Environmental Analysis For Yves Saint Laurent Company to Expand in Vietnam

Analysis, Pages 8 (1933 words)

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Since the technologies and economics develop strongly, others industries like art, education and agriculture are expands larger as well, specially fashion. Each people on earth have their own taste of fashion, but the fashion type that prove people are high class and more competitive is luxury. Yves Saint Laurent is an iconic fashion luxury brand that exist for 50 years that mostly every fashion devotee have to owned at least on piece of its items. In Vietnam, wearing luxury goods is the trend since 2015; it’s an opportunity for Saint Laurent to expand its store in an S shape country in South-East Asia.

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Company Background

Yves Saint Laurent or can be known as Saint Laurent, is French luxury fashion brand found by Yves Saint Laurent in 1961. Since 1962, after 1 year of established, the company has been considered to be one of the most prominent fashion house, known for iconic, luxury and modern pieces of collection. Nowadays, Saint Laurent produces Men-Women ready-to-wear products, leather goods, boots, cosmetic and jewelry.

Since 2013 to 2017, Saint Laurent gain huge amount of revenue thanks to Hedi’s design, which brought back vintage combine with modern style. Around the world there are 400 Saint Laurent store in every continents. According to Marketwatch, net profit of SLP in 2017 is USD$2.20 billion, beats it’s competitor Gucci, gain USD$1.82 billion in net profit.

Country Background

Vietnam is a small country, located in South East Asia, in between Laos, Cambodia and South China Sea. It’s one-party Communist state, one of South-East Asia's fastest-growing economies and has set its sights on becoming a developed nation by 2020.

Although the government is single party and communism, the market of the country is capitalism since 1986 after the “Doi Moi” (which means “renew”) policy. In 2017, Vietnam’s GDP is $234 billion. According to WorldAtlas (2017) the economy of Vietnam is believed to become one of the fastest growing emerging markets in the world by 2020s with a GDP of $436 billion. Vietnam attracts many foreigner investors in Asia-Pacific region and Europe. The majority of ethnics are Kinh people and using Vietnamese as standard language. The geography of the country is fantastic for worldwide trade. Vietnam main export partner are United States of America, Europe, China and Japan. Main import partner are China, Korea Japan and Taiwan.

According to United Oversea Bank (2016), thanks to good government stability and the rising level of middle-upper class, the expand of business of foreigner investment in Asian countries like China, Thailand, Singapore, Hong Kong to Vietnam become easier. Vietnam government stated consistency policy; means shake hands with other countries for further development of bilateral relationship. “Since 1990, most other regional countries, except Singapore, have experienced “coup d’etats” or political crises. Meanwhile Vietnam has achieved political stability – a factor that enables Vietnam go ahead with its renewal process.” Therefore, political stability is an opportunity for Saint Laurent to expand its business in Vietnam. The business will not be interrupted by conflict and political crisis and business’s profit will be maintained.

The economy of Vietnam is a socialist-oriented market economy. Based on Trading Economics (2018) analyze, it is the 47th-largest economy in the world measured by nominal gross domestic product (GDP) and 35th-largest in the world measured by purchasing power parity. Although the country’s government is communism, the market of the country changed to capitalism and encourages free trade since 1986. In 2018, Vietnam’s GDP is $240 billion nominal. Generally, the GDP of Vietnam is medium-high compare to the world. With the rise of GPD is 0.6% annually; Saint Laurent will consider being benefit from consumers. The high GDP means consumer’s income is medium to high. This is the reason why they can spend more for the luxury goods, especially in high economics city like Hanoi and Ho Chi Minh City. Age factor is greatly impact and opportunity for the expanding and benefit to Saint Laurent business. According to Indexmundy (2016), the majority age group in Vietnam is around 20 to 35 years old. Indeed, Saint Laurent products target customers from teen-ages to middle ages because of its design style. Luxury goods spending is growing quickly in Vietnam market, mostly young generation from 18 to 25 years old and 50% are middle-class. With average-high income and young to middle ages, the customers around these ages are attracted by good quality products and brand, which brought them an invisible value. Group age from 15 to 19 years old is second highest in Vietnam. In next 4-7 years, the economics along with expenditure will rise up from this group age, which demand and spending on luxury is higher than now.

Based on statistic of Vietnamnet (2018), 50 million people in Vietnam are now using internet, which more than half of the country’s population. This considers being an opportunity for the business to advertise its brand name and selling products online. In addition, young generation from 20 to 25, which is the target customers of the business, is also using Internet the most. According to Medium Corporation, 65% Internet user in Vietnam shopping online and increase 2% per year. From this statistic, Saint Laurent can sell its products in online shopping websites like Lazada. Wide usage of Internet leads to high usage of social networks. Saint Laurent can take these advantages to advertise its products on popular social network like Facebook and YouTube.

Vietnam is a tropical country, which only have 2 seasons: dry season and raining season. This considers being a challenge to Saint Laurent in Vietnam. Most of Saint Laurent ready-to-wear products are design to wear in Europe climate, which made from thick fabric and leather. These materials are not suitable to wear in hot, tropical country. To keep the profit maintain and prevents inventories, Saint Laurent must release items that suitable with climate condition in Vietnam along with customers’ demands. More than that, most of items are followed by seasons’ collection, not fast design-fast selling” style like Zara or H&M.

Last but not least is Law issue. Vietnam rank in 107th out of 180th countries in corruption rate in 2018, which is medium-high. In research of LA times (2018), corruption level in Vietnam had drops significantly since 2012. Government gave strong policy about strike and destroys all corruption acts and arrest-corrupted politicians. As the Vietnamese law is strict recently, Saint Laurent has potential to maintain the business with strong investment of items and hire skillful employees. With high corruption level, custom’s fees and relative chart are high, which reduce the profit and increase Saint Laurent item’s price. Reduce in corruption level in Vietnam means tax and import fees are lowers. With lowering corruption level annually, Saint Laurent’s store can expand more than expected in the future in Vietnam.

Porter’s five forces analysis

Porter’s five forces is a system that identifies and analyzes five competitive forces that build up every industry, and gives detail about the strength and weakness of the industry.

At the moment, luxury fashion brands are not too popular in Vietnam and people hardly can own luxury goods. Opening Saint Laurent store is a wise choice, which serves people demand and selling more products in Asia. There are less threat of other competitors because Saint Laurent is a famous brand, may give people less attention to other big old luxury brand like Louie Vuitton and Gucci. More than that, items of Saint Laurent are iconic design and new to most of people, which people have more curious about, mostly young people. Like explain in the first paragraph, Saint Laurent brings new looks of luxury fashion to people, especially to the young generation. Every “fashionista” and stylish are admit that Saint Laurent have a step to the new level in fashion industry and being famous. Investors of Saint Laurent is strong thanks to huge amount of profits last years, but to run Saint Laurent in Vietnam require taking risks when step to a whole new market. To operate Saint Laurent in Vietnam, the director have to consider about other luxury fashion brands that currently operate in Vietnam which have experience about Vietnam’s market. More than that, other competitors’ reputation will overwhelm all of the newbies in the first step. Famous brand name means difference of items design. Saint Laurent release new collection every 6 months, each season have its own design style. With its iconic products and high quality, there are not many luxury or low-end fashion brands can compare to Saint Laurent. Consumers can feel like the unique of items they own rather than the same with other luxury items. But unique and high quality means high price. The majority of Vietnamese income are quite low compare to rest of the world, spending USD$500 to USD$2000 for an items is not an easy decision to make. To satisfy their demand on good design items, customers may not buy the items or choose substitute items following the previous paragraph, substitute items is the main threat to Saint Laurent to run in Vietnam. Fast fashion brand like Zara and H&M exist for a long time in Vietnam, people used to wear low cost items with stunning design and less care about the quality. Luxury goods are not necessary for most people, especially people who have average-low income. Just spend 1 by 10 of Saint Laurent item’s price, people can owe an exactly same items for example the faux leather jacket and boots.

Lastly, Saint Laurent suppliers are limited because release of new collection only occurs twice years. On YSL.com, there are only 5 countries that produce Saint Laurent products: Japan, Turkey, USA, Italy and France with approximately 50 factories. Despite of low suppliers, Saint Laurent still maintain because of sales rate is not fast as low-end fashion brand. More than that, leather and fabric are main material of Saint Laurent products. High resources means the production of jacket, dress, shirt and accessories are various, can prevent out of stock” status.

Recommendation

Based on PESTLE and Porter’s five force, there or recommendation that Saint Laurent should do to expand its business in Vietnam. Because of hot and humid climate, directors should import and sell suitable clothing like less thick fabric and leather shirts, jackets and dresses.

Saint Laurent should take advantage of high level in using Internet to promote its products. High level of people shopping online (at mention in PESTLE) same meaning with attention of online advertisement is high. More than that, director should distribute the products to other shopping website like Lazada.com for people who do not have clue about Saint Laurent’s official web page.

Last but not least, Vietnam economics is stepping forward faster than expectation. Beside operate a store, the business should establish Saint Laurent factory in Vietnam. Many other famous fashion brands like Adidas, Nike, Zara has succeeded on manufacturing product in Vietnam. With huge work force, cheap material and low wages, it’s a fantastic idea to run a factory.

CONCLUSION

In general, a renowned luxury brand originally from France is able to open new subsidiary in Vietnam. People from thousands of miles away could probably agree with this idea that Saint Laurent should open a branch in this South-east Asia country. The benefit that brought is to the society is significant. Besides spreading the fame to take sales and revenue, Saint Laurent able to satisfy any “fashionista” who desire to own at least one of its products and people who want to enjoy new taste of luxury goods. On the other hand, Vietnam is still a developing country, which the numbers of costumers who can actually purchase the products are still insignificant. Weather condition also can affect the business because products are leathers and thick fabrics, hard to wear in tropical, high temperature region.