Mary Kay Cosmetics (MKC) is an American company that deals directly with selling of cosmetics and toiletries products.
It has existed for 15 years since 1992. It is implanted in 21 countries and planning to market 4 or 5 new markets.
It is a “feminine firm” which promotes a strong philosophy of self fulfillment and woman charisma through the way of using and selling MKC products. Indeed, MKC proposes middle-line products, accessible for all American women, and promotes business opportunities for them… for both clients and beauty consultants.
Mary Kay Cosmetics focuses not so much on how much profit the company could make, but rather on giving women opportunity to make real, noticeable income while maintaining balance with family life. Using the direct sales model, consultants continually seek out new customers, but they present the products in customers' homes. Its estimated retail sales in 1992 are $1 billion. MKC sold a range of skin care, personal care, and cosmetics products through approximately 275,000 independent salespeople worldwide, known as “beauty consultants”.
In early 1993, the United States was still emerging from the recession of 1991-1992, one that was different from all of those preceding it. All of American business had undergone dramatic structural changes during the 1980s, and that shift was still in progress in the early 1990s. China had been conducting an economic experiment in its southernmost province and represented at that time the new Eldorado for American firms which were in bad shape.
In the early 1990s, Mary Kay Cosmetics was contemplating whether expansion into China and Japan would be beneficial for the company. The purpose here is to assess this question, as well as identify the key elements of Mary Kay's expansion strategy.
[...] The U.S-based firm Mary Kay Cosmetics (MKC) is going to market via a force of independent beauty consultants who buy and resell cosmetics and toiletries to contacts either individually or at social gatherings (the party plan distribution channel). When considering market entries in Asia, the company arrived at a final decision between Japan and China. By the standards of most country-level data, Japan was by far the most attractive country: it boasted the highest per capita spend of any country in the world on cosmetics and toiletries, it had high disposal incomes levels, it already hosted a thriving direct marketing industry, and it had a high proportion of women who did not participate in the workforce. [...]
[...] The advantage of this solution is that MKC could assess easily to the market keeping its American image. Moreover, such an alliance develops the confidence of the local consumers. A domestic joint venture prices products are divided by 4 compared to imported products due to costless labor force. That is a fundamental advantage to attract more consumers such as young consumers with a moderate purchase power. MKC has to therefore to choose a region, to install the joint-venture we have planned to establish. [...]
[...] Final analysis before taking decision: Comments about charts: Figures comparison with the estimates costs of Market Entry between Japan and China clearly shows that China is competitively more attractive than Japan in terms of costs and investments. Even if the gross margin 4 times superior in Japan than In China, this comparison is not relevant because, consumers are quantitatively much more superior in China than in Japan. Besides, in Japan, the ageing of the population of the population would be aged over 65 years by the year 2010) should orientate the market products toward anti-ageing cream. [...]
[...] Looking at Mary Kay Cosmetic's main figures in 1993, MKC seems to be a growing and healthy company; with a turnover of billion, an annual growth of 16% over the five last years and net revenues multiplied by two in the last five years, MKC is a strong actor on the Cosmetics market. Nevertheless, in 1992, MKC's international sales accounted for only 11% of its total sales. That clearly points out the weakness of the company: its difficulty to take profit of foreign market opportunities. [...]
[...] Product and Targeting The objective of MKC would be to target the largest market share. Consequently, it is forecast to develop two lines of products: the MKC skin care line and MKC glamour line. The aim of MKC is to initiate a new trend in the Chinese market. The MKC skin care line: MKC profits from the domestic joint venture to launch a skin care line which corresponds to Chinese women's demands: purity, protection, whitening products. It would address a large part of the women population. [...]
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