Herborist International Expansion in Canadian Market - Assignment Example

Herborist International Expansion in Canadian Market Herborist International Expansion in Canadian Market Introduction As one ofChina’s most successful companies in the skin care industry, Herborist has been received reasonably well in overseas markets including the US and some European countries. From this perspective, the senior management has decided to venture into Canada as the next market in its international expansion plan. This decision is based on the research hypothesis that Canada will provide an appropriate market for international expansion. Basing on literature review as well as research, both qualitative and quantitative, this paper will present a personal statement according to the research proposal and focus on three points. First, it will answer the question “why should Herborist expand into the Canadian market?” Then it will focus on the strategies for Herborist’s expansion into the Canadian market and, finally, how the Chinese heritage claims will be balanced with modernity claims. Why Should Herborist Expand into the Canadian Market? As a team consisting of eight members, we did an analysis of the local market, the Canadian market and the strategies necessary to expand into Canada. According to (Ingram 2010, p. 69), the market for clinically tested and more advanced skin care products in Canada has been ready since the onset of the 21st century. Therefore, Herborist stands a high chance of success by expanding into the Canadian market and delivering consumer value. Viewed from the domestic perspective, Herborist may be doing well in the skin care industry in China. However, it is also faced with stiff competition from foreign brands. As the management team, we believe venturing into the Canadian market will provide more opportunities than relying on the domestic market. For example, at the beginning of 2008, according to McDonald (2009, p. 94), mainstream skin care products from across the world had entered the Chinese market, presenting more competition to local brands. On the other hand, Herborist is China’s only premium brand of skin care products that has been successful in Asia and Europe. This is an indication of the potential success in the Canadian market if the proper marketing strategies are used. According to studies conducted in the Canadian market, the skin care industry is growing at a favorable rate and even though women are driving the trend, the market is still demographically diverse (Business Wire 2011, p. 1). From such reports, we decided that the Canadian market can present viable growth opportunities. For instance, as shown by Sponagle (2011, p. 1), an environmental aspect has also indicated that Canadians are increasingly becoming interested in skin care products as temperatures are rising across the country. This has led to a growth in the retail market especially in spa, cosmetics, toiletries and beauty and personal care products with a projected annual growth of up to six percent. Further, the Canadian population has also been shown by reports to be rapidly aging but also urbanizing. Apart from the increasingly aged market, the youth and especially teenagers are earning more disposable income through parental allowances and part time jobs (Sponagle 2011, p. 1). Market studies in Canada have also shown the significance of the gender aspect, indicating that even though females are the leading consumers of cosmetics, men a d the youth are increasingly joining the trend (Berghoff, Scranton & Spiekermann 2012, p. 102). For the foreseeable future, the narrowing divide in gender is a trend expected to continue. From the perspective of ethnicity, we established from studies that 20% of the minority population of Canada is expected to be visible by 2017. Further, 95% of that minority that will become visible will be living in large cities as indicated by trends starting from 2001 (Ingram 2010, p. 83). We feel that this is particularly significant especially since trends are showing that common law and marriage relationships are leading Canadians to partner more with ethnically different groups. The result is a new generation of children with multi-ethnicities characterised by a wide array of skin tones and more open attitudes towards lifestyle and culture. Essentially, this creates a unique market for the skin care and fashion industry among the wider population since consumers show more willingness to try new products and looks. According to the Canadian Marketing Association (CMA, 2014, p.1), the Canadian population, both natives and immigrants, lead relatively active lifestyles and show considerable interest in health and wellness. Whether it is for leisure or work activities, they have been shown to embrace grooming trends. For Herborist, this provides business opportunities outside of China and away from the competition presented by the international brands that are growing in popularity in the domestic market. As pointed out by Deighton et al (2012, p. 4), the rapid growth in the skin care industry compromised quality and safety control in China. However, by moving away from the stiff domestic competition, it is believed that Herborist will be able to concentrate on the two aspects, albeit with less production. According to Malhotra (2010, p. 14), skin care is a highly developed and mature industry in Canada, with women forming the larger customer base. Strategies for Herborist’s Expansion into the Canadian Market The market entry strategies researched by the team responsible for strategies was based on the Ansoff Matrix and focused on the key four areas that included market penetration, market development, product development and diversification. It was agreed by the team that penetration strategies will set the foundations of selling the company’s existing products to the Canadian market by, for example, changing prices and the packaging as well as adding new features. Essentially, this will enable the products to appeal to the Canadian marketing without necessarily abandoning the Chinese cultural claim. With acknowledgement that the Canadian market also has other players in the industry and also a population with diverse cultures, it is believed that strategic marketing will be crucial. Studies have shown that the high-end or premium cosmetics market in Canada has the largest profitability resulting from high sales volumes (CMA 2014, p. 1). However, in order to enter the market as a more diversified player, the company should focus not only on the premium market but also mass segment. It is also acknowledged that the Canadian market has other brands that have positioned themselves strategically in the organic/natural segment, but Herborist will be able to position itself basing on the unique Chinese heritage. An analysis of the local market showed that the Canadian population is characterised by slow growth but there is a relatively significant saturation in the cosmetics industry. However, Deighton et al (2012, p. 5), the needs of the growing number of females of Asian origins are not fully addressed in the Canadian market. This presents an opportunity to be taken advantage of and drive sales that target that market segment (Young 2009, p. 91). With this information, the team analysing the local market found it necessary to analyse the key trends of the supply side as well as demand. Therefore, we felt it was necessary to detail the segmentation of both local and international products as well as historic values and volumes. While the products offered by Herborist are not different from their competitors, we decided that packaging would be one way to differentiate them and facilitate market penetration. This will involve increasing the market share within the selected market segments by selling more products with the aim of establishing customers and finding new ones (Bradley 2009, p. 72). We acknowledge that the internationalisation process is complicated, which is why the company must pay particular attention to its business operations. There exist significant differences between the Canadian culture and the culture of the company that originates from China. Product development will be used to come up with products that target specific market segments and especially consumers of an Asian background as the literature review has shown. From analysing the market, we established that this is a viable way of achieving growth. However, from the perspective of market development, we all agreed that introducing existing and successful products in the new market would be a beneficial strategy to extract maximum gains. We all agreed that entering the Canadian market has its own barriers especially in the form of branding luxury. Unlike the domestic Chinese market, the Canadian one is highly moved by aesthetics (CMA 2014, p. 1). While local brands in China generally lack ambition and tend to use local advertising agencies because of their low costs, Herborist will have to enter the market with an aggressive strategy to develop a customer base. We also realised that the skin care industry in China, especially local players, focuses much on price to an extent that they find themselves in a dilemma. Eventually, they are either forced to reduce their prices, with potential losses, or quit. However, since Herborist has already established itself as a premium brand locally, we felt that it would be beneficial to market its products in Canada as premium products but not focus much on the price. Rather, a focus on diversification will be more beneficial and part of a long-term strategy with higher profits expected after the company has positioned itself in the market. Although we also felt that introducing already successful brands into the Canadian market will be a way of continuing the company’s legacy, diversification will also introduce new products that will target specific market segments. How Herborist will balance its Chinese Heritage Claims with Claims of Modernity The Chinese heritage is unique and highly reflected in Chinese products. Herborist is known for combining contemporary biological technology with the typical Chinese beauty to develop a brand identity that is characteristically natural and balanced (Business Wire 2011, p. 1). According to Czinkota and Ronkainen (2009, p. 19), it is critical to maintain a cultural identity even when marketing internationally so as to differentiate products from the competition. In this case, Herborist neither intends to abandon its Chinese heritage nor ignore technological developments. Therefore, the choice of colour will be used to remind consumers of nature but innovatively and in a modern way. As already mentioned earlier, packaging will combine modernity and the Chinese heritage claims. Differentiation will be emphasised by the branding (Kotler & Armstrong 2010, p. 101). For example, we established that Japanese products emphasise on purity, the French are more concerned with elegance and the Americans market their products as sexy. However, we felt that Herborist should brand itself as a marketer of natural Chinese products, which would be in resonance with the Canadian market trends for natural and organic products. Studies conducted in the Canadian cosmetics market have shown that natural cosmetics are demanded by up to seven percent of the total market (Deighton et al 2012, p. 6). Further, the increase market share is specifically for products of facial care. Natural cosmetics developed for skin, body, hair and bath from traditional herbal remedies such as calendula, nettle, burdock root and palmetto oil are on increasing demand. Therefore, after researching the products sold by Herborist, we felt that they conveniently integrate the benefits of modern biotechnology with traditional Chinese herbal medicine because they use these ingredients in their products. A brand or image of tradition associated with innovation will enable Herborist to position itself successfully for rapid growth in the new market (Fill 2009, p. 34). This way, we feel the brand will effectively target a market segmented into mature women, men and the youth. Conclusion Herborist has been shown to be one of China’s most successful companies in the skin care industry that is also received reasonably well in overseas markets including the US and some European countries. This prompted the senior management to decide to venture into Canada as the next market in its international expansion plan. As a team of eight, we researched the viability of entering the Canadian market and the strategies for expansion as well as balancing the Chinese heritage claims with modernity claims. Therefore, to enter the new market, the management must adjust so as to survive in the foreign market and make full use of their research and development team to conduct continuous studies. Finally, the company has outstanding features among its brands that can be taken advantage of for development in the new market. References Berghoff, H, Scranton, P & Spiekermann, U 2012, The rise of marketing and market research, Macmillan, New York. Bradley, N 2009, Marketing research, Oxford University Press, Oxford. Business Wire 2011, Research and markets: skin care in Canada - forecasts to 2015 - in 2010 retail sales of skin care products showed a 4% rise in current value terms to total C$1.5 billion, viewed 16 March 2015, http://www.researchandmarkets.com/research/061f6c/skin_care_in_canada Czinkota, M & Ronkainen, I 2009, Principles of international marketing, Cengage, London. Deighton, J, Kornfeld, L, He, Y & Jiang, Q 2012, Herborist, Havard Business School, New York. Fill, C 2009, Marketing communication: interactivity, communities and content, Pearson, Edinburgh. Hague, P 2006, Business-to-business marketing, American Marketing Association, Chicago. Ingram, T 2010, Sell. 2010 student edition, Cengage, New York. Kotler, P & Armstrong, G 2010, Principles of marketing, Prentice, New Jersey. Malhotra, N 2010, Basic marketing research: a decision-making approach, Prentice, New Jersey. McDonald, M 2009, Marketing plans, Butterworth, Oxford. Sponagle, M 2011, The Canadian skin-care industrys latest hot ingredient? maple syrup, viewed 16 March 2015, http://www.theglobeandmail.com/life/fashion-and-beauty/beauty/the-canadian-skin-care-industrys-latest-hot-ingredient-maple-syrup/article598569/ The Canadian Marketing Association (CMA) 2014, Marketing, viewed 16 March 2014, http://www.the-cma.org/about Young, C 2009, The advertising handbook, Ideas, Washington. Read More