WRITTEN ANALYSIS OF CASE

Mary Kay Cosmetics Asian Market Entry

COURSE:

MARKETING STRATEGY

PRESENTED TO: PRESENTED BY:

MR. YASSER HAMAYUN SHAHBAZ SHOUKAT 0 !!"#$ MBA

Institute of Management Sciences Pa!"Aims# SYNO%SIS O& CASE

In Fe$%ua%& '(()* Cu%%an Dan+u%an+* senio% ,ice -%esi+ent of Ma%& .a& Cosmetics Inc/ 0e 1as %ef2ecting on t3e com-an& Inte%nationa2 O-e%ations/ M.C -%o+ucts 3a+ $een so2+ outsi+e t3e 4nite+ States fo% o,e% '5 &ea%s an+ $& '((6/

M.C '((6 %etai2 sa2es 1e%e 7 ' Bi22ion/ M.C so2+ a %ange of s!in ca%e* -e%sona2 ca%e* an+ cosmetic -%o+ucts t3%oug3 a--%o8imate2& 695*::: in+e-en+ent sa2es -eo-2e 1o%2+1i+e/ Com-an& offe% un2imite+ o--o%tunities of 1omen in $usiness/ ;i%tua22& a22 t3e com-an& -%o+ucts 1e%e manufactu%e+ in a sing2e -2ant nea% Da22as/ Fou% $asic 2e,e2s of in+e-en+ent cont%acto%s 1e%e inc2u+e+ in M.C sa2es fo%ce/ M.C +e,e2o-e+ -%og%ams an+ manua2s fo% its sa2es fo%ce/ Ma%& .a& As3<s c3a%isma* -3i2oso-3&* an+ moti,ation 1e%e 2i!e2& a--ea2 to 1omen t3%oug3out t3e 1o%2+/ Com-an& 3a+ '::= su$si+ia%ies in nine count%ies/ T3e fi%st t1o ma%!et ent%& 1as not c3osen fo% st%ategic %eason $ut fo% a--%oac3 to com-an& f%om 2oca2 ent%e-%eneu%s/ In '((6* M.C initiate+ an o%gani>ationa2 c3ange t3at %esu2t in t3e fo%mation of g2o$a2 %esou%ce g%ou- to su--o%t sa2es su$si+ia%ies 1o%2+1i+e/ '(() %esea%c3 in+icate+ t3at M.C 1as -e%cei,e+ $& some Cana+ian consume%s as out of +ate/ Di%ect se22ing met3o+ $ac!e+ $& a+,e%tising* cata2og sa2es an+ $u&ing c2u$ sa2es 1as successfu2 in Aust%a2ia/ B%an+ image an+ a1a%eness 1as -ositi,e afte% fou% &ea%s in Me8ico/

 ?oo+ sa2es -osition in Tai1an an+ in futu%e it 1i22 g%o1/ M.C esta$2is3e+ su$si+ia%ies in ?e%man&/ ?%eat teac3e% st%ateg& to +iffe%entiate M.C f%om ot3e% %etai2 an+ +i%ect se22ing com-anies in '(()/ Decision e,o2,ing ent%ies in fastest g%o1ing %egion of Asia/ Fin+ing out t3e c%itica2 success facto% fo% ent%ies into @a-an an+ C3ina/ E,a2uating ne1 +ist%i$ution met3o+ fo% $ot3 count%ies/ Lea%ning f%om com-an& o1n an+ its com-etito%<s inte%nationa2 o-e%ations/ Bette% un+e%stan+ing of consume% -%efe%ence an+ +eman+ an+ +e,e2o-ment of ne1 -%o+ucts fo% +iffe%ent %egion of t3e 1o%2+/ In '((6* M.C con+ucte+ a focus g%ou- in C3ina/ Sen+ing 2engt3& -%o+uct fo% a--%o,a2 to Minist%& of 0ea2t3 @a-an#/

INTRODUCTION
Ma%& .a& Cosmetics inco%-o%ate+ in Te8as 4nite+ States# in '(A) $& Ma%& .a& As3/ M.C 1as a +i%ect se22ing cosmetics com-an& an+ $& '((6 inte%nationa2 sa2es %e-%esente+ on2& ''= of t3e 7 ' $i22ion tota2/ W3e%e as one of its com-etito% A,on P%o+ucts Inc +e%i,e+ o,e% 55= of its 7)/A $i22ion sa2es f%om inte%nationa2 ma%!et/ M.C so2+ a %ange of s!in ca%e* -e%sona2 ca%e* an+ cosmetics -%o+ucts t3%oug3 $eaut& consu2tants/ T3e com-an& -o1e%fu2 cu2tu%e 1as $ase+ on offe%ing un2imite+ o--o%tunities fo% 1omen in $usiness* a2so com-an& +efine+ its mission as -%omoting $usiness o--o%tunities fo% 1omen* teac3ing 1omen 3o1 to ca%e fo% t3ei% s!in an+ use cosmetics an+ offe%ing s!in ca%e s&stems an+ -e%sona2 se%,ices to its custome%s/ In '((6 M.C manufactu%e+ 665 S.4s inc2u+ing co2o% s3a+es an+ ,i%tua22& a22 M.C -%o+ucts manufactu%e+ in a sing2e -2ant A most efficient cosmetic -%o+uction faci2it& in 1o%2+# nea% Da22as/ Com-an& in,o2,e+ its sa2es fo%ce in -%o+uct -o2ic& +ecisions $& sen+ing sam-2es to t3em fo% e,a2uation/ M.C sa2es fo%ce inc2u+e+ t3e fou% $asic 2e,e2s $eaut& consu2tants* sa2es +i%ecto%s* senio% sa2es +i%ecto%* an+ nationa2 sa2es +i%ecto%s an+ -%omotions 1e%e ma+e on t3e $asis of -e%fo%mance/ ;i%tua22& a22 $eaut& consu2tants 1e%e fema2e an+ t3e& $oug3t M.C -%o+ucts at a B:= to 5:= +iscount off t3e %etai2 se22ing -%ice* +e-en+ing on ,o2ume a2so '5= of sa2es fo%ce 3a,e to atten+ semina% in Da22as/ Sa2es -eo-2e %ecei,e+ B= to '6= ma%gins of 13o2esa2e -%ices of t3e -%o+ucts/ M.C 3as a2so +e,e2o-e+ manua2s* sa2es t%aining a+s fo% its sa2es fo%ce/ M.C facing a matu%e ma%!et an+ -enet%ation of 4/S/ cosmetic +i%ect se22ing com-anies in '(()/ A2so com-etito%s of t3e com-an& 1e%e successfu2 in inte%nationa2 ma%!et a2so M.C e8ecuti,es $e2ie,e+ t3e com-an& cu2tu%e cou2+ $e t%ansfe%%e+ inte%nationa22& an+ moti,ation* -3i2oso-3& 1e%e 2i!e2& to a--ea2 to 1omen t3%oug3out t3e 1o%2+/ In ea%2& '(()* M.C -%o+ucts 1e%e so2+ in '( count%ies an+ ne1 o%gani>ation st%uctu%e is s3o1n in E83i$it B/ T3e g2o$a2 ma%!eting g%ou-* 3ea+e+ $& Dan+u%an+* -%o,i+ing su$si+ia%ies 1it3 -%o+uct +e,e2o-ment* ma%!eting su--o%t* a+,e%tising* -u$2ic %e2ation an+ consume%s -%omotion mate%ia2s/ Fo% futu%e Inte%nationa2 e8-ansion %egiona2 sa2es 3ea+Cua%te%s 1e%e esta$2is3e+ fo% AsiaD-acific* Eu%o-e* an+ Ame%icas e8c2u+ing t3e 4/S/#/ Fo% futu%e inte%nationa2 e8-ansion a E?%eat teac3e%F St%ateg& is i+entifie+ in '(()/ Tai1an su$si+ia%& $& '((6* $ecome -%ofita$2e an+ -%omise+ goo+ futu%e sa2es g%o1t3/ M.C futu%e e8-ansion com-an& consi+e%ing $ot3 @a-an an+

C3ina ma%!ets/ Com-an& 3as con+ucte+ focus g%ou-s an+ consi+e%ing 13ic3 -2ans an+ ma%!eting mi8 o-tions 1ou2+ $e mo%e effecte+ in $ot3 count%ies/

%ROB'EM STATEMENT
T3e !e& issue %ig3t no1 is t3at 3o1 M.C cou2+ e8-an+ its inte%nationa2 o-e%ations an+ 13ic3 e2ements of M.C<s cu2tu%e* -3i2oso-3&* -%o+uct 2ine an+ ma%!eting -%og%ams a%e t%ansfe%a$2e/ C%itica2 success facto%s an+ ma%!eting st%ateg& fo% futu%e inte%nationa2 e8-ansion nee+ to $e +efine+/ Cu%%ent2& com-an& 1as e,a2uating t1o ma%!et ent%& o--o%tunities an+ t3ose a%e @a-an an+ C3ina/ Com-an& 1i22 face t3ese !in+s of ma%!et an+ situations:
o @a-anese ma%!et 1as a matu%e $ut 2uc%ati,e ma%!et/ o C3inese ma%!et 1as a %a-i+2& g%o1ing an+ c3anging $ut %e2ati,e2& un!no1n ma%!et 1it3 su$stantia22& 2o1e% in+i,i+ua2 -u%c3asing -o1e%/

Ent%ies into t3ese ma%!ets 1ou2+ fu%t3e% e8ten+ its inte%nationa2 e8-ansion/

CASE ANA'YSIS
In '(()* M.C 1as facing a matu%e 4/S/ cosmetics ma%!et a2so inc%easing num$e% of com-eting +i%ect se22ing o%gani>ation* an+ -otentia22& ma8imum 3isto%ica2 -enet%ation in some a%eas of t3e 4nite+ States/ A2so com-etito%s of t3e com-an& suc3 as A,on an+ Am1a& 3a+ $een ,e%& successfu2 inte%nationa22&/ Due to t3ese facto% com-an& e8ecuti,es t3in!ing 1a& M.C a2so not mo%e successfu2 2i!e t3ei% com-etito%s/ Fo% t3is Cu%%an Dan+u%an+ S/;/P# of g2o$a2 ma%!eting g%ou- consi+e%ing t3e ma%!et ent%& o--o%tunities of @a-an an+ C3ina fo% AsiaDPacific %egion* on t3e $asis of ma%!eting st%ategies 13ic3 1i22 $est suit fo% eac3 count%&G Bot3 t3e count%ies ma%!et 3as -otentia2 fo% t3e s!in ca%e cosmetic -%o+ucts/ As com-a%e to @a-an* C3inese ma%!et is %a-i+2& g%o1ing ma%!et 1it3 2o1e% in+i,i+ua2 -u%c3asing -o1e%/ But on t3e ot3e% 3an+ in @a-anese ma%!et cosmetic ma%!eting an+ +i%ect se22ing 1e%e 1e22 !no1n an+ acce-te+/ C%itica2 success facto%s fo% eac3 ma%!et in te%m of ma%!et si>e* +ist%i$ution c3anne2s* com-etition an+ $a%%ie%s to ent%&/ A22 t3ese facto%s 1e%e most im-o%tant facto% fo% $ot3 ma%!ets an+ can $e a++%esse+ $& com-a%ing $ot3 count%ies s!in ca%e ma%!et/

Com(ariso) o* S+i) care mar+et o* ,a(a) a)- C.i)a#

S+i) Care mar+et i) ,a(a)

@a-anese ma%!et 1as matu%e $ut 2uc%ati,e/

%ro(ose- Mar+eti)/ %0a)s *or e)teri)/ ,a(a)

Mar+et Si1e Ta%get ma%!et H 5 Mi22ion

Preliminary Estimates of the First Year Economics of Market Entry: Ja an an! China

Average retail unit price US$ Average MKC wholesale unit price Cost of goo s "reight an ut# %ross &argin )ro uct evelop&ent costs*#ear )ro&otion an a vertising costs*#ear Manage&ent overhea *#ear Start+up invest&ent costs

Japan $25.00 1250 2.!0 0.$5 '.(5 1.'M !.0M 0.(M 10.0M

In ta!es B"5 &ea%s to ea%n a goo+ -%ofit @a-an/

Missio)23isio)
De2i,e% 3ig3 Cua2it& -%o+ucts an+ Ma%& .a& As3<s C3a%isma* moti,ation an+ -3i2oso-3& fo% successfu2 ent%& into C3inese ma%!et an+ +e2i,e% $est Io$ o--o%tunities/

Mar+eti)/ O45ecti6e
A successfu2 ent%& into @a-anese ma%!et fo% t3e fu%t3e% g%o1t3 of inte%nationa2 e8-ansion/

Mar+eti)/ Mi7
%ro-8ct 9esi/) P%o+ucts s3ou2+ $e +esigne+ acco%+ing to t3e stan+a%+s of t3e @a-anese consume%s/ Bra)- Name M.C s3ou2+ use its o1n $%an+ name $ecause fo%eign -%o+ucts 1e%e 3ig32& a--%eciate+/ %ro-8cts S!in 2otions* face 1as3 an+ c2eansing -%o+ucts* an+ fe1 Ma!eu- -%o+ucts/ %ro-8ct %rice A22 t3e -%o+uct -%ices s3ou2+ $e c3a%ge $& consi+e%ing +omestic an+ fo%eign com-etito%<s -%o+ucts -%ices an+ com-ensation -2ans/ %0ace ?%o1t3 a%eas of @a-anese ma%!et/ %ac+a/i)/ P%o+uct s3ou2+ $e -ac!e+ in att%acti,e Ia%s o% containe%s/ La$e2 s3ou2+ $e a--2ie+ to Ia%s in a att%acti,e 1a& ca%%ies $ot3 Eng2is3 an+ @a-anese co-&/ Inst%uction -a-e% s3ou2+ $e inc2u+e+ in t3e -ac!ing in $ot3 2anguages// A-6ertiseme)t On -o-u2a% T; c3anne2s* -%int me+ia 2i!e maga>ines/ %ro-8ct 9i**ere)tiatio)2Com(etiti6e A-6a)ta/es De2i,e% 3ig3 Cua2it& an+ ,a%ieties of s!in ca%e an+ ma!eu- -%o+uct 1it3 a image of $est suite+ fo% @a-anese consume%s/

Co)s8mer Be.a6ior
In &ea% '((:* a inc%easing -e%centage of @a-anese 1omen 1e%e going fo% fu%t3e% e+ucation an+ 1o%!ing outsi+e t3e 3ome an+ 65/( mi22ion of @a-anese 1omen o,e% t3e age of '5 1e%e em-2o&e+/ In &ea% '((6* t3e& s-en+ on a,e%age 7B:: on cosmetics/ Fo%t& -e%cent of a22 cosmetics sa2es 1e%e to 1omen in t3ei% 6:s an+ ):s ')/BAJ mi22ion# B/AAJ mi22ion of ):s#/ T3e 3ea,iest use%s 1e%e J/J mi22ion 1omen age+ $et1een 6: an+ 6( an+ t3ese 1e%e 2ess -%ice sensiti,e an+ inte%este+ in 3ig3 Cua2it& cosmetics/ S!in ca%e -%o+ucts accounte+ fo% B:= of a22 cosmetic sa2es/ F%om facia2 an+ s3a+e+ ma!eu- use%s* fo%t&"fou% -e%cent an+ fo%t& -e%cent -u%c3ase a22 o% some of t3ei% -%o+uct f%om +i%ect se22ing com-anies a2so nineteen -e%cent an+ t1ent& -e%cent f%om t3e +i%ect sa2es-eo-2e/ T3e a,e%age @a-anese 1omen s-ent a2most t3%ee times mo%e on s!in ca%e t3an t3e Ame%ican 1omen* $ut t3e -%ice +iffe%ence co,e%s $ot3 t3e count%ies annua2 e8-en+itu%es an+ @a-anese consume% em-3asis on ,isua2 a--ea2 of -%o+uct -ac!aging/ @a-anese consume%s $e2ie,e+ t3at t3e& 3a,e sensiti,e s!in an+ -in! co2o% 1as mo%e a--%o-%iate fo% c3i2+%en an+ teenage%s/ A2so in @a-an se,e%a2 +iffe%ent c2eanse%s an+ moistu%i>e%s 1e%e t&-ica22& use+ in a sing2e s!in ca%e %egion as com-a%e to ) in 4nite+ States/ M.C s3ou2+ consi+e% a22 t3ese -oint s-ecia22& t3e co2o% of t3e -%o+uct an+ is ,isua2 a--ea2ing of t3e -%o+uct a2so sensiti,e s!in $e2ie,e of t3e @a-anese consume%s/ 9istri48tio) C.a))e0s P%o+uct +ist%i$ution can $e +one $& using t3%ee main c3anne2s in @a-anese Ma%!et an+ t3ose 1e%e: Franchise system a2so !no1s as a c3ain sto%e/ Dist%i$ution com-an& is a2so in,o2,e+ an+ a2most fo%t& -e%cent of cosmetics sa2e t3%oug3 t3is c3anne2 $& '((6/
Ma)8*act8rer 9istri48tio) Com(a)y Retai0er

Retai2e% o$taine+ fu22 %ange of -%o+uct f%om manufactu%e<s +ist%i$ution com-an&/ Beaut& consu2tant -%o,i+e $& manufactu%es to +e2i,e% $ette% se%,ice to custome%s an+ maintain cont%o2 o,e% t3e se22ing -%ocess/ A ,a%iation of f%anc3ise s&stem ca22e+ +i%ect se22ing f%anc3ise in 13ic3 com-an& Contact +i%ect2& to %etai2e% 1it3out t3e +ist%i$ution com-an&/
Ma)8*act8rer Retai0er

T3is effo%t su--o%ts t3e fo%eign com-an& face to face counse2ing an+ 2imite+ num$e% of s3o-s an+ +e-a%tmenta2 sto%es/ General distribution 1as t3e con,entiona2 c3anne2 an+ a2most t3i%t& -e%cent of cosmetics sa2e t3%oug3 t3is c3anne2 $& '((6/
Ma)8*act8rer :.o0esa0er Retai0er

Door to door $&-ass t3e cost2& com-2e8 %etai2ing net1o%! an+ a2most nineteen -e%cent of cosmetics sa2e t3%oug3 t3is c3anne2/ Due to sta&ing at 3omes +i%ect se22ing com-anies fin+ing +ifficu2ties att%act sa2es -e%sonne2/ Some +i%ect se22ing com-anies 3a+ sta%te+ ma%!eting its -%o+ucts to ,a%iet& s3o-s* aest3etics* an+ sa2ons an+ $& mai2 o%+e%/ M.C $eing a +i%ect se22ing com-anies use F%anc3ise s&stem an+ gene%a2 +ist%i$ution c3anne2s fo% its -%o+uct +ist%i$ution an+ not consi+e% +oo% to +oo% at t3is time $ecause -%o+uct +ist%i$ution using t3is c3anne2 3a+ +ec%ease/ A2so 4se -a%t& -2an met3o+s as 1e22/

Com(etitio)
M.C 1ou2+ face 3ig3 com-etition f%om to- fi,e com-anies of @a-an inc2u+ing some fo%eign com-anies/ @a-anese Manufactu%ing com-anies s-en+ a2most B= of t3ei% sa2es on %esea%c3 an+ +e,e2o-ment 13ic3 is +ou$2e to t3e fo%eign manufactu%es/ Some of t3e fo%eign com-anies -u%sue+ se2ecti,e +ist%i$ution t3%oug3 2imite+ num$e% of -%estige +e-a%tmenta2 sto%es/ E83i$it ': an+ Ta$2e D -%o,i+e t3e +ata of some +omestic an+ fo%eign cosmetic manufactu%es an+ +i%ect se22ing cosmetics com-anies of @a-an/ Po2a 1as 2ea+ing one $& '((:/ A22 of t3ese com-anies offe%e+ 3ig3 commission ma%gin 65= to ):=# an+ a2so gi,e $onuses as 1e22/ A2so most of t3e -e%centages of t3ei% sa2es 1e%e facia2 s!in ca%e an+ ma!eu- -%o+ucts/ Most of t3ei% em-2o&ee atten+s t3e t%aining c2asses as 1e22* 13ic3 1as an im-o%tant facto% as com-a%e to 4/S/ cosmetics com-anies/ Due to 3ig32& com-etiti,e it 1i22 ta!e )"5 &ea%s fo% t3e com-an& to tu%n into -%ofit an+ ta!e s3a%es of t3e ot3e% com-anies/ Success to t3is ma%!et 1i22 2ea+ t3e com-an& into fu%t3e% into count%ies of Pacific Rim/

Barriers to E)try
M.C 1ou2+ $e a 2ate ent%ant in matu%e* com-2e8* f%agmente+ an+ 3ig32& com-etiti,e ma%!et/ A2so @a-anese -eo-2e $e2ie,e+ t3at t3at t3e& 3a,e sensiti,e s!in an+ on2& 2oca2 manufactu%es can un+e%stan+ t3is !e& fact $ette% t3an t3e ot3e% fo%eign count%ies/ Consume% attitu+e to1a%+ t3e 2oca2 cosmetic manufactu%es is mo%e t3an t3e fo%eign manufactu%es/ E83i$it 9 summa%i>es @a-anese consume% $u&ing $e3a,io%/ @a-anese minist%& of 0ea2t3 gi,e a--%o,a2 fo% t3e -%o+ucts an+ it ta!e time as 1e22 as -%o+uct Cua2it& 13ic3 suit fo% t3e @a-anese -eo-2e/ A2so M.C 1i22 face 3ig3 com-etition f%om +omestic manufactu%es an+ fo%eign com-anies/ Point 13ic3 com-an& face: @a-anese ?o,e%nment -o2icies an+ %u2e an+ %egu2ation fo% fo%eign Cosmetic manufactu%es a2so im-o%t ta%iff can $e c3ange+ $& t3e @a-anese ?o,e%nment/ To %eac3 Economies of sca2e it 1i22 ta!e time fo% com-an& it manufactu%es in @a-an/ In-ut cost 1ou2+ $e 3ig3/ Ca-ita2 %eCui%ements 1ou2+ a2so $e a -%o$2em fo% t3e com-an& as 1omen 1e%e sta&ing 3ome o% fin+ing sa2e -e%sonne2/ Due ot3e% +omestic manufactu%es B%an+ i+entit& 1ou2+ ta!e time fo% t3e com-an&/ Access to +ist%i$ution c3anne2 is a2so not cont%o22a$2e facto% +ue to matu%e com-2e8* f%agmente+ an+ 3ig32& com-etiti,e ma%!et/ Language -%o$2em/ Ne1 -%o+uct nee+s a--%o,a2 f%om t3e Minist%& of 0ea2t3 of @a-an/

S+i) Care mar+et i) C.i)a

C.i)a Mar+et Se0ecti)/ Reaso)
If 1e com-a%e C3ina Ma%!et 1it3 @a-an t3en t3e %esu2t 1ou2+ $e t3at Com-etition is 1ea!* Ma%!et 1it3 si>e: ?%o1t3 %ate is 3ig3* De,e2o-ment -ossi$i2it&: It 1i22 $e 3ig3 13en It 1as ana2&>e+ 1it3 @a-anese ma%!et/ I st%ong2& consi+e% M.C ent%& into C3ina Cosmetic Ma%!et an+ com-an& s3ou2+ ta%get t3e S3ang3ai cosmetic consume%s/

%ri)ci(0e re/io)a0 mar+et o* C.i)a In te%m of -%ice* +i%ect se22ing an+ s3o- se22ing

Direct sellin#

Shanghai

Price lo"
-ei.ing

%uang,hou

High

$ho sellin#

%ro(ose- Mar+eti)/ %0a)s *or e)teri)/ C.i)a Missio)23isio)

De2i,e% 3ig3 Cua2it& -%o+ucts an+ Ma%& .a& As3<s C3a%isma* moti,ation an+ -3i2oso-3& fo% successfu2 ent%& into C3inese ma%!et an+ +e2i,e% $est Io$ o--o%tunities/

Mar+eti)/ O45ecti6e
A successfu2 ent%& into C3inese ma%!et fo% t3e fu%t3e% g%o1t3 of inte%nationa2 e8-ansion/

Mar+et Si1e
T3%ee -%inci-2es of %egiona2 ma%!ets of c3ina c3a%acte%istic a%e gi,en in Ta$2e E/ ?uang>3ou* BeiIing* S3ang3ai/ Among t3e%e S3ang3ai is $est suite+ fo% ente%ing into c3ina: S.a)/.ai;s (o(80atio) S3ang3ai f%om insi+e most It is a $ig cit& 1it3 a comme%ce Cu2tu%e/ It is a cent%a2 -2ace/ ')/5 mi22ion H Cit&/ A: Mi22ion H P%o,ince/ Tota2 ma%!et si>e s3ou2+ $e ta%gete+/ H ')/5 mi22ion/

Co)s8mer Be.a6ior
T3e%e 1as g%o1ing +iffe%ence fo% 4%$an an+ Ru%a2 A%eas/ Eig3t& se,en -e%cent of t3e C3inese 1omen 1o%!e+ an+ man& 3e2+ t1o Io$ one state Io$ an+ ot3e% in+e-en+ent/ T3e t3%ee -%inci-2e %egiona2 ma%!ets 3a,e +iffe%ent c3a%acte%istics/ ?uang>3ou 3as most f2e8i$2e fo% $usiness a--%o,a2 an+ 3i%ing/ Consume% c3a%acte%istics 1e%e un%efine+* main inte%est is foo+ an+ fami2& $ut most inte%este+ in g2amo%ous/ BeiIing is ca-ita2 of c3ina an+ 2i,ing -eo-2e in t3is %egion a%e %igi+* $u%eauc%atic* S3ang3ai consume% a%e e2egant* ,ain* toug3 negotiato%s as com-a%e to BeiIing an+ ?uang>3ou/ A2so t3e& see! Cua2it& o% consi+e% Cua2it& mo%e t3an ot3e%s/

M.C Cosmetic -%o+uct goo+ in Cua2it& an+ t3at<s 13at t3e s3ang3ai -eo-2e 1ante+/

Com(etitio)
M.C 1i22 face com-etition f%om fo%eign com-anies 2i!e @o3nson K @o3nson an+ 4ni2e,e% an+ some of t3e +omestic cosmetics manufactu%ing com-anies in S3ang3ai/ A22 t3e fo%eign com-anies com$ine sa2es accounte+ fo% )= of t3e C3inese ma%!et/ In ot3e% %egions A,on an+ L<O%ea2* Re,2on* an+ S3isei+o 1e%e -%esents/

Barriers to E)try
Fin+ing t3e $est @oint ,entu%es com-an&/ Negotiation a2so in,o2,e+ some go,e%nment $o+ies/ In +e-t3 ma%!et an+ feasi$i2it& stu+&/ Com-etition 2i!e2& to $e inc%ease in futu%e f%om fo%eign com-anies/ Due to inc%easing in -o-u2ation* fo% meet t3e +eman+ %eCui%e+ a manufactu%ing -2ant t3at cost at 2east 6: mi22ion an+ ta!e 6 &ea%s of time/ On Io$ 2ea,e faci2ities fo% 1omen an+ $enefits/

9istri48tio) C.a))e0s
State o1ne+ +e-a%tmenta2 sto%es 1it3 6J:*::: out2ets -%esent in c3ina accounte+ fo% B:= of a22 consume%s< -%o+uct %etai2 sa2es/ A2so co22ecti,e2& o1ne+ sto%es '/6 mi22ion# accounte+ fo% )6 = of sa2es an+ J mi22ion in+i,i+ua2 o1ne+ sto%es accounte+ fo% 6:= of t3e sa2es/ Rests of sa2es 1e%e ma+e t3%oug3 )): Ioint ,entu%e sto%es 5= of t3e sa2es# an+ +i%ect se22ing com-anies )=#/ C3inese +ist%i$ution s&stem 1as accessi$2e to 4/S com-anies t3an t3e @a-anese s&stem $ut 3o1e,e% it is mo%e f%agmente+/ Im-o%te+ fo%eign -%o+ucts 3a+ so2+ at a 3ig3e% -%ice e,en at J time mo%e t3an t3e c3ina manufactu%e+ $%an+s an+ '5 time t3ose of C3inese 2oca2 $%an+s/ Most of t3e fo%eign -%o+ucts 1e%e +ist%i$ute+ $& using a Ioint ,entu%e com-an& an+ 2icense+ +ist%i$uto%/

M.C s3ou2+ fin+ a goo+ Ioint ,entu%e com-an& +ist%i$ute its -%o+uct into C3inese ma%!et an+ use some mo+ifie+ -a%t& -2an met3o+ $asis of focus g%ou- fin+ings#/ Li!e ot3e% fo%eign com-anies M.C s3ou2+ %ent some cosmetic cases an+ fe1 s3e2f s-aces f%om t3e +e-a%tmenta2 sto%es/

&i)a)cia0 -ata 6 &ea%s e8-ecte+ sa2es 1ou2+ $e )/( Mi22ion to %eac3 its $%ea!e,en/

Brea+ e6e)
I)itia00y t<o years E7(e)se BE% =%ro-8ctio) 6o08me# 7)/5MD7 6/:6 g%oss ma%gin# H '*9)6*A9) units Tar/et (ro-8ctio) 6o08me =*or years> 7)/5 Mi22ion

'/9MD6 &ea%s H 7:/J9M units Tota0 Sa0es :/J9M units L 7 B/5 13o2esa2e unit -%ice# H 7 )*('5*::: H 7)/( Mi22ion Starti)/ e7(e)ses *or e)try i) C.i)ese mar+et
Average retail unit price US$ Average MKC wholesale unit price Cost of goo s "reight an ut# %ross &argin )ro uct evelop&ent costs*#ear )ro&otion an a vertising costs*#ear Manage&ent overhea *#ear Start+up invest&ent costs $'.00 (.50 1.20 1.2/ 2.02 0.1M 0.(M 0.25M 2.0M

Com-an& 1i22 attain its BEP in s3o%t"te%m time 1it3in t3e -e%io+ of 6 &ea%s/

4nit ma%gin on so2+ 1ou2+ $e 2esse% t3an t3e -%o+uct so2+ in @a-an/ But sta%tu- cost* office o,e%3ea+ an+ a+,e%tising e8-en+itu%es cou2+ $e some13at 2o1e% in C3ina t3an @a-an/

Mar+eti)/ Mi7
%ro-8ct 9esi/) P%o+ucts s3ou2+ $e +esigne+ acco%+ing to t3e stan+a%+s of t3e C3inese consume%s/ Bra)- Name M.C s3ou2+ use its o1n $%an+ name $ecause fo%eign -%o+uct 1e%e 3ig32& a--%eciate+/ %ro-8cts W%in!2e %emo,ing -%o+ucts/ S!in Sno1 13itening -%o+ucts/ S!in T%eatment -%o+ucts/ Ma!eu- -%o+ucts/ %ro-8ct %rice A22 t3e -%o+uct -%ices s3ou2+ $e c3a%ge $& consi+e%ing +omestic an+ fo%eign com-etito%<s -%o+ucts -%ices an+ com-ensation -2ans/ %0ace S3ang3ai* C3ina %ac+a/i)/ T3e enti%e P%o+uct s3ou2+ $e -ac!e+ in a att%acti,e g2ass o% -2astic Ia%s 1it3 co2o% ca-s/ La$e2 s3ou2+ $e a--2ie+ to Ia%s o% stum-e+ an+ ca%%ies $ot3 Eng2is3 an+ C3inese co-&/ Inst%uction -a-e% s3ou2+ $e inc2u+e+ in t3e -ac!ing/ A-6ertiseme)t On %egiona2 an+ -%o,incia2 te2e,ision c3anne2s an+ use some -%int me+ia -o-u2a% Maga>ines# an+ in +e-a%tmenta2 sto%es $%oac3e%s* s!in t%eatment $oo!s#/

%romotio)
Offe% a to22 f%ee num$e%/ O%gani>ing ca%%ie% o--o%tunit& semina%s/

Bra)- a<are)ess
Fo% $%an+ a1a%eness it 1ou2+ %eCui%e 7 '::*:::/

%ro-8ct 9i**ere)tiatio)2Com(etiti6e A-6a)ta/es

De2i,e% 3ig3 Cua2it& s!in ca%e an+ ma!eu- -%o+uct acco%+ing to +eman+ of t3e C3inese consume%s A2so t%aining of sa2es -e%sonne2 fo% com-etiti,e a+,antages/

MKC S8ccess*80 I)ter)atio)a0 Mar+et E)try

(Based on company own experiences and its Competitor Avon In ea%2& '(()* M.C -%o+ucts 1e%e so2+ in '( count%ies an+ com-an& 3a+ '::= o1ne+ su$si+ia%ies in nine count%ies: T3e fo22o1ing -oints 1i22 +esc%i$e 13at M.C 3a+ 2ea%ne+ f%om in its inte%nationa2 o-e%ations: !nternational market entry is stron"ly based on personal contacts# $eparate international division operation helps the head %uarter &or &urther international operations# '(() or"ani*ational chan"e resulted in the &ormulation o& "lobal resource "roup to support sales subsidiaries worldwide# +his also consolidated the human resources, le"al, &inance, manu&acturin" and marketin" &unctions# Marketin" and product development, %uality controlled support by "lobal marketin" "roup# -orldwide $ubsidiaries support &unction and assistance# Ac%uisition o& direct sellin" companies increase company sales and ima"e worldwide# $ales &orce (Beauty consultants, sales people increase due to o&&erin" .ob opportunities# /roduction &acilities increase due to international expansion# 0#$ marketin" strate"y is best &or products and communication to subsidiaries# Entries into new countries cosmetics markets and studied the behaviors o& competitors and local manu&actures# !n time entry decisions are hi"hly valuable# &orm its com(etitors Each country subsidiary run by a country mana"er# Decision authority must be on the basis o& a"reed upon per&ormance ob.ectives# Emphasi*e o& merchandisin" is import &or marketin" campai"ns# Event should be addressed properly in e&&ective manners by usin" brochures# $ales consultant should have limited $10s to overcome the complex problems# 2ower product line turnover ou"ht to be permitted#

 !nternational marketin" pro"rams have considerable importance# /rice settin" should be accordin" to individuals buyin" power in individual countries# 3irin" o& local national is important and "ivin" them some directions# +rainin" o& employee is most important &actor to "ive them a better understandin" o& company vision4missions#

Recomme)-atio) a)- S8//estio)s

Ent%& into C3inese ma%!et 1ou2+ $e successfu2 $ecause com-etition f%om fo%eign com-etito%s is 2o1 as com-a%e to @a-an/ A2so C3inese cosmetic ma%!et ent%& is eas& as com-a%e to @a-anese cosmetic ma%!et/ C3inese -o-u2ation is a2most ten times mo%e t3an t3e @a-an an+ g%o1t3 %ate is a2so 3ig3/

Point to be considered
M.C can e8ten+ its fu%t3e% inte%nationa2 e8-ansion in AsiaDPacific %egion afte% t3e successfu2 ent%& into C3inese ma%!et/ M.C s3ou2+ +esign t3ei% -%o+uct acco%+ing to t3e stan+a%+s of t3e C3inese consume% $e3a,io%/ P%ice s3ou2+ $e a+Iuste+ acco%+ing to ma%!et an+ consume% $u&ing $e3a,io%/ Bui2+ st%ong %e2ations in count%ies* 13ic3 1ou2+ 3e2- t3e com-an& to fin+ t3e $est Ioint ,entu%e com-an&/ To meet t3e +i,e%se nee+s of t3e g2o$a2 consume%* Ma%& .a& customi>es its co2o% -%o+uct 2ines $& %egion/ P%o,i+e W3itening Essence an+ Po1+e%& Foun+ation $& %egion $ecause on2& fe1 com-anies -%o,i+ing in AsiaDPacific Rim/ Fo% fu%t3e% M.C 2aunc3 some f%ag%ance -%o+ucts La$o% c3a%ges a%e c3ea-e% in C3ina t3an @a-an/ It ta!e 6 &ea%s to %eac3 BEP in c3ina as com-a%e to @a-an 13e%e it 1i22 ta!e B"5 &ea%s to ea%n a goo+ -%ofit/ Fo%eign nation $%an+ P%efe%ence in c3ina is im-o%tant facto%/ S3ang3ai Consume%s Out1a%+ a--ea%ance 1ou2+ 2et t3e com-an& to int%o+uce ne1 -%o+ucts an+ its featu%es/ Com-an& a2so focuses Resea%c3 an+ +e,e2o-ment of ne1 -%o+uct fo% +iffe%ent %egion acco%+ing to consume%<s -%efe%ence/ Com-an& a2so focus on some ot3e% +i%ect se22ing tec3niCues 2i!e ot3e% its com-etito% 3a+ +one/ Com-an& $ui2+s its image in t3e min+ of consume%s fo% ca%ing t3em $est an+ fo22o1s Ma%& .a& As3<s c3a%isma an+ -3i2oso-3& fo% successfu2 inte%nationa2 o-e%ations/ Com-an& a2so sta%t mai2 o%+e% s&stem E"S3o--ing 1e$site as 1e22/ O%gani>e ca%%ie% o--o%tunit& semina%s/ 4se some mo+ifie+ -a%t& -2an met3o+s $ecause sim-2e -a%t& -2an 1ou2+ $e not as muc3 feasi$2e $ecause 3ouses a%e sma22 in S3ang3ai* C3ina/

E7isti)/ %ro-8cts E7isti)/ Mar+ets

Ne< %ro-8cts

MKC i) C.i)a

Ne< Cu%%ent focus 1ou2+ $e Mar+ets fo% fu%t3e% futu%e goa2s

MKC i) C.i)a

%nsoff Matri&

S:OT A)a0ysis
$tren#th )ro uct 0ualit# 1perating in &an# countries 1002 owne su3si iar# in fee countries. Superior e ucate Staff Sales force O ort(nity 'eakness 1nl# in cos&etic &ar4et 5i&ite resources

Threat

6ntries into growth potential &ar4ets. "oreign nation 3ran )reference.

"oreign national co&petitors 7ule an regulation 3# other countries )olitical insta3ilit# in so&e countries.

Porter Model: evaluation of Industry Forces

T3e Po%te% Com-etiti,e Mo+e2 se%,es to $ette% i22ust%ate t3e facto%s t3at inf2uence t3e cosmetics in+ust%&/ It focuses on t3e fi,e fo%ces t3at affect an& gi,en com-an&: Su--2&* +eman+* a2te%nati,es* %is!s* an+ t3e +i%ect com-etition of t3e fi%m/

THREAT O& NE: COM%ETITION E8isting com-anies Fo%eign Com-anies Potentia2 ne1 +omestic manufactu%es

BARGAINING %O:ER O& SU%%'IER Cont%acto%s S3i--ing Com-anies @oint ,entu%e com-anies

COM%ANY RI3A'RY @o3nson K @o3nson PK?* Am1a&* A,on* S3isei+o* Nu S!in Inte%nationa2 /

BARGAINING %O:ER O& BUYERS C3oice $et1een su$stitutes an+ o%igina2/ Bu&e%s ten+ to c3oose c3ea-e% -%o+uct t3at 3a,e se -e%cei,e+ featu%es

SUBSTITUTE SER3ICES Imitation P%o+ucts Ne1 -%o+uct 2ines fo%m com-etito%sM

Characteristics of Three Princi al Re#ional Markets in China: )**+ %uang,hou South 8100&iles north of 9ong Kong: > &illion ? cit# 25 &illion ? province 5ow+cost &anufacturing 3ase for 9ong Kong. Most fle@i3le for 3usiness approvals an hiring. AvonB ColgateB )C%B an A&wa#. Unrefine . Main interest is foo an fa&il#. -ut &ore intereste in gla&our. $200*&onthB highest consu&er goo s Spen ing in China. "loo e 3# foreign consu&er goo s. -ei.ing ;orth 8China<s capital: ( &illion ? cit# 11 &illion ? province %overn&ent &inistries. Secon +largest retail center an strong An ustrial 3ase. Shisei oB 5<1real 7igi B 3ureaucratic. More cere3ral. Shanghai 6ast Coast 3# =angt,e 1!.5 &illion ? cit# >0 &illion ? province /.52 of China<s in ustrial output Cultural an co&&ercial capital. Johnson C JohnsonB Unilever 6legantB vainB tough negotiatorsB see4 Dualit#. 1ver $100*&onth. 9ighest spen ing on clothingB cos&eticsB Jewelr#. 86sti&ates ? !02 isposa3le Anco&e.:

5ocation )opulation 7egion characteristics "oreign co&panies Consu&er characteristics

E#pical wage level

$/0*&onth 3ut rising level of affluence in the last two #ears.

C(rrently market com arison of China an! Ja an China )opulation 1B1!'&illion Ur3an population 2$2 )er 1st person %;) $!25B At is increasing rapi l# 6cono&ic growth rate 102B Gith conservatis& person political Duarrel of refor& 7on sleeping fiel econo&ic refor& ela# possi3ilit# Hirect sale &etho regulation possi3ilit# e@istence Ehe price is low relativel# &ar4et a vance hea e@penseB Gith the fact that the running cost will 3e low in Japan forecast !2 At is few !2 Japan )opulation 12(&illionB Ur3an population $$2 )er one person %;) $1(B!11B growth rate 6cono&ic growth rate 2F!2B. Ehe sta3ilit# the possi3ilit# of seeing it is not 3ut co&pares in ChinaB sta3le )u3lic welfare sincerit# har Satisf# regulation e@istence At is high 2!2 8pro uction 1/2 I inco&es 52 insi e Japan of foreign nation enterprise: At is &an#

Si,e of the present &ar4et -u#ing power 6cono&ic growth rate )olitical sta3ilit# 5egal ele&ent 6ntr# cost "oreign nation 3ran ratio Co&petitive foreign nation 3ran Hirect sale ratio Consu&er propensit#

1'2 JariesK greatl#K e@cessivel#K ver# At will co&pare in Japan an it will ta4e &uchK awfull#K terri3l#K re&ar4a3l#K the si e e@traor inaril#.