Herborist - Factors to Succeed in the Russian Market Expansion - Essay Example

Independent Research Paper Proposal Contents Introduction 3 Discussion 3 One country which Herborist should prioritize (Russia) 3 The entry mode intothe suggested country 5 Growth strategy in the designated country 5 How to implement the suggested strategies (i.e. organization structure, HR, corporate culture) 6 Conclusion 7 References 8 Introduction The Chinese cosmetics market has become extremely concentrated and competitive with the major mainstream brands of cosmetics entering the market. This has led to increased competition among the domestic cosmetic companies and the international cosmetic companies operating in China. Faced with this situation, the domestic companies in China are facing the immediate need of expanding their businesses in other countries so as to increase their profitability and market share as well as negate the losses caused in the cosmetic market due to the tough competition from the international cosmetic brands like Chanel, Lancôme, Shisheido, Estee lauder, Yves Laurent and so on. Like many other Chinese cosmetics companies, Herborist has also recognized the need to expand their operations in new markets and follow and extensive internationalization process while keeping the business rooted to its own unique cultural factors and a differentiated positioning strategy. Herborist is in the business of herbal cosmetic products and is an established name in the herbal care sector of China. The traditionalism and uniqueness of the herbal factor remains the unique selling proposition for the brand which it must capitalize on while entering a new potential market for its expansion process. Discussion One country which Herborist should prioritize (Russia) The international expansion process of a company is guided by many factors which are likely to drive the development of the internationalization success for the company. These factors may include the following: the company may seek growth opportunities through market diversification, the company may seek to increase the revenues and profitability of the business, the company may try to gain ideas about new business processes, products and methods for innovation, the company may aim to serve a wider range of potential customers in new regions, the company may also achieve increased benefits from new supply sources and get the advantages of global sourcing and the company may achieve economies of scale through lost cost and high volume production (Bakker, 2008, pp.117-118). Herborist can focus on entering the market of Russia as a part of their international expansion strategy as this would help the company to achieve all the above mentioned benefits as well as the company will be able to benefit from the interest of the consumers in this country towards herbal skin care products and spa services that Herborist can offer (Deighton, Kornfeld, He and Jiang, 2010, p.10). The Russian cosmetic industry is a developed market in which the customers have much interest in using products based on herbal ingredients (Briot, 2011, pp.273-294). The Russian cosmetic industry is a booming industry which is being tapped by many of the leading cosmetic and beauty product companies from all across the world (Ashenburg, 2007, p.89). The cosmetic market in Russia is one of the largest in the world and one which expects continuous and accelerated growth in the future. Therefore, entering this market would make Herborist capable of increasing their sales, easily source raw materials from the numerous suppliers available in this market and help the company tap a wide range of consumers and increased market share (Burke, 1996, p.72). The Russian cosmetic market is much focused on products like skin care, spa products, perfumes, toiletries and beauty products (Gundle, 2008, p.90). These products are in alignment with the range of products and services which Herborist specializes in. Therefore, the country would be the most preferred choice for the global expansion of Herborist. The entry mode into the suggested country The entry mode decision of the company is one of the most critical decisions involved in the expansion process of the business. The different market entry modes that can be availed by a company are direct exporting, wholly owned subsidiaries, indirect exporting, licensing, franchising, direct investment and joint ventures. Herborist should effectively use the mode of establishing wholly owned subsidiaries as this would suit the market conditions, the competitive situation and the economic policies of the country. The establishment of wholly owned subsidiary would ensure that the company has better controller its operations in the destination country. Also, the business processes can be effectively monitored and it would not be needed to be shared with any other party. Russia has become an open economy which encourages foreign companies to invest in setting up their operations in Russia which was not possible before 1992. Herborist can thus establish subsidiaries to ensure the creation of a profitable business in Russia. Growth strategy in the designated country Herborist should use effective marketing strategies to promote its growth in the Russian market. The company should focus on extensive promotional strategies, selling techniques and customer value creation. Since the use of internet is common among the consumers in Russia, therefore the company should focus on promotional activities through the use of social sites (Cipriani and Zago, 2011, pp.428-430). The company should focus on effective risk management and achieve economies of scale in its operations in Russia. Since the Russian cosmetic market is a developed market, there are many suppliers (Friedman and Jones, 2011, p.242). The company can focus on growing its sales and profitability through proper sourcing and distribution policies. Herborist should also focus on effective marketing strategies including channel development, research and development, product innovation and focus on developing the beauty products and the spa services according to the taste of the target customers in the Russian market (Wang, 2011, p.35). Market segmentation and catering to the needs of the particular customer groups would be a critical part of the growth strategy of Herborist in the Russian cosmetics market (Caves, 2000, p.141). Herborist should also employ effective investigation and communication systems for achieving the different marketing and growth objectives in its business in the new market. Also, it should focus on using all the main marketing tolls like personnel selling, public relations, direct marketing, advertising and sales promotions. How to implement the suggested strategies (i.e. organization structure, HR, corporate culture) Herborist should employ effective customer relationship management system in its new operations. For example, it can introduce the Herborist membership scheme which it uses in its domestic market (Cayla and Eckhardt, pp.216-218). This would help the company to gain increased customer loyalty and have a fixed customer base as it has in its domestic market of China. The development of membership activities is followed by the major cosmetic and beauty product companies across the world like The Body Shop, Estee lauder, Oriflamme International etc. (Basten, 2008, p.98). Herborist can also focus on the same strategy to implement effective management system in its organization. The company should focus on developing a culture and communication within the organization that suits the market needs of Russia. The company should focus on the range of relaxing spa services, anti-ageing products and whitening products which are known to dominate the cosmetic market in Russia (Ashikari, 2003, pp.55-79). Herborist should focus on proper research and elopement in the organization for the development and design of products and services suitable for the Russian culture. Also, the company should employ the local people and use extensive local surveys and market research tie understand the gaps in the cosmetic market and the evolving needs of the market (Frost & Sullivan, 1983, p.18) Conclusion Herborist can succeed immensely in its expansion in the Russian market like the other major multinational beauty product companies have done. This can be achieved if the company employs significant strategies for the expansion process. Since the business environment is becoming more complex, Herborist should concentrate on innovation and customer value creation in the foreign market. The company should focus on the cultural differences between their domestic country i.e. China and the foreign country i.e. Russia. Also, the different regulatory policies, tax structure, demands of the customers and the market trends should be properly evaluated by Herborist to establish a successful business in the cosmetics and beauty products market of Russia. Herborist is financially equipped to compete with major cosmetic brands and it should use its resources and competencies to succeed in its expansion into the Russian market. References Ashenburg, K. 2007. The dirt on clean. New York: North Point Press. Ashikari, M. 2003. The memory of the women’s white faces: Japanese and the ideal image of women. Japan Forum. Vol. 15(1), pp. 55-79. Bakker, G. 2008. Beauty and the regions. Cambridge, UK: Cambridge University Press. Basten, F. E. 2008. Max Factor: The man who changed the faces of the world. New York: Arcade. Briot, E. 2011. From industry to luxury: French perfume in the nineteenth century. Business History Review. Vol. 85(2), pp. 273-294. Burke, T. 1996. Lifebuoy men, lux women. Durham, NC: Duke University Press. Caves, R. E. 2000. Creative industries: Contracts between art and commerce. Cambridge: Harvard University Press. Cayla, J., & Eckhardt, G. M. 2008. Asian brands and the shaping of a transnational imagined community. Journal of Consumer Research. Vol. 35(2), pp.216-218. Cipriani, G. P., & Zago, A. 2011. Productivity or discrimination? Beauty and the exams. Oxford Bulletin of Economics and Statistics. Vol. 73(3), pp. 428-430. Deighton, J., Kornfeld, L., He, Y., & Jiang, Q. 2010. Herborist. Harvard Business School Case. [Pdf]. Available at http://cb.hbsp.harvard.edu/cb/product/511051- PDF-ENG. [Accessed on 13 February 2104]. Friedman, W. A., & Jones, G. 2011. Creative industries in history. Business History Review. Vol. 85(2), pp. 237-244. Frost & Sullivan. 1972. The cosmetics and toiletries industry market. New York: Author. Frost & Sullivan. 1983. Marketing strategies for selling cosmetics and toiletries in Europe. New York: Author. Gundle, S. 2008. Glamour: A history. New York: Oxford University Press. Wang, W. 2011. INTERNATIONAL MARKETING STRATEGY FOR HERBORIST. [Pdf]. Available at http://www.theseus.fi/bitstream/handle/10024/29635/Wei_Wang.pdf?sequence=1. [Accessed on 13 February 2104]. 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