Case On Pretty Me
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China- Macro external environmental factors: Opportunities & Threats
There are several macro environmental factors which could affect MKCs entry into Chinese market either in a positive or negative way. Some of these macro factors are politico-legal climate of the country, socio-cultural framework, economic factors, demographic factors and competition (which can be both macro and micro).
Chinese governments open door policies, economic reforms, liberalization policies and a shift of agriculture economy towards service economy are some of the key factors which will influence MKCs entry into the Chinese market because all these factors will determine the cost, price, demand and supply of goods. These factors certainly present an opportunity to MKC to enter the market. High GDP growth will increase the aggregate demand for products & services. High income growth rate, increase in education levels, propensity to save coupled with urbanization of the population are going to be favorable for MKC. High income will lead to higher purchasing power of Chinese women who would be able to buy these imported goods from foreign players.
Therefore as a marketer its right time for me to enter the market, if I look at the data it tells me that majority of the sales happens through departmental stores and direct selling only contributes to 3% of sales, there is a potential to tap this distribution channel and capitalize on Chinese womens rising tendency to augment their income (Govt jobs as well as part time work).Chinese are more open to new product adoption this presents another opportunity for us to enter the market.
Geographical location of the growing cities like Guangzhou and Shanghai will help easy movement of goods.
However some factors which present a threat to my entry are competition, socio cultural framework, governments protection policies which support the working women, govt. censorship and fragmented market. Government control over the media is a threat and in less that 2 years time advertising will become substantially expensive, hence these factors are not favorable for me as a marketer. Other factors like Chinese currency devaluation may make the products more expensive for people driving the demand downwards.
Micro environmental Factors: Strengths and Weaknesses
Customers, suppliers, product, price, distribution and competition are some of the micro factors that I would like to consider. Some of MKCs strengths are smaller product base which is easier to promote. I can also have economies of scale because of cost efficient production at a central location. As a marketer this will help me in passing price benefits to my customers.
Avon has a distinct competitive first mover advantage over MKC which is a weakness of MKC to develop the distribution network. Since more and more Chinese women are showing interest in higher education, MKC can utilize their talent to build its distribution network which will help them augment their current income.
Another drawback with MKC is that it has always relied on its Sales directors personal contacts to expand the network in new markets, china represents a totally different market where MKCs people have had no experience of selling.
Adaptability to local market (reformulation of products) is the other weakness of MKC compared to its nearest competitor Avon.
(Please refer to Annexure A for a summary on Macro and micro factors)
Primary Target market segmentation:
My primary target market would be young working women of Shanghai either married or unmarried between the age group of 20 Ð- 35(middle and upper class) who would buy skin care products like moisturizer, cleanser, toner, anti aging cream. I would launch skin care products first in Chinese market because they like cleanliness more than glamour products. Income of these women is over $100 /month and they have disposable income of $30.They are also the group who spends most on Cosmetics, clothes and jewelry.
I have chosen Shanghai because its urban population is close to 13.5m as compared to Beijing or Guangzhou which means availability of educated women who can build our network is high because of cosmopolitan nature of city.
These women are very conscious about their looks and hence would be ideal segment to launch the product. MKC can not only sell to these customers but also make them their brand ambassador. There are more polished when compared to their counterparts in Guangzhou or Beijing.
Secondary Target Market
Lifestyle: Ostentatious
Income: High
Age: 32 years (20-40)
Social Class: Middle class
Activities: Spend on food, foreign goods and entertainment
I would select Guangzhou as my secondary target market and test the feasibility of glamour products because women are more ostentatious and age group will be between 20-50. They are not so sophisticated but are generous spenders. This group has high spending power. I will launch skin care line (anti wrinkle creams) for older women either working or homemakers who are in 35-50 age groups.
Product Line Portfolio & Value proposition
My core products will be skin care products like Moisturizers, lotions, anti Ð-aging creams, cleansers, day creams and nourishing creams. I would launch these products keeping target audience profile in mind, Chinese women like to project a youthful image and also they are keen on cleanliness. They are very