International and Global Marketing

International and Global Marketing BSP6063 (PERL Cosmetics, 2022)

ST20166582 WRIT 1 WORD COUNT - 3116

Contents Introduction PESTLE Market Analysis and Data Trends Market Attractiveness and Competitive Strength Analysis Market Entry Analysis STP Analysis Porter's Generic Strategies and Clear Points of Differentiation (PODs) International Marketing Mix Mock Ups Conclusion References Appendices

(PERL Cosmetics, 2022)

Introduction

This report will include a detailed analysis of the Chinese market, including data trends, market attractiveness and suitable market entry methods. An STP analysis, PODs, and an international marketing mix will also be included.

(PERL Cosmetics, 2022)

PESTLE Analysis A PESTLE analysis has been conducted to justify why China is the better country for PERL Cosmetics to expand into over France.

Political Factors: China has developed effective techniques to keep raw material costs low. Investors can also benefit from reduced labour costs, making it a viable business option. (Red Points, 2022).

The government sets programmes to encourage businesses and provides financial assistance to them. The Chinese government, for example, is presently promoting e-commerce companies. (China Briefing News. 2022).

Economic Factors: The Chinese economy is currently performing at an all-time high and with the present GDP rate it will soon surpass the U.S. economy. (GDP Ranked by Country 2022).

China has some of the lowest labour costs in the world. (Statista. 2022).

Social Factors: China’s current population is over 1.4 billion (Statista, 2022) and this will help the business get specialised laborers and employees at a smaller cost, as the high population is a reason they keep labor costs so low.

As of December 2021, over one billion people had access to the internet in China, resulting in a fast-growing mobile app market in the country. (Statista, 2022) China has a 96.8% adult literacy rate. (Knoema. N.d., 2021).

Technological Factors: Due to the fact that the country has sufficient technological support, a large portion of the population prefers to buy things via ecommerce rather than going to a store. (Fashion Network, 2017).

65% of China are active social media users. (Thomala, L., 2021).

Legal Factors: The country has banned social media like Facebook, Whatsapp, Twitter, YouTube, which has prevented these platforms from earning revenue and prevents companies being able to use these platforms to promote their products. (Beina Xu, 2014).

Environmental Factors: China is aiming to make electronic vehicles its primary mode of transport. (Nancy W. Stauffer, 2021).

China has 3x more renewable energy than any other country. (Dominic Chiu, 2022) After carrying out a PESTLE analysis for the Chinese Beauty Market, it is clear to see that there is a lot of opportunity for PERL cosmetics to grow as a brand in China. Although there are some negative Legal Factors, the positives will outweigh this.

Market Analysis Data and Trends China has the second biggest beauty goods sector market in the world in terms of value (Sappachang, 2022), this is hugely beneficial for emerging into the Chinese beauty market because they have a clear consumer demand for beauty products. The typical cosmetic products sold in China include skincare, color cosmetics, haircare, and toiletries. The beauty and cosmetics industry is one of the fastest-growing and most promising fields of business in China for the near future (Statista, 2021). China not only has a large population but a youthful one as well, as this large generation ages it is predicted that they will naturally become more concerned with caring for their skin and therefore create a huge new pool of beauty consumers within China. As a tech savvy generation, they have also begun changing the way that beauty is shopped (Lim, 2021), meaning that social media brands such as Perl are at their best opportunity to penetrate.

In China, the skin care and cosmetics industry has grown 17% in the last decade, with growth of more than 20% in the premium segments. The market is growing and segmenting to include more than just basic facial makeup and skincare. People are now looking for beauty devices for the face and body and new, innovative brands (Statista 2021) (Sappachang, 2022).

China’s medical and technological beauty sectors are expanding rapidly, growing from 7.8 billion dollars in 2015 to 21.2 billion dollars in 2019 and is forecast to reach US $52.4 billion by 2023. Beauty devices such as lasers, microneedling and steam treatments are growing in popularity due to their innovation. Traditionally, the Chinese beauty market has been dominated by huge, luxury brands which appeal to the country’s love of all things designer.

However, this is changing due to a growing demand for more accessible and mid range beauty products as China’s previously poor suburbs develop.

Innovative brands and products are gaining popularity with a particular trend for drinkable beauty, infused drinks marketed as making you beautiful from the inside out. (Chinese Marketing Insights, 2021) This beauty market likes experimenting with new techniques and trends, much like the UK market, and Perl’s mix-your-own formulas fit well with this trend.

(PERL Cosmetics, 2022)

Market Attractiveness and Competitive Strength Analysis In order to look at the attractiveness of the Chinese beauty market, an analysis of Porter’s 5 Forces (Porter ME, 1980) has been carried out. At present, Chando is one of the biggest examples of Industry Rivals (Statista, 2021), however this sits more in the high end beauty sector rather than the mid-range where PERL would fall. Linking to this, the threat of substitutes both already present in the market and that could potentially enter it is limited as PERLl Cosmetics has such a unique concept. Both of these factors suggest a low level of competitiveness within the market.

On the other hand, the threat of new entrants was a concern as the chinese beauty market is seeing an influx of international brands entering both in bricks and mortar retail and online (Statista, 2021). This and the bargaining power of the suppliers were the two main points that we established as making the market less attractive. Being a British made brand that uses British ingredients, there is the potential for conflict with local suppliers who compete heavily for production contracts. Despite these two issues, the Chinese beauty market is demanding newness and innovation, and PERL satisfies this need.

The MACS analysis that was completed for China places the country in the ‘A countries’ category, suggesting that there is a strong opportunity for investment and growth (MACS Matrix, Mckinsey, N.D.). Using the same weightings that were used for the French MACS analysis, China scored highly in terms of trends, market share and opportunity to take a share of the market. These three factors suggest a highly attractive market for PERL to enter. These factors were also part of the micro analysis which were weighted more heavily than the PESTLE factors, further emphasizing the attractiveness of this market. See Appendix 1 for map.

Market Entry Analysis After conducting research into different international market entry methods (see appendix 2), a decision was made that the most suitable entry method for PERL cosmetics to enter the Chinese market is Online Market Entry.

Other options considered for PERL’s market entry method included:

Direct exporting: Pros: More control over the export process Potentially higher profits Closer relationship to the overseas buyer and marketplace Cons: Requires more time, energy and money than company may be able to afford Having to handle all the logistics (business.gov.nl. 2022)

Indirect exporting: Pros: Lower financial risk, no or very few extra staff required.

Cons: Lower profit margins and no direct customer contact. (business.gov.nl. 2022) Direct and indirect exporting aren’t the most viable option for PERL cosmetics as they involve a large risk for the e-commerce brand.

Franchising: Pros: Lower risk Brand recognition Cons: Involves a high initial cost Lack of financial privacy Franchising is not a suitable method for PERL cosmetics because they are an ecommerce store, and don’t have the option to expand to a franchise as they are still quite a small company that sell their products through their own website and also Etsy.

After appraising other market entry methods it was decided that the best option for PERL cosmetics is to enter the market via Online Market Entry, this is because the business is solely e-commerce and setting up a bricks and mortar store is not an option as they don’t have any stores yet. E-commerce has been identified as the preferred shopping channel for Chinese consumers (fashionnetwork.com, 2017), and consumers are keen to purchase cosmetics from entry level consumers abroad (TMall Global Survey, 2017). Important factors that need to be considered when selling to Chinese consumers include PERL’s website being translated into basic Chinese and offering payment methods typical to the local market e.g. Alipay (the Chinese equivalent of PayPal) (The BigCommerce Blog. 2022). The Chinese e-commerce market has a 1,420,062,022 population and 57.7% internet penetration (The BigCommerce Blog. 2022), which gives PERL a huge opportunity to market to a well-informed, inquisitive and online-shopping-literate consumer.

STP Analysis

r e m u s Con ofile Pr

Demographic

Psychographic

Name: Xiuying Age: 24 Income: ¥7,819,346.25 Occupation: Social media manager Education: University degree Marital Status: Dating

Lifestyle: Some disposable income Personality: Fun, outgoing, sociable Values: Family, friends, environmental issues Concerns: Global warming, animal testing

Geographic

Behavioral

Country: China Purchasing habits: Medium purchase City: Schenzen volume, low price concern, purchases Language: Mandarin once a week Climate: Sub tropical Brand loyalty: High Population: 12.51 million Shops: Online Segmentation - Kotler et al (1997) define market segmentation as: ‘Dividing a market up into distinct groups of buyers with different needs, characteristics or behaviors, who might require separate products of marketing mixes.The consumer is part of the sophisticated singles global segmentation, with high affluence and urban living.

Consumer Moodboard

Targeting - Kotler et al (1997) defines targeting as: ‘the process of evaluating each market's attractiveness and selecting one or more segments to enter.

PERL cosmetics states “We've created customisable skincare products as we know skincare isn't one size fits all.” (PERL Cosmetics, 2022). This means that PERL are currently targeting consumers of all ages due to the bespoke tailored products they offer. PERLs products will attract many different demographics but the products will be most appealing to consumers aged 19-29 because in 2019, the main contributors to the consumption of beauty and personal care products in China were between 19 and 29 years old (Statista, 2021). The decision to market to 19-29 year olds has been made, this means that concentrated marketing will occur, a marketing segmentation strategy in which the firm concentrates its entire efforts and resources on serving one segment of the market; also called Niche Marketing (Monash Business School, 2022). Targeting one segment at a time and gaining consumers that way, starting with the age group that favor skincare the most currently in China.

The most effective way to target the consumer is online, through campaigns and advertisements as 533.32 million members of the population are currently online shopping (The BigCommerce Blog. 2022). According to research (The BigCommerce Blog.

2022) the Chinese consumer loves discounts and promotions, so PERL will benefit from having a special offer to entice the consumer. The Chinese consumers also love trying new brands, especially brands that have a history and heritage, and PERL brand themselves as “Natural British Skincare” on their platforms (PERLCosmetics TikTok, 2022) and demand for British products from Chinese consumers remains high, with the value of goods sold by UK brands on Tmall and Tmall Global (Alibaba's China marketplaces) increasing by 27% year on year in 2020 (The Grocer, 2021).

Positioning - Kotler et al (1997) defines positioning as: ‘arranging for a product to occupy a clear, distinctive and desirable place relative to competing product in the mind of the target customer’.

Positioning Map:

High Price

Low brand awareness

High brand awareness

r o t i t e p Com lysis Ana

Low Price

Y, Ma, 2021).

A positioning map was created to show PERL cosmetics positioning amongst the main competitors they will have once they’ve emerged into the Chinese cosmetics market. Competitors include high brand awareness, high price brands like Origins and Kiehls. PERL have currently been placed in the low brand awareness section, with half way positioning between high and low price. Ideally PERL’s brand awareness will grow and expand once they have launched their products to the Chinese market and their place on the positioning map will move to high awareness, alongside some of the brands main competitors.

(PERL Cosmetics, 2022)

Porter's Generic Strategies and Clear Points of Differentiation (PODs)

Porter’s Generic Strategies (Porter M., 2004) describe how a company pursues competitive advantage across its chosen market scope. There are three/four generic strategies, either lower cost, differentiated, or focus (Wikipedia, 2022). The strategy that will be applied to PERL Cosmetics is The Differentiation Strategy, The Differentiation Strategy is where a business focuses on differentiating its products or services from competitors (Lucidity, 2022). PERL cosmetics are able to use this strategy because they offer a unique product that the Chinese market currently do not have on offer, the product being a customisable pink clay mask that allows you to add as much or as little illuminating oil as you desire to the mixture, making it suitable for your own skin type. PERL cosmetics have the benefit of having clear Points of Differentiation (PODS) when it comes to their unique skincare product, and the fact that it is manufactured in the UK and has British heritage will make the Chinese consumer want to purchase their customisable products. There are many benefits of applying the differentiation strategy to PERL Cosmetics, for example, lower price competition because the product is unique, PERL can compete on grounds other than price, unmatched products and services giving PERL the opportunity to use innovative marketing and advertising strategies. Brand loyalty will also be gained due to the fact that the unique product creates its own unique place in the consumer's mind, and competitors are not capable of substituting PERL’s products (Harappa. 2021). As well as the product itself being a differentiator , PERL can also offer price, reputation, brand image and service as differentiators. Although having differentiators can be beneficial for PERL, their are some disadvantages that they may face, for example, increased cost, inconsistency with communication that means it’s important to have umbrella communication, such as cutting-edge technology and innovative leadership, and affordability as unique products often have to compete with low quality knock-offs of their own product (Harappa. 2021).

International Marketing Mix Product - The product offering from PERL Cosmetics will be adapted for entry into the Chinese market because currently the product and instructions that come with it are only in English, and a Chinese consumer who can’t speak adequate English could be put off by the product if they cannot understand what it does and why it’s unique. According to some estimates, fewer than 10 million Chinese, or less than 1% of the population, speak English (English Levels in China, 2021) and to tackle this potential problem, the product will have Mandarin and Cantonese translations on the packaging and the product itself.

There are many benefits of adaptation and Cleveland and Laroche (2007, p.250) note that, “more than any other factor, culture is the prime determinant of consumers’ attitudes, behaviours and lifestyles….”, and therefore, the needs that consumers satisfy through the acquisition and use of goods and services”. The main benefits to product adaptation include that the products from PERL will Meet consumer purchase and use motivation factors, meet customer differences in taste needs and wants, meet sociocultural, lifestyle and religious differences, meet local packaging requirements and meet PLC differences (Research Methodology, 2016). Korotkov et al. (2013) illustrate advantages of adaptation strategy at psychological level. Specifically, according to Korotkov et al. (2013), adaptations of product design, functions and capabilities according to the needs of specific geographical customer segments are most likely to be appreciated by local customers with positive implications on the levels of revenues.

Promotion - The way PERL Cosmetics currently promote their products is mostly via the use of social media, and this is a problem when it comes to marketing to Chinese consumers because a lot of their social media channels are blocked and they are unable to use them. Google, Facebook, Instagram, Twitter, Tik Tok and many more websites are blocked for the use of Chinese citizens (Wikipedia, 2022). PERL Cosmetics will be adapting their promotion techniques to make them more suitable to capture the eye of the Chinese target consumer, and the way this will be done is by live streaming, as the livestream shopping market in China is expected to reach RMB2tr, or more than $300bn this year (Growth Business. 2021). According to (Growth Business, 2021) live streaming is the primary medium for key opinion leaders (influencers) to engage with their followers in China, fans can ask questions about the products, post comments to the hosts and even send virtual gifts as a token of appreciation while watching the livestream. PERL Cosmetics will live stream via Alibaba’s shopping festival to promote their exciting unique products using Douyin, Douyin is the Chinese version of TikTok and probably the most popular short video app these days according to (Tenba Group, 2022). Alongside live streaming, PERL will also have the option on their website to translate to Cantonese and Mandarin.

Mock Ups

The option for either the English or Cantonese/Mandarin language on the PERL website, utilising the adaption method for promotion.

The mock up for the live stream for PERL to promote and demonstrate products on livestream via Douyin.

Price - The price of the products sold by PERL Cosmetics will be adapted for the Chinese consumer, as the prices will have to rise to cover shipping costs. Each product will have a price rise of 20% to cover the costs of shipping and will be a cost oriented approach. Cost plus pricing involves adding a mark-up to the cost of goods and services to arrive at a selling price. Under this approach, you add together the direct material cost, direct labour cost, and overhead costs for a product, and add to it a markup percentage in order to derive the price of the product (Doole, Lowe and Kenyon (2019). The benefits of adaptation include PERL meeting exchange rate fluctuations, market demand rate and meeting competition and competitive practice (ResearchMethodology. 2021).

Place - The place in which PERL Cosmetic’s products are sold will be adapted to suit the Chinese market. The main distribution channel for PERL Cosmetics entrance to the Chinese market will be Alibaba, Alibaba has been called the gateway to China – its Tmall Global platform is China’s largest international e-commerce platform, with more than 29,000 brands from 84 countries selling to almost 900m consumers. While an increasing number of social platforms in China have introduced their own ecommerce offerings, Alibaba’s Taobao and Tmall remain the number one destination for online shopping in China (Growth Business, 2021). Alongside PERL being sold on Alibaba, their website will also be available for Chinese consumers to view products and descriptions in their ntive language. According to research from (Growth Business, 2021) it is important to align product releases and marketing campaigns with major chinese holidays e.g. Alibaba’s own 11.11 global shopping festival in November (when the livestream will be shown), this will help brands gain the consumers’ attention.

Conclusion After thoroughly researching the most effective ways to enter and thrive in the chinese market, a clear STP analysis, Porters Generic Strategies and marketing mix have been created. The choices made for PERL cosmetics entrance into the chinese market have been backed up with relevant research and statistics that will help the brand enter china and gain many new target consumers that have been identified in the STP analysis. PERL Cosmetics have a huge opportunity to emerge into the chinese market and according to research their is a demand for their unique and exciting products.

(PERL Cosmetics, 2022)

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Appendices Appendix 1 - Market/country attractiveness and competitive strength map for China.

Appendix 2 - Suitability of market entry methods Direct exporting = Some companies use direct exporting, in which they sell the product they manufacture in international markets without third-party involvement (business.gov.nl. 2022). This option isn’t suitable for PERL because the business isn’t big enough yet.

Indirect exporting = Involves the company using an independent organisation located in their home country to handle the exporting (used when co has limited international experience, selling surplus stock, testing out new markets (business.gov.nl.

2022). This option isn’t suitable because the company won’t have the funds for this yet.

Piggybacking = This market entry strategy involves asking other businesses whether you can add your product to their overseas inventory. If your company and an international company agree to this arrangement, both parties share the profit for each sale (Indeed Career Guide. 2021). This could be a suitable entry method for PERL if a brand was willing to add their products to their inventory and they could gather enough sales.

Licensing = Licensing occurs when one company transfers the right to use or sell a product to another company. A company may choose this method if it has a product that's in demand and the company to which it plans to license the product has a large market (Indeed Career Guide. 2021). This option could have also been suitable for PERL if they could’ve marketed a product and gathered the demand for the product in China.