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Problems and conflicts


In 1997, Shiseido commenced sales in Vietnam via its distributor (Thuy Loc Trading
Company Limited). A year later, the company and its 13 partners invested in some outlets
to help develop a nation-wide network for the brand. Over 15 years, they developed a
professional nationwide retail network and successfully made the
luxurious cosmetic brand popular amongst Vietnamese customers.
In 2010, Shiseido established Shiseido Cosmetics Vietnam Company Limited (SCV) as a
wholly owned subsidiary and commence operations to handle import and sales of
cosmetics products in Vietnam. By doing that, Shiseido could have the right for direct
distribution in Vietnam to expand sales and profit. Next, Thuy Loc transferred the
management of Shiseido in Vietnam to SCV and problems occurred.
First of all, this caused loss to 13 investors who made 30-60 per cent investments in
several retail outlets. They claimed that SCV and Thuy Loc only had promotions
exclusive to outlets fully owned by SCV, undercutting sales in the jointly-owned shops.
According to them, there was discrimination between shareholder-funded stores and
SCV-funded ones.
They assumed that they should be considered as business partners of Shiseido trademark
via the bridge Thuy Loc, which is currently under the management of SCV.
However, SCV stated that on legal basis, they did not hold any tie with Thuy Locs
partners.
At the same time, SCV and Thuy Loc were also involved in a legal dispute over money
that each party claimed the other owed.
Question 2: entry strategy SCV used to enter Vietnam market
SCV entered in Vietnamese market through indirect export strategy with an export
trading company (ETC) named Thuy Loc company (TLC).
Because of independent trade relationship between TCL and SCV (SCV as a salesman of
TLC) then the way TLC consumed products does not affect the Shisiedos reputation in
Vietnam (expect Shiseido does not sale products to TLC).By this way, TLC hold
executive power, the 15 shareholders not only bear recurring interests but also supported
and participated in promoting products, looking for customers in Vietnam. After an entry
in Vietnamese market, SCV has chosen methods of competition by selling same products

with cheaper price than TLC together with many promotion programs for the purpose to
attract directly customers without through TLC.With such business strategy, SCV made
the cost of its competitors (including TLC and 15 investors) increased and SCV benefited
from it.
Shiseido took advantage of a popular Japanese cosmetic image in Vietnam by allowing
TLC be the only independent exporter in Vietnam around 10 years then they established
SCV with the aim to hold the exclusive distributor of Shiseidos products in Vietnam
through TLC without losing any cost of marketing, promotion and seeking for demand.
3. Gains and Losses of SCV and TLC
In this case, Shiseido Japan has an enormous advantage over its competitors. Firstly, by
exporting indirectly through Thuy Loc export trading company, Shiseido Cosmetics
Vietnam (SCV) needn't interfere but already have a certain position in Vietnamese
market, its time for SCV promote widely and directly their own product. Vietnamese
customers approached and had confidence in Shiseido cosmetics due to marketing
strategy of TLC during 13 years. SCV took control of the exclusive distribution in
Vietnam.
Secondly, officially entering Vietnamese market, SCV gain advantages of more
competitive price comparing with TLC, of cheaper labour cost, cheaper business
premises, higher interest rate comparing with their company in Japan. However, SCV
brought discredit upon Vietnamese customers when they came to an agreement with
TLC, which was considered as a lack of transparency.
Despite earning $ 8 million from the sale of the company and dealers, Thuy Loc seems to
keep their business unprofitable. SCV and TLC had had business relationship for years
but then became competitors. TLC did not only deal with a loss of reputation but this also
affects negatively to their future business because they involved in a messy legal battle
involed The People's Court in Ho Chi Minh city. The agreement was considered to be
violated by TLC led to their responsibility in legal issue.
Cu 4.
In Thuy Loc Company side, from this case they have many lessons to learn.
To begin with, the international business law is very important when dealing with foreign
company. In this case, Thuy Loc Company couldnt protect their rights and made losses
to themselves. If their knowledge about international business law was better, they could
have avoided unwanted situation and consequences like this case.
Secondly, getting to know your partners way of working, included their cultural business

behavior, is a must. For instance, Thuy Loc Company didnt aware of Shiseido
Companys intention to take control of Vietnam cosmetic market, so they were a part of
Shiseido Companys plan to achieve their own goal.
The third lesson from this case is domestic company should have transparency among
themselves and their retail stores. This can help them prevent disputes later and legal
issues related to transparency like payment, receipt, etc.
Last but not least, domestic company should register their copyright and be careful when
conduct a transaction. This action can keep their benefits protected by the law, and to
make sure they dont have to suffer any loss by making mistakes.
From the side of SCV, there are 2 lessons. Firstly, understanding your partners
background and the way they are working is crucial. Second, have knowledge of the
business law of the country can give advantages when working international. Both of
these lessons can help foreign or international company achieving the goal when doing
business in Vietnam.
5. What mistakes do you think each involved party make? Explain.
On the Thuy Loc's side, in this case Thuy Loc made 2 significant mistakes.
First, they did not take a deep research about the international business law, international
business methods; and second, their lack of vision and understanding about
Shiseido's plans and purposes led to the lost control of Vietnamese market.
The reason for the first mistake was because of the lack of experience in doing business
with foreign companies. During the late 1990s and early 2000s, Vietnamese companies
were new players in international business, Thuy Loc company was not an exception.
Therefore, Thuy Loc let the Shiseido Vietnam (SCV) controlled the entire Vietnamese
market, and later on they were brought to Vietnam International Arbitration Centre by
SCV in order to get the debt money from Thuy Loc company.
The second mistake was their fault in letting SCV controlled Vietnam market. From 1998
until early 2010, the business of Thuy Loc company went smoothly and successfully,
however, when Shiseido decided to establish a branch in Vietnam which was Shiseido
Cosmetic Vietnam (SCV), Thuy Loc decided to transfer the management of Shiseido
products to SCV.
Another mistake from Thuy Loc company which has been debated in the past few years
is the un-transparency action with their investors. After 2010, many investors losed their

investment money on Thuy Loc and they have not got it back yet. This action put a big
question on Thuy Loc company's activity and it dealt a big damage on Thuy Loc's
reputation.
On the Shiseido's side, it was hard to say whether they was wrong in this case or not, but
still, there might be an assumption that Shiseido also conducted their un-transparency
activities which led to the downfall of some investors. Many of these investors wanted to
sue Shiseido for this reason

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