Global Marketing Plan for Firm Avea - Case Study Example

?Global marketing plan Table of Contents Global marketing plan Table of Contents 2 Executive Summary 3 Introduction 4 Target Country Profile/PEST 5Political 5 Economic 5 Sociological 5 Technological 6 Target Market PEST 6 Political 6 Economic 6 Sociological 7 Technological 7 Competitor Profile 8 Bargaining Power of Buyers 8 Bargaining Power of Suppliers 8 Threat of New Entrants 8 Threat of Substitutes 9 Competition among Existing Players 9 Market Appraisal 9 Market Entry Method 10 Marketing Strategy 10 Objectives 10 Target Segments 11 Source of Competitive Advantage 11 Marketing Mix Recommendations 12 Product 12 Price 12 Place 12 Promotions 13 Measurement and Control 13 References 14 Executive Summary In an age of cut throat market competition it has become imperative for every business organization to undertake strategies that can help in enhancing the market share of the firms. International expansion is perhaps one of the most important strategic initiatives taken up by the firms for meeting the challenges of the business environment. The present study would focus upon the international expansion plan of the UK based cosmetic firm Avea in the Indian market. The study would include an analysing of the Indian consumer market as well as a general framework for the strategic initiatives of the firm to enter the Indian market. The study would also contain a product mix that would be used by the firm in the Indian consumer market. Finally a feedback and control mechanism would also be framed that would help the firm to evaluate its strategies and generate sustainable competitive advantage in the Indian market. Introduction Globalisation has changed the dynamics of business environment as firms have expanded beyond geographical and political boundaries to reach out to new markets. The present study would focus upon the international expansion of Avea into the Indian consumer market. Avea is a UK based cosmetic manufacturing and marketing company that has a range of organic cosmetic products under its portfolio. The choice of the product assumes significance as the FMCG sector in India is assumed to be the fourth largest in the world with experts stating the market value to be approximately 13.1 billion US dollars. The figure is set to touch 33.4 billion US dollar mark by the year 2015. These figures also generate significance for firms like Avea as the cosmetic industry alone is being valued at 274 million US dollars. The personal cosmetic products hold the biggest potential for the entire industry with personal wash based items being valued at 989 million dollars (IBEF, n.d., p.90, 92). Target Country Profile/PEST The external environment of an organization is largely based upon the aspects of political, economic, sociological and technological factors (Wakley & Chambers, 2005, p.38). Political India is the world’s largest democracy and has been a role model for a democratic state. The nation has a stable government that is headed by the president who acts on the advice of the Prime Minister and his council of ministers that are elected democratically. This makes it one of the most attractive destinations for investment for business organizations (CIA, 2011). Economic India is one of the fastest growing economies of the world registering favourable GDP growth rates. The growth of economy also implies higher disposable income of the residents of the nation (CIA, 2011). This holds good opportunities for business organizations like Avea to expand its operations into the Indian consumer market. Sociological India is the second most populous nation of the world having a population of approximately 1,189,172,906 individuals as of 2010. A majority of this population falls within the age group of 15-64 years which is the target market for the company. The median age of the population is pegged at 25.6 years that again represents good opportunities for cosmetic marketing firms like Avea (CIA, 2011). Technological Technological aspects also hold widespread implications on the business prospects of an organization. The nation has made enormous strides in the area of information technology and its universities churn out a large number of talented individuals every year that makes it among the most favoured destinations for investment. Target Market PEST Political The major regulatory body for cosmetic industry in India is under the purview of the office of the drug control in India. The Drugs and Cosmetics Act 1940 and the Drug and Cosmetic Rules control the regulatory market for drugs and cosmetics in the Indian market. Necessary approval from local and state authorities is also required for foreign players (Emmeplus, 2008, p.2). A hundred percent FDI is allowed for cosmetic products to be sold in India (IBEF-a, n.d., p.12) Economic The cosmetic industry in India is divided into facial, lipstick and talcum power products. The makeup products occupy a mammoth share in the market. The makeup based products market is being slated to be valued at approximately Rs. 20 million by 2012 that shows formidable opportunities. The per capita usage of cosmetics for branded cosmetic products in India is about 0.68 dollars in a market that is dominated by Hindustan Unilever and L’Oreal (Emmeplus, 2008, p.2, 8). Sociological The Indian residents have a good affinity towards branded cosmetic products especially the imported products from the West. Approximately 120 million dollars of goods are being shipped into the nation every year for the consumption of the Indian market audience (Emmeplus, 2008, p.8). Figure 1: Consumer Classes in India (Source: IBEF, n.d., p.91) Technological Technological advancements particularly in the area of internet technology and advertisements have led to a growth for branded cosmetic products in the nation. Firms are trying to use technological innovations in advertisements to reach out to the urban as well as rural customers (Nanda, 2008, p.1). Competitor Profile The analysis of the competitive profile can be undertaken by using the framework of the Five Forces model proposed by Michael Porter. The five forces include bargaining power of buyers, bargaining power of consumers, threat of new entrants, threat of substitutes and competition among the existing players (Hill & Jones, 2009, p.42). Bargaining Power of Buyers The Indian consumer market is characterised by the presence of a large number of market players that includes both domestic as well as multinational companies. The aspect of low switching costs leads to considerable bargaining powers that are high in extent in the Indian markets. Bargaining Power of Suppliers Suppliers hold considerable influence of the participants of the cosmetic industry players. However a large number of suppliers tend to reduce the bargaining power to a medium extent of influence. Threat of New Entrants The recent government deregulation in the nation has led to the growth of a large number of market players in the industry. The low entry barriers make it very easy for a new entrant to set up base in the nation. Hence new entrants pose a high level of influence in the industry. Threat of Substitutes Substitute for organic cosmetics include herbal and ayurvedic cosmetic products that have become increasingly popular in the market. Considering that India is the birthplace of Ayurveda these substitute products have a high influence and have a high level of threat to the market participants. Competition among Existing Players The Indian consumer market is characterised by a large number of market players with the leading firm being Unilever India. In addition to this there are a large number of domestic as well as international players. This has also triggered a price war that has further intensified the competition in the market. The extent of influence of this factor is therefore high in nature. Market Appraisal India has been demonstrating rapid growth in the cosmetics market since the last few years with the people increasingly getting fashion conscious. Since 2008, there has numerous new cosmetic brands launched in the Indian market. Increasing awareness about cosmetic brands has even occurred in rural India. Moreover the local cosmetic companies have been trying to obtain fair-trade certifications for their cosmetic products. In 2008, the per capita consumption of cosmetics for the well known and branded products was 0.68 dollars among which the most frequently used brands are Procter & Gamble, Unilever, Dabur and Godrej (The Times of India, 2008). Because of the presence of a significant price differential between the Indian and foreign brands, the penetration of international brands in the Indian market is low. The total size of the Indian cosmetics and retail market is presently estimated at $950 million. The market has also been growing at a rate of 15 to 20% annually which is double the rate as that in the United States and Europe. Consumers have been increasingly consuming the premium global brands with the Indian consumers increasingly exposed to the international media. Changing consumer behaviours and growth potential of the market have attracted many foreign beauty and cosmetic brands to inter the Indian market (International Trade Administration, 2010). Market Entry Method The suitable method of entering into the Indian market would be to enter into partnerships with a local brand. Since the Indian consumers are extremely price sensitive, the entry of a high priced brand would not be accepted at once. Also, a new brand would have to gain acceptance from the customer as to their quality and reliability. In such a situation it is recommended that the company could handhold with an established and leading local brand. This would not only help to find a large customer base, but would also help the brand earn goodwill of the customers buy aligning with a brand which is already well accepted by customers. Marketing Strategy Objectives The objectives for Avea’s market entry strategies in the Indian consumer market would include the following points: To enter into a partnership with a local player To undertake a market research Formulating a product mix To enter into top 6 cities in India To achieve break even after 3 years Expand into other cities after reaching the breakeven point Target Segments The target market segments for the company would constitute individuals in the higher and upper middle class segments. Avea’s target market would largely be concentrated in the tier 1 and metro cities of the nation. The company would bring in a large array of products that would enable it to tap a large number of target market segments. The company would target customers in the age group of 16-45 years and would target mainly women customers. The company would also launch baby products directed at toddlers (Avea, n.d.). Source of Competitive Advantage Avea’s competitive edge would focus upon its innovative product portfolio that includes a large range of products. These products would include women as well as child care products. The main competitive edge of the firm would emerge from its high quality products and a good brand image. Considering the consumer behaviour of the Indian market audience that has a good affinity towards foreign brands, the company would use this element to generate consumer interest. This would be backed by a strategic communication strategy that would include all the channels of communication. A brand ambassador involving a film celebrity would also be used to spread the message to the target audience. Marketing Mix Recommendations The elements of marketing mix include the elements of product, price, place and promotions. Product The product offering of the organization would include all the brands of the company that would be used to target men, women as well as children. Some of the brands that would be launched in India include La Claree, Anane, and Phillip Martins etc. The company would also launch some of the herbal products in order to tap the consumer segments. Price Avea would initially adopt a discount based pricing strategy and would sell the products at a lower price so as to help generate initial customer response from the market. The company would also provide products at small volumes that would help in making initial appeal to the customers. This would help in generating an effect that would help in inducing customers to five a first try at the product considering the large number of related products in the market. After initial success the company would reduce the discounts and follow an optimum pricing strategy that would help in to achieve good market share in the Indian consumer market. Place In the initial phase Avea would launch its products in the top six metro cities of the country. These would include cities like Delhi, Mumbai, Kolkata, Bangalore, Hyderabad and Chennai. After gaining initial success the company would launch the products in the tier 1 cities of the country. Promotions The promotional mix of Avea would include use of print, electronic as well as the online communication channels. A brand ambassador would be chosen for the product that would be a celebrity from the film industry. Initially the company would also provide free samples to attract the market audience towards the product. Measurement and Control In addition to the strategic initiatives discussed in the previous sections, it is also essential to include a policy framework for exercising the effectiveness and control in the strategies adopted by the organization. A balanced scorecard technique can be used to analyse and evaluate the financial as well as non financial business strategies. Any loopholes in the strategies could be easily identified and corrective remedial measures could be initiated immediately. The use of a balanced scorecard as a control and feedback mechanism would help in analysing the financial as well as non financial strategies of the company. References Avea. (No date). Our Brands. [Online]. Available at: http://www.avea.co.uk/tomvital.html [Accessed on June 6, 2011]. CIA. (2011). The World Factbook. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/in.html [Accessed on June 6, 2011]. Emmeplus. (2008). Indian Cosmetic Sector 2007-08. [Pdf]. Available at: http://new.emmeplus.eu/wp-content/uploads/2010/01/cosmetic-sector-in-india.pdf [Accessed on June 6, 2011]. Hill, C. & Jones, G. (2009). Strategic Management Theory: An Integrated Approach. Cengage Learning. IBEF. (No date). The Great Indian Bazaar. [Pdf]. Available at: http://www.ibef.org/download/indianbazaar_jan19.pdf [Accessed on June 6, 2011]. IBEF-a. (No date). FAST MOVING CONSUMER GOODS. [Pdf]. Available at: http://www.arc.unisg.ch/org/arc/web.nsf/f1d9ed904340e51ac1256a8d00504269/43cf0caeed566faac12571d30061daac/$FILE/India%20Symposium_IBEF_Sectoral%20Reports_FMCG.pdf [Accessed on June 6, 2011]. International Trade Administration. (2010). MISSION STATEMENT: Beauty and Cosmetics. [Online]. Available at: http://trade.gov/trade-missions/mission-statements/beauty-and-cosmetics-trade-mission-to-india-november2010.asp. [Accessed on June 06, 2011]. Nanda, S. (2008). COSMETICS AND CONSUMERS. [Pdf]. Available at: http://consumereducation.in/cosmeticeng.pdf [Accessed on June 6, 2011]. The Times of India. 2008. India's cosmetics market set to grow. [Online]. Available at: http://articles.timesofindia.indiatimes.com/2008-01-06/india-business/27764868_1_cosmetics-brands-capita-consumption-industry-body. [Accessed on June 06, 2011]. Wakley, G. & Chambers, R. (2005). Chronic disease management in primary care: quality and outcomes. 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