Value Prop
Most emerging economies will eventually transition from being an import-dominated market to one where domestic firms hold sway – we intend to be that company for the Vietnamese cosmetic industry.
VietCoco is a holding company that performs two functions. First, we operate coconut plantations, as coconuts are easy to grow in Vietnam. We have adopted a vertical integration strategy (Investopedia, 2018), where the coconuts we produce are then used to produce beauty products, which will be built as a local Vietnamese brand that can compete with imported brands. At present, the beauty product industry in Vietnam is dominated by foreign companies, but the typically progression of market development is that a domestic business, position slightly below the luxury foreign company, and earn market share by offering equivalent quality at a slightly discounted price.
Value Proposition
A value proposition is that we are going to offer the equivalent quality of product as the international luxury brands but at a discounted price. A value proposition should reflect was you will do uniquely to meet market needs (Skok, 2013) and we believe that we have accomplished that. The international brands bring two things to the table – they have great products and they have great brands. There is a bias towards foreign companies, mostly because high quality is often associated with the foreign companies. Foreign companies pay high costs to import raw materials, produce goods, and then ship them and market them around the world. The prices are set based on an internationalization price strategy, where the product needs to cost the same anywhere in the world to avoid people attempting to arbitrage the price of the good (Ebrary.net, 2018).
Our company has brought in manufacturing talent from Europe to work in Saigon, and will produce beauty products locally. The cost of goods sold is much cheaper in Vietnam, because the cost of labor is much cheaper, and so is the cost of some of the key ingredients. We are specifically going to focus on virgin coconut oil as a major ingredient in our beauty products. In fact, the use of coconut oil in beauty products has been increasing a lot recently (WebMD, 2017).
So the value proposition for the company is basically to put these two things...
The company will have a significantly lower cost of production than its foreign rivals, and yet will be able to deliver a quality that is almost as good. For the consumer, the end product will not be quite as good as the best foreign brands, but will be of high quality. The math is something like a product that is 90% as good but at 60-70% of the price. This creates superior value that we feel will convince the Vietnamese consumer to purchase a Vietnamese product, which in this business they have not really felt like they want to do (Euromonitor, 2017).
Innovation
There is absolutely nothing innovative about virgin coconut oil. This is a product that has been used by human beings since long before written records existed. Literally, if you are thinking that virgin coconut oil is an innovation, or that innovation is necessary to succeed in business, you are wrong. This is why innovation and value prop are two different things – an innovative technology is great, but the reality is that whether what you have is innovative or not, the way that you put something together and present it to the market, aka the value prop, is what matters.
The funny thing is that sometimes you don't need to be innovation in order to have a great value position – just doing something that other people do, but better, or in a different market, is enough. In this case, Vietnam is one of Asia's fastest-growing economies (Euromonitor, 2017). The market for beauty products is strong, but divided between cheap stuff, and high-end foreign brands, with the market holding a preference for the foreign brands when they can be afforded (Euromonitor, 2017). In other markets, when they begin to emerge on their own, the foreign companies dominate early, but then domestic competitors start to emerge. Japan and Korea are two major beauty product manufacturers, but when those markets first started to emerge from poverty it was all foreign brands. China is following in their footsteps, and soon so too will Vietnam. In that sense, we aren't reinventing the wheel. We aren't pretending that we're doing something that's never been done before. We certainly are not going to spout a bunch of babble…
