International Marketing Strategies of Oriflame - Research Paper Example

International marketing

At the dawn of the twenty-first century, marketers face the challenge of change. Power in organization is moving away from those with marketing expertise tied to specific countries and industries. As industry and national boundaries are blurring, the ability to think across industries, transcend culture, and find universals is emerging as the new necessity (Hamel and Prahalad, 1996). The foundation for a successful global marketing program is a sound understanding of the marketing discipline. Although the marketing discipline is universal, markets and customers are quite differentiated. This means that marketing practice must vary to country to country. Each person is unique and each country is unique. This reality of differences means that we cannot always directly apply experience from one country to another. If the customers, competitors, channels of distribution, and available media are different, it may be necessary to change our marketing plan. Companies who don’t appreciate this fact will soon learn about it if they transfer irrelevant experience from one country or region to another. An important task in global marketing is learning to recognize the extent to which marketing plan and programs can be extended worldwide, as well as the extent to which they must be adapted. Theodore Levitt argued that marketers were confronted with a homogenous global village. He goes on to advise organizations to develop standardized, high quality world, and product and market them around the globe using standardized advertising, pricing and distribution. A successful global marketer must have the ability to “think globally and act locally”. Global marketing may include a combination of standard (e.g. the actual product itself) and non standard (e.g. distribution or packaging) approach global marketers and marketing requires to behave in such a way that is global and local at the same time by responding to similarities and differences in world markets. A central issue in global marketing is how to tailor the global marketing concept to fit a particular product or business. It is necessary to understand that global marketing does not mean entering every country in the world. Global marketing does not mean widening business horizons to encompass the world when scanning for opportunity and threat. The decision to enter markets outside the home country depends on a company’s resources, managerial mindset and nature of opportunity and threat. Global marketing strategies can be based on product or system design, product positioning, packaging, distribution customer services and sourcing considerations. The particular approach to global marketing that a company adopts will depends on industry conditions and its source or sources of competitive advantage. As we know that when any company enters in the new market it analyzes macro and micro factors of the market. The factors which have the potential to affect the marketing processes as a whole have to be analyzed thoroughly. In the process of marketing plan, company has to analyze its strength, weaknesses, opportunity and threats. On the basis of above discussed broader aspects of international marketing, we would like to analyze a truly multinational company Oriflamme.

It’s a company based in Sweden and deals in cosmetics. We will further focus on Oriflame’s entry into Eastern and Central Europe. A special focus will be directed towards Oriflame’s operations in Poland.

Oriflamme was founded in Sweden in 1967 by brothers Jonas and Robert at Jochmick and fBengt Hellstern. In 1972, the parent company, Oriflame International S.A (OISA), Luxembourg, was established. Oriflame’s specific market concept involved direct selling and rapid market development outside its original place. The company is currently represented in 42 countries in Europe, the Far East Australia and America. Oriflame develops and products its own naturally based products in its manufacturing plant in Ireland where the group’s research laboratories arte also located. In 1994, direct sales accounted for 83% of the group sales. Oriflame is represented by sales companies in 42 countries of which 29 are wholly owned and mainly located in Europe. The market for cosmetic products is developing positively with recent growth averaging around 4% per year by volume. The company has experienced steady growth in sales since the start in 1967. The increase in sales has been particularly significant in Europe with the establishment of new operations in central and Eastern Europe. This is also explained by the fact that people are becoming more discerning about how they buy things. Many people find visiting a departmental store tiresome and impersonal. The current trends are returning to personal service, care and attention. Combine that with Oriflame’s commitment to offering value for money with a full 100% money back guarantee and the current sales growth is explained. The global market for cosmetics and toiletries is mature and projected to grow at the modest rate of 3-4 % annually. In the developing world, especially in India & China it is growing faster then others. At present accounts for the largest percentage of overall sales is in Europe. The growth rate in the European market is among the strongest of any in the world when the results from Eastern Europe are considered. In the global market for cosmetics and toiletries, skin care is a large sector in most countries. One key trend is the launch of products that are marketed as having benefits to the skin which are not just cosmetics. This trend can be seen across the cosmetic market and indicates that demand is becoming more sophisticated. The cosmetics industry has been very active in the development of new products in recent years, spending heavily on research and de4velopment and often transferring medical research to cosmetic products. Oriflame is one of the main direct sales companies in many of its markets and the largest direct sales company in Scandinavia and in Central and Eastern Europe. Conventional selling involves moving a product through a hierarchy of middlemen from the manufacturer to the end customer. All these middlemen like wholesalers, retailers and Jobbers-earn a profit from handling the product. In a direct selling environment, these positions are not necessary and profits are instead shared among the distributors. These costs cutting also give Oriflame the possibility to sell a higher quality product at lower, more competitive prices. Oriflame’s responsibility in the markets in which it operates is to package the products and handle the financing and data processing, warehousing, shipping and marketing as well as creating training programs and materials to support the independent distributors. The Oriflame distributors offer unique, value added services such as cosmetics consultancy in their customers home or offices. It is company policy that prospective customers

1) Are not subject to pressure selling nor is they obliged to purchase;

2) Receive free skin analysis and personalized advice on proper skincare; and

3) Are offered free ongoing after sales-sales services.

Oriflame’s selling method consists of selling a wide range of the highest quality cosmetics to consumers on a person-to person basis, backed by a unique multilevel marketing plan. Oriflame is now implementing and expanding a new (for them) marketing method. This involves the distributors building up a sales network and receiving a bonus or commission on the sales made by each individual recruited to be a distributor, as well as on the sales made by recruits. This system often called multilevel marketing can offer career opportunities for current hobbyists because the system permits main source levels of income. The method has worked most successfully for Oriflame in Latin American and several Eastern European countries. When Oriflame decided to start its operations in Poland and it recruited Edward Zieba as a country manager with the objective of starting operations in Warsaw. Oriflame initially started its operation in Poland in March 1991. At that time Zieba gathered some 20 of his friends with their spouse for a cozy party during which he did not speak about Oriflame but only displayed some products. Three years later, in 1994, eight of them were selling Oriflame products as their only professional activity and were at the epicenters of several different networks of thousands of distributors.

Product and Pricing: Initially a selection of 100 items was offered. One year later the number increased up to 150. Oriflame cosmetics are gentle but effective. They are produced doe nonirritant natural plant extracts and protect the skin against the harmful effects of pollution and stress. Oriflame products like the best of nature with the best of science to achieve the highest quality. A first product selection was made by the marketing department in Brussels and one of Zieba’s first assignments was to propose local pricing. Oriflamme generally sales in local currency. At a later stage free choice is given with regard to new introduction and discontinuation. Our intention was and still in to offer the most comprehensive range of skin care, Color and fragrance products in polish market. The first month clearly showed the consumer habits differ in many areas from what we have seen in different countries. Since conception product price positioning has been one of the most important issues and intensive market studies are continuously carried out in this area. It is necessary to keep on the top of a rapidly changing economic environment. At an early stage it was decided to offer very competitive prices in order to attract millions of new customer rather than selling a limited number of items with traditionally high margins.

Merchandise Support: Twice a year, Oriflame issues 380,000 copies of its catalog showing 250 products classified in the following categories; skin care, body care, family favorites, color, cosmetics, women fragrance and men fragrance. Prices are not printed in the catalog but on a separate loose sheet. Oriflame prints its entire catalog in Sweden using the same catalog in nine different countries. Translation and typesetting of the text is made each country before the printing. These catalogs a product guide information on the marketing plan; samples and some real product are all in the starter kit that any new distributor has to buy. Company sees a catalog as a major marketing tool and there is a lot of efforts going into the preparation of every issues.

Operations: When Oriflame started operating in Warsaw from a rented villa, people are lining up for hours in the street to but some of first product range. In March 1992, Oriflame Poland purchased Kamelia, a cooperative that produced cosmetic products in Ursus, a suburb of Warsaw, later followed by the installation of packaging facilities in the old factor. In 1993, 12 service centers were opened most of them in rented villas throughout the country. In 1994, Oriflame Poland employed 150 people, all of them polish origin. The distribution network counted over 50,000 registered members. By 1995 Oriflame was selling a range of 200 products 60% of which were filled and packed in Ursus, with the remaining coming from the factory in Ireland.

Advertisement and Public Relations: In 1993, it became evident that Oriflame was aiming towards a mass market with its sales volume and therefore the company decided to invest into both advertising and public relations activities to strengthen the brand awareness. The first advertising campaign was run in the autumn of 1993, followed by spring and autumn of 1994, the media used were mainly public TV and all segments of women’s magazines. The advertising budget for 1994 was almost $ 700,000 of which 70 percent was spent on TV. Below- the –line activities included not only traditional PR but also exhibitions and company promotional days in all major cities in the country, with an estimated audience of 300,000. Frequent contacts with the press resulted in broad media coverage, with little negative comment.

The Oriflame Distributor: In December 1994, Oriflame Poland has built a network of 50,000 distributors (placing orders at least once during the preceding 3 months) plus 30,000 non-active distributors (no orders in the last 3 months). Of the 573 distributors who have reached the director level and beyond, 90 percent of the4m devoted all their working time to Oriflame. Another several hundred are making a living that is far beyond average standards in Poland. The oriflamme network consists of some 75 percent of women and 25 percent of men, the majority being 25 to 35 years old. Bert Wozciech, after 3 years as area manager for Benetton on Poland, joined Oriflame as training manager for the whole network.

Competition: In 1994, it was estimated that over a million poles were working for different networks in direct-selling, multinational companies such as Avon, Amway, Zepter, Oriflame, Herbalife, and so on.

Oriflame manufacturing in Poland: The high demand for natural skin care and makeup products in Poland inclined the Oriflame corporate management to make the investment at Ursus. “We see Poland as a very big and important market which is still growing. We believe it is a prudent decision to broaden our activities here by building an ultramodern factory”, said Jonas afJochnick, the company’s founder and president during a press conference at Oriflame headquarters. The $ 20 million manufacturing plant was due to start operating during 1995. It is state-of-the –art production equipment and complete research and laboratory facility, which will make it the most modern cosmetics factory in Poland. Products will be made from the same ingredients and under the same strict quality control as in all other Oriflame plants. All production processes will be environmentally safe. Poland is the second country where Oriflame cosmetics will be manufactured. Part of the production will be exported to neighboring countries. More than 300 people will be employed full time once the new plant is operational.

Key factors in Oriflame’s success: Looking back over the years from 1990 onwards and the development of Oriflame in Eastern European markets, Sven Mattsson identified these key factors to the company’s success.

Local management: Since the beginning, in 1990, Oriflame developed a local management policy. Sending expatriates to do the job, even if they had a solid knowledge and experience of both the company’s products and the local culture was never considered as an appropriate solution. In each country, the company recruits a local manager and staff, spending a lot of time during interviews explaining the nature and spirit of the free market economy, the direct selling method, and the Oriflame marketing plan.

Marketing plan: The marketing plan itself is company. Support, guidance, and training were supplied from Brussels, with staff spending a great amount of efforts and time helping local markets. The marketing plan, called” the success plan”, was the same for each country, with minor adaptations where required. Mattson summarizes the Oriflame concept, “Oriflame considers itself as a company offering two kinds of products. First, a concrete one, originating from the same range of 200products displayed in a catalog with a pricing policy that favored volume rather than margins. Second, a more intangible product, which originated from the business opportunity offered to each distributor to develop their own business”.

PR and Advertising: Investing in PR has always been considered important. This is especially true of former communist countries who have long forgotten the knowledge and practice of a free market economy. Oriflame was spending approximately $45,000 per year in each country for PR and is planning to increase it in the coming years. A considerable amount was invested in “above the line” advertising to capitalize on the relative inexperience of media purchasing during 1991 to 1993. “Oriflame has reached 80 percent awareness in Poland. Czech Republic, and Hungary, which is definitely partly due to successful advertising campaigns during the past years” says Mattsson. Oriflame used a mix of TV commercials, printed advertisements, and bill boards.

Product and Price: Out of the range of approximately200 products, the company manufactures about 65percent; the remaining 35 percent come from subcontractors. Oriflame cosmetics are made from pure, natural ingredients. As Jonas afJochnick explained, “the company is dedicated to ensuring that our customers receive the highest quality products at reasonable prices each time they purchase cosmetics. “According to Mattsson, “Our aim is to have our products priced below our international competitors and at the same time be considered as an alternative to cheap local products”.

Distribution: In order to facilitate the distributor’s activity, the company has created in each country several service centers. This further improves the lead time between order and delivery. In 1994, Poland has 18 services centers; the Czech Republic and Slovakia, 20; Hungary, 9; Turkey, 9; and Greece, 3. The aim has been to give a 48-hourservice turnaround throughout the country, with a 24-hour service in the capitals “Our distribution strategy has proven to be very successful. As in all areas of life today, speed and accuracy are very important and this is especially true for direct selling.”