Mary Kay Cosmetics

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Case Study on Mary Kay Cosmetics: Asian Market Entry

Executive Summary

Mary Kay Cosmetics Inc’s (MKC) was facing challenges of increasing number of competing direct selling organizations in the US cosmetics market and was not satisfied with their sales revenue generated from international sales. They believed MKC culture could be transferred internationally and that Mary Kay Ash’s charisma, motivation and philosophy were likely to appeal to women throughout the world.

MKC management would like to expand their coverage to some other Asian countries – Japan and China. With evaluations of both markets through PESTEL framework and their own market attractiveness, there are proven potentials in developing MKC in these markets.

Successful entry to these markets would definitely assist MKC on further expansion to other developing Asian countries and the rest of the world.

Background

In 1993, management from Mary Kay Cosmetics Inc’s (MKC) global marketing group was reflecting lower international sales of the overall sales in 1992 compared to their competitor, Avon Products Inc., which is 11% of $1 billion versus 55% of $3.6 billion. The management believed they could achieve increased sales, brand awareness and business stability by entering a new market, especially with their past successful international experiences.

Aside from choosing which markets with the most potential MKC should enter? The choice of mode of entry, its STP and marketing programs favored to chosen markets.

PESTEL Analysis
Expanding business to Japan and/or China is a decision the management has to make and to further develop a market entry strategy that fit with the MKC culture and the local market environment. Some market environment factors are crucial in deciding the vitality of entry into these markets:

Political Situation
A closer cooperative relationship has been going on in Japan and the US with the election of Prime Minister Yasuhiro Nakasone, this political stability favors MKC investment in Japan.

Political instability has been going on after the retirement or death of China’s longstanding Premier Deng Xiaoping and leading political struggles between conservatives and reformers. Another issue was the Chinese government not allowing its people political freedom corresponding with their increasing economic freedom.

Economic Situation
The economy of Japan was one of the largest in the world in 1992, with Gross Domestic Product (GDP) of $3,370 billion and it is estimated with 2.3% and 3.2% GPD growth in 1993 and 1994 respectively. Specifically looking at the cosmetics industry, there were increasing numbers of shipments to and from United States and local production by foreign firms.

Back to late 70s, China has undergone several economic reforms due to “Open Door Policy”: free market pricing and more liberal foreign exchange conversion were introduced and foreign investment became more acceptable. These reforms had great impact on coastal provinces to facilitate foreign investment. And now, though China’s GDP is just 10% of Japan, that is, $371 billion in 1992, it has a fast-growing economy with 10.1% and 9.5% GDP growth in 1993 and 1994 respectively. It was estimated that 41 million household would have incomes of $18,000 per annum by the year 2000 and saving rates at 35%.

Foreign companies importing finished goods into China faced high tariffs and likely devaluation of Renminbi which would add up the retail prices of their products.

In the 80s, cosmetics and toiletries became an important part in China’s light industry with 6 times increment between 1982 and 1990. The Chinese Ministry of Commerce can foresee the potential in this industry and initiated professional training programs for two million cosmetics staff on selling skills and beauty knowledge.

Social-Cultural Situation
There is an increasing percentage of Japanese women going on further education and working outside the home, predominantly...
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