Oriflame is a Swedish beauty selling company, which offers over 1.000 different products such as skin care, cosmetics, fragrances, personal and hair care, and other wellness products. Oriflame operates in more than 60 countries in the world, besides it is the market leader in more than half of those countries. Oriflame’s first entries were in Northern Europe. After settling in those Scandinavian markets, Oriflame expended in other European countries such as the United Kingdom, Spain, etc…; in South America such as Mexico and Argentina; and in Asia such as China, Thailand, Vietnam etc.
We did realise a huge and potential market for Oriflame, which is the United States of America. In our opinion Oriflame should expand its market to the United States of America since it’s a direct way to achieve Oriflame’s CEO’s – Magnus Brännström – goal: “Our vision is to be the best, to be number one in the world selling beauty product direct”.
In our report we will focus on handling the different problems and challenges that might occur when entering the US market.
1.3 Problem proposal
How could Oriflame increase its market share with the US market?
●Why is it worth/beneficial to breach the US market?
People in the US are in an average more wealthier than people in Europe, which gives them the opportunity to spend more on natural quality products. On the other hand it is the biggest cosmetic and toiletry consumer in the world, therefore it’s definitely worth entering this market as well. ●What kind of competitors are we going to face in the US market? Currently there are two big competitor companies present in the US. market. They are AVON (US), and FABERLIC (RU). We are going to analyse the market, identify
different threats and opportunities and drive a conclusion about the best strategy to overcome the competition. ●What are the advantages and disadvantages of the MLM system, why would we keep using it? The original routes of the MLM system is based in the US. The majority of the people are living in those typical US-style neighbourhoods, and they are more likely to let a consultants in their house than in Europe. This kind of system has got more awareness & acceptance. It’s quite common, that housewifes join different MLM companies (Forever, Amway), and they buy the products from each other. On the other hand where the society is not as opened, for example in big cities, or among the elderly, people do not really like prefer kind of approach. That’s a threat for the company. ●Oriflame has no brand awareness in the US.
“Brand awareness is an important way of promoting commodity-related products. This is because for these products, there are very few factors that differentiate one product from its competitors. Therefore, the product that maintains the highest brand awareness compared to its competitors will usually get the most sales.” (http://www.investopedia.com) Oriflame currently has no brand awareness in the US market, that can be a huge disadvantage for us. ●Oriflame does not cooperate with department stores or drugstores. None of the Oriflame products can be found in large department stores, neither drugstores. The advantage of this is that the customer can collect its desired good itself. On the other hand the department stores sells high volumes of products therefore they could provide additional sales and trade offers. Also they can afford to advertise on large scale which is good for the brand awareness.
What is included in our report?
●Why do we want to enter the US, and not other areas?
We are going to elaborate why do we think that the Oriflame has the biggest potential in the US market rather than China. ●Different market and competitiveness analysis:
In order to analyse the US market and get a picture about the future potentials we have used the PESTEL model, SWOT analysis, Porter’s diamond and five forces.
●Entry movements & competition:
We will describe how we are willing to enter the US market, and develop core competence against our main competitor AVON (who is already present)
What is not included in our report?
●Supply Chain Management – Logistic solutions
Due to the lack of time and resources we did not include any kind of logistics or supply chain management methods, such as producement, stocks, etc… In our project we assume that the consultants in the MLM system already have the products. ●Financial informations
Why US and not China?!
First of all, nowadays people in America are more likely buying natural and organic products, and that’s exactly what Oriflame is producing: Oriflame’s products are made with mostly natural ingredients. That’s why marketers are pressing their R&D efforts to develop greener products to satisfy consumer demand with sustainability. Moreover, according to the report “US Cosmetic & Toiletries Market Analysis” (http://www.rncos.com/Report/IM339.htm), there is a large room for future growth in the US. According to the study, the total market for cosmetics and toiletries is projected to reach around US$ 42 Billion by the end of 2015. So the United States of America is a very potential and attractive market for these beauty products. On the other hand we did look at the Chinese market as well. China has not got a single unified market. It has two differents market structures: urban and rural. Consumer spending on beauty and personal care products is largely concentrated in regions along its eastern coastline, where consumers are more affluent and have access to beauty and personal care products are more developed, due to availability in supermarkets or hypermarkets, department stores and beauty specialist retailers. That’s another reason why it would be challenging to attract that mass of people with their products.
How to enter the US market?
Whenever we start a research about entering a new market, we always have to begin with HOW and WHY would we enter this market. The main reason would be, because it is a huge market and includes many advantages on taxing solutions comparing to other countries. Furthermore the cosmetic industry is in a huge growth mood, it’s a great market sector, for companies like Oriflame, who uses natural ingredients and has innovative plans. Oriflame wants to enter the cosmetic industry – within the US market – its with this company value and advertisement that they have. When you want to enter this kind of huge market you have to own something unique, in this case the it’s core competence is a product more natural. Values of this company is majority thing, they use natural, products are tested well, people now Oriflame products is healthy
PESTEL analysis The PESTEL analysis stands for ‘Political, Economic, Social, Technological, Environmental and Legal analysis’. The majority of the companies want to widely see how these aspects are influencing them in specific country. PESTEL can give you an overview of the different external macro environmental factors that the company has to take into consideration when entering a new market such as Oriflame would do with the US market. These factors are not controlled by the company itself. For a company’s perspective it is essential to know what are the different factors of the given country where Oriflame is willing to sell its beauty products in order to adapt its offers, its way of selling, its way of producing. For example Oriflame can use PESTEL analysis to clarify their social communication with customers, they can investigate how they’re doing in the socializing sector. Environmental investigations in this analysis can help to make Oriflame’s products becoming more natural and healthier.
We need to study the strengths and the weaknesses of Oriflame in order to know what we can improve in this company. We also need to study its environment to be better than its competitors such as its biggest one: the Avon company. After the SWOT analysis is done, we can adapt our marketing strategy to make the firm a better one or the best one.
We need to study the marketing-mix in order to know about Oriflame; its
products, its prices, its places, and its promotions. Furthermore, we need the 4Ps analysis to improve the way of selling of this firm in order to be better than Avon for example. The 4Ps will help us to compare Oriflame with Avon, and we will try to do better than them to be the market leader of selling direct beauty products.Companies need to analyse themselves before analysing others.
Business to consumers- major thing of this concept is that B2C converts shoppers into buyers. The reason why it is good to use, because saves a lot of time and money. For example ordering or trying to buy through the internet this way, you don’t to pay taxes so you can pay less for your product. This B2C strategy is just superior for people who don’t like going shopping in big crowded shops, now they easily buy stuff sitting at homing and relaxing. Oriflame is using Business to Consumer strategy for many years they’re now are big company, who saved lots of money on taxes. www.oriflame.com cosmetics company homepage, where people easily can check oriflamme accessories, cosmetic with sales going on. Although on conclusion it should be mentioned that of course for some people who are not that good with technologies, it’s hard to use internet, B2C could be difficult to see, use. That way on arguing some cosmetics companies could win, which has shops where consumer can go, buy staff. The major problem of the MLM system in Oriflame is, that there are no stores to visit in real. For some people it’s hard to use internet, not everyone have internet, access to it. Some competitors that have stores have big plus against Oriflame, this way problem should be solved by having some shops not only on MLM system. But B2C helps to save time, money. That should be solved by telling widely people, that kind of pluses
Porters five forces (Oriflame vs. AVON)
Porters five forces is commonly used for reaffirming, updates, and extend. It also addresses common misunderstandings, provides some practical guidance and offers a deeper view of its implications for strategy. We can also describe the supplier’s input to the company. On the other hand it gives us the opportunity to analyze the level of advertising cost, competitive strategy, and flexibility of customization. Also it helps to make competitive moves like changing price in order to gain advantage and improving product differentiation. For us one of the main aspect is the threat of substitute products or service. This is used in order to manage the price which comes from out of company power to regulate. Substitute force typically impacts an industry through price competition.
This helps us to have a better sense about our customers, their needs, standards and principles. The main categories of value chain are: Research and Development, Production, Distribution, Customer Service, which helps mostly on company researches. With this the company can get more information about it’s customers, their needs, to get your product innovative, better looking. Companies can see exactly on what they’re good in, where they have some weaknesses in market or sales, why and where should they exactly pull everything together for better results. Some of the research like geography, group target and so could show where and why company should input in bigger, wider way. From this analysis it’s easier to know about customer’s satisfaction. Many companies has for example calls lines, where customers easily can call and say they thoughts about products, service Other problems are about department stores. Talking about this problem we should mention from methodology side the value chain. It could possibly solve this problem, because value chain is mainly all about customers, their needs. If a company knows what customers want, it’s not risk to start opening department stores for real. Oriflame is well known so it would be successful, not bad idea by using value chain on some research open flagship stores for example in US