Herborist's Global Expansion in Russia - Essay Example

Individual Essay -Herborists global expansion in Russia Introduction Herborist is a Chinese brand of cosmetics and beauty care products which are differentiated from other cosmetics brand on the basis of the use of ancient Chinese medicines and secrets in the product range offered by the company. With the increasing trend of international expansion and the preference of the consumers towards medium range cosmetic products, especially after the financial downturn of 2008, Herborist has identified sources of success in the various international expansion processes involved in the business. The company has earlier expanded its operations in markets like Hong Kong and Paris in which it has derived mixed results for the business. But in the changing global scenario, where the global cosmetics market is expected to grow highly in the future and the cosmetics market in China is becoming increasingly saturated for the local players like Herborist, it has become increasingly important for the company to focus on entering into profitable foreign markets to ensure the profitability as well as the sustainability of the business in future. The competition from the foreign cosmetics companies including the Japanese cosmetics companies like Shisheido and the western cosmetics companies like Chanel, Estee Lauder, and Lancôme etc. in then Chinese cosmetic industry has created urgency for the local companies like Herborist to consider new markets for expanding their business. The use of Chinese medicinal properties and herbal ingredients in the beauty care products manufactured and sold be Herborist makes it a differentiated cosmetics company and increases the probability of its success in global markets due to the increasing demand of the consumers for herbal beauty products rather than the chemical containing beauty products. One country that Herborist should prioritize (Russia) Herborist may consider a number of countries for its international expansion including India, Germany and Russia. But Russia can be identified as the most suitable country that Herborist can focus on entering into. The various macro environmental factors prevailing in Russia make it a potential market for Herborist. The high rate of economic growth and development in the country is likely to facilitate the business of Herborist. The consumers in Russia are identified to have increasing preference in using herbal beauty products and are much interested in spending for beauty products (Wang 160). The growing economy suggests an increasing purchasing power of the consumers and the active social life existing in Russia also indicate that the consumers would have much interest in spending considerably for buying cosmetics and beauty products to enhance their appearance. The Russian cosmetics and beauty products market is one of the largest in the world and has high potential to absorb new companies like Herborist and driving profitability and customer base for the business (Bakker 182). The entry barriers into the Russian market have also been lowered after the WTO accession of Russia. The business practices have become much less restrained which would facilitate and support the expansion process of Herborist in the country. By opening up its business in the Russian market, the company may seek a number of benefits including the access to a wider range of customers, increasing the profitability and the market share for the company, benefits of global sourcing as well as a number of economic and financial benefits by tapping in a large and potential market (Ingram 91). The entry mode into the suggested country Herborist should decide critically on the choice of entry mode into Russia by evaluating the pros and cons of different options of entering into the new market. These entry mode options may include the setting up of franchises, partnering with local brands, setting up wholly owned subsidiaries, licencing, joint ventures, exporting or direct investment (Porter 214). The method of establishing wholly owned subsidiaries for the business in Russia is considered to be the most advantageous and feasible mode of entry for the company. The setting up of wholly owned subsidiaries of Herborist in Russia would be suitable to match the existing economic policies and the market conditions in Russia (Briot 273-294). This choice of entry mode would also ensure that Herborist can draw maximum profit from the overseas operation and can maintain direct control over the operations in the foreign market. Also, the company will not have to share its profits and can harness the all the revenues gained from the business operating in the country. Other options of entry into Russia would not have similar benefits as the establishment of wholly owned subsidiaries as they would require the sharing of profits and control will the alliancing partners (Johnson 118-119). The open economy structure in Russia that has been established after the WTO membership would support the establishment of wholly owned subsidiaries in the market making it the most feasible and beneficial option for Herborist. Growth strategy in the designated country Herborist should concentrate on implementing suitable strategies to ensure the growth and profitability of the business in the Russian market. The company should try to achieve economies of scale which is one of the most critical objectives underlying the international expansion process of a business (Julien and Eckhardt 216-230). The choice of suitable suppliers would be a significant move by the company in setting up the overseas business. The most cost effective and reliable suppliers and distributors should be accessed for the business to maintain high reliability and profitability of Herborist in the new market. The distribution policies of the company should be strategically designed and effective promotional strategies should be used to ensure better profit margins and revenues for the business (Kotler 159). Robust communication and customer value creation processes should be established by Herborist to ensure its growth in the destination market. The company should also devise and incorporate proper risk management strategies in the business to ensure that there are no hindrances to the growth of the company in the Russian market. Market strategy and sales networks in the country The establishment of interconnected and highly functional sales network would be critical for the success of Herborist in Russia. The choice of market strategies and sales network should be done after proper market research and sampling done to understand the choice and preferences of the Russian consumers (Lopes 91). The products should be designed to cater to a wide range of customers belonging to different age groups and social strata. The brand can segment its product lines into a premium range targeted at the niche market segment and a mass range that can be afforded by the common public. The pricing of the products should be done accordingly with the premium range having products that are high valued and the mass range containing products that are affordable and value for money products. The promotional strategies should be innovative and unique and should ideally be a combination of traditional promotional strategies like media advertising and creative new age promotional strategies like the use of social media and the internet (Fill 102). The company should employ extensive research and development processes to ensure high innovation in the products. Herborist can also concentrate on channel development, public relations and personnel selling in order to position the business effectively in the new market. The supply of the products in premium spas and salons would be a beneficial marketing strategy to reach a wider base of consumers and also create customer awareness about the brand (Rosenbalt 222-235). The use of the products marketed by Herborist in reputed salons and spas would also play a crucial role in increasing the reliability an assurance factor of the customers of the brand. How to implement the suggested strategies The company should consider employment of suitable strategies to ensure that a loyal base of customers can be created for the business. Membership schemes in which discounts and benefits are provided to the members of the brand would go a long way in increasing the loyalty of the customers towards the brand. The tie ups with salons would increase brand awareness and the customers of the spa may be targeted as potential customers for the business. The establishment of spa services including different packages would help in boosting the sale of the products as well as establishing the brand as an effective multifaceted brand (Gundle 452). The launch of different product ranges including anti tan range, fairness range and anti-ageing range for catering to different segments of consumers would be other effective strategies (Czinkota 90). The introduction of a separate range of products for men would also be beneficial because the metrosexual men are becoming more conscious about their appearance and grooming (Ashikari 48). The maintenance of a good management system and the establishment of a good corporate culture in the overseas operations would help the company to implement the necessary strategies. The employment of the local people in the business and engaging in socially responsible activities as well as implementing businesses processes to suit the existing culture in Russia would help the company to adapt to the external environment and would also influence the people of Russia to accept the brand more readily (Bradley 68). Conclusion The implementation of significant strategies in the establishment, marketing and corporate activities of Herborist would foster the success of the brand in the foreign country. The creation of higher value for the customers and innovation in the product development and corporate strategies would be the key to success in Russia. Before establishing its business in Russia, Herborist should conduct extensive market research to understand the level of competition, the preferences of the consumers and the cultural aspects existing in Russia. The company would also need to identify the key differences in the domestic and foreign market so that it can successfully adapt to the cultural and other factors of the foreign market. The identification of the differences and implementing market strategies to capitalize on these differences would be important drivers of the new business established by the company in Russia. Herborist should focus on the shifting preference of the consumers towards herbal beauty products because the unique selling proposition of Herborist remains in the use of Chinese herbs in the beauty products range. The financial and product development capabilities of Herborist should be employed in its international expansion processes so as to establish a compliant and profitable business in Russia which would add up to the revenues of the company. Herborist should also focus on the optimal utilization of its resources and using its internationalization experiences in expanding its operations in the highly potential market of Russia. Works cited Ashikari, Merei. “The Memory of the Women’s White Faces: Japanese and the Ideal Image of Women.” Japan Forum. 2003. Web. Bakker, Gerbrand. Beauty and the Regions. Cambridge, UK: Cambridge University Press, 2008. Print. Bradley, Frank. International Marketing Strategy. New Jersey: Prentice Hall International Ltd., 1995. Print. 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Global Brands: The Evolution of Multinationals in Beauty Products. New York: Cambridge University Press, 2007. Print. Porter, Michael. “Material of International Marketing Communications.” Harvard Business Review 54 (2008). Print. Rosenblat, Tekin. “Why Beauty Matters.” The American Economic Review 96 (2006): 222–235. Print. Wang, Wei. ”International Marketing Strategy for Herborist.” International Journal of Marketing 36 (2011). Print. Read More