Herborist Case

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CAS E ANALYS I S :

0 : I NTRODUCTION
Herborist is a high end brand for natural beauty products from traditional Chinese ingredients. The brand is owned by Jahwa United Co. Ltd, a Chinese-based company product of the merge in the mid-90s.

Since 2008, the brand began acquiring steady expansion by entering foreign markets, especially Europe and Hong Kong. This combined with the promising forecast of the natural cosmetics industry, even despite of an economic slowdown, made an interesting scenario for high profits and a great brand out of Herborist.

Nevertheless, the brand faced tremendous competition beyond their segment of traditional based cosmetics facing the ultimate top three competitors of the personal care industry: P&G, Unilever and L’Oreal, as well as the many other domestic . And as if this was not enough, Herborist had an almost null experience as to enter markets abroad, unlike these corporate giants. W ith all this promising and challenging market, we should proceed to analyze the current conditions of the company and its brand and analyze the previous and most promising decisions that they should pursue.

1 : A BOUT J AHWA A ND THE INDUSTRY
Jahwa became one of the strongest personal care enterprises in China with several brands, being the largest and oldest with a distribution in over 200 cities. Also, the company was well diversified in other activities that went from real state and beverages to rubber products, among others. The company had a diverse portfolio of mass-market products and kept a high reinvestment in R&D, creating a constant increase in its product line and SKUs . This combined with the previous experiences of local acquisitions, cooperations, joint ventures and distributions with many international related companies such as SC Johnson or Adidas , gave Jahwa a great competitive

advantage in a market that was able to grow over 100 billion USD in less than a decade (see Exhibit A), but all of these actions may not be enough.
Herborist was intended to be a global brand from its start but entering the international scenario meant facing some serious challenges. First, it was mostly either multinational personal care brands or Japanese brands that dominated the market, so a high competition level characterized the market and this made the industry to be very fragmented as well . Secondly, the mode of entry was very complicated, especially to enter in supermarkets and chains due to the fact that Herborist was a new and unrecognized brand to them.

As a first intent for international expansion, Herborist entered Hong Kong. The local market was extremely competitive, with ten brands holding almost 70% of the market share, mainly with imports. Herborist mode of entry was opening direct stores with their products labeled in English. I believe that there were two main mistakes in this strategy: First, there was no real research ma de about the target market and a competitor analysis to determine the best mode of entry in such a fragmented market; and secondly, they tried to enter as a foreign westernized brand imitating their competitors, while the local consumers knew that this Herborist had a traditional Chinese background. With this, it could seem that they were failing to its cultural heritage that could be somehow related to the one of Hong Kong for its Chinese roots. Both of these actions lead out to diminish the brand reputation no matter how good the products were. This entire situation just seemed to be as they got too eager to have a piece of this great market and also to have an international brand that they made an impulsive decision as to enter the market.

At the end, Herborist decided to re-enter the market but this time with an agreement with one of the most important local chains. This allowed the brand to successfully offer their product in over 300 stores in all the country and to become one of the most preferred brands until 2010. I consider that this was an adequate...
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