Analyzing and Planning on Expanding Overseas Cosmetics Market Essay

Analyzing and Planning on Expanding Overseas Cosmetics Market Prepared by: Tuo Du CONTENTS ABSTRACT……………………………………………………. 3 INTRODUCTION………………………………………………4 Australian situation……………………………………4 Others situation……………………………………….. 5 MARKETING STRATEGY……………………………………9 Market Positioning…………………………………….. 9 Product Strategy……………………………………….. 9 Price Strategy…………………………………………. 10 Product Distribution…………………………………… 10 Market Promotion……………………………………… 11 COSMETICS FOR MAN………………………………………12

COSMETICS TREND…………………………………………. 13 CONCLUSION…………………………………………………. 13 REFERENCES………………………………………………….. 14 ABSTRACT Cosmetic industry, perfume and personal care products can trace back to 16h century, ancient Roman and ancient Egyptian spread balm on to their bodies and even on their weapons. It also lights up our colorful daily life According to the analysis report of Euromonitor International, the value of cosmetics industry in year 2007 climbed up to US$290. 90 billion (Euromonitor, 2008). This figure is still continually reaches a higher amount than previous year.

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It is the industry that not seriously influenced by the financial crisis staring at the late 2007. As a cosmetic company in Australia, we have full of interests aiming to the global market after the recovery of recent financial crisis. We have 4 developed countries the select from as our next market targets, Japan, France, Germany and Italy. These four countries are all known as both the large consumers and manufacturers. INTRODUCTION Cosmetic industry, perfume and personal care products can trace back to 16h century, ancient Roman and ancient Egyptian spread balm on to their bodies and even on their weapons.

It also lights up our colorful daily life According to the analysis report of Euromonitor International, the value of cosmetics industry in year 2007 climbed up to US$290. 90 billion (Perez, 2008). This figure is still continually reaches a higher amount than previous year. It is the industry that not seriously influenced by the financial crisis staring at the late 2007. As a cosmetic company in Australia, we have full of interests aiming to the global market after the recovery of recent financial crisis. We have 4 developed countries the select from as our next market targets, Japan, France, Germany and Italy.

These four countries are all known as both the large consumers and manufacturers. In this report I would provide my point of view based on my research and discuss the most reasonable marketing approach in a particular country within these four. First of all, the target country we are going to market our products should be decided by analyzing the strength and weakness. After this, marketing plan and strategy would be mapped out, including the entry mode, target customers, product positioning and so on. The history of Australian cosmetic is much shorter than other big countries’ like France and Japan.

Thus, our brands are not well known globally as L’Oreal or Shiseido. However, we have our own exclusive strength. The mainly cosmetic product made in Australia is skin-care series. ‘Safe and effect, natural and healthy’ is the consistent policy. Sheep placenta, aloe, lanolin, squalen and lavende are usually used by Australian as the esteemed raw material of products. Jurlique and Aespop are the two big and most famous cosmetic brands in Australia. Jurlique founded in 1985, headquarter is located in Adelaide. After the founder’s research, he finally worked out he method to keep the nutrient substance from the plant. This innovation was seemed as the alchemy in cosmetic industry. From then on, Australian biological technology used in cosmetics stays at the industry leading level. The government’s budget allocation each year on this kind of field is substantial. Aesop is called the ‘Aesop’s Fables in bottle’ with the simple and antiquated package design, which follows the concepts of pure nature and humanity. Headquarter locates in Melbourne and its products covers body-care and hair-care.

CURRENT SITUATIOIN At the very first and the most important step, selecting the most suitable market could be seemed as the key procedure in the whole cycle of marketing plan. The deep analysis of the four countries’ backgrounds will help us in further understanding and final strategic decision. Japan, as the second largest consumption and manufacturing countries (just next to US), its scale of value in cosmetics and toiletries reached US$230. The Japanese particularly seems the appearance as etiquette and a kind of value. In Japan, 99. 9% of women use cosmetics every day, even the housewife will walks chronically to the dresser once she wakes up. It could be said that making-up is the beginning of the every single day. The Japanese cosmetics market could be concluded as the following several features. 1. Up to 2011, Japan will face with the first wave of aging population The people aged above 65 will be counted to 12. 6 million, which covers 1/10 of the population or customer in another word. There option will be changed from high priced and luxury products to lowed-priced ones. 2.

The product series related to light make-ups has a substantial prospect. In 1970s, Japanese used to be with heavy make-ups following the example of people in Western countries. However after 1980s, Japanese women confirmed that the light make-up presents nature beauty of the oriental women even more than heavy make-up. At meanwhile, the light make-up and skill are becoming popular in groups of male, which brought business another opportunity to expand their markets and increase the revenue. 3. The products are appearing to be emerging polarization from middle market to the both low and high market. 4.

The Chinese medicinal herbs cosmetic developed rapidly in recent years in Japan. The product with Chinese medicinal herbs has covered 50% market of cosmetic industry. France, known as the kingdom of luxury goods, its cosmetic price also leads the world. L’Oreal is the most successful company in the world. By viewing the world cosmetic industry, the French product covers over the half of the world market, Germany and UK as its largest two client. Beyond the Europe, the prospect toward the overseas market is not that optimistic. Because that the market is fully controlled by Japan and US in Asia and America.

Germany, which containing 85 million consumers is the biggest market in Europe. However, the average consumption is € 135 in 2005, standing 10th in European countries. The made-in-Germany cosmetic is well known as its highly quality and innovated design. Beiersdor, Schwarzkopf and Henkel are the three main companies holding the 30% of the local market. In Germany, 50% of the sales were generated in retail pharmacy store. Italy has a sophisticated and developed cosmetic market. Approximately 9 billion euros of cosmetic products are sold in Italy every year making it the fourth largest market in Europe.

Although highly competitive, there is potential for growth in several sectors of the Italian cosmetics industry. Body care, hair, face, and hygiene products continue to dominate the cosmetic industry and account for 60 percent of all cosmetic sales. Best prospects are found in raw materials, naturally derived products, and innovative or unique products. Naturally derived products are a growing market segment within Italy. Italian consumers are becoming increasingly attuned to a “wellness culture” and products derived from natural active ingredients are progressively popular. Global insight, 2007) Italy has mature skill and technology in the research and development of cosmetics, although there are not many big brand names. Especially in the past decade, the cosmetic industry overcame some negative factors by expanding overseas markets. At the same time, the healthy national distribution network and advanced system helps its cosmetic industry with sustained growth. The average consumption reached € 150 in 2005, which is higher than Germany. According to the UNIPO (Italian Association of Cosmetic Industries), there are 550 companies and over 100,000 employees.

The Italian cosmetic market has registered a continued increase in sales reaching 9 billion euros in 2007. According to recent estimates provided by UNIPRO, exports of Italy’s cosmetics grew by 5. 3 percent reaching a total of 2. 25 billion euro, while imports increased by 4. 5 percent totaling 1. 43 billion euro with respect to 2006. Italy exports approximately 28 percent of its total turnover. Hair and body care products continue to dominate the cosmetic industry. These two products make up 32 percent of the total marketplace. Facial care, make-up, and body hygiene products are the best prospect products for U. S. ompanies and 43 percent of the total cosmetics market is directly made up of these three different product areas. Italian consumers seem to prefer more specialized channels for purchasing cosmetic products. The pharmacy channel for purchasing cosmetic continues to be the most lively as it increased 8. 5 percent from the previous year. The pharmacy channel offers sophisticated products at a more affordable price to most consumers. However, the perfumery channel still remains an important aspect to the concept of beauty, although there has been a change in consumption to other channels due to the expensive nature of the products.

The herbalist shop market is another major potential participant in the marketplace, registering an increase of 4 percent with respect to previous years. Consumers remain enthusiastic about the herbalist market due to its perceived value for money. After the brief review of the 4 markets, the similarity is that customers would like to purchase the conditioner and body-care products and from the pharmacy retailer close to them. The pharmacy sale model could be seemed as the trend of the global cosmetic industry.

Moreover, the resolution carried out in 2006 by United Nation stating that the chemical substance containing potential risk of toxic should be prohibited from the cosmetic and executed from 2007. As a result, the natural and organic products will become fashionable in the next 10 or 20 year. As we can see from the diagrams above, the pie chart broadly summarize the cosmetic industry in Europe, Japan, China and US, which reveals that the market size in EU (27 countries) is as big as US and Japan’s combination. It provides us the knowledge that the European market is larger enough than Japanese market.

The table above illustrates the number of patent have been entered into the market in a given year in Japan, Germany, France and Italy. The number of cosmetic brands has tremendously increased. Among these four countries, Japan has the most cosmetics patents introduced, followed by Germany and Italy, 3 large markets surprisingly. Nevertheless, Italy, such a romantic country is the only one that no local brand name has been introduced at year 2005 as I mentioned in the introduction of Italian market. Obviously the markets in Japan, Germany and France are closing to saturation.

If we insist on entering these 3 markets, we can only share a little piece of cake of market. By considering the risk adventure, we would rather keep our eye focusing on the Italy market. Besides the reason of not developed market, the other is that its well-organized distribution network. MARKETING STRATEGY As the recommendation from Department of US Commerce, in order to be competitive in the Italian market companies you should be prepared to heavily invest in promoting your products and brands. Companies will need to be able to effectively promote their image and appeal to Italian tastes and fashion preferences.

Packaging is also a key component. Products should be packaged in a well-presented, eye-catching fashion. In addition, to sell cosmetic products in Italy companies must have an Italian representative whose company is properly registered in Italy. Market Positioning Once talks about cosmetics, the word ‘woman’ will naturally come to our minds. Cosmetics seemed as the woman’s own belongings. Our main market position will focus on woman aged especially from 25 to 34, because the income of this group of people is around $100,000 on average.

Thus, the main consumption power is the part of woman who can dominate her income. Following the trend of global cosmetic industry, the research and development on men’s cosmetic will become our next strategic target. The products we are going to introduce to the market is between low-income and medium-income people in short term and then continually promote our high level product once the brand name are adopted by most of Italian customers. Product Strategy Firstly, effective product strategy adapts to different market segment.

The main purchase power is the group of woman with low-and-middle income. They do not spend lots of money on cosmetics, but the number of this group is substantial. The product development strategy aiming to this group is ‘good and cheap’. On the other hand, the other small part of women consuming high price level products are longing for elegant lifestyle. The number of people is much less than the former. For this group, the quality of product design should be concentrated on, as well as the customers’ various characteristic needs to be pursued according to their different psychological level.

Secondly, product package is the vital factor impact on the sale of the products. The pack design should be fit to customers’ psychological requirements in order to produce sympathetic response. The details we should pay attention are as follows: present the emotion through the design, for example, using color of pink or some smart decorations; breakthrough of traditional idea; improve the package’s added-value and function. Price Strategy At the present stage, women’s cosmetics pricing method could be classified as two categories.

One is similarity, for example, lipstick as the very normal and less profitable product should be valued at the market price or even lower, because the function and quality of this kind of products do not differ too much. The most efficient way attracting women to buy your product is making your package attractive (i. e. enlarge the size the package). The other category is differentiation products, which face to the high spending crowds like white collars in cities. High-income women normally advert to the recognized brand and value. These companies could use strategy of prestige pricing.

Obviously, as our company is the new entrant to the market and the market position is low-and-medium group, we would select first strategy rather than the second. Product Distribution For the new entrant of a strange market, I highly recommend to build an online store at the very first step. Many world top companies successively opened its online store in recent year in order to expand their global market such as Avon, Estee Lander, Lancome. For us, it is the secure and rational option to select as our short-term goal. First of all, we can take advantage of those pioneers’ experiences by learning from or following good examples.

Secondly, the customer information could be easily collected and organized to analyze their consumption habbits. Putting the cosmetic products only to the pharmacies’ shelves was firstly proposed by Vichy and made a great success. In Italy, the cosmetics sales channels are mainly rely on the distribution in supermarkets and shopping malls. Moving battlefield from those competitive locations to pharmacies can avoid the head-to-head conflicts. On the other hand, pharmacy distribution could improve the brand’s reliability professional image.

We consider these two channels as our initial distribution plan. Direct selling offers consumers a unique opportunity to purchase products outside of the traditional retail environment. Because this method has been so integral in the development of consumer relationships, it continues to be a popular method of sales in many countries. The direct selling approach enables the company to offer low-priced products to its customers because of reduced expenditure on advertising and promotion, the elimination of middlemen, and limited reliance on brick and mortar stores.

Moreover, under this approach, consumers can ask questions, seek advice and get their product questions clarified directly from the sales consultants in a free and relaxed environment. Direct selling also ensures reliability and convenience to the consumers. Direct selling approach will be the replacement once the Pharmacy distribution and online store combination approach failed. Market Promotion By viewing the global market, most of the giant cosmetic giants spend huge amount of expenditures on its flagship products’ promotion. We are identified as the new entrant in Italian market.

In order to catch the customers’ eye, we plan to invite a famous movie star or model to represent our products because it can more easily make them move. Lancome and Shiseido are the two most obviously successful examples. Trial sample is another effect promotion approach. If one of our customers registers an account and fill in her personal profile online she will receive a free little trial sample from us by only paying the postage. Afterwards, she will share the comments and experiences within her social circle. It is win-win strategy, which not only satisfy customers’ curiosity but also expand our products’ visibility. (Kempf, 2001)


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