Analysis of SABECO's External Environment and Market Dynamics

This report offers a comprehensive analysis of SABECO, a prominent beer brand in Vietnam, assessing the impact of its external environment on its operations. Employing Porter's Five Forces, PESTLE, and SWOT analyses, the report dissects the competitive landscape, political, economic, social, technological, legal, and environmental factors influencing SABECO. It examines both the positive and negative impacts of the macro environment, evaluating potential competition, current market dynamics, and the threat of substitutes. The internal environment, including vision, mission, and core values, is also explored, alongside an analysis of SABECO's strengths, weaknesses, opportunities, and threats. Lessons are drawn from competitor Heineken, providing insights for SABECO's strategic decision-making and adaptation to the evolving market conditions. The report concludes with key findings and recommendations for SABECO's future growth and sustainability in the Vietnamese beer market.

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TABLE OF CONTENT
A. INTRODUCTION ................................................................................................................................. 1
B. FINDINGS ..................................................................................................................................................
1
I. PORTER’S FIVE FORCES......................................................................................................................... 1
1. Potential competition..................................................................................................................... 1
2. Current competition ....................................................................................................................... 1
3. Threat of substitute ........................................................................................................................ 1
4. Power of
suppliers .......................................................................................................................... 1
5. Power of buyers ............................................................................................................................. 1
II. PESTLE ANALYSIS .................................................................................................................................. 1
1. Political Factors .............................................................................................................................. 2
2. Economic Factors ........................................................................................................................... 2
3. Social Factors .................................................................................................................................. 2
4. Technological Factors ..................................................................................................................... 2
5. Legal Factors ................................................................................................................................... 2
6. Environment Factors ...................................................................................................................... 3
C. DISCUSSION .......................................................................................................................................... 3
I. POSITIVE AND NEGATIVE IMPACTS OF MACRO ENVIRONMENT TO THE COMPANY ........................ 3
1. Porter’s Five Forces ....................................................................................................................... 3
1.1. Potential competition .............................................................................................................. 3
1.2. Current competition ................................................................................................................ 3
1.3. Threat of substitute ................................................................................................................. 4
1.4. Power of suppliers ................................................................................................................... 4
1.5. Power of buyers .......................................................................................................................
5
2. Six Factors of Macro Environment (PESTLE) ................................................................................. 5
2.1. Political .................................................................................................................................... 5
2.2. Economic ................................................................................................................................. 5

2.3. Social ........................................................................................................................................ 6
2.4. Technological ........................................................................................................................... 7
2.5. Legal ......................................................................................................................................... 7
2.6. Environment ............................................................................................................................ 8
II. INTERNAL AND EXTERNAL ANALYSIS – SABECO’S POTENTIAL ........................................................... 8
1. The internal environment of SABECO ........................................................................................... 8
1.1. Vision – Mission – Core value .................................................................................................. 8
1.1.1. Vision .......................................................................................................................... 8
1.1.2. Mission ........................................................................................................................ 8
1.1.3. Core value ................................................................................................................... 9
1.2. Company structure ..................................................................................................................
10
1.3. Human Resources ....................................................................................................................
11
1.4. Brand Equity ............................................................................................................................
11
1.5. Financial Strength/Fix assets ...................................................................................................
11
1.6. Research and Development .....................................................................................................
12
2. The influence of external environment ........................................................................................ 13
III. STRENGTHS – WEAKNESSES – OPPORTUNITIES – THREATS ANALYSIS ..............................................
13
1. SWOT ANALYSIS ............................................................................................................................. 13
1.1. Strengths of SABECO................................................................................................................
14
1.2. Weaknesses of SABECO ...........................................................................................................
14 1.3. Opportunities of
SABECO ........................................................................................................ 14
1.4. Threats of SABECO ...................................................................................................................
14
2. Decision-making of SABECO – New solution for the new context .............................................. 15
IV. LESSON FROM EXPERIENCE OF CURRENT COMPETITOR ....................................................................
16
1. HEINEKEN’S PROFILES ....................................................................................................................
16

2. Analysis the solution to both companies .....................................................................................
17
2.1. Advantages of HEINEKEN .........................................................................................................
17
2.2. Disadvantages of HEINEKEN ....................................................................................................
17
3. Lesson for SABECO ......................................................................................................................... 17
D. CONCLUSION .......................................................................................................................................
17
REFERENCE ................................................................................................................................................... 19
LIST OF PICTURES
Picture 1: PESTEL model analyzes the enterprise environment ........................................................................
1 Picture 2: Some popular beer brands in
Vietnam ............................................................................................. 4 Picture 3: The police go out to check
for alcohol content violations in traffic .................................................. 8 Picture 4: Core Values of SABECO
(Annual report 2019, p.13) .......................................................................... 9
Picture 5: The organization structure of SABECO (Annual report, 2019, p.33) ....................................
10
Picture 6: Some typical products of SABECO .....................................................................................................
11
Picture 7: SABECO's sustainable development strategy focuses on four pillars ..................................
13
LIST OF FIGURES
Figure 1: Per capita income in Vietnam from 2010 to 2020 and forecast by 2021 ........................................... 6
Figure 2: Energy consumption figures for 2019 compared to 2018 .................................................................. 7
Figure 3: Profit after tax of SABECO (VNEXPRESS,2020) ......................................................................
12
Figure 4: Beer market shares of enterprises from 2010 to 2019 ......................................................... 13

A.INTRODUCTION
SABECO is a famous beer brand in Vietnam with the leading beer market share in the country. Over 145
years of establishment and development, SABECO has been a familiar brand name to Vietnamese people. In
the previous report, the researcher analyzed the company's internal environment, the following report will
analyze how the external environment affects the company's operations.
Through Porter's Five Forces, PESTLE, and SWOT analysis, this report will show the strengths and
weaknesses of SABECO and the potential investors can realize.
B.FINDINGS
I. PORTER’S FIVE FORCES
1. Potential competition
Potential competitors are the competition that manifests itself in the reaction of existing competitors to
barriers to entry. The risk of intrusion by potential competitors will affect the level of competition in the
future.
2. Current competition
The major determinant is the number and ability of competitors in the market. When the market has
many competitors but the products and services offered do not differ much, it leads to a sharp drop in
the attractiveness of the market.
3. Threat of substitute
The substitution threat largely depends on the nature of the goods being traded in the market and the
degree of differences in the product, such as price and quality. If a product does not have a substitute,
the producer will face less competition, which results in a higher producer market power.
4. Power of suppliers
A supplier's bargaining power relates to the supplier's ability to put pressure on companies by
increasing prices, reducing quality or reducing the availability of products. Vendor powers are
significantly reduced as companies can produce the components they need by themselves.
5. Power of buyers
A customer's bargaining power means that a customer or consumer can put pressure on a business
to provide higher quality products, better customer service at lower prices. Buyers have higher market
power when a market has a small number of buyers. Enterprise, companies always need customers,
so most of the market power of customers is high.
II. PESTLE ANALYSIS
PESTEL analysis is an acronym for a tool used to identify the macroscopic (external) forces that an
organization faces.
1

Picture 1: PESTEL model analyzes the enterprise environment
1. Political Factors
These factors determine the extent to which government and government policies can affect a
particular organization or industry. Governments can impose a new tax or tax, which in turn can
change the overall revenue-generating structure of organizations. Political factors include tax policies,
Fiscal policy, trade tariffs, etc.
2. Economic Factors
These factors determine the performance of the economy that directly affects a company and has
lasting effects on resonance. For example, an increase in inflation will affect the way a company prices
its products and services. It also affects consumer purchasing power and supply/demand patterns for
that economy. Economic factors include inflation rate, interest rates, foreign exchange rates,
economic growth patterns, etc.
3. Social Factors
These factors carefully analyze the social environment of the market and evaluate determinants such as
cultural trends, demographics, demographic analysis and so on.
4. Technological Factors
These factors indicate that innovations in technology can affect industry and market performance,
either favorably or adversely. Factors can include changes in digital or mobile technology, automation,
research and development.
5. Legal Factors
2

Organizations need to understand what is legal and permitted in the territories in which they operate.
They also need to grasp the earliest changes in laws to adjust their business accordingly. Factors include
employment laws, consumer laws, health and safety, international and commercial regulations and
restrictions.
6. Environment Factors
The environment is an essential factor for certain industries such as tourism, farming, agriculture and so
on. Factors include climate, recycling, carbon emissions, waste disposal and sustainability.
C. DISCUSSION
I. POSITIVE AND NEGATIVE IMPACTS OF MACRO ENVIRONMENT TO THE COMPANY
1. Porter’s Five Forces
1.1. Potential competition
The Vietnamese market is considered the directional land for both foreign and domestic brewers
due to the massive consumption. In reality, however, it is a highly competitive playing field. As a
long-standing beer company, SABECO has great power in the market and has become the leading
brand in Vietnam (VNEXPRESS, 2018).
1.2. Current competition
Vietnam's beer industry has grown rapidly over the past 10 years with beer production now
accounting for 95% of the total alcohol consumption of Vietnamese. Facing the great
attractiveness of the market, the world's leading beer brands such as Heineken, Tiger, Carlsberg,
Budweiser, Sapporo, ... all "landed" in Vietnam. Therefore, the Vietnamese beer market
gradually becomes "cramped" when there are more than 30 major beer brands in the world
participating. The increasing appearance of international beer brands has made competition in
the Vietnamese beer market increasingly fierce, especially in the premium beer segment. This is
a bad sign for SABECO when dealing with other famous beer brands (MINH DUNG, 2020)
3

Picture 2: Some popular beer brands in Vietnam.
1.3. Threat of substitute
Recently, after a series of doubts about the effects of alcohol on gout, scientists have finally
proved this connection is real. And beer is the most dangerous threat. Hence light beer
appeared. SABECO's direct competitor is HEINEKEN when it has launched a new non-alcoholic
beer.
1.4. Power of suppliers
Climate change is one of the main factors influencing the price and volume of key ingredients such
as malt and hops. Malt and hops are agricultural products; if the weather is not favorable, farmers
will not actively harvest, leading to a shortage of raw materials. Moreover, in order to limit the
negative impact of price and volume fluctuations, SABECO has actively looked for solutions to
reduce raw material costs such as (ANNUAL REPORT, 2019, P.52)
• Buying output in advance following the demand to ensure enough raw materials for
production.
• Maintain supplies from different regions to minimize the risk of product shortages and
provide the opportunity to purchase raw materials at the most affordable prices.
• Collaborate with companies in the system to make joint purchases to achieve better prices
and stable quality.
4

• Packaging improvements to reduce costs and harm the environment.
1.5. Power of buyers
With the number of over 300 breweries with the production of over billion litres per year and
with the presence of famous beer brands both at home and abroad such as Heineken, Tiger,
Sapporo. Beer products have given customers in Vietnam many choices. This has created
enormous competitive pressure on brewers, and SABECO is also facing similar difficulties.
2. Six Factors of Macro Environment (PESTLE)
2.1.Political
The beer industry is directly influenced by the State's policy changes.
• In 2018, the excise tax on alcoholic beverages increased from 60% to 65% on beverages with
an alcohol content above 20 ABV and increased from 30% to 35% for beverages below 20 ABV.
This has a significant impact on the profitability of SABECO.
• In 2019, the Law on Prevention of Harms of Alcohol No. 44/2019 / QH14 was issued by the
National Assembly and came into effect from the beginning of 2020. This regulation affects the
consumption behavior of the beer and alcohol market in Vietnam. Besides, the law has also
enacted many restrictions on advertising beer and wine products. Businesses in the industry
have more difficulties in promoting products.
• At the end of 2019, the government issued Decree No. 100/2019 / ND-CP on handling
violations in the road traffic sector with strong and strict sanctions to minimize traffic
accidents. However, this will cause a significant reduction in alcohol consumption.
• In 2020, due to the complexity of the COVID-19 epidemic, the government has policies to
restrict people from going to the streets and closing businesses such as restaurants, bars, and
karaoke. This causes SABECO's local consumption channel seriously affected, leading to a
decline in revenue and profit in 2020.
2.2.Economic
5

Figure1: Per capita income in Vietnam from 2010 to 2020 and forecast by 2021
In 2020, Vietnam is one of the four economies with per capital GDP growth (Viet Hoang, 2020)
According to the General Statistics Office of Vietnam, the economic growth rate in 2019 will reach
7.02%, creating favorable conditions for SABECO's the production and business activities (Annual report,
2019)
Vietnam's economy is in a fast-growing group with increasing GDP and per capita income and rapid
urbanization. Vietnam is one of the countries in the region with a population structure in the "young
population" period. These are factors that help boost demand and support the future growth of
Vietnam's beer market.
According to John and Partners, there is a strong disparity between urban and rural incomes. This leads
to significantly different trends and habits of Vietnamese product consumption in different regions,
depending on each person's income level. The writer also points out that in industrial activities, the beer-
alcohol-beverage industry has higher economic efficiency than other industries (John & Partners, 2018)
2.3. Social
Vietnam is witnessing rapid changes in population and social structure. Currently, Vietnam's
population is 96.5 million, with 70% of the population under 35. This is a good sign for the beer
industry.
According to John et al., With a golden population structure, increasing educational attainment, a
growing middle class and a stable economic outlook of the government are key factors helping
Vietnamese consumers. More importantly, spend more money and drink more beer.
6