Mary Kay to Italy

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COUNTRY MARKET REPORT
MARY KAY TO ITALY

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EXECUTIVE SUMMARY
Mary Kay, a corporation created and run by women, sells cosmetics and skin care products worldwide. The impact on the skin care and cosmetic industry has proved to be impressive at US $2.5 billion on an international level in 2010. Mary Kay’s headquarters and primary manufacturing facility is located in Addison, Texas. The corporation operates on a multi-level marketing structure, while implementing direct selling methods through hired beauty consultants. Mary Kay has enjoyed global expansion over the past 25 years in countries throughout Europe, South America, and Asia (Mary Kay, 2011). The proposed market in Italy has much potential for several reasons. First of all, Mary Kay is already located in several European countries, such as Germany and Spain. Therefore, the concept of a planned expansion to Italy is not entirely foreign. Additionally, the Italian cosmetics industry is growing in terms of natural and organic products, which has already been one of Mary Kay’s leading unique selling propositions (USP). The Italian market is expected to be very attractive to Mary Kay for several reasons stipulated in this report, including but not limited to a developing interest of non-traditional segments, such as men, children, and the elderly in the products of the skin care industry. This trend is very likely to open up further growth opportunities for Mary Kay. Given the success of Mary Kay’s business model around the world, the company is well advised to enter the Italian market by simply implementing the already proven strategy of multi-level marketing. Conceptually, the mode of entry is defined as licensing, since local independent Beauty Agents (licensees) will be licensed by Mary Kay (licensor) to acquire new customers and sell the company’s products through direct marketing. In terms of product adaptation, Mary Kay does not have to put much effort in reengineering its product line for the Italian market. This is because of the high quality and excellent tolerance regarding Mary Kay’s products and the benefit from the “EU common market advantage” from a regulatory point of view. Due to the cost efficient distribution strategy and foreign exchange benefits, Mary Kay is able to pursue a reciprocal pricing strategy, i.e. the company delivers high quality to a relative lower price than its competitors. -------------------------------------------------

ECONOMIC ENVIRONMENT
Italy’s economy is the 7th largest in the world, with a GPD of $1.77 trillion (2010 estimate adjusted for purchasing power parity). The U.S. and Italy share a friendly trade relationship; Italy serves as the 7th largest U.S. export market, and the U.S. serves as Italy’s 10th largest supplier (United States Department of Commerce, 2010). Italy’s economic beginnings were as that of an agricultural state, with a very slow rate of industrialization, but the country has grown constantly into an industrialized nation ever since. However, to simply recognize the country’s status as industrialized would be to ignore the blatant fragmentation of Italy’s economy into dual parts. The country’s economy is considered to be divided into two distinct parts due to stark regional differences in productivity and employment characteristics. The northern part of the country has a highly-developed and industrialized economy, which is driven by privately-held – and often family-owned – companies. Southern Italy’s economy remains predominantly agriculturally-based, and suffers from a markedly higher rate of unemployment than that of its northern counterpart (The World Factbook, 2011). The size of Italy’s economy suggests that it is large and dense enough to support interest as a target market for Mary Kay. However, Mary Kay must be cautious to recognize the country’s pronounced regional differences in...
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