Individual Report free essay sample

This essay is an analysis of Why Herborist’s next target market should focus on USA and how to implement based on the current situation of Herborist. 1 Background of Herborist Herborist is a high-end skin care brand of Jahwa Group which born in 1998 (Herborist, 2014). It is the first complete modern herbal personal care brand in China. The meaning of Herborist is the essence of hundreds of herbs. Herborist develop the natural and effective products for consumers by combining the traditional Chinese medicine formula and the latest achievement of modern biotechnology (Herborist, 2014). Nowadays, Herborist has become one of the leader brands in China’s high-end cosmetics market, and has embarked on the journey of international market. France is the first success step of Herborist. 2 Products Up to now, Herborist has about 180 products, covering hair care, body care, facial care and essential oils. These products has been divided into different series, the New Whitening series and Taichi Series are the featured product, also the bestsellers, among all series. 3 SPA In 2002, Herborist SPA opened its first store in Shanghai China (Herborist SPA, 2014). So far there are 15 stores in China, in order to provide a place to modern people for relaxing and calming their body and mind from the busy life (Herborist SPA, 2014). 2 Market analysis By considering the development of Herborist, it is obviously not enough that limited the international market to France. Therefore, further expand the international market is imperative. According to the analysis of the following data, we think that United States, Canada and United Kingdom should be taken into account. 1 Why USA 1 Comparison between USA and Japan Table 1: Country market size by retail value (retail selling price) from 2004 to 2009, and world ranking Rank US$ millions 2004 2004 2006 2007 2008 2009 1 USA 54,485. 4 56,092. 5 57,732. 1 59,546. 1 59,647. 5 58,864. 1 2 Japan 38,683. 4 39,580. 8 40,472 41,128. 9 40,865. 6 40,013. 5 *Country market size by retail value (retail selling price) from 2004 to 2009 (Zhou, K. 2011) Table 2: Demographing and expenditure per capita of personal care products, and world ranking CCountry Male population aged 15-64 Female population aged 15-64 Rank Expenditure on personal care products per capita (US$) 2009 Rank USA 104,411,352 104,808,064 3 262. 08 19 Japan 40,815,840 40,128,235 6 390. 83 3 * Demographing and expenditure per capita of personal care products (Zhou, K. 2011) As we can see from table 1, the market size of USA and Japan were ranking top two of the world since 2004. Table 2 shows that there is a huge population allocated between 15 to 64 years old in USA and Japan, third in the world for USA and sixth in the world for Japan, respectively. Turing to the expenditure on personal care products per capita, Japan ranks third and USA is nineteenth. When considering expanding into new markets, the market size and customer base are very important. From table 1, the market size of both USA and Japan are large. And table 2, although the expenditure per capita of USA is not as good as those of Japan, the total spending in USA is much higher than in Japan due to the large number of population. 2 Other reasons For USA: The USA is an immigrant country with a large number of Chinese settlers. The USA is a multicultural country with a high degree of culture compatible. People in USA are easy to accept new things. The USA is a aboard study country. A mass of international students come to USA every year, especially Chinese students. The USA has many local beauty brands related to herbal, which means people know about herbal in a certain degree. For Japan: Japan’s land area is too small; the population is not as much as USA’s. There are too many naturally domestic brands, through Japanese people know herbal very well, the market is too competitive. Although Japan is also a aboard study country, the number of universities is far lower than that of USA. That means the student group is small. Lack of a stable customer base. Japan is not a country of immigrants, in another word, people from other countries like international students will continue leaving once completed their studies. Considering all the reasons above, we strongly recommend Herborist choose USA as the next enter market. 2 Campaign There are a lot of natural and organic brands in the U. S. market. If Herborist decides to enter USA, Kiehl’s and Origins will be the strong competitors to Herborist. Kiehl’s Kiehl’s is a natural brand of L’Oreal Group. It is famous for high quality skin care and hair care products in U. S. market. Kiehl’s believes that natural ingredients have been an important part of their formulas since they began as a New York City pharmacy more than 150 years ago (Kiehl’s, 2001; L’Oreal, no time). Origins Origins belongs to the Estee Lauder Group. It is an advocate of natural, highly effective skin care brand. Origins uses the natural and organic material, such as mushroom, lemon and ginger, to create safe and effective products. They claim that their products are formulated with natural and certified organic ingredients and 100% natural essential oils (Origins, 2014; Estee Lauder, 2011). 3 Marketing Strategy analysis Here will analyse Herborist’s current situation and strategies. 1 SWOT analysis 1 Strengths Unique selling point. Chinese medicine formula is an attractive point to customers. Strong research and develop capability. In November 2007, Herborist Herbal Institute was established. It is the first research institute focus on the field of Chinese herbal cosmetic in both China and the world. Good organic cosmetics brand image. Product packaging is fresh and simple that makes people feel comfortable. Clear marketing position. Target on middle-class consumers. Strong parent company. Jahwa Group was evolved from Kwong Sang Hong, Hong Kong, which founded in 1898 (Jahwa, 2014). Currently, Jahwa Group has 9 brands and its own research institute. Store+counter+SPA sales channel. At the beginning, Herborist opened stores to enter the market. Then opened counters in advanced shopping mall to improving brand image. Finally, opened Herborist SPA in 2007, built a new channel for products promotion. 2 Weakness Gap between eastern company and western culture. It may lead to lack of understanding the market. Lack of brand awareness. Although Herborist is famous in China domestic market, still cannot compare with some big brands in international market. Lack of experience on international marketing. Simple product lines. Herborist was founded only 15 years, the products line is still simple. 3 Opportunity There are not many herbal medicine cosmetic brands in USA. Large middle-class customer base in USA. The Chinese medicine is popular in USA. Easy to promote. Herborist can do promotion with Sephora. Nature ingredient trend. Online shopping platform. Growing number of people would like to shopping online. 4 Threat Tough competition. Competing with many world famous cosmetic brands on the same stage. Under control of Sephora. Sephora is the only one sales channel of Herborist in international market. Economic crises decreased consumers’ expenditure. Impact of the same type products from other brands. Made in China. The image of ‘China is world factory’ will make customers feel that Herborist is not high-end products. 2 Porter’s five forces analysis * The five competitive forces that shape strategy (Porter, M. E. 2008) The Porter’s Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation (Tool, M. 2011). 1 Analysis Suppliers In international market, Herborist only have one agent in one market, which means Herborist will be control by agents and week power on the sales channel construction. Customers Herborist will increase benefits if they can reduce the cost of customers’ time, money, physical and spiritual. Competitors It specific performs in the game between competitors and agents of Herborist. Herborist’s channel advantage will be weakening once the competitors got more benefit. 2 Herborist can consider two strategies of Porter’s Three Strategies for channel construction Cost leadership For Herborist, lower the channel costs for increasing the cost-effectiveness is the best choice for international market expansion. Differentiation First of all, under the situation of single channel in international market, Herborist should try to make differences between its own channels with others. In addition, Herborist can use its own advantages, such as traditional Chinese medicine formula. By using this unique selling point Herborist can create different promotion strategy. 4 Future strategy and implementation Base on the analysis of Herborist current situation and strategy through SWOT and Porter’s Five Forces, Herborist can use the following marketing plan. 1 Marketing Mix 4Ps 1 Products Intensify the development of products, enrich the product lines. Open a SPA flagship store. This store does not sell any products but use the Herborist products to offer service to customers. 2 Pricing As a high-end brand, the price of Herborist’s products in USA should be higher than the domestic price. 3 Place Maintain the cooperation with Sephora. For the reason that Sephora has a lot of stores in USA. Open up new sales channels. Herborist can find another agent in USA or open an online shop, thus can get rid of the control of Sephora. 4 Promotion Herborist should increase advertising spending to improve brand awareness. Herborist can promote in the SPA flagship store and online store other than promote in Sephora. Herborist can also find a spokesperson. Give free sample to consumers or potential customers in promotion events. 2 Entry mode Direct export is a suitable choice for Herborist. The reasons are following. 1 Products continuously made in China so that Herborist can maintain its authenticity. 2 Keep maintaining the strategic alliance with Sephora. Because of the failure in Hong Kong. 3 Establish an online shop to lower the cost of sale. Herborist can deliver products to the U. S. customers from China, so that no need to rent a warehouse in USA. At the meanwhile, make an agreement with a local delivery company. 3 Grow strategy Once determined that USA would be the next target market, it is better for Herborist to make a five-year plan. First year: Selling in all Sephora stores in a select city where has large population of Chinese people, such as Los Angeles, to ensure successful promotion and a stable customer base. Second and third year: Develop to other Sephora stores in one or more states on the basis of original city. Set up membership and points system to expect in retaining the old customers and attracting new customers. Fourth and fifth year: Develop to all Sephora stores in the whole USA. At the same time, open the first SPA flagship store in a particular city like New York, and establish an online shop. 2015 2016 2017 2018 2019 Revenue US$ 1 million 3 million 5-7 million 7-10 million 10 million + *Table: Assuming budget for the next three years 5 Conclusion Herborist is the first high-end skin care brand of Jahwa Group and famous for its high quality products (Global Times, 2014). With 16 years development, nowadays Herborist has already got the ability to compete with other international brands in the global market. However, too many brands lead to extremely competitive in the world cosmetic market. In this case, in order to win in the competition, Herborist must walk out a special way in market strategy, product position, channel construction and promotion. This assignment is based on the current development and strategy of Herborist, analysed the possibility of enter the U. S. market, and gave adjustments on the marketing strategy.