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1.0. Introduction
Internationalization present great opportunities for international companies to exploit new international market opportunities with a goal of higher customer reach to increase sales revenues, profitability and overall growth of the companies. Yue-Sai Cosmetics has changed the face of China through its recognition as a completely owned foreign cosmetic company in 1990. The company starting from zero in 1990 in the cosmetic segment has made efforts and improvements that have seen it become a favourite brand enjoying a brand recognition of 95% (Yue-Sai, 2019a). Its acquisition caused further growth of Yue-Sai Cosmetics by L’Oreal, the largest cosmetic company in the world in 2004 which helped the company in its developing beauty products for Chinese women (L’Oreal, 2019). The most famous products of the company include Ganoderma Life, Cordyceps Huanyan Constant Colour, perfection cream, custom essence, and skin cream. The specific product that the current study plan to recommend for an introduction to the UK market is the Ganoderma lucidum product due to its unique natural features specifically being 99% natural (Yue-Sai, 2019a). According to Vox (2018), the demand for natural products has been increasing due to increasing concern for healthy consumption and health effect of non-organic-made products. Therefore, the introduction of this product in the UK, Ganoderma lucidum may be viable based on the unique organic features of the product. In order to introduce the product in this new market, the goal of the essay is to introduce the product features and benefits, target client segment, the pricing strategy for each segment, the value proposition as well as sales channels with the sale techniques for each channel.
2.0. The Product to the UK
The product that we choose to introduce in the UK is the Ganoderma Lucidum which is suitable for all skin types. The Ganoderma Lucidum contains pure Qiongyuan extract condition liquid which makes it have a limited edition (Yue-Sai, 2019a). The product is made of Lingzhi mushroom which is a traditional Chinese medicine and has mainly been used for skin care due to its anti-oxidative effects when it is supplemented. Specifically, the product was mainly recommended traditionally due to its therapeutic effect on insulin resistance, reduction of prostate cancer risk. The product has an anticancer effect on the body and increases the skill cell activity if used as a lotion as Yue-Sai Cosmetics. Besides the benefits of the Lingzhi mushroom raw materials used in the product, the product has other benefits and features which are illustrateded in Table 1;
Ganoderma Lucidum Product Features
Product Benefits
- The product ingredients are Ganoderma Lucidum, which is an original product of Huoshan used for traditional Chinese skin medicine, extracting organic purity of more than 99%.
- Has curative features that can help in reducing the chances of skin problems and diseases such as dullness, roughness, and loss of elasticity
- The product is packaged in 150ML packet sold at ¥360
- Enhances the skin breathing
- Smooth and translucent when applied to the skin.
- It reveals the skin new radiance
- Promotes skin health benefits in addition to reducing the chances of skin cancer
- Fit for skin problems such as pores caused by night, day and nights as well as fatigue
- 99% produced from organic raw materials so have no skin side effects.
Table 1: Ganoderma Lucidum Product Features and Benefits (Yue-Sai, 2019b).
The product benefits of Ganoderma Lucidum brand make it appropriate for the UK market because they have a range of different choices for this product as shown figure 1 for facial repair, fresh essence, lipstick and Ganoderma Lucidum body lotion applied in complementing way.
Figure 1: Ganoderma Lucidum brand (Yue-Sai, 2019b).
3.0. The Target Client Segment
The three main target client segments that we would choose are based on the rules of Business to Customer (B2C), Business to Business (B2B) and Business to Government (B2G). These three categories are identified in the table below with a suitable product that would fit the target client category.
Target Client Segment
- The Target Segment Description
- Big Retailers
- · Tesco, Boots, Sainsbury’s etc.
(B2B)
The business who directly selling the products to companies can either buy them as raw materials and further process the cosmetic product or sell it to their specified category of consumers. In this case, the B2B in the UK would fit customer segments in big markets such as Boots, Tesco and Sainsbury’s where we would sell the products directly to these big retailers who would further sell the products to consumers without direct engagement by Yue-Sai in marketing activities.
The advantage of using this strategy is that the once it has established the target customers and relations have been formalised, the company is assured of huge and consistent sales. However, the limitation of this is its limited to control the distributors pricing (Raus et al., 2010).
- Female between the age of 18-35 who likes beauty
(B2C)
As we need direct contact with consumers and need to establish our distribution channel. Therefore, this can be done through establishing direct offline stores that complement online shopping which can act as customer collection points. In this case, the target customers would be young UK female consumers between the age of 18-35 years who greatly mind about beauty, appearance or even modelling and would love flawless skin. The key product categories for this target segment would fit in skin care products with different brands such as facial repair, fresh essence, lipstick and Ganoderma Lucidum body lotion applied in complementing way.
The advantage of adopting the targeting strategy is that the business is easy to penetrate to other new markets in addition to being able to interact with the customers directly.
- Government pharmacies and public health centres
(B2G)
The target customer for the public sector would be the public health sector due to the curative properties of the skin care product produced by Yue-Sai. We are aiming to sell to the government pharmacies and public health centres with facial repair, fresh essence, due to their curative skin measures. Furthermore, the product is also suitable in this target segment due to its use in preventing skin cancer among other related skin allergies and problems (Yue-Sai, 2019b).
The benefit of adopting this targeting strategy is that it is easy to do production and sales quoting in addition to a guaranteed specific market share. However, the disadvantage of this strategy is that intensive documentation is required in addition to low sales margins because sales are made when the sales stock is replenished, and there might also be many negotiations leading to highly lowered prices (Scheulovs & Gaile-Sarkane, 2010).
Table 2: The Target Client Segment
4.0. The Pricing Strategy for Each Segment
There are key factors highlighted by Lobel et al. (2015) that are required to consider when setting prices for products. The first factor is the cost of the product which is important in understanding the cost at which the products have been produced with and that which the business must not go below to earn a profit. Furthermore, the company objectives determine the pricing strategy because it helps to understand the profits the company wants to earn and the prices that can help earn a profit. The level of competition, customer needs, and characteristics, as well as economic conditions, determine the prices of products in new markets (Lobel et al., 2015). For instance, in highly competitive markets and harsh economic conditions, lower price than competitors might help the business penetrate the new markets while customer perception either product as a luxury or essential may impact the pricing as higher than the market. In consideration of these factors, three pricing strategies can be implemented when using B2B, B2C or B2G target client segment as table 3 shows.
Pricing Strategy
- The Pricing Strategy Features
- Client Segment Fit
- Penetration price Strategy
The penetration pricing strategy is that the business using a lower price than the normal market rate to make faster the process of market penetration. This strategy is appropriate in increasing the market share where product acceptance is low (Lowe & Alpert, 2010). The appropriateness of this pricing strategy is that new competitors are discouraged from entering the market niche if they mistakenly see this pricing strategy as the long-range prices of the industry. However, the limitation of using this strategy is that the company must be willing to sacrifice some of its profit to penetrate successfully (Spann et al., 2010).
We plan to use penetration price strategy on B2B clients which are those big retailers. Basically, we will be selling the products to our taeget customers for lower prices than what the competitors are selling and further renegotiate for better prices after the market has fully been penetrated. Therefore, if B2B customer is targeted, then the penetration price strategy will be adopted to attract businesses.
The average current price is at ¥360(£40.59), and the prices can be set lower at £34.99 to attract businesses.
Skimming price Strategy
The skimming pricing strategy needs to set a very high price in a market for a limited period before it is reduced to a more competitive level (Lowe & Alpert, 2010). It is assumed in this strategy that customers are willing to pay relatively high prices because they see the products as either essential, luxury or prestigious to them. However, the skimming strategy is only practical in situations where the threat of competition is shorter or where there is a need for rapid cover up for startup cost.
The skimming strategy is suitable for products are viewed as prestigious. Yue-Sai Ganoderma Lucidum is considered to be highly prestigious and bought by female middle-high income level consumers. For this reason, we plan to use skimming strategy when entering the UK may be most appropriate in the B2C segment to identify how the consumers value the new product. Later on, the business may re-adjust the prices higher or a bit lower to meet the consumption demand.
Considering the current average price is at ¥360(£40.59), products can be set at £49.95 to see the customer reactions and later be lowered to £47.99 to meet the current market price of UK cosmetics category (Euromonitor, 2018).
Variable price Strategy
Variable pricing strategy is suitable for which more than one product is offered to and there is a concession with specific customers (Ingenbleek et al., 2013). Various reasons may lead to offering variable pricing strategy, one of them being the bargaining strength of consumers in addition to customer knowledge about the product. While the benefit of this pricing strategy is that the company can charge more when it wants to identify the financial strengths and desire of the customer to purchase the product. One key limited factor is that there is high bargaining power by the buyer which making the company charge very low therefore reducing its profitability.
The variable pricing is appropriate where the client or customer has high negotiation power. In this case, it can be applied in the B2G customer segment because the government has higher negotiation power than us. This will cause we selling products at lower prices than the market price, but due to consistent sales and guaranteed payments, the target client segment is still viable.
Table 3: Pricing Strategy for Each Segment
5.0. The Client Value Proposition
Based on table 2 of the most suitable pricing strategy, it is showed that the most feasible client segment would be business to customer segment due to a high value in terms of quick and high returns in addition to the high need in the UK for organic cosmetic products by consumers as cited by Vox (2018). Vox (2018) further notes that consumers are not only scared of the rise in chemical use in cosmetic products but are shying away from non-organic products making Ganoderma Lucidum brand appropriate for the target market which is young female consumers who have a taste for beauty between the age of 18-35 years. In this section, the environmental scanning, competitive analysis and sales, and promotion channel strategy are evaluated.
5.1. Market Research and Environmental Scanning
The PESTEL framework critically assesses the firm’s macro-environment to help understand the forces in the external environment and address them. Table 4 provides critical PESTEL evaluation and impact on the Cosmetic industry.
- Environmental Forces
- Critical Assessment
Political
The key political environment that may affect non-domestic cosmetic companies in the industry is Brexit. Following the UK withdrawal from EU, the terms may affect the political, legal and economic framework which may directly impact the cosmetic industry. For instance, the Brexit may lead to high importation cost due to trade barrier cause non-domestic cosmetic firms impacting Yue-Sai Cosmetic as well (Market Inspector, 2018). However, the targeted reduction of taxes from the current 19% to 15% by 2023 may act as an advantage for the cosmetic industry companies because the reduction means higher profit after tax (PKF, 2019).
Economic
The UK GPD grew to 1.3% in 2018 and is expected to increase to 1.6% in 2019 which shows a better economic performance (PWC, 2018). The good economic performance in the UK means beneficial business environment for both local and multinational cosmetic companies. Furthermore, the unemployment rate went down from 5.4 in 2015 to further 4.4% in 2017 and 4.1% in 2018 as showed by Statista (2019). This means that the dispensable income is high and customer purchasing power for cosmetic products has increased over the years which is a positive indicator for the growth of this industry.
Socio-Cultural
The ageing population in the UK is on the rise which means that the customer segment for young women between ages 18 and 35 years tends to go lower, which means negative signs for cosmetic firms that target this customer category (Kaynak & Kahle, 2019). However, the perception of beauty among the UK is positive and high and young women value their beauty as a way of reflecting their personality and feminism. In addition to the fact that there is a high demand for organic products due to the rise in cosmetic products that have high chemicals, companies selling organic cosmetic products may benefit (Vox, 2018). Therefore, there is a market opportunity for an organic product which our product Yue-Sai Cosmetic can exploit.
Technological
With the current advancement in technology especially the internet technology, online purchasing and consumption have been enhanced in the cosmetic industry. Companies are using e-commerce platforms such as Amazon to ensure high chances of sales considering the high brand names (Han & Kim, 2019). Therefore, such platforms can be beneficial for new entrants who can benefit from the high-value proposition of Amazon and other online channels.
Environmental
The beauty industry in the UK is now focusing on going green and organic. Specifically, there is a need for eco-friendly packaging due to the high emphasis on ensuring less stress to the environment when consuming cosmetic products (Li & Leonas, 2019). Furthermore, the growing concern on plastic packaging in the skin care segment which Yue-Sai Cosmetic products are sold promotes the company to use greener packaging techniques which Yue-Sai Cosmetic can adopt. Furthermore, the company can thrive in the industry because its products are 99% natural and have no heavy chemical ingredients.
Legal Environment
Finally, the legal forces that affect the cosmetic industry in the UK are ingredients regulations. FD&C (Food, Drug and Cosmetic Act) and FPLA (Fair Packaging & Labeling Act) are some of the regulations that the cosmetic industry has to follow. FDC ingredients used to ensure that customers are not misinformed as well as ensuring that the ingredients are not harmful for health (Smolinske, 2018). Therefore, companies entering the UK should understand these regulations to avoid legal implications that might affect the operations of the business in the UK.
Table 4: PESTEL Analysis
5.2. Competitive Analysis and Comparison
Porters’ five forces have been used as a good measure to understand the level of competition helping existing and new entrants understand the level of competition. Table 5 shows the Porters Five forces analysis for the UK cosmetic industry.
- Porter’s Five Forces
- Critical Assessment
New Entrant threat
The threat of new entrant is high because of the competitive nature of skin care and cosmetic products which attracts new entrants leading to decrease profits for existing companies. However, some of the entry barriers include strong brand Identity, high cost of manufacturing set up and moderate level barrier in accessing distribution channels and retaliation from key competitors (Haung et al., 2016). However, Yue-Sai Cosmetic may reduce these barriers.
Threat of Substitutes
There is a relatively low threat of substitution from homemade remedies and other skin care products that contain natural ingredients. This type of products is mainly in rural areas, and most UK women take such products as outdated (Nadkarni et al., 2016). Furthermore, the buyer preference and switching cost to substitute are low which means that our product, Yue-Sai Cosmetic, may offer the option to such women who would require natural ingredients which are 99% of the company product.
Supplier Bargaining Power
There is low supplier power because there are large suppliers in the industry and low input differentiation (Laba, 2017). The threat of forwarding integration and specific switching cost exists in low limits and impact of switching to substitute suppliers is also low which makes it possible for Yue-Sai Cosmetic to acquire suppliers for natural raw materials easily.
Buyer Bargaining Power
Due to the availability of the products and increased competition, the bargaining power of the buyers is relatively higher. This gives them a higher position to influence prices which further affects firms’ profitability. Specifically, the higher bargaining power by consumers may force firms to reduce prices because consumers can switch products with low switching cost (Haung et al., 2016). Therefore, unique products are needed by UK female consumers where Yue-Sai Cosmetic comes in because of our natural organic Ganoderma Lucidum brand.
Competitive Ribaldry
The competition in the sector is very high especially from international brands such as Clarins, Espa, Elemis and other local companies. There is a medium degree of differentiation in addition to high barriers to exit and negligible difference among different brand’s products (Laba, 2017). Therefore, for a company to develop in this market, it must enter with a unique brand proposition such as Ganoderma Lucidum brand which is more than 99% pure organic.
Table 5: Competitive Analysis and Comparison
5.3. Promotion and Pricing Strategy
The target client segment was selected in Table 2 as B2C so as the company can target female customers aged between 18 and 35 years who have a great taste for beauty. The pricing strategy was identified in Table 3 as being skimming pricing strategy because the skin beauty products are considered as prestigious and lowering the prices may make consumers question the beauty products (Euromonitor, 2018). Therefore, the current price in China for the Ganoderma Lucidum brand is at ¥360(£40.59), increasing the price by 23% to £49.95 may help test the most appropriate price for the product and later change the prices lower if the consumers complain of higher prices. This pricing strategy is feasible considering that the UK economy has been growing and consumers have higher income to spend on prestige products. Furthermore, considering the need for organic skin care products which our products address, this pricing strategy is appropriate as it makes the product look prestigious to the target market (Lobel et al., 2015.
In addition, this pricing strategy will be accompanied by some promotional strategies such as sales promotion and publicity. The use of personal selling and telesales in itself will act as a marketing technique for the product as the company calls different dealers and prospect customer segments and physically sends personal selling representatives to advertise the brand (Spann et al., 2014). Furthermore, discount and delivery of products purchased online for select customers based on London will help market the products because consumers will be motivated to buy the product online considering the free delivery and high discount for products bought in bulk. Use of publicity through public figures and celebrities in the UK engaged in different modelling, and sporting activities will help attract female consumers who admire to be like such celebrities.
6.0. Suitable Sales Channel for Ganoderma Lucidum Brand
A sale channel is viewed by Jobber et al. (2011) as the route to be taken by goods through the process of selling to customers from the supplier. While sometimes the channel is direct especially when goods are incorporated in the process of manufacturing, others are indirect where goods are sold through different channels. The key factors that should be considered when selecting a suitable channel for Ganoderma Lucidum brand product are channel cost, the market, the type of product, profit potential and channel structure (Dinner et al., 2014). Specifically, the channel must be compatible with similar products which are critical in distribution success. In consideration of the stated factors, sales channel can be through direct, intensive, extensive and selective. When the direct channel is used, middlemen are not used to delivering and selling products to end consumers unlike selective where a few middlemen are selected because of their special facilities or abilities to enable proper product marketing. Furthermore, intensive have maximum exposure to the point of sales where many outlets are used, unlike exclusive where restricted number dealers are used (Haung et al., 2016).
Considering the type of product that requires to reach as many female customers as possible and has low cost and narrow product line, it will be suited for intensive channels. Furthermore, the use of selective channel may also enhance the profitability of the firm. Therefore, the company will use Direct, Selective and intensive channels in distributing its products as figure 1 below details.
Figure 1: employment of Direct, Selective, and Intensive Sales Channels (Self-Generated)
Specifically, the selective channel is appropriate because we will employ online selling techniques and may need distributors who have unique capabilities such as Amazon who can better market the online product due to their high brand awareness (Jobber et al., 2011). Therefore, the use of Amazon through selective channels will allow Yue-Sai Cosmetic to easily market its product in a well-known platform that has a high customer base. Furthermore, the direct channels will ensure that the company delivers products directly to its end uses thus increasing the chances of understanding the customer demands and making product adjustment as they have direct contact with consumers. Finally, the intensive will help maximise the sales specifically in physical outlets which will increase the high level of awareness of this product among the target consumers (Familmaleki et al., 2015). The use of intensive strategy will also help our brand products to reach consumers even in the rural and other remote areas which the company is not able to reach due to the high cost of establishing outlets in the areas in addition to increasing customer targeting for those in need of cosmetic products made of organic and natural ingredients.
7.0. Sales Techniques for the Sales Channel
The key sales technique which a company can use includes telesales and personal selling. Specifically, the use of telesales will be great importance in reducing the cost of sales, finding new direct customers and sales outlets to be used for the sales channels. For this reason, the telesales technique will mainly be employed in intensive and direct sales channels which require high levels of relationship between the business and consumers or business, seller and final consumers. Furthermore, the use of telesales will ensure that in these two channels, the customer service is improved to final customers and process information requests and incoming orders have fully been handled (Dinner et al., 2014). This will be assisted by the establishment of call centres in the UK where large incoming calls can be handled with the staff being fully trained for marketing success and reasons.
The second sales technique that will be used mainly in making the selective strategy successful is personal selling. Personal selling will be critical in identifying and reaching specific distributors such as Amazon who have great market knowledge and can be of great use in product marketing. The use of personal selling is important as it helps to build customer-to-seller relationships in addition to determining the customer needs therefore influencing the buyers to make a purchase based on communicated product benefits (Jobber et al., 2011).
8.0. Conclusion
The current report critically evaluated how Ganoderma lucidum product can successfully be introduced in the new UK market by introducing the product features and benefits, target client segment, the pricing strategy for each segment, the value proposition as well as sales channels with the sale techniques for each channel. The product features were found to be unique with the target client selected as B2C customers consisting of female consumers between the age of 18 and 35 years. Also, the best pricing strategy for the customer segment is skimming is that it will help measure the price perception of the category of the consumers due to the perception of the products being prestigious. Both PESTEL and competitive environment analysis showed that the product is viable and can be introduced in this new market. Specifically, the healthy economic environment, use of online technology and acceptance of organic products by female consumers makes our product acceptable in the UK.
Furthermore, the low supplier power, low substitute threat, and low entry threat is an advantage for Ganoderma lucidum products. In introducing the product, the sales promotion strategies used will include telesales and personal selling which are also sales techniques and publicity selling. In addition, the channels that we plan to use will be Direct, Selective and intensive channels due to
- Ganoderma Lucidum Product
- Specific Dealers
- Consumers
- Multiple Dealers
- Consumers
- Consumers
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