economic
As of the first half of 2023, Vietnam boasts a thriving economy, with the Gross Domestic Product increasing to 11.72 percent. This positions Vietnam as one of the fastest-growing economies in Southeast Asia. The per capita Income in Vietnam has been growing consistently; for example, since 2020, it has increased from 2.73% to 4.74% in 2021 % to 10.84 % in 2022. This indicates an upward trend in individual purchasing power and the expanding middle-class population. Vietnam has maintained an excellent economic growth rate, evidenced by its resilience and stability (PwC Market Research & Economic Study, 2023). Also, the company growth rate reflects the country's increased financial performance. Vietnam became an attractive destination for foreign Direct Investments, with an FDI of approximately 23,500 USD/VND rate in 2022. This investment is a sign of confidence in the Vietnamese Market.
The significant economic growth and rising per capita income help create a conducive environment for the skin care industry. Consumers with higher disposable incomes are increasingly inclined towards personal care and beauty products. The growing middle class in Vietnam is emphasizing skincare and beauty products more. This trend aligns with ABC Co's business in the skincare industry. Also, the favorable economic policies and the openness to foreign investments will likely enhance the viability of ABC Co. entering the Vietnamese markets. The skin care industry can benefit from the overall positive investment climate. The thriving economy and expanding skincare markets present lucrative opportunities for ABC Co. to introduce its products to a receptive consumer base (PwC Market Research & Economic Study, 2023). The statistics show that Vietnam's robust economic growth, increasing per capita income, and favorable investment climate make it one of the attractive Markets for ABC's entry into the skin care industry. The economic indicators provide a conducive environment for business expansion and create potential success in the Vietnamese Market.
Technology
When viewing Vietnam through a technological lens we can clearly see that it is very well developed and can be described as being extremely technologically sophisticated. This level of sophistication can be attributed to several different reasons, ranging from: the level of access, the level of security associated with these different forms of technology, and the opportunities that are available for new and emerging forms of technology to step into the industry.
In regard to the availability and access of the different types of technology within Vietnam we can first take a look at it through a broad perspective. According to the 2021 data from The World Bank, it was shown that approximately 74% of the population, 97.91 million people, within Vietnam both have access and utilize the internet (World Bank Open Data, 2023). Whether this be through the use of mobile devices such as phones and smartphones, or desktop and laptop computers there are a plethora of options available for internet access. When looking deeper into the specifics of the data, according to a publication by Statista, it was shown that internet usage and access within Vietnam was predominantly mobile-based with a "smartphone penetration rate" reaching upwards of 75% of the whole country and being described as a "mobile first market (Internet Usage in Vietnam, 2021)." Alongside the high smartphone usage within Vietnam, the usage of smart TVs, desktop computers, and laptops also have been on the rise. Further data presented by Statista, shows that "online entertainment, such as video and music streaming and gaming" has been gaining momentum amongst internet users within Vietnam (Internet Usage in Vietnam, 2021).
Alongside the growth of technology within Vietnam, the by-products associated with it have also benefited from it. With an ever expanding demand for digital services within Vietnam, there has been further expansion towards a greater emphasis on cybersecurity and measures to prevent cyber threats (International Trade Administration). This unprecedented growth within the technological sector also makes way for several new opportunities. Vietnam's e-commerce sector has been described as a fast-growing market with an even faster growing market-value. According to Statista, "sales from e-commerce have been accounting for an increasing share of the total revenue in the country (Internet Usage in Vietnam, 2021)." Alongside this, due to the COVID-19 pandemic, consumers within Vietnam have been "more willing to shop for basic necessities and fresh products online, making food and personal care the e-commerce category with the highest growth (Internet Usage in Vietnam, 2021)." With the current state and level of growth of the technology sector as a whole within Vietnam, it is clear that it would be a perfect opportunity for ABC Co. to enter into this international market. Factors such as a booming e-commerce market that has shifted from travel accommodations to personal care products is a clear indicator of the potential for an expansive and high market-value skincare industry. Alongside this, with The World Bank estimating that "Vietnam's digital economy will exceed USD 43 billion by 2025 (International Trade Administration, 2021)" and the high level of influence that technology has on other country skincare industries, such as South Korea and Japan, it would be an extremely favorable and optimal time to delve into the slightly tapped market within Vietnam.
Education, Social, and Cultural Philosophy
Vietnamese's social and cultural aspects present a lot of interesting findings. Education is among one of the many values that Vietnamese place a high emphasis on for its younger demographic. A typical Vietnamese child is placed into 12 years of education where they will partake in 5 years of primary school, 3 years of upper secondary school (middle school), and then choose to attend a gifted school where they focus on learning one subject such as math, science, literature, etc. in depth or continue completing their education at a public high school for 4 years (Nguyen, 2022). The formal education journey will conclude with students successfully passing the National High School Graduation Examination (NHSGE) which will determine their entrance to universities (Nguyen, 2022). With such a high emphasis on education brings a high percentage of 98.63% in literacy rate among youths which will represent the future workforce in the country (Nguyen, 2022). Because of such values placed on education, the Vietnamese rigorous education system results in a high increase in mental and social issues (Nguyen, 2022). Depression and anxiety are among the leading causes of the increase in the suicide rate in the country (Nguyen, 2022). Though a rigorous education system, many would say that the country's education system is degraded due to how heavily it relies on textbooks and a lack of focus on applying theory into practice (Cy, 2023). This has unfortunately led to students' lack of confidence in applying these concepts into real life applications, deeming them to be unfit for the job market and need to be re-train. In terms of the language, Vietnamese is the official language spoken in the country while English is increasingly favored as the second language (FRONTLINE/WORLD. Vietnam - Looking for Home. Facts and Stats | PBS, 2011). In addition to these, there are some regions that speak Chinese, Khmer, and French (Youngblood-Coleman, n.d.). The country places a strong emphasis on honoring its ancestors and family which results in a social structure that persists in tradition and a strong sense of national identity (Youngblood-Coleman, n.d.).
Religion, Political and Economic Philosophy
Religion plays a significant role in Vietnam's graceful terrain of beliefs and values. Life in Vietnam was cultivated with gods, spirits, beliefs, and practices. There are different religions that are being used in Vietnam, those being: Buddhism 5.8%, Catholic 6.1%, Protestant 0.8%, some may practice Christianity along with other religions or belief systems 0.8%, and those who don't practice any religion consist of 86.3% (CIA & Asia Society). It is believed that there is a strong cultural impact from ancestors and the government of the country that had historically managed religious affairs. Since Vietnam consists of a variety of beliefs and religions, some skincare practices would be influenced by the cultures and religions in the country. For example, in Vietnam rituals or ceremonies would consist of or involve skincare as a way or form of purification, therefore leading some people to choose certain products. Even though Vietnam has contemporary beauty practices, Vietnam isn't the only country that really uses skincare products since it was influenced by practices that were originally practiced in the United States, Europe, and East Asia (Graduate School of Asia Pacific Studies). In religious festivals, ceremonies, or events, skin care products can have an increase in demand since businesses can use certain occasions to market their products, and will have an economic impact as well in relation to religious impact.
Political Philosophy in Vietnam mainly consists of a socialist political understanding by the communist party. Socialism in Vietnam and the Communist Party introduced Marxism, which is the political and economic ideas of Karl Marx. Vietnam's government is solely based on socialist principles, so there are a few connections between the political system and the skin care industry. Since Vietnam's socialist principles may focus on the well-being of the people, being able to afford or access these skin care products can cater to those who would choose or want to use these products.
In connection with the political philosophy in Vietnam, the economic philosophy is pretty similar knowing the fact that it's based on a socialist-oriented market economy. Skin care around the world is constantly growing. There are foreign brands and domestic brands within Vietnam that really cultivate the idea and market for skin care. Shiseido is a non-local skincare business in Vietnam that began in 1997 (Shiseido Group). Since the market for skin care is becoming more complex and challenging against other competitors, Shiseido is finding ways to expand and strengthen its skills to maintain or even improve its position in the Vietnamese Skin Care Market. They would do so by learning and understanding that consumer behavior is vital to attracting more consumers through marketing and even brand building. Saigon Cosmetics
Corporation is a local skincare company that has been one of the leading enterprises for Vietnamese skin care and cosmetics for over 40 years. They believe that they are confident enough to be at the top of the market since they conduct sustainable development, ingredients, and production techniques along with honors and certifications to deliver high-quality products for everyone to use (Saigon Cosmetics Corporations). Since skin care companies are developing sustainable products, that is one of the principles or practices that is known to occur in Vietnam.
With that being said, Religion, Political, and Economical Philosophy are exclusively based on the principles, beliefs, and practices that they have been influenced by for many years now. Whether it's religious, political or economic views, the skin care industry in Vietnam is rapidly growing and expanding since there are new opportunities such as positively improving appearance, economic developments to make it more affordable and sustainable, health trends, and so much more.
Skincare Industry Profile of Vietnam
Market Size & Growth Trends
The Vietnamese skincare market has grown significantly, according to Allied Market Research's report, Vietnam Skin Care Products Market Size, Share & Analysis Report 2027. This growth has been attributed to a number of factors, including rising disposable income, the emergence of a growing middle class, and increased consumer awareness of skincare and cosmetics. The market has demonstrated consistent growth, boasting a compound annual growth rate (CAGR) of approximately 12%. In 2019, its value stood at $854.3 million, and it is anticipated to reach $1,922.4 million by 2027. This growth is primarily fueled by the escalating demand for personal care and beauty products among Vietnamese consumers. The skincare products market presents an incremental revenue opportunity of $1,154.25 million from 2020 to 2027.
According to a Statista report on Skincare in Vietnam, the revenue in the Skin Care market is projected to amount to US $769.30 million in 2023, with an expected annual growth rate of 3.65% (CAGR 2023-2028). It is noteworthy that, in a global context, the majority of revenue in the skincare industry is generated in the United States, reaching US$23,590 million in 2023. When considering per-person revenues in Vietnam, the figure is estimated to be US$7.78 in 2023, providing insight into the industry's economic impact on an individual basis within the country's population.
Consumer Profile
The consumer profile conducted by Statista found that there are four main targeted consumers of skin care products in Vietnam: 28% Generation Z, 43% Millennials, 26% Generation X, and 3% Baby Boomers (Skin Care - Vietnam | Statista Market Forecast, n.d.). Because it is the skin care industry, women consumers dominate the market by 62% who are more likely to look after and put greater care for their skin (Skin Care - Vietnam | Statista Market Forecast, n.d.). The report Statista also discoveredfound that there is fairly even distribution in terms of skin care users from different household incomes. which 37% accounts for high class consumers, 35% for middle class consumers, and 28% from lower class (Skin Care - Vietnam | Statista Market Forecast, n.d.). This distribution shows that each household income consumers actively engage in purchasing skincare products. Consumers in the country engage with all types of media (TV, social media, etc.) and 62% found online user reviews are helpful in helping them determine whether to purchase these skincare products (Skin Care - Vietnam | Statista Market Forecast, n.d.). However, it is found that consumers interact with companies more on social media compared to the average online (Skin Care - Vietnam | Statista Market Forecast, n.d.).
Provide the benefits, costs and risks of investing in the country, given your PEST analysis and skincare industry, and your client's business.