Company Background

Don Dien is a small retail brand that offers beauty and home goods through Facebook. While the
business began operations in 2012, it was not until 2020 that they obtained a formal license to
operate as a joint-stock partnership.   As a start-up, the company's size is quite restricted, with
low to moderate financial power.

Don Dien is a retailer as well as a mass producer. They mostly sell two product lines in retail:
body care and house care, while also providing refined products to other industries by bulk
manufacturing. The brand's goods are said to be inspired by indigenous Vietnamese folklore and
high-quality organic ingredients, which serves as a way for the business to distinguish itself from
competitors on the market. Don Dien's commitment to high-quality ingredients and exceptional
customer service has culminated in a loyal customer base that is typically comprised of middle-
income consumers with a higher level of product familiarity.

Figure 1.1.1. Don Dien’s Logo and Product Line

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Macro-environment

Economic

According to the General Statistics Office, Vietnam's GDP is expected to expand rapidly in the
coming years (Thanh 2020). The improving economy encouraged more shoppers to spend
money on leisure, clothing, and beauty and personal care goods. Indeed, beauty and personal
care revenues continue to grow at a rapid rate, owing primarily to an expanding economy, and
the rapid growth of social networks (Euromonitor International 2020).

Figure 2.1.1 Sales of Premium and Personal Care by Category: %Value Growth
(Source: Euromonitor International 2020)

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 Figure 2.1.2. Sales of Mass Beauty and Personal Care by Category: % Value Growth
(Source: Euromonitor International 2020)

As shown in a 2019 study from Vietnam's Ministry of Industry and Trade, the country's customer
confidence index has increased significantly as compared to neighboring countries such as
Singapore and Indonesia. As a result, consumers are willing to spend more money on products,
especially during the boom in e-commerce and online payments. These aspects will, hopefully,
add to the trajectory of growth for companies in the market, including Don Dien.

However, according to a survey by Euromonitor International (2020), demand for luxury beauty
and personal care is predicted to be marginally impacted by a transition towards cheaper mass
goods among price sensitive consumers after the Covid-19 Pandemic. In that case, Don Dien,
which offers affordable premium products, is perfect for buyers who have spare income but do
not want to splurge on luxury prices. This change could be an opportunity for them to attract
more customers and increase their market share, which could boost their success.

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Social

Nowadays, the availability of internet activity and the vast volume of knowledge accessibility
enable people to take better care of themselves and better engage with health practitioners
(Magdalena & Fedak 2015). Indeed, as more consumers worry for their health and well-being,
they are also seeking accountability from the goods they buy. As a result, in recent years, the
"natural" movement has been the most critical trend in personal care all over the world, including
Vietnam (Delventhal 2020). Don Dien, a corporation whose products are manufactured from
sustainable and organic ingredients, stands to benefit enormously from this movement and will
continue to do so.

Figure 2.2.1. Internet health use by age group in 2005-2007-2012.

Among the beauty and cosmetic industry, especially in Vietnam, there has been a growing trend
among young people to use bold, statement make-up looks as well as brand-name cosmetics.
This is due to the high diffusion of Western and Korean society by social networks, as well as
the media's position in raising consciousness of how to choose and use make-up effectively
(Euromonitor International 2020). This development is accelerating in tandem with the
increasing availability of luxury brands such as Estée Lauder on online platforms (Euromonitor
International 2020). Furthermore, following the “natural” trend, an increasing number of mass
brands are developing their own “organic,” “eco-friendly” product lines (Euromonitor

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International 2020), posing a significant challenge to local brands that sell the same products.
Despite not being exclusively in the beauty and makeup business, this may ultimately pose a
medium challenge to Don Dien in the future as their product range is mostly aimed at the same
demographic.

Technological

Nowadays, as advertising algorithms improve, social media sites can take users' tastes into
account and recommend goods to them. This, combined with the advancement of electronic
payment systems, has attracted an increasing number of Vietnamese to online shopping (VNA
2020). Naturally, this benefited large brands, as they could leverage the algorithm by investing
more money to get their products on the front page and drive more traffic to their campaigns.
However, for small, niche brands, especially start-ups like Don Dien, this may pose a significant
threat to their business development, as their consumer traffic is generated primarily via
Facebook and word of mouth.

Legal

Along with the rise in online shopping comes an increase in online fraud, especially in Vietnam,
where the legal system has yet to keep up with the sprouting growth of e-commerce. According
to Mr. Tran Huu Linh, it is only a matter of time before further rules and regulations are enacted
to safeguard online users (VietQ 2021). As a result, more restrictive policies could make it
difficult for companies to reach their consumers via online social media channels in the future.
Don Dien's growth could suffer, as they rely heavily on Facebook.

Conclusion

In conclusion, it can be shown that the cosmetics and personal care industries would undergo
rapid development in the future, with substantial opportunities and little to moderate risks. More
precisely, as the economy improves, demand for beauty and personal care goods may increase
significantly. However, as information becomes more available, customers' awareness of their
products increases, and their tastes adapt accordingly.

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As a niche start-up in the industry, Don Dien will encounter opportunities as well as major
challenges that could significantly impact development. To begin, the market moves toward
natural, organic goods created numerous growth opportunities. However, an increasing number
of large brands with considerable financial and technical resources will seize these possibilities
and diversify their product offerings, posing significant risks. In addition, changes in
technologies and legalities would eventually become an impediment for Don Dien.

Porter’s 5 forces

Threats of new entrants

In Vietnam, beauty and personal care are dynamic sectors that quickly draw new competitors
vying for market share (Euromonitor International 2020). This has a serious impact on the
profitability of established companies. To begin, emerging companies, such as Unilever or
Shiseido, benefit from significant economies of scale. Second, even for small companies like
Don Dien, the capital needed to create a manufacturing setup is moderate to large. Thirdly,
customers have a clear sense of brand identification and loyalty. Access is often a modest degree
obstacle if delivery and anticipated retribution are involved. As a result, it is possible to infer that
the market has high entry barriers. Don Dien, on the other hand, as an established business with a
client base, is expected to benefit from this.

Threat of substitution

There are primarily two possible substitutes for Don Dien's products. To begin, skincare products
that are homemade using natural ingredients such as herbs and oils to preserve and rejuvenate the
skin. Though, women regard these replacements as antiquated and inefficient as it took time and
effort to make. The substitute for their house care line would be the conventional household and
personal care products sold at stores. However, it does not have the same benefit since they are
not produced organically or considered a luxury produce. As a result, neither alternative can be
called a perfect substitute. Finally, it can be deduced that the buyer's tendency to substitute is
low, which would greatly benefit Don Dien profit-wise.

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Competitive Rivalry

The market is highly competitive. Among the rivals are Unilever, Shiseido, and local labels such
as CandleHolic and VietHerb. There are very little distinctions between goods with various
brands. As a result of this, the degree of differentiation is moderate. In addition, due to the initial
capital spending for brands to enter ranging from moderate to heavy, the exit barriers are high.
Finally, if competition among players in a market is fierce, it can force down costs and reduce
the industry's overall profitability. Don Dien operates in a highly competitive market for beauty
and personal care products. This rivalry does have an impact on the organization's overall long-
term profitability.

Supplier Influence

This industry has a large number of suppliers. Nowadays, as a result of the "natural" movement
(Delventhal 2020), there are numerous manufacturers of organic materials (Organic Market
2018). However, inputs are not highly differentiated. The availability of substitutes for inputs
and their effect on cost are minimal. In general, manufacturers in this sector have little
negotiating power. Reduced supplier negotiating leverage has the overall effect of increasing
Don Dien Products' total profitability.

Buyer Influence

Increased rivalry and product supply have provided buyers in this sector significant bargaining
power. The businesses have little control on the prices of the goods, which makes it more
challenging for them to remain profitable over the long run, especially small businesses like Don
Dien. Additionally, buyers can force the firm to lower product price, since they may quickly turn
to alternative products. The smaller and more powerful Don Dien's client base, the greater the
consumers' negotiating leverage and willingness to demand increasing deals and discounts. This
placed a strain on Don Dien 's long-term viability.

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Conclusion

Through evaluating all five of Don Dien 's competitive forces, I can gain a full understanding of
how the business's profitability in the Beauty and Personal Care sector is impacted. In general,
the Beauty and Personal Care industry is an attractive industry due to its high entry barriers,
healthy competitive rivalry, low supplier bargaining power, and low threat of substitution, with
the only negative force being buyer bargaining power. Through thoroughly comprehending the
Porter Five Powers, Don Dien 's managers can sway certain forces in their favor. They should be
capable of identifying game-changing patterns early on and reacting quickly to capitalize on the
developing potential of the market.

Reference

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Organic Market 2018, 'Vietnam: Organic exports for the global market', OrganicMarket.info,
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