Context Analysis of The Body Shop Launch in China - Essay Example

Context Analysis of The Body Shop launch in China Sub Paper Due Contents Executive Summary 3 Business Context 4 Corporate Mission 4 Brand Identity 4 Societal Marketing and Values 4 Competitor Analysis 5 Product Level Analysis 6 Marketing Strategy 7 Porters Generic Strategy 9 Customer Context 9 Demographics and Psychographics 9 Time of Adoption of Innovations 10 Internal Context 10 Organizational Identity 10 Financial Constraints 11 External Context 11 PESTEL Analysis 11 Conclusion 14 Bibliography 15 Executive Summary The Body Shop follows the societal marketing concept which states that the marketing strategy should delivery services in a manner that maximizes customer satisfaction, maintains the wellbeing of the society and upholds the values of the company as well. The company aims to strike a balance between customer satisfaction, profits and welfare of the planet and society through its operations; and that is reflected in not only their operations but their communication strategy as well. It is marketing with a heart and a social dimension. Its competitive advantage comes from its emphasis on social responsibility, ethical trade and delivering value to customers who believe in the same values as The Body Shop. The marketing plan proposes to use these values as a pillar to form the marketing strategy which would be directed towards the younger segment that is prone to adopting new trends early. Business Context Corporate Mission “To dedicate our business to the pursuit of social and environmental change” (The Body Shop, 2015) Brand Identity The Body Shop International was set up by Dame Anita Roddick and sells skin and beauty products. The brand combines activism and marketing to encourage men and women to focus on social and environmental issues. The brand operates in 60 markets worldwide and has more than 2500 stores that work on a franchise based model. They also have the new Hemp Body Care line and The Body Shop at Home line as well. (The Body Shop, 2015) Societal Marketing and Values The brand has five core values that are integrated throughout their operations and communications strategy. These include: 1. Against Animal Testing The Body Shop is an animal cruelty free and vegetarian brand. It is recognized by the Humane cosmetics Standard for their Against Animal Testing policies (The Body Shop, 2015). 2. Fair Trade The brand believes in fair trade and has set up its own fair trade program called Community Fair Trade. This program involves 30 suppliers in 20 countries and provides 25,000 people worldwide with income to build their future. The Body Shop also sources its raw materials from their suppliers (The Body Shop, 2015). 3. Defend Human Rights Since 1994, The Body Shop has helped raise funds and awareness for domestic violence. Since 2004, over 4 million pounds has been donated to partners who prevent, support and protect women and children from domestic abuse (The Body Shop, 2015). 4. Activate Self Esteem The advertising campaigns by The Body Shop are also aimed at activating self-esteem. The emphasis is on confidence and inner wellbeing rather than outer beauty and imagery. 5. Protect the Planet Protecting the planet is an important value for the Body Shop. They take full responsibility of their carbon footprint and aim to minimize their impact on the planet. This includes plants to reduce energy consumption and waste generation and change attitudes around the world about ecofriendly products (The Body Shop, 2015). Competitor Analysis The Body Shop does not face competition from well-known brand names like Mac, Sephora or Chanel because its product offerings and target market is different. In China, the competition comes from brands that originate from Japan or Korea like Missha or the Face Shop. These brands have already established a presence in the Chinese market and also have an organic product range that they market actively to young consumers (Yuping & Jinger, 2007). In terms of competitive advantage, the Body Shop has a superior product quality and a wider range but its price points can prove to be a disadvantage for the company. Foreign funded enterprises also play a big role in the cosmetics market in China and account for 86% of all retail sales (PR News Wire, 2014). Product Level Analysis Kotler has outlined that organizations should formulate a marketing strategy that addresses the product offerings at five different levels, namely (Kotler, 2004): Core Benefit Basic Product Expected Product Augmented Product Potential Product Each of these offerings add a value to the overall customer experience. The Body Shop differentiates itself on the Augmented and potential product levels but is similar to its competitors on the lower levels. The product offerings by the Body Shop on 5 different levels are: Core Benefit: Protect the skin Basic Product: moisturize and whiten skin Expected products: The product delivers on its value Augmented Product: Natural and Organic ingredients Potential Product: Unique corporate values of the company that fulfil the desire of consumers who wish to better this world and have that reflected in their spending Missha and the Face Shop do not have the potential product benefits and the augmented product offerings to the extent that the Body Shop can offer with its range. However, in terms of price points, Body Shop is facing a disadvantage. The Body Shop has its factories and production units in the UK where there is a much higher variable cost and labor cost. This can make the overall price of the products are costly to produce. Missha and the Face Shop have economies of scale in their product processes and hence have lower prices (Yuping & Jinger, 2007) Marketing Strategy Product The product range of the Body Shop should remain consistent with its values of using only natural ingredients to produce cruelty free products. However, keeping in mind the latest trends being followed in China, the product range can be varied. One trend that is being followed is the demand for skin care products that lighten the skin. The Body Shop can use this to its advantage and stock a wider variety of products with skin whitening agents. Price According to one survey conducted about cosmetic use in China, 64% of the respondents said that they spend less than 1000RMB on cosmetics every quarter. 24% said that their expenditure is between 100RMB and 300 RMB on cosmetics (Yuping & Jinger, 2007). This means that the price points of the Body Shop products cannot be higher than the above mentioned maximum and should be affordable. In order to enter this market and gain a market share, it is necessary to follow a price range that is not too above the competitors prices. These prices can later be lowered once the Body Shop forms its production units in China. Place The study showed that most consumers in China chose super markets and shopping mall counters to purchase cosmetics. This means that the Body Shop should set up its own chain of stores. This is also necessary to ensure that the point of purchase location of the Body Shop products reflect the brand values and corporate identity. The stores of the Body Shop have a trade mark look and feel and this differentiation aspect is an important aspect in maintaining its competitive advantage and marketing to a niche market. The stores in China should reflect the values and therefore should follow the theme followed by the Body Shop stores internationally. Promotion The Body Shop is known for its societal marketing concepts where they project an image of a “corporation with a soul’’. They have corporate values that stand for cruelty free products that benefit the consumers, producers and the society at large. Generally the Body Shop supports many causes and it is through their support of such causes that they gain media attention and promote their company. However, since China is a new market, the consumers must be made aware about what the company stands for and what their USP is. This would entail advertisements in both print and outdoor form that are directed towards the younger segments. They can also create micromentries or web series that are about human rights or animal cruelty and promote their product through that. The commercials should reflect the values of the company and should highlight what sets them apart from its competitors i.e. its use of all natural ingredients and socially responsible business practices. Porters Generic Strategy Based on a study conducted about the spending habits of Chinese consumers in the cosmetics section and analysis of the competitors operating in the market, it can be concluded that the strategy that should be followed by the Body Shop in China is the Focus Strategy. This strategy can allow the Body Shop to focus on niche markets and develop low cost or well specified products for the market (Porter, 2008). Such a strategy can increase brand loyalty in that market and make that segment unattractive to the competitors. Since the Body Shop has unique corporate values and product offerings, it would be safe to say that it should follow a differentiation focus. However, this does not mean that the company should not focus on lowering costs in the long term. Its competitors in the market offer cheaper alternatives and The Body Shop should look into setting up production units in China to lower import cost and make the overall product more affordable. Customer Context Demographics and Psychographics According to a survey conducted about the cosmetic preferences of consumers in the 18-50 age group in China, it was found that 60% of the respondents wished for cosmetics to be environmentally friendly. 90% wished for the products to be made of organic ingredients and 90% said that they would want to spend less than 300RMB on cosmetics per quarter (Yuping & Jinger, 2007). The survey also showed that a large chunk of the Chinese youth were conscious of the environment and were innovators. Based on this information, the target market should market itself towards the younger age segment in China. The target consumers for its products are mainly young females who wish for products that are high in quality and come from a recognized brand name. Time of Adoption of Innovations The 15-30 age groups should be suitable because young people are likely to be opinion leaders and early adapters and will pick up new trends and products more quickly. Although this segment currently make a small portion of the population, but they can be used to influence the larger population in general (Catalyst, 2012). The younger age segments that form the innovators are more likely to take risk compared to the early users in the population. 45.3% of the women in China are a part of the labor force and have a disposable income. They can also prove to be a potential market for the Body Shop (Catalyst, 2012). The packaging of the product should be such that it attracts the customers but remains true to the simplistic roots of the brand (Saini, 2005). The overall product should appeal to young age groups who wish for a high quality product from an international company known for its ethical practices. Internal Context Organizational Identity The Body Shop is socially responsible cosmetics giant that campaigns on ‘true beauty’. They source their raw materials from local artisan farmers, support community fair trade, and don’t test on animals and product vegetarian friendly cosmetic products. The brand is based on an activist platform which cars about the people, animals and the planet as well (The Body Shop, 2015). Financial Constraints The Body Shop celebrated 25 years of commitment to its values of fair trade, supporting local communities, protecting the plant and standing against animal testing. Retail sales for 2012/2013 grew by 0.3% and consolidated sales grew by 1.2% (Loreal, 2015). The total number of stores increased by 82 in the year 2013. Revenue in 2013 was 1,150.562 dollars so the company is in a stable financial position. L’Oreal chief executive Jean-Paul Agon is reported to have said, “I very often receive very strong offers to buy The Body Shop, which means that it’s a kind of treasure” (Craven, 2012). In 2001, Mark Constantine, the founder of Lush Cosmetics also tried to buy The Body Shop but was denied. External Context PESTEL Analysis Political Factors A new regulation formed by the Chinese authorities stated that cosmetic products sold in China could be tested on animals by the country’s authorities for post market testing. This recently caused Body Shop to remove its products from duty free shelves (Yuping & Jinger, 2007) The company spokesperson claimed that they were working with the Chinese authorities to figure out a solution for this problem but for a company that is founded on its stance of cruelty free products; this regulation could prove to be a problem. This also has an impact on the travel retail sales. Economic Factors There are many economic factors that have an impact on the Body Shop. The company has its production plants based in the UK where increases in VAT, high labor costs and exchange rate fluctuations have pushed up the prices of the products (Finch, 2010). This means that the products that will be shipped to Chinese stores will reflect the high cost in production and shipping and might be unaffordable by the Chinese market. Social Factors There is a greater demand for lighter skin in China and the skin whitening product market makes $2 billion annually (CBS News, 2012). This trend means that skin whitening products could flourish in the Chinese market and the Body Shop could use this opportunity to market its own brand of whitening products. Moreover, according to a study conducted, Chinese consumers are becoming more and more environmentally conscious and this is a trend that the Body Shop can take advantage of. The number of women in the labor force is also increasing in China and the rise of the independent woman is another opportunity for the Body Shop to market its products (Catalyst, 2012). Technological Factors Research and Development in the cosmetics and beauty care market is a means to gaining competitive sustainable edge in the market. Most cosmetic giants have their own research and development teams who work around the clock to develop new techniques and methods to satisfy customer needs in a better way. This includes new makeup formulas, new application methods and new products to target latent needs. Environmental Factors Most consumers in China are environmentally conscious and want products that are environmentally friendly. They want their values to be reflected in their spending and hence would opt for a company that operates in a green manner (Yuping & Jinger, 2007). Strategic inference would suggest that this trend of environmental awareness can change consumption patterns. Legal Factors Government enforces certification requirements such as ISO safety standards and other operating certifications on cosmetic companies to ensure good operating practices. Companies have to abide by these regulations and change their processes to ensure compliance. International trade policy by the government can also have an impact the company as well. Trade policy has an impact on import and export policy which can increase or decrease cost of supplies especially for companies like The Body Shop who source their materials from foreign markets. Moreover, regulation by Chinese authorities which can interfere with the ethical stance of the company can also cause problems. The recent example of a regulation which stated that Chinese authorities would conduct post market animal testing of Body Shop products, caused the company to remove its products from Chinese airports (Davidson, 2014). Conclusion The marketing and communication strategy followed by The Body Shop is unique. It uses its unique positioning in the market to push its products to a specific segment. It does this through its unique brand message and its’ USP of cruelty free and environmentally friendly products. The market in China is a good opportunity for the company and the rising awareness of environmentally friendly products is a good indication of market readiness. The product offerings and promotion strategy need to be tailored as per the trends being followed in the China. However, the brand must retain its core image of environmentally friendly company that offers good quality products but at the same time adjust the price points and product range according to the Chinese market needs. Bibliography BBC, 2013. BBC: UK labour costs below EU average - Eurostat data. [Online] Available at: http://www.bbc.com/news/world-europe-22098519 [Accessed 8 March 2015]. Catalyst, 2012. Catalyst: Women in the Labor Force in China. [Online] Available at: http://www.catalyst.org/knowledge/women-labor-force-china [Accessed March 2015]. CBS News, 2012. CBS News: Latest trend sweeping China: Lighter skin. [Online] Available at: http://www.cbsnews.com/news/latest-trend-sweeping-china-lighter-skin/ [Accessed 30 March 2015]. Craven, N., 2012. The Mail on Sunday: LOreal is ready to sell High Street chain The Body Shop. [Online] Available at: http://www.thisismoney.co.uk/money/news/article-2214108/LOreal-ready-sell-High-Street-chain-The-Body-Shop.html [Accessed 11 March 2015]. 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