The following are the key drivers of profitability in the cosmetics industry in Vietnam: ○ The beauty and cosmetics retail market in Vietnam has been estimated to be worth $1.7 billion annually, a figure that will likely reach $2.35 billion by 2018, according to market research company Mintel. ○ Increase in Sales Volume – Though the market size is relatively small, growth in most beauty and personal care categories is expected to continue to expand over the next decade as per capita spending increases. ○ Increase in Average Sale Price – Being a sought after makeup brand, MAC has the ability to hike up prices higher than what its products will sell for in the home country. Consumers are willing to pay more for premium goods. ○ Reduction in Unit Costs – considering that packaging and labor will be done in Vietnam, cost of goods (components for packaging) and labor cost is significantly cheaper in Vietnam. When you lower the operation costs and increase average price of product in the market, you will have a high profit margin. ○ Developing Country- As a developing country, Vietnam’s population consists of younger generations. With beauty trends, makeup has been on the rise especially in Asian countries including Vietnam. Assume that the company M.A.C Cosmetics is trying to expand its makeup business in Vietnam. Discuss the benefits M.A.C Cosmetics will get from each one of these key drivers of profitability and provide specific examples for each one of them. Discuss the disadvantages M.A.C Cosmetics will be facing from some of these key drivers of profitability and provide specific examples? How do you think M.A.C Cosmetics should mitigate these disadvantages?

The following are the key drivers of profitability in the cosmetics industry in Vietnam:
○ The beauty and cosmetics retail market in Vietnam has been estimated to be worth $1.7 billion annually, a figure that will likely reach $2.35 billion by 2018, according to market research company Mintel.
○ Increase in Sales Volume – Though the market size is relatively small, growth in most beauty and personal care categories is expected to continue to expand over the next decade as per capita

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