Sabeco: Analysis of Business Environment and Strategic Recommendations

This report provides a comprehensive analysis of Saigon Beer-Alcohol-Beverage Joint Stock Corporation (Sabeco), a leading beer producer in Vietnam. It examines the company's profile, competitive environment using Porter's Five Forces (threat of substitutes, industry rivalry, power of buyer, power of supplier, and threat of entry), and the PESTLE factors (political, economic, social, technological, legal, and environmental) influencing its operations. The report also assesses Sabeco's strengths and weaknesses, leading to strategic business decisions and a TOWS matrix analysis. The analysis highlights Sabeco's market position, challenges from competitors like Heineken and Habeco, and the impact of macro-environmental factors on its business performance. The report concludes with strategic recommendations based on the findings.

ASSIGNMENT 2 FRONT SHEET
Qualification BTEC Level 4 HND Diploma in Business
Unit number and title Unit 1: Business and Business Environment
Submission date 30 August, 2019 DateReceived1stsubmission
Re-submissionDate DateReceived2ndsubmission
Student Name Nguyen Thi Thu Trang Student ID GBH18737
Class GBH0803.1 Assessor name Nguyen Thu Trang
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Table of Contents
Company Profile ........................................................................................................................... 4
Competitive Environment ..................................................................................................................... 6
Threat of Substitute ......................................................................................................................................... 7
Industry Rivalry (current competition) ............................................................................................................. 8
Power of Buyer .............................................................................................................................................. 10
Power of Supplier .......................................................................................................................................... 10
Threat of Entry (Potential Competitor) ........................................................................................................... 11
PESTLE ................................................................................................................................................ 11
Political .......................................................................................................................................................... 11
Economic ....................................................................................................................................................... 13
Social Class .................................................................................................................................................... 17
Technological Advance .................................................................................................................................. 18
Legal .............................................................................................................................................................. 19
Environment .................................................................................................................................................. 19
Strengths and Weakness ..................................................................................................................... 20
Business Decision ................................................................................................................................ 22
TOWS Matrix ................................................................................................................................................. 24
Conclusion .......................................................................................................................................... 25
Bibliography ....................................................................................................................................... 26

Company Profile
Company Name Saigon Beer-Alcohol-Beverage Joint Stock Corporation
Stock Code SAB
Address 5th Floor, Vincom Center Building, 72 Le Thanh Ton,
Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam
Establishment 1875
Legal
Representative Koh Poh Tiong – Chairman of the Board of Directors
Tel No ([phone] - 3829 4083 - 3829 6342
Fax No ([phone]
Email [e-mail]
Website http://www.sabeco.com.vn/en-US/home
Headquarter 187 Nguyen Chi Thanh, Ward 12, District 5, Ho Chi
Minh City, Vietnam

Beer is an indispensable drink in parties, meetings, chatting with family and friends of Vietnamese people.
Based on this, Sabeco has focused on developing beer products mainly. The revenue of selling beer of
Sabeco in 2018 is 30,790,775,222,873 VND, increasing by 3.2% compared to 2017 and it accounts for about
85.7% of the total revenue of the company (Sabeco, 2019). Sabeco was born in 1875 with the strong
development of the national economy, Sabeco has become a leading group in the beer industry in Vietnam
with famous brands such as 333, Saigon Lager, Saigon Special ... (Sabeco, 2019). Although there is a strong
foothold in the domestic beer market (43% market share of beer consumption in Vietnam market 2018),
the competitor has come from inside and outside the country, especially strong and fierce competition of
big players like Heineken and Tiger ... make Sabeco very pressure (Khang, 2019).
The following report highlights the positive and negative effects of the macro environment on Sabeco's
business. Besides, it also mentions the strengths and weaknesses within Sabeco and each of their links to
external macro factors.

Macro Environment includes Competitive environment and PESTLE
Competitive Environment
• There are several
barriers to entry or
exit
ð Quite low
Barriers to
Entry/Exit
Current Competitor
• Target customers fall
in the age range of
25-50
=> lots of potential
customers
=> weak
Customer's Power
• The main materials
are imported from
many countries in
Europe, Australia and
America.

Threat of Substitute
No Product Price
(VND) Characteristic Competitive Advantage
1 Saigon Special
beer 15.000
Glass bottle (green)
330ml
100% Malt
Alcohol : 4.9%
Concentration
Perennial beer brand
Combine during meals
Good price
2 CAFFÈ
AMERICANO 65.000
Paper/Plastic cup
473ml
Caffeine 225mg
Alcohol : 0%
concentration
Global coffee brand
Separate flavors
Customer Service
3 Iced tea 3.000
Glass cup
330ml
Tea
Alcohol : 0%
concentration
Cheap price
Appear everywhere

refreshed. Especially in the summer and after work, choosing iced tea is better than carbonated soft drinks.
Beer made from barley, cereals, malt, houblon, beer yeast - ingredients rich in energy, vitamins and other
minerals, it also has very high nutritional content (Sabeco, 2019). However, all of these 3 types, if used
incorrectly, will affect health. Both beer, coffee, and iced tea can be taken anytime we want but especially
Beer can be used in combination with food, no one has eaten rice and coffee or iced tea, but sometimes
in meals, family members together to drink beer beer is very conspicuous. From here, it can be seen that
the competitive pressure of substitutes is mainly the ability to meet demand compared to products in the
industry in addition to the factors of price, culture and technology also affect the threat of replacement
products.
ð Opportunity: Other products are hard to replace the position of beer products.
Industry Rivalry (current competition)
No Product Price
(VND) Characteristic Market Growth Competitive
Advantage
1
Saigon
Special
(Sabeco)
15.000
Glass bottle
330ml
100% malt
The total revenue
2017 increases 11%
compared to 2016
A pioneer beer brand
in Vietnam market
Some products are
made from 100% malt
without rice
Reasonable price, rich
taste
2 Heineken
(Heineken) 19.000
Glass bottle
250ml
A-yeast
The total revenue
2017 increases 5,3%
compared to 2016
High-end segment
A-yeast

In the current beer market, Sabeco is facing two competitors, Habeco and Heineken. According to the
annual report of companies in 2018, the market share of the beer industry in Vietnam of Sabeco, Habeco,
Heineken is 45%, 15% and 25% + respectively (Khang, 2019) . Habeco's key product line is Hanoi beer. This
is a product that accounts for 70% of HABECO's products (Habeco, 2019). The product is contained in glass
bottles (brown yellow) with a capacity of 450ml, alcohol content of 4.4% and has a selling price ranging
from 7,500 - 9,500 VND for 1 bottle. The reason for the bottled beer in Hanoi has a strong position in the
markets of the provinces and cities in the North is because of the attractive bright yellow beer color,
durable foam, smooth white, harmonious bitter taste, and aftertaste deposition. With Heineken, the
mainstream product line is also bottled beer. The packaging design is a blue glass bottle with a capacity of
250ml, Heineken's alcohol content is 5.0% (Heineken, 2019). The main ingredients for beer production of
all three companies are water, malt, houblon, but Heineken is more special because it uses A-yeast -
characteristic yeast, creating the brand of Heineken. Heineken locates its products in the high-end - high-
end segment, so the retail price for 1 Heineken beer bottle of 250ml capacity falls between VND 13,950 -
14,160 per bottle depending on the supplier. If Heineken has a special A-yeast material, the main product
line of Sabeco Saigon Special is no less competitive when it is produced 100% from malt (without rice). The
design of Saigon Special is also extremely eye-catching when the bottle is made of green glass, combined
with Sabeco's label designed specifically for this product line. The capacity of 1 bottle is 330ml with an
alcohol content of 4.9%. Sabeco positioned the product in the high-end mid-range segment with the selling
price falling around VND 15,000-17,000. With the strong distribution ability and the "bear play" of
marketing and social charity activities, Sabeco helps create a beautiful image in the eyes of the public.
Special product line with specially designed dwarf bottle shape has been built by Sabeco for TVC with the
slogan "Although you are not high, everyone must look up" (Thắng, 2018). That slogan has become Viral
for a long time, and it has brought great recognition to Sabeco as well as its Saigon beer product. Besides,
Sabeco is the brewer with the highest total capacity, reaching 1.8 billion liters of beer / year with 23
breweries spread across the country. With the coverage of factories in both North, Central and South,

Power of Buyer
Sabeco's target customers are about 25-50 years old regardless of male and female (who like to indulge in
drink) and this is also the age group that accounts for the majority of our country's population (about over
50% equivalent to about 48,787,097 Vietnamese people) in addition. The foreign market is also the market
invested by Sabeco. As pioneers in the beer market of Vietnam, Beer of Sabeco has appeared since 1875,
so when it comes to Sabeco, people still feel a little taste of the tradition, the taste of the nation. Customers
choose Sabeco because of the bold and unique flavor that Special brings. However, there are many other
beer products on the market from domestic to import. Drinking beer is related to taste, sometimes
consumers want to change their taste, want something new, and the beer market has too many choices
for them to fully meet price to quality. So the transition to another brand is not too difficult. And beer is
not a product that is too necessary in life, so they can absolutely not use it. In the beer market, power of
buyer is quite high.
ð Threat: the buyer of Sabeco is easy to change into the other brand.
Power of Supplier
Sabeco is known as a corporation that focuses on quality investment. In order to ensure the highest quality
of raw materials, as well as to take initiative in supplying sufficient and timely raw materials for production
and business activities, Sabeco has diversified the supply of raw materials, positively looking for and
cooperating with capable and reputable suppliers at home and abroad. The main ingredients in beer
production process are malt (barley seeds), houblon flowers, enzymes imported from countries in Europe,
Australia and America. Since raw materials account for a large proportion in the cost structure of products,
the change in raw material prices will directly affect the cost and profit of the corporation. The malt barley
market in Vietnam may be rare, there are not many suppliers but the world malt output in 2010 reached
123.54 million tons (VIRAC, 2017). So to find a good quality malt supplier with good price is not too difficult
for Sabeco. Currently Sabeco is importing malt from countries such as China, France, Germany, Australia.

Threat of Entry (Potential Competitor)
Besides Sabeco, there are currently many breweries such as Habeco, Heineken, ... and other small
companies that also produce beer still exist on the market. There are many substitutes for beer such as
tea, coffee, wine, ... and the possibility of substitution is also very high. Especially, the prices of products
are often unlisted, vary depending on the seller, who provide the product directly to consumers. For
example, Saigon Special cans, the price for a carton with 24 cans of 330ml here and .com is VND 337,000;
at Lazada is VND 120,000 and at LOTTE.vn is VND 297,600. So the market structure of Sabeco is
Monopolistic Competition. Beer is an alcoholic beverage, so when Sabeco wants to introduce the beer
market to Vietnam, there are some legal and food safety barriers to the beer production process.
Vietnamese law has a circular 53/2014 / TT-BCT stipulating conditions for ensuring food safety for beer
production and trading establishments (Thoa, 2014); Circular QCVN 6-3: 2010 / BYT - National technical
regulation on alcoholic beverages (FSI, 2010). The beer market in Vietnam has a large consumption
capacity, an exponential growth rate so a lot of foreign investors want to enter the market, businesses
want to invest capital to participate in the beer market share. Vietnam is not too difficult. Businesses that
want to get out of the market also have some barriers. The initial investment and separate technological
lines of the business will be lost. Enterprises also have to compensate labor contracts for employees. In
general, the barriers are not too tight and not too big, so the beer market currently has a lot of members
and in the future there will be many new members who will enter this potential market.
ð Threat: the low barrier to entry or exit makes Sabeco having a lots competitors
PESTLE
Political
A country's politics has a lot to do with its business. Sabeco is currently developing most strongly in

was honored to welcome many heads of state from the US, Korea, Cuba, ...; was chosen to host the US-
Korea summit. The tenure of the heads of state is also very stable about 5 years for 1 term.
Vietnam currently has 3 very strong exclusive economic zones: Van Don (Quang Ninh); Bac Van Phong
(Khanh Hoa); and Phu Quoc (Kien Giang). Enterprises here will enjoy 10% tax rate for a period of 30 years,
4 years tax exemption and 50% reduction of payable tax amount for 9 subsequent years from the time of
taxable income. Particularly for income from real estate investment and business projects, the preferential
tax rate of 17% will apply (Sơn, 2017). So if Sabeco develops in these areas, it will be greatly supported by
the government and the state, the opportunity for Sabeco to expand its market. Since January 11, 2007,
Vietnam has officially become the 150th member of the World Trade Organization (WTO) (Dantri, 2007).
This is a major turning point in the process of integration with the international economy. Increased role
in the international arena of Vietnam is a good premise, creating favorable conditions for Vietnamese
enterprises to boost exports, including Sabeco Company. At the same time, it also brings Sabeco company
great challenges when competing with similar products of foreign companies imported into Vietnam.
Economic development policy: Our country is in the process of industrialization and modernization, so the
State creates favorable conditions, policies, and preferential tax system to encourage businesses.
Annually, the government spends a considerable amount of money on building infrastructure, bridges,
roads and auxiliary works that indirectly affect the business operation of the company. Besides, our
country has exchanged relations with many countries
In the world, it is convenient for us to export and find partners to develop markets abroad. As an enterprise
operating in the form of a joint stock company and listed on the Saigon Stock Exchange, the operation of
Sabeco is influenced by the legal documents on joint stock companies, securities and The stock market
includes the Enterprise Law, the Securities Law, its by-laws and regulations for listed companies. Laws and
sub-laws in this area are in the process of being completed, changes in policies can always occur and at
that time more or less affect the management and business activities of the Company. This afternoon,