International Business Strategy of Creative Cosmetics Ltd - Example

Executive summary

In order to grow and achieve sustainability in the current global village, companies need to acquire bigger market shares in the existing markets. This can only be achieved through entering into new foreign markets to tap into the market potentials offered rather than continue operating only locally in markets that are saturated. However, entering into new foreign markets offer various challenges for businesses, despite the attractiveness that it offers. For this reason, the company planning to enter into such markets needs to define its international business strategies critically to enable it minimize or avoid any business risks that may be present in the new business environment.

The report has discussed the international business strategy of Creative Cosmetics Ltd as it plans on venturing into the Mexican economy as a business expansion strategy. The introduction discusses the justification of a company in entering new foreign markets while the main body consists of the overview, effects of culture on international business, the marketing strategy, human resource strategy, product/service strategy, operations strategy as well as the SWOT analysis. These strategies emanate from the international strategies adopted by the organization in order to successfully enter the new market. The implementation of these strategies is also discussed in respect of the three-year timeline set within which the task should be accomplished.

Introduction

Business expansion is the process of increasing the scale of business operations and/or existence within a market. Increasing a business’s scale of operation requires a substantial amount of resources, effective planning, thorough market analysis and proper timing. Businesses can expand its scale of operation locally, internationally or both. It should be noted that expanding a business into the internal market is more challenging than in the local market. The reason is that international markets are like new territories with different political, social, economic and technological factors. These factors should not be overlooked by businesses planning to expand into the international markets. On that note, this paper will present an expert advice on an international business strategy to Creative Cosmetics Ltd. The company is interested in entering the Mexican market. The paper will discuss how culture influences international business operations; will present an international business strategy for Greenergy, and will discuss implementation plans for the proposed strategy.

Company Overview

Creative Cosmetics Ltd is one of the leading contract manufacturers in the UK. The company specializes in designing, manufacturing, filling and assembling of cosmetic and skin care products. It operates through high street stores, specialist retailers, mail order companies, party plan organizations as well as other manufacturers. Creative Cosmetics have become one of the UK’s leading contract manufacturers incorporating design, production, filling and assembly of cosmetic and skin care products (Creative Cosmetics 2016). The company has been in the business for more than 20 years, designing and manufacturing cosmetic products through a complete or part service manufacturing as well as supplying own branded cosmetic ranges.

The company’s production facility offers a complete manufacturing solution from development through to delivery or any stage between (Creative Cosmetics 2016). The Company owns studios, warehouse, laboratory and production facilities which are located in Ipswich, 70 miles north of London. Products are filled in the fully equipped production facility using efficient techniques and automated packaging equipment in various lines including bottle, label, cream and gel production, powder pressings, nail polish, mineral powders, carton products in glass and plastic containers among others. The company assists its customers in designing and formulating their unique cosmetic range to match their current product lines.

The cosmetic industry is registering an exponential growth globally owing to the increasing number of working professionals who are highly aspirational in matters concerning their looks. Also, there has been a significant shift in the men grooming culture whereby, their bathroom cabinets today are equipped with bronzers, mud masks, anti-aging creams, etc. there is an increasing growth prospect in the cosmetic industry which is enhanced by the growing demand for beauty services (Noruega 2016). Mexico presents an attractive market for companies aspiring to enter the international market. It is the biggest Spanish-speaking country in the world. Combined with Brazil, Mexico has a leading position in Latin America. Over the past years, the country has experienced continuous development, having a consolidating democracy which is emerging to be a more open and pluralistic society.

Mexico also has a free trade agreement with more than forty countries. Free trade transit zones, local consolidation points, and localized customs clearance lead to optimized time, transportation costs and administrative efficiency (Noruega 2016). Operation costs may present a forbidding force for a business to venture into new markets. Once these costs are minimized through more liberalized trade practices, companies are offered the opportunity to grow through expanding into new business areas.

The Mexican market is characterized by strong macroeconomic indicators, a rising consumption demand as well as low manufacturing costs. The Mexican Government has set infrastructure that will invigorate numerous commercial ventures, for example, development, vitality, transportation, tourism, water administration, and information transfers (Noruega 2016). An analysis of the external environment for a business includes the government as one among the elements that can either create or prevent an enabling environment for a company’s successful business operations.

The incentive presented by the Mexican government through the ambitious infrastructure provides a conducive external business environment which will positively impact on all businesses including the multinational companies. The rising demand indicates the existence of a ready market that can still accommodate any increases in supply which mean that Creative Cosmetics stands a chance to capture a significant market share in Mexico and realize its growth strategy (Noruega 2016).

Creative Cosmetics Ltd. Is a makeup manufacturing company mainly serving corporate clients and this ensures that it captures a wide customer base. The increasing demand for cosmetics has led to a respondent increase in new manufacturers who may not be well acquainted with the business or would do better with a contractor’s services in order to create new cosmetic lines or enhance the existing ones through relevant professional assistance. Having operated in the cosmetic business for more than twenty years, Creative Cosmetics have the expertise and infrastructure to venture into new markets and capture the potential offered by the growing demand (Kroll 2013). The company being from the UK, which is a NAFTA member country whereby Mexico is also a member, enjoys various advantages that revolve around trade liberalization on the basis of trade tariffs. This will ensure an easy entry for the company, devoid of trade restrictions that would otherwise render entry difficult.

In Latin America, Mexico presents very lucrative business prospects in the cosmetics industry, especially in the exports business. Mexico has turned into the main cosmetic exporter in Latin America, specifically affecting industry venture and the creation of employment opportunities, according to the Mexican Chamber and Association of the industry of Personal and Home Care (Canipec) (Kroll 2013). This growth in the exports of cosmetics offers an opportunity both to new entrants as well as the existing players in the Mexican cosmetic industry. In turn, these companies would look for ways to position themselves in the industry in order to capitalize on competitive advantages which can be achieved through innovations in other different ways. Creative Cosmetics stands to take advantage of the situation by providing customized contract manufacturing services to such companies to enhance their growth and sustainability.

The cosmetics market in Mexico has continued to show positive growth in the midst of an economic turmoil making the external economic environment a lesser threat to the industry. Despite the recession affecting the middle-class incomes, according to Euromonitor International the Mexican premium cosmetics market grew by a staggering $3.7bn from 2007 to 2012, almost a 55% increase in size (Barker 2013). This indicates certainty for Creative Cosmetics in terms of the assessment of its external environment which means that the business risk posed by the macroeconomic environment is minimal, and forecasts can be made more reliably in order to adopt the right business strategy. It also shows that the cosmetics products have an inelastic demand and the company is able to enter the market using high prices without affecting its supply of products and services. Through positioning itself as a quality conscious manufacturer of cosmetic products, the company will be able to tap the market potential by filling any existing gaps and thus have a strong initial and sustainable growth in the Mexican market.

Effects of culture on international business

Socio-cultural environment alludes to impact practiced by certain cultural and social factors which an organization control. Such factors include the attitude of people to work, caste system, education, habits, languages, urbanization, business ethics, preferences, religion, social trends, family system, marriage, social responsibility of business, customs and traditions, etc. (Richter 2014, p. 173). Culture affects businesses including both those operating locally as well as internationally. However, the case is particularly more sensitive to international businesses since the situation presents a new business environment which may be different from the cultural aspects presented in the markets that the company is already operating within.

It is important for a company to do an analysis of the cultural aspect of the new prospective market in order to design market strategies that can well suit the new cultural environment for it to compete successfully in the new market. Changes in the cultures and societies affect businesses which make it necessary for companies to be aware of them. In particular, international businesses are more vulnerable as they operate in different geographical environments with varying cultural make-ups. Such companies need to adapt to the different cultures in order to be competitive and gain sustainability in the business environment (Richter 2014, p. 173). Culture is represented by various aspects including religion, customer preferences, among others. Changes in the consumer preferences represent one of the major cultural aspects that significantly affect businesses.

Globalization has by far affected the swift rate with which consumer preferences are changing. What was considered to be trendy yesterday may not be considered so today. This has the effect of undermining long successful products and services making them obsolete. As a result, companies can only remain relevant and sustainable if they keep up with the changing preferences (Richter 2014, p. 173). The impact that this may have on a company is costly innovations in terms of research and development as well as cut-throat competition from other companies.

Demographics also play a significant role in affecting businesses such that, when populations age, certain markets shrink while others expand. For instance, markets for products in the fashion industry may shrink while the market for health products may expand. The proportion of the gender in a market may also change including religion, ethnic groups as well as different races (Noruega 2016). For a multinational corporation, this is more enhanced as compared to local companies since operating in a different or new business environment will always entail a change in the demographics and this may impact negatively on a company if preliminary measures are not taken to consider their implications.

When in Mexico, do as Mexicans do. Building a successful business operation in Mexico requires adapting to the Mexican culture (Noruega 2016). The Mexican way of doing business may be quite different from how business is conducted in the UK. For a successful business especially for new entrants like Creative Cosmetics, personal relations are paramount. To know a person better in Mexico, one needs to know the families as Mexicans prefer to engage in business with those people they can identify with (Noruega 2016). This means that the company needs to exercise a lot of patience in developing business relations as well as trust as a relevant element. Business negotiations take more than the first or second meeting because of the need first to establish trust. Therefore, patience is needed.

Internalization theory is one of the concepts that explain the international trade. The essential rationale of the internationalization theory is that under the states of imperfect markets, the trading of physical, informational resources and money related, and assets crosswise over long separations and fringes by business sector sort legally binding courses of action is supplanted by exchanges inside a solitary association since it is more costly to utilize authoritative game plans than to internationalize (Verbeke & Kano 2015, p. 416). Culture plays an important role in a company’s ability to internalize successfully in order to do away with contractual arrangements. A company may opt for contractual arrangements as a result of lack of understanding or the ability to adapt to a new cultural environment. This will be more costly for it. Once a company is able to do an analysis of the new business environment’s cultural aspect, it becomes easier for it to serve the market successfully with the different culture and thus able to successfully internalize (Verbeke & Kano 2015, p. 416).

Internationalization process model is one of the models used to explain the theory of international trade. The internationalization procedure depicted as a slow regulated duty to offer and to make globally as a feature of a development and trial learning procedure is a model that is connected with the exploration on the internationalization of Swedish assembling industry that has been done at the University of Uppsala (Ford 2002, p. 210). The step-by-step process entails an organization’s learning process of its new business environment and culture form an important element in the business environment that the company has to learn.

International Business Strategy

Amid the stiff competition among businesses, the best chance to grow a business and its productivity is the point at which an organization leaves its nation of origin. Be that as it may, with these open doors come the difficulties of running a multinational operation (Cullen & Parboteeah 2009, p. 5). Dealing with employees from different cultural backgrounds, different consumer preferences, different political and legal requirements and different currencies to be managed in different economic environments are just some of the challenges that Creative Cosmetics may have to face while entering the new market in Mexico. It is, therefore, important for the company to develop an international business strategy that will enable it to have an effective entry.

Business strategy is the example or arrangement that coordinates an association's significant objectives, approaches and activity groupings into a firm entirety. A very much defined procedure marshals and designate an association's assets into a novel and suitable stance in view of its relative inside capabilities and weaknesses, foreseen changes in the earth and unexpected moves by astute rivals (John & Allen 2007, p. 176). Creative cosmetics needs to develop a comprehensive business strategy that will cover various areas of importance before venturing into the Mexican market.

Marketing strategy

Marketing strategy alludes to an association's incorporated example of choices that determines its vital decisions concerning showcasing activities and the distribution of promoting assets among business sectors, market portions, and advertising activities towards the creation, correspondence and/or conveyance of an item that offers quality to clients in trades with the association and in this manner empower the association to accomplish particular goals (Shankar & Carpenter 2012, p. 24). The objective of Creative Cosmetics Ltd is to enter the new market and acquire a significant market share relevant for its existence in the new market.

The company needs to gather enough information on the existing market as well as any gaps that currently exist. Such information will enable it to take the right steps in meeting the needs of its consumers as per their preferences. As such, the first marketing strategy to be adopted entails a comprehensive market survey (Ferrell & Hartline 2011, p. 35-37). This will entail gathering and analyzing of the market data ranging from competitors’ products, prices, and consumer preferences, etc. from this survey, the company will be in a position to understand their target customers, and come up with the right marketing mix. This will enable better decision making on whether to enter the market or not, prices to be charged and the products and services to offer.

This will prevent any costly mistakes on decisions about products and services as well as save on the time needed to get assimilated into the new market. As is the case with any survey data, the chose respondents must have the skills to answer direct inquiries regarding the estimation of an offering, represent the buyers, and share that information (Lilien et al. 2013, p. 42). Creative Cosmetics Ltd., being a contract manufacturer deals with corporate clients and not the final consumers. The market survey should, therefore, include both the final consumers as well as the cosmetic manufacturing companies as respondents. Data collected from the final consumers is relevant for the company as it will be used to provide the corporate clients with professional advice on the current consumer preferences so that they can be assisted in developing the right products.

Marketing promotion forms another basic marketing strategy that the company will use to create awareness in the market. The company should position itself as a pioneer in the makeup industry with the ability to provide relevant solutions to the existing as well as the unexplored market. The company may use the social media, television networks, radio broadcasting as well as its official website to advertise its products and services to the larger public and also adopt a more aggressive form whereby, it will have to establish personal contacts with the existing cosmetics companies and other outlets to promote its products and services. The company needs to plan carefully for this strategy and allocate enough marketing resources to achieve its objectives. Promotional planning is the planned application of marketing resources to achieve sales promotion objectives, says Gelder & Woodcock (2003, p. 3).

Operations strategy

The company’s operations strategy will specify how resources can be allocated to support infrastructure and production. This will ensure efficiency and effectiveness in the production process while minimizing the total operating costs. Corporations usually use three basic strategies low-cost production, differentiation, and cost or differentiation focus (Gong 2013, p. 3-6). Among the three operation strategies, Creative Cosmetics can use one that will support its overall marketing strategy as well as its position in the industry as a pioneer and solution provider to other cosmetics manufacturers. Manufacturing costs are lower in Mexico, which makes firms take advantage of the situation and offer their products at low costs.

This may not create a competitive advantage for a firm since it is common for most of the firms. Besides, the demand for cosmetics products seems to be inelastic such that price increases or bad economic times do not affect their consumption. The company should, therefore, focus on product differentiation in terms of superior quality which will make it stand out among its competitors and though it may charge high prices for its products and services, it will be assured of a bigger market share since the consumers are not price conscious. The company should then deploy the right infrastructure that will enable its operations in the new market. Such facilities will include studios, warehouse, and laboratory and production facilities, argues Gong (2013, p. 3-6).

Human resource strategy

Human resource strategy includes specific and articulated plans to create ‘bundles’ of human resource practices and develop a coherent HR system (Armstrong & Armstrong 2011, p. 125-130). Human resource strategy is aimed at managing the organization’s workforce and design jobs so that employees are efficiently and effectively utilized. Mexico as a new market poses human resource challenges for Creative Cosmetics Ltd such that, recruitment has to be carried out on prospective employees who come from different cultural backgrounds in Mexico, which the company’s human resource team is not well acquainted with.

First, the company needs to adopt a strategy whereby, the top management should be sourced from the current management personnel who possess relevant skills necessary to adapt to a new business environment. The middle and lower level management, as well as other staff, should then be recruited from the local population. Being a new business environment, a lot of information needs to be gathered concerning the local human resource practices and what constitutes ethical as well as unethical practices according to the local social set up (Armstrong & Armstrong 2011, p. 125-130). The company should also engage the services of existing recruitment agencies to assist the human resource management in selecting the right people for the existing jobs.

In order to have an effective human resource strategy, Creative Cosmetics can specifically focus on different areas which include human capital management, corporate social responsibility, knowledge management, organization design and development, engagement, resourcing, employee relations, learning, and development as well as reward systems. Human capital management will enable the company to gather information on operational and investment decisions for effective performance (Armstrong & Armstrong 2011, p. 125-130). Corporate social responsibility will enable the company to have a positive impact on the Mexican society that it operates within. Knowledge management will facilitate and enhance learning within the organization.

Organization design and development will enable the organization to respond positively to change and remain sustainable in the market. Engagement will enhance the employees' sense of belonging to the organization and thus remain committed to the overall organizational objectives. Resourcing will enable the organization to attract and retain highly qualified personnel (Armstrong & Armstrong 2011, p. 125-130). Employee relations will help the organization to maintain a healthy relationship with its employees as well as their trade unions. Learning and development will help encourage the employees to learn and thus develop themselves to be better individuals. Reward policies will help the organization achieve its business goals and meet the needs of its stakeholders.

Product/service strategy

The product/service strategy of a firm relates to making decisions about the features, quality and the entire offering (Zimmerman & Blythe 2013, p. 171). The product or service strategy enables the business to focus on specific target markets. Creative Cosmetics Ltd has defined itself in the UK market as a contract manufacturer for cosmetic dealers. For more than twenty years, the company has developed the business attitude on providing partial or full manufacturing services. The company also provides professional assistance for cosmetic companies that wish to create new product lines or enhance their profitability through their existing product lines. Through this, the company is one of successful contract manufacturing companies in the UK. While entering the Mexican market, the company should use the same service strategy with the cosmetic manufacturers in Mexico since it already has the relevant experience in this line of business, and it may thus spend lesser time and resources in carrying out an assessment of the market situation in Mexico.

SWOT Analysis

Creative Cosmetics needs to carry out a SWOT Analysis, which entails an assessment of its internal strengths and weaknesses against the external opportunities and threats which are present in the Mexican market. Whether a firm gets the full advantage of SWOT investigation relies upon the way the manager uses the system. In the event that it is done suitably and carefully, SWOT examination can be a practical component for the improvement of the marketing activities (Ferrel & Hartline 2011, p. 122). An analysis of the strengths possessed by Creative Cosmetics includes the fact that it has been in the market for more than twenty years and has the infrastructure which is relevant for its growth.

Venturing into the new market will ensure its growth to a wider geographical region. A weakness for the company as it enters the new market is the prospect of not being able to meet the consumer preferences due to the different population makeup in Mexico. The opportunity presented by the external environment includes the increasing demand and thus a growing cosmetics market in Mexico, as well as government incentives to encourage manufacturing business. One of the major threats the company faces is competition from other existing manufacturers as well as new entrants who strive for market shares in the existing market.

Implementation of the business strategy

Strategic implementation is the procedure that executes plans and activities in order to attain objectives (Lorette 2016). A well-implemented strategy will lead to successful achievement of the organization’s business goals. Creative Cosmetics’ overall goal is to enter the Mexican market and establish itself as a leader in cosmetic solutions so as to capture a significant market share to justify its existence in the new territory. The implementation of the above strategy can be accomplished within three years in a systematic manner in order to realize the company’s successful entry into the new market. The first year of the strategy implementation will be focused on research work both within the company as well as the new market in Mexico.

This will entail the SWOT analysis. This analysis will serve to enable the organization to assess its internal competencies and weaknesses against the external opportunities and threats. The company can, therefore, mobilize its resources to enhance its strengths while minimizing its threats and adopt suitable strategies to take advantage of any opportunities in the market and avoid or minimize the impact of threats. The goal of the SWOT analysis is to develop an understanding of the business’ internal and external position (Carlock & Ward 2001, p. 154). The company will need to do a critical internal analysis by employing the services of its technical team in collaboration with professional consultancy firms reputable for such services. A market research team will also have to be deployed on the ground in the Mexican market to carry out an intensive market research on the existing threats and opportunities in the macroeconomic environment. This will entail regular feedback to the company by the team on a timely basis so that the company may devise plans on adapting to the prevailing situation, says Carlock and Ward (2001, p. 154).

The second year of strategy implementation will entail the operations strategy on the infrastructural establishment. The company will have to establish itself by establishing studios, warehouse, and laboratory and production facilities in order to facilitate its operations. The final year of strategy implementation will entail most of the business strategies (Havaldar 2005, p. 115). This will include the implementation of the marketing strategies through market surveys and the promotional activities through creating awareness to the target market, human resources strategy in terms of recruitment practices shall also be carried out in the third year as well as the establishment of other specific human resource strategies as explained above.

Products and services strategies shall be implemented as the company starts its operations in the new market which should also start in the third year of strategy implementation. An industrial organization must consider two major objectives while creating product strategy. These are; to guarantee that the item blend is in accordance with general organization and showcasing goals and to advance rules for looking into the execution of the current products, by utilizing variables, for example, profits, competition, sales and client acknowledgment, explains Havaldar (2005, p. 115).

Conclusion

Creative Cosmetics Ltd is a cosmetics contract manufacturing company that stands a better chance of growth through expanding into new geographical territories. Mexico offers an attractive business prospect owing to the growth in demand for cosmetic products. However, this objective can only be accomplished with the right business strategies in various business aspects including marketing, operations, product/services, human resources as well as a comprehensive internal as well as external assessment through the SWOT analysis. This will ensure that the company approaches its business operations in the right way that suits the new market.