Herborist on Their Next Step of International Expansion - Essay Example

 Herborist on Their Next Step of International Expansion Contents Contents 2 Introduction 3 Strategic Planning of global expansion of Herborist in the Russian market 3 Conclusion 9 References 10 Introduction In 1998 Herborist was established in Shangai China. In the domestic cosmetics industry of China Jahwa is the first listed company which was invented in Shanghai about 100years ago. The wholly owned subsidiary of Jahwa United Co., Ltd is Herborist. The products of Herborist are greatly inspired by the herbal beauty culture of China. The main products of Herborist are natural skin care, skin care products, acne treatment, and cosmetics etc. Herborist includes Chinese herbal science for their product development and its unique massage techniques give a unique experience of well-being and beauty. Herborist has been expanding in the global market since 2008 (Wang, 2007, pp.34-35). Its first expansion strategy was in the Hong Kong market which was highly dominated by western and Japanese cosmetic brands. Its products were not very successful in the market but it re-entered the market with collaboration with Sephora which is well known Paris cosmetic brand (Auguste and Gutsatz, 2013, pp.103-104). The company has been expanding down the years with new kinds of international strategies. It has been operating in the Asian and European markets and has further plans of expanding into the Russian market. Russian market has a greater scope for the foreign cosmetic companies as the number of domestic players is very less in the market (Zhou, 2011, p.15). So it is a great opportunity for Herborist to expand its operation in the Russian market. Strategic Planning of global expansion of Herborist in the Russian market Foreign participation is increasing its share in the Russian market, and the personal care products which were imported in the past century is manufactured in the Russian territory as the companies are opening up their subsidiaries to grab the maximum opportunity in the Russian market. The consumer market is the key growth driver behind the growth in the Russian market. The large urban population base of the country is the factor that has led to such vast growth in the cosmetics and retail sector in the Russian market (Kumar and Steenkamp, 2013, pp.123-124). It is the ninth largest consumer market and is estimated to become the worlds fourth biggest and the Europe’s largest consumer economy by the end of 2020. The market has different income level consumer segments and comprises of sophisticated and changing consumer trends. The largest share of population belong to the elite class who spend lavishly and have exotic taste, this makes it a great opportunity for the foreign companies to directly export their products in the Russian market (Frey, 2004, pp.76-77). The cosmetics market has shown a sustained growth over the years in the Russian market and has not been impacted by the economic downturn of the country in 2008-09. There has been a considerable rise in the high quality product in the market with a 14% growth in the cosmetics and personal care market (Handlechner, 2008, pp. 45-46). The consumer market in this country is very trendy and often uses different kind of products to compare them with the other brands/ products. The diversified product range has given an opportunity for many foreign players to enter into the market and at the same time the growing consumer demand has made the companies to implement new innovative solutions into their product range (Connor, 2011, pp.130-131). The major part of a Russian’s life is the passion for beauty. This attitude has made Russia a promising market for the personal care products, and hence it can be prioritized by Herborist for its global expansion. The Russian economy has revived from its economic crisis and its rate of inflation has also come down. The economy has noticed a lower unemployment rate and even there is an increase in the income level (Hollis, 2008, pp.113-116).There is no such political interference to the entry of foreign players. The Russian consumers has remained price sensitive and do not spend unnecessarily, but the consumers do spend on the high quality products. They even are much more cautious about the ingredients used in the herbal products and are more in favour of herbal ingredients used in the products purchased. The macroeconomic conditions are promising in the Russian market (Aslund, 1952, pp.55-56). However direct selling is not a favourable expansion strategy in the Russian market. On the contrary the other countries that was considered by the company for their global expansion was India and Thailand. Herborist is a herbal personal care manufacturer so in order to enter into a country it is very essential to analyze that whether such kind of product suitable for the entering and whether there is growth opportunity in the targeted market (Luo,1999, pp.65-66). The challenges faced by a foreign player like that of Herborist in the Thailand market will be a lot of Government intervention. To launch its product the product formula needs an approval from the higher authorities which might be time consuming and even it will face bureaucratic delays on receiving shipments from its manufacturing plants if it has plans for opening up subsidiaries into the Thailand market. The consumer market in this country is very much price sensitive and has already domestic natural product manufacturers who holds a strong market share (Konn, 2000, pp.131-132). The price of Herborist product is relatively towards the high end though it ensures high quality but would not be able to attract the majority population of Thailand that are more price cautious. In case of India a huge competition already exist in the personal care segment from P&G, HUL, etc. Even there are lot herbal personal care product manufacturer for instance Himalaya, Amway etc. These products are already capturing a lot of market share and are available at a competitive price in the Indian market. The consumer market in this country is more prone towards herbal products but at the same time is more price cautious (Glazunov, 2013, pp.129-130). The high ended herbal product of Herborist would not be suitable investment for such a price sensitive market with innumerable strong competitors who are executing their business operations over the years in this country. Even the consumer market of this country are more brand loyal and are less risk taking towards switching for a completely new brand in their region. The challenges that are present in these potential countries makes Russia prioritize in the list of the countries that are considered by Herborist for global expansion. Russia has the opportunity for this Chinese brand to expand its operations in the country and seek for further growth. The basic product line of Herborist is personal care, aromatherapy and food therapy. At the initial stage of expansion the company has already faced a lot of difficult, as the new brand could not be placed in any departmental stores (Spulber, 2007, pp.69-70). However the company did not give up its strategy of international expansion and started opening up its own stores in the country it operated through franchising. It even had joined its operations with other renowned brand that already had their stores on the targeted country and places its products on their stores. The entry mode strategy for Herborist into the Russian market would be based on franchising. Direct selling is not a favourable option in this market; on the other hand the sale of retail stores and specific stores has increased over the years (Doole and Lowe, 2008, pp.56-58). Opening up their stores through franchising would be the best entry mode into this country. Even in order to handle the vast territory of Russia and occupy almost the maximum of market share it is advisable the company enters through franchising. The common growth strategy adopted by Herborist is of diversification. Since the products that they manufacture is new and often target the new markets. In case of Russian market the market is an existing one and the product is comparatively a new one so the growth strategy used by the company would be of product development. Constant addition of products and services into the market would enhance more of growth of Herborist (Schnaars, 1998, pp.96-97). The consumer market of this country is more of quality conscious so their high end personal care products can only seek a desirable growth when there is a constant product development. The R&D team of Herborist has very strong analyzing expertise. They constantly observe the consumer trend before entering into the targeted market. The company has even extended its service by opening up spa centres in various locations. The elite customer base of the Russian market is very strong and opening up of such spa centres across the whole territory would strengthen the brand equity of Herborist. The marketing strategy formulation comprises of market analysis in terms of customers and competition, and then developing the marketing mix. According to Porter’s five forces model, there is a high consumer’s buying power as there are different product available in the market, and the supplier’s buying power also remain high (Mercer,1998, pp.87-88). The rivalry amongst the same segment is high as there are brands like L’Oreal and Avon already executing its operations in the market. The threat from substitute product is low and the threat from potential entrant is favourable. The market analysis clearly states that there exist a strong competition in the market but the high consumer demand for high quality herbal product is also a growth opportunity for Herborist. The marketing mix for Herborist would comprise of price, promotion, product and place. The targeted market segment for Herborist would be the high and medium income level customers who are more quality conscious (Tielmann, 2010, pp.91-92). The positioning of the product would be a high end best quality herbal product. The pricing strategy would remain the same, premium pricing or a price suitable for medium to high end consumers. Herborist has low budget on the promotional activity so the common form of promotion that is normally used by the company would be considered to support its expansion strategy in Russian market. The promotion mode would be of print media and lifestyle magazines (Webster, 1995, pp.45-46). The company can even give out free samples in the magazines to spread awareness about the brand in the Russia market. The implementation of these strategies requires an established corporate culture of delivering the best quality products to the consumers. Herborist has a very strong brand image in the market it operates because of their original herbal ingredients usage in the product they manufacture. They even proclaim themselves to be the body shop of China. There exists a corporate culture of not just capturing more markets but giving the best quality beauty products to the customers. They charge a premium price because of the quality they ensure (Perkins and Shortland, 2006, pp. 156-157). The company can even recruit the cheap human resource available in the country it operates as they would know the market’s changing trends more briefly. The organization structure would be the same as it is in other markets where it operates, having a franchisee and franchiser. There would be regional heads who would manage the entire operations in the particular region (Peng, 2013, pp. 92-93). Such factors if taken into account can help Herborist to implement the expansion strategies. Herborist club which will encounter the changing demand trends in the market and would maintain customer relationship by solving their issues effectively can be set u across the Russian territory. This would help in enhancing the growth strategy of the company. Herborist has a lot of opportunity to grab in the Russian market if the entry mode, growth and marketing strategies are successfully implemented. Conclusion Herborist has been originated from China but has not restricted its operations to a single country. It has shown considerable growth expansion since 2008. The company even has adopted innovative strategies to focus on different markets. The company’s expansion in Asia and Europe and a reasonable growth in its sales highlight the effective operations it follows. The next country to expand its operations is Russia. The high consumer demand and favourable economic condition makes it a suitable market for Herborist to expand its operations. The internationalization strategy the company follows is a standard one, and similar implementation of its strategy would help the company to gain more of consumer market share and expand its operations in more number of countries. Herborist is well known for the quality products and its herbal contents and this would be the key strength for the company to operate across more number of countries. References Aslund, A. 1952. Russia's Capitalist Revolution. USA: Peterson Institute. Auguste, G., Gutsatz, M. 2013. Luxury Talent Management: Leading and Managing a Luxury Brand. UK: Palgrave Macmillan. Connor, J. T. 2011. Out of the Red: Investment and Capitalism in Russia. New Jersey: John Wiley & Sons. Doole, I., Lowe, R. 2008. International Marketing Strategy: Analysis, Development and Implementation. Canada: Cengage Learning EMEA. Frey, J. 2004. Building Consumer Good Brands in China. Shanghai: Diplomarbeiten Agentur. Glazunov, M. 2013. Business in Post-Communist Russia. USA: Routledge. 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Brand in China. Hong Kong: Zhongming Pan. Webster, F.E. 1995. Industrial Marketing Strategy. New York: Wiley. Zhou, K. 2011. Herborist: A Chinese Personal Care Brand Goes Abroad. Hong Kong: Asia Case Research Centre. Read More