Expanding Pure Elegance Cosmetic Incorporation to Japan - Research Paper Example

?Pure Elegance Cosmetics Incorporation Expanding into Japan Prepared for Mr. Victor Newman, CEO Ashley Abbott, VP Human Resources Pure Elegance Cosmetic Incorporation 1111 Elegance Lane Genoa City, WI 53128 Prepared by LaShonda D. Baker July 21, 2012 LaShonda D. Baker July 21, 2012 Mr. Victor Newman, CEO Pure Elegance Cosmetic Incorporation 1111 Elegance Lane Genoa City, WI 53128 Dear Mr. Victor: Please find attached the report you requested in June about the business expansion possibilities and opportunities for the Pure Elegance Cosmetics Incorporation into the Japanese market, and the recommended action plan that the company should follow for a successful foreign business venture. The focus of the research was the various socioeconomic factors that would determine this business venture, such as economic viability, political stability, culture, legal restrictions, market acceptability, competitor analysis, location, workers criteria, employment outlook, and employee expectations. After the research, it is evident that Japan is a viable economic center for the expansion of the company, and its market would readily accept and support the cosmetics company and its products. The most suitable location for this venture would be Tokyo, the country’s capital. Tokyo is home to the majority of the 68 international companies that have their businesses in Japan. It is a metropolitan city with more than a quarter of the country’s population which is in constant need of cosmetics. With appropriate training of the staff and the incorporation of both local and American workforce, it is expected that the company would make a smooth transition into the foreign market, and would thrive there. The report has made use of several print and online resource materials to explore the different avenues related to the Japanese market. Of particular interest and importance are the websites for CIA World Fact Book and the International Monetary Fund, and the book “Japanese Business: Cultural Perspectives” by Durlabjhi and Marks. I am grateful to you for allowing me to conduct this research and work with you. It was a learning experience and a fascinating journey into Japan’s culture and traditions. In case you have any queries, please feel free to contact me any time. All queries would be assisted with no additional costs. Looking forward to working with you again. Sincerely, LaShonda D. Baker LaShonda D. Baker Table of Contents Letter of Transmittal………………………………………………………………………… i Executive Summary………………………………………………………………………… iii Introduction………………………………………………………………………………… 1 Purpose and Scope………………………………………………………………….. 1 Assumptions………………………………………………………………………… 1 Method……………………………………………………………………………… 1 Market Prerequisites………………………………………………………………………… 2 Economic Viability…………………………………………………………………. 2 Political Stability……………………………………………………………………. 2 Culture………………………………………………………………………………. 3 Legal Restrictions…………………………………………………………………… 3 Market Expectations………………………………………………………………………… 3 Market Acceptability………………………………………………………………… 3 Competitors Analysis………………………………………………………………... 4 Location……………………………………………………………………………... 4 Workforce Requirements……………………………………………………………………. 4 Workers……………………………………………………………………………… 4 Employment Outlook……………………………………………………………….. 5 Employee Expectations……………………………………………………………... 5 Conclusions and Recommendations………………………………………………………… 5 References…………………………………………………………………………………… 7 List of Illustrations Figure 1 Japan GDP growth rate……………………………………………………… 2 Figure 2 Popular district among younger generation…………………………………. 4 Pure Elegance Cosmetics Incorporation Expanding into Japan Executive Summary Pure Elegance Cosmetics Incorporation is a stable company with the potential for expanding into the global market. The best destination for its expansion would be Tokyo, the capital of Japan. Tokyo is home to the majority of the 68 international businesses that are operative in the country. With more than a quarter of the country’s population working round the clock, Tokyo is a vibrant market for cosmetic products. It is a metropolitan city, and the company would garner a lot of exposure from this business venture. Japan is the second largest and strongest economy in the world, and the second largest cosmetics market in the world. It is home to the oldest and the fourth largest cosmetics company in the world. With a population of 127 million and an unemployment rate of 4%, it is a stable and thriving market for a foreign business. The government is stable and the regulations for foreign investment are lax and easy, favoring the company’s transition into the country. The following recommendations should be taken into consideration for a successful business venture into the Japanese market: 1. Market prerequisites: Sell the products at the same price range as that of other local and international cosmetics companies in the area Due effort should be made to adopt the local culture into the company’s policies and practices. 2. Market expectations: The company stores should be located in Tokyo, the country’s capital. The company should try to target the older population as well, which forms well over 30% of the entire population 3. Workforce Requirements: It is imperative that the company employ local Japanese workforce along with the American staff The company should have two managers in Japan, one American and the other Japanese The company should train its workforce in the local values and traditions. The company should hire workers of all ages, including older workers, but should not give up its policy of hiring and promoting workers on merit. Introduction Pure Elegance Cosmetics Incorporation is a financially stable multi-national company that is currently exploring the possibility of establishing a new market in Japan by expanding its offices there. The company had directed for a detailed report on the possibility and viability of such a business expansion, and to conclude and recommend any suggestions that would be necessary for the success and prosperity of the company. Purpose and Scope: Pure Elegance Cosmetics Incorporation is a successful company in the United States, and owing to its success and stability, it has decided to expand in the global market and explore opportunities of setting up a cosmetics business in the thriving corporate market of Japan. This report purports to explore the requirements and information of and recommendations for such a business venture. This report will analyze several pertinent topics, starting from the market requirements and condition, including the economic, political, cultural, and legal conditions; the expectations of and from the market, including market acceptability, competitor analysis, and location determination; and the company’s workforce requirements, including worker selection criteria, employment outlook, and employee expectations. The report does not cover the internal workings of the company, nor does it offer a detailed analysis of the other companies currently established in the Japanese market. Assumptions: Throughout the report, it is assumed that the economic, political, and legal conditions of the host country would remain stable and uniform, and that the process of expansion would be similar for Pure Elegance Cosmetics Incorporation as that for other American companies currently established in the Japanese market. Method: The report has made use of several print and online resource materials to explore the different avenues related to the Japanese market. Of particular interest and importance are the websites for CIA World Fact Book and the International Monetary Fund, and the book “Japanese Business: Cultural Perspectives” by Durlabjhi and Marks. Market Prerequisites This section will focus on the existing conditions of the Japanese Market that will determine the viability of this business expansion. Economic viability: Figure 1. Japan GDP growth rate (Trading Economics, 2012). Japan is a stable and thriving economy that has the capacity to support international businesses. According to the International Monetary Fund, Japan is the second most developed and strongest economy in the world, with 68 out of the 500 international companies being currently operative in this market (2012). Over the past three years, there has been an increase of 3.4% in the Gross Domestic Product of the country, with the Gross Domestic Product averaging 2266.10 US dollars over the past decade (IMF, 2012). This is ample proof the market can easily accommodate the expansion of another stable international corporation. Pure Elegance Cosmetics Incorporation would determine the prices of its products according to the current trend of costs in the market. Political stability: The political environment of the country is fairly stable, with the government imposing minimum sanctions and impediments on foreign transactions. The country remains under a constitutional monarchy (CIA, 2012). The government freely permits all foreign exchange transactions to and from Japan. Formal sanctions on the allotment of foreign exchange and the majority of limitations on foreign investment have been eliminated (Karan, 2010). Culture: It is vital for the company to adopt the Japanese culture in its foreign offices, and while dealing with the customers. Therefore, it is vital for the American managers and other staff to socialize and interact with the local workforce in order to learn about the native culture. The company should organize workshops and interactive training sessions for its American employees to better understand the environment in which they would be performing. The Japanese culture is very different from the American culture. They believe in calmness, politeness, and courses, practices which would have to be incorporated into the business for its survival (Locker and Kienzler, 2010). Legal restrictions: The Japanese government has made it fairly easy for international businesses to expand and set up in the Japanese market. The legal procedures are short and simple (Karan, 2010). A detailed breakdown of the step by step procedure for setting up businesses is beyond the scope of this report. Market Expectations This section focuses on the expectations of and from the market that Pure Elegance Cosmetics Incorporation might encounter. Market acceptability: The Japanese cosmetics market is the second largest in the world, with a hefty increase of 170% in the market since 2000 (IMF, 2012). The Japanese population is willing to spend a lot on cosmetics and beauty products; in fact, some of the products are considered to be vital by the Japanese, who are willing to spend considerable amounts in their procurement (Yano Research Institute, 2010). On an average, there is an expenditure of 242 US dollars by the Japanese on beauty products per person (Yano Research Institute, 2010). The Japanese prefer established names in the market, and foreign products with soft and lively colors, low scents, and high quality (Yano Research Institute, 2010). With more than 30 percent of the population being above 60 years, there is a substantial market for skincare and age reduction products (Karan, 2010). Pure Elegance Cosmetics can easily fulfill these market criteria. Therefore, this is a welcoming market for the incorporation. Competitors Analysis: The biggest competitors to Pure Elegance Cosmetics are the local Japanese cosmetics brands. The foremost among them is Shiseido (Discount Upon, 2011). It is the oldest and the fourth largest cosmetics company in the world (Discount Upon, 2011). Others include Kanebo, Kose, and SK-II, the heavyweights in the local cosmetics industry (Discount Upon, 2011). All the companies use direct and indirect marketing techniques, including advertisements and door-to-door services for their marketing (Discount Upon, 2011). Location: Figure 2. Popular district among younger generation (Japan-Guide, 2012). Although a small country, Japan has a dense population of 127 million, with more than a quarter of that population residing in the country’s capital, Tokyo (CIA, 2012). Tokyo is also a thriving metropolitan city with offices of the majority of international businesses that are located in Japan. Residents work round the clock, and therefore, are in a constant need of beauty products (Kunkal, 2010). Therefore, it is recommended that Tokyo be the site of the company’s offices in Japan. This will ensure the maximum exposure of the company products to a vast population, all of whom will be potential customers. Workforce Requirements This section deals with issue of the workforce, both local and American, that the company might face in its offices in Japan. Workers: The company should employ both American staff as well as the local Japanese staff. This is important not only to foster good relations between the two nationalities, but also to help the American staff learn about the Japanese culture and mannerisms by their Japanese coworkers, as these local traditions will have to be incorporated into the working of the company. It is a Japanese tradition that employees are not selected or promoted on the basis of merit, but rather on the basis of age and experience (Durlabhji and Marks, 1993). Therefore, the company would have to make an effort to employ workers of a varying demographic, including the aged and experience workers. This should not substitute the company’s policy of choosing its employees on the basis of competence and merit. Both procedures should go hand-in-hand. It is recommended that the company should have two managers, an American manager and a Japanese manager, to make the working of the company in a foreign land smoother. Employment outlook: As previously mentioned, Japan has a population of 127 million (CIA, 2012). The unemployment rate in Japan is 4% (CIA, 2012). This means that although most of the Japanese population is employed, there will be enough staff available in the country to run the Pure Elegance Cosmetics Incorporation. As the company does need local staff to run the business, it is encouraging that the availability of such staff will not cause any impedance in the company’s set up or running. Employee expectations: In the Japanese tradition, the employees forge a long-term and loyal relation with their employers and companies, a phenomenon known as paternalistic approach (Locker and Kienzler, 2010). This could be beneficial to Pure Elegance Cosmetics Incorporation, in that once the relationship has been established, the company would not need to fear any shortage of staff or unexpected behavior from staff. Also, the company would have to employ less time and effort in trying to keep the staff motivated. However, it would have to strive to develop such a relationship in the beginning. The availability of local Japanese managers and other workforce will ease and expedite the process of employer-employee relationship and trust building. Conclusions and Recommendations Pure Elegance Cosmetics Incorporation, being a financially strong and stable company, is ready to expand into the global market. The most suitable destination for its foreign stores would be the Japanese market. Japan is a thriving and stable economy, and its policies welcome foreign businesses. It is also a very affluent consumer society, which would be to the benefit of the company. It is recommended that the company adopts the following action plan for a successful expansion into the Japanese market. 1. Market prerequisites: The company should sell its products at the same price range as that of other local and international cosmetics companies in the area for a better chance of competition and sales. The company should understand that the Japanese corporate culture is very different from the American culture, therefore, due effort should be made to adopt the local culture into the company’s policies and practices. This will increase the clientele and the sales of the company. 2. Market expectations: The company stores should be located in Tokyo, the country’s capital. This is because Tokyo has a thriving metropolitan population, more than a quarter of the entire population of the country, with residents working round the clock. This means that they will be in a constant need for beauty and skincare products. The company should try to target the older population as well, which forms well over 30% of the entire population. Age reducing products and skincare products should be made easily available. 3. Workforce Requirements: It is imperative that the company employ local Japanese workforce along with the American staff to foster good relations and to help learn the American staff about the country’s culture and traditions. The company should have two managers in Japan, one American and the other Japanese, for the smooth running of the business. The company should employ substantial time and energy in the training of its workforce in the local values and traditions. The company should hire workers of all ages, including older workers, but should not give up its policy of hiring and promoting workers on merit. References Bucknall, Kevin B. Japan: Doing Business in a unique Culture. C&M On line Media, 2005. Print. CIA World Fact Book (2012, June 8). Japan. The World Fact Book/Central Intelligence Agency. Retrieved June 8, 2012, from https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html Discount Upon. (2011). Top 10 Japanese cosmetic brands. Retrieved from http://discountupon.com/japanese-cosmetic-brands/ Durlabhji, Subhash, and Norton E. Marks. Japanese Business: Cultural Perspectives. SUNY Press, 1993. Print. International Monetray Fund (2012). Japan's Solid Recovery. International Monetary Fund. Retrieved 2012, from http://www.imf.org/external/pubs/ft/survey/so/2012/CAR061112B.htm Japan-Guide. (2012). Tokyo. Retrieved from http://www.japan-guide.com/e/e2164.html Karan, P. P. (2010). Japan in the 21st Century: Environment, Economy and Society. University Press of Kentucky. Kunkel, Lilly M. International Business Etiquette and Manners: An Investigation of the key Differences in Practice between the United States of America and Japan and their effects upon Communication and Working Relationships. GRIN Verlag, 2010. Print. Locker, Kitty O., and Donna S. Kienzler. Business and Administrative Communication. 9th ed. McGraw Hill, 2010. 132. Print. Mente, Boye. Japanese Etiquette & Ethics in Business. McGraw Hill, 1994. Print Trading Economics. (2012). Japan GDP growth rate. Retrieved from http://www.tradingeconomics.com/japan/gdp-growth Yano institute of Research (2010). Cosmetic Industry in Japan: Key Research Findings. Japan Market, 2(46). Retrieved from www.yanoresearch.com/press/pdf/693.pdf   Read More