THE BODY SHOP的国际市场International market of THE BODY SHOP

Executive summary执行摘要
 

该报告选择THE BODY SHOP客观分析其潜在的新的国际市场，并讨论为目标市场营销计划。全球市场的筛选和深入的市场分析后，提出了中国，随着巨大的人口和皮肤护理产品的需求不断增加，是THE BODY SHOP最好的新市场。特许经营进入模式应该被实现，它是THE BODY SHOP开展在中国的4Ps营销组合更好。向中国出口要征收增值税，消费税和关税以及中国 - 韩国自由贸易协定和上海保税区将成为事件进口化妆品市场影响很大。信用证可以用THE BODY SHOP被使用，它应该强调，中国政府要求的标签的信息。The report chooses THE BODY SHOP as objective to analyze its potential new international market and discusses the marketing plan for the target market. After global market screening and depth marketing analysis, it puts forward China, with huge population and increasing demand for skin care product, is the best new market for THE BODY SHOP. Franchising entry mode should be implemented and it is better for THE BODY SHOP to carry out 4Ps marketing mix in China. Exporting to China should pay value-added tax, consumption tax, and customs duties and the China-Korea free trade agreement and Shanghai Free Trade Zone will be the events influence greatly to importing cosmetic market. Letter of credit could be used by THE BODY SHOP and it should stress the labeling information required by China government. 

 

1. Introduction介绍

这是著名的原始的，自然的和道德的美容品牌，它有2500多家门店遍及60多个国家的世界（The Body Shop的，2015年）。它坚持倡导以相反的动物试验和贸易公平。 THE BODY SHOP的五个主要值是支持社区公平交易，维护人权，反对动物实验，激活自尊和保护我们的地球侧重于保护环境，促进社会发展（美体小铺，2015年）。报告的结构显示如下。首先，它会引入THE BODY SHOP的情况。其次，它会给全球市场的筛选和做出深入的市场分析关于THE BODY SHOP的高潜力市场。第三，将讨论THE BODY SHOP为目标市场的进入战略市场的计划。第四，它会给国际化模式的一些细节描述目标市场。最后，它会给出一个简短的结论。THE BODY SHOP is chosen to analyze its high potential new international market about its skin care products. THE BODY SHOP (2015) was established in the United Kingdom in 1976 by Anita Roddick. It is famous for its original, natural and ethical beauty brand and it has more than 2,500 stores spreading all over more than 60 countries in the world (The Body Shop, 2015). It insists to advocate to opposite animal testing and trading fairly. The five main values of THE BODY SHOP are Support Community Fair Trade, Defend Human Rights, Against Animal Testing, Activate Self-Esteem, and Protect Our Planet which focuses on protecting environment and promoting social development (The Body Shop, 2015). The structure of the report shows as following. First, it will introduce the situation of THE BODY SHOP. Second, it will give a global market screening and make depth market analysis about the high potential market of THE BODY SHOP. Third, it will discuss the entry strategy market plan of THE BODY SHOP for the target market. Fourth, it will give some detail description of internationalization modality to the target market. Finally, it will give a short conclusion.#p#分页标题#e#

2. The situation of THE BODY SHOP THE BODY SHOP的情况

2.1 Financial data and product/service

According to the annual report of THE BODY SHOP, the gross sales of THE BODY SHOP were 139.86 billion pound in 2013 which has 0.3 percent rate of increase compared with 2012. The detail sales in different market show in the Figure 1 (L’Oreal, 2014).  

Figure 1: detail sales of THE BODY SHOP

 

(Source: L’Oreal, 2014)

The skincare product of THE BODY SHOP includes cleansers, toners, moisturizers, serums, lip care, exfoliates and masks, and eye creams (Figure 2)

Figure 2: Skincare product of THE BODY SHOP

 

(Source: The Body Shop, 2015)

2.2 Current strategies 

At present, THE BODY SHOP still insists the ethical approach of Roddick which focuses on CSR to balance the relationship between profit and society, for example, fighting for human rights, opposition of animals test. For the product strategy, it pursues the product differentiation through natural ingredients and being environment friendly. In addition, THE BODY SHOP also stresses customer satisfaction that it collects and accepts the feedback of consumers about its product to adjust and develop product. 

2.3. Industry Analysis and Industry trends 

In UK, as the turnabout and restored consumer confidence, the beauty and personal care industry are benefit with 3 percent growth rate in 2013 (Euromonitor, 2015). For global tendency of the beauty and personal care industry, the industry is expanding quickly, especially in emerging market such as China and Latin American countries that the total sales of Latin American is expected to reach $80.3bn in 2014 and China has already exceeded Japan to become the second largest country of cosmetic consumption (Euromonitor, 2015). 

2.4 Product life cycle stage

THE BODY SHOP may be in the growth period with rapid increasing quantity demanded and sales. The excellent brand image of THE BODY SHOP on environment friendly caters to the future developing direction of the beauty industry of eco-friendly and this is a powerful promotion strength to the future development of THE BODY SHOP. 

2.5 Domestic and International factors for internationalization of THE BODY SHOP 

For domestic factors, the decreasing sales of THE BODY SHOP in UK and Ireland market from 2002 to 2005 influence its internationalization (Figure 3).

Figure 3: Retail sales reports from 2002 to 2006

 

(Source: L’Oreal 2006)

For international factors, the increasing of per capita incomes and the rapid development of economic globalization which has opened international markets to cosmetics, promote the internationalization of THE BODY SHOP. #p#分页标题#e#

2.6 S.W.O.T. analysis of THE BODY SHOP

The SWOT analysis shows in Figure 4.

Figure 4: SWOT analysis

 

(Source: L’Oreal 2014)

3. Global market screening全球市场筛选

3.1 Identification of high potential country markets

There are three countries with high market potential for THE BODY SHOP and the three countries are China, Argentina, and Columbia. China, with greatest population in the world, has become the second largest country of cosmetic consumption. The cosmetics sales of Columbia was US$ 6.2 billion as of 2010 (Euromonitor, 2015). Argentina’s cosmetics market reached US$200 million in 2011 with 40 percent growth in value and 12 percent in volume (Euromonitor, 2015).

3. 2 Macro-level variables of high potential country markets

For political environment, both the three countries has stable political environment. For China, China increased import duties on luxury goods, including cosmetics, by 10% to 30% in 2007 and the tariff rates on cosmetics has be revised to 50% (WANG and LIU, 2012). Colombia encourages foreign capital that it gives the national treatment to foreign capital and Colombia is the country with the highest protection of intellectual rights in Latin America (CARRioN et al, 2011). Argentina implements an ad valorem duty on most products. The simple average rate Argentina about tariff is 11.9% for non-agriculture goods and the Customs Taxes of cosmetics and cleaning products are 18 percent (Viladrich and Baron-Faust, 2014).

For economic environment, China has strong and sustained GDP growth in recent years. According to the World Bank Group, GDP in China, Colombia, and Argentina was worth 9240.27, 378.15, and 611.76 billion US dollars in 2013 respectively with 7.3 percent, 4.2 percent, and -0.8 percent GDP Annual Growth Rate (Trade economics, 2015). 

For social environment, as the development of economy, consumers in the three target market all began to emphasize beauty product. China consumers pay close attention to launches of new products and the overall trend of consumption of cosmetics product. Colombian consumers emphasizes on the price. The demand of Argentina consumers on beauty and personal care are growing and they trends to purchase new products with mid-priced and economy-priced. 

3.3 Market accessibility variables of high potential country markets

China needs foreign cosmetics company gets pre-market approval or notification from the (SFDA) before importing into China and China insists animal testing for cosmetics. 

Columbia government provides expedited procedure on cosmetics product to promote the process of cosmetics product appearing on the market.

Argentina restricted imports including beauty and personal care product in 2013. 

3. 4 Micro-level variables of high potential country markets—Porter’s five forces#p#分页标题#e#

Threat of new entrants is relatively high as low enter barriers of new entrants in the industry that there is no requirement of large capital or economies of scale for new entrants to open a cosmetics corporation. 

Threat of substitute products is medium to low as there is no substitute for cosmetics products. 

The bargaining power of buyer is high. In the supply chain, B2B customers such as beauty salons and beauty specialists, often occupies a solid position. B2C consumers could obtain clear information through Internet and the switching cost is low. 

The bargaining power of suppliers is high. The production of various raw materials depends on high-end technology, for example, process and extracting of oiliness material and the manufacturing of surfactant. Those improve the bargaining power of suppliers. 

Competitive rivalry is high. The cosmetics market of high potential country markets there are multiple famous cosmetic brands in the markets. 

4. Depth market analysis 深入的市场分析

4.1 The best target market country

China is the best target market country for THE BODY SHOP as China, with large population of 1.3 billion, has huge market potential and demand about skincare products. According to the data of Euromonitor (2015), the gross sales of skin care products in China were Rmb131.4 billion in 2013 with 9.1 percent annual growth rate and the gross sales of cosmetic products in China from 2008 to 2013 show in Figure 5.

Figure 5: Gross sales of cosmetic products in China

 

(Source: HKTDC, 2015)

4.2 Main competitors

The main competitors of THE BODY SHOP in China are THE FACE SHOP and Herborist as the product of the two brands is similar with THE BODY SHOP that they also advocate natural material and the target market also are young generation (HKTDC, 2015). THE FACE SHOP, South Korea-based skincare and cosmetics manufacturer, belongs to LG Household & Health Care of LG Corporation. Herborist, Chinese herbal care brand, provides skin care products, natural skin care, cosmetics.

The main competitors of THE BODY SHOP in Columbia are NIVEA and AVON(CARRioN et al, 2011). NIVEA, one of the world's largest skin care brands, belongs to Beiersdorf. AVON provides various products including skin care products.

The main competitors of THE BODY SHOP in Argentina are Olay and POND’S (Viladrich and Baron-Faust, 2014). Olay, American skin care brand, belongs to Procter & Gamble. POND’S, a brand of beauty and health care products, belongs to Unilever.

4.3 Company's market sales potential and market share

The market sales potential of China is huge without a doubt (analysis in 4.1). Columbia has high growth rate of the number of women in the workforce—37 percent (16% growth rate in worldwide) (Euromonitor, 2015). Argentina’s cosmetics market also has rapid development with 40 percent growth in value and 12 percent in volume in 2011 (Euromonitor, 2015). However, compared with Rmb131.4 billion of gross sales in 2013 in China skin care products market, the total sales of Columbia—US$ 6.2 billion in 2010, and Argentina— US$200 million in 2011, are short of competition (Euromonitor, 2015). In addition, for a conservative projection, THE BODY SHOP is promising to occupy 5 percent, 15 percent, and 10 percent market share in China, Columbia, and Argentina respectively.#p#分页标题#e#

4.4 Current market-entry conditions for each target market country

Market-entry conditions in China process shows in the Figure 6. 

Figure 6: market-permission of cosmetics

(Source: Whalley, 2006)

In addition, it also should abide by the management system of cosmetic product in China (Figure 7)

Figure 7: the management system of cosmetic product in China

(Source: Whalley, 2006)

Columbia, signed FTA between EFTA and Colombia with low market-entry conditions, allows cosmetic product to appear on the market after applying product registration to INVIMA (CARRioN et al, 2011).  

Argentina's import licenses of cosmetic products is non-automatic, are administered by the MEP's Secretariat of Industry, Trade and SMEs. The import license should be submitted to the Import Directorate (Viladrich and Baron-Faust, 2014). 

4.5 Existing distribution channels

The main distribution channels of cosmetic products in China are Hypermarkets, department stores and internet retailing (Euromonitor, 2015). However, Hypermarkets and department stores are the areas that The Body Shop rarely focuses on and it may have some barriers for The Body Shop. The Internet retailing is better for The Body Shop to select.

Internet retailing is the main distribution channel in Colombia in recent years (Euromonitor, 2015). And it is helpful for cost saving with wide spreading speed and strong influence power.

Direct selling is the main distribution channel in Argentina (Euromonitor, 2015). Direct selling is one of method that The Body Shop implements and it has strong capital scale and it has abundant ability and experience to achieve direct selling model.

5. Entry Strategy and Market Plan进入策略和市场计划

5.1 Entry strategies and marketing plans

The main entry strategies include export, contractual entry modes, and direct investment abroad. And the alternative marketing plans include 4Ps and 4Cs. In this report, based on the environment analysis of THE BODY SHOP, Franchising and 4Ps will be implemented. 

5.2 Mode of entry

Considering the intensive competition in China complex market, Franchising is a best choice for The Body Shop as the low risk and franchising could help it enter China market soon without investing too much resource. In addition, The Body Shop has long-term experience of franchising. 

5.3 Marketing strategies and action plans

For the pricing, according to relevant survey of China cosmetic consumers, the younger generation is hard to accept high price and the price of the products of competitors’ ranges from 10 RMB to 200 RMB which should be taken seriously by THE BODY SHOP (Luo, 2013). 

For the positioning, the Body Shop should initiatively focus on young people ageing from 15 to 30 as they are the main consumer group for environmental skin care product (Yang, 2014). In addition, professional women will be another huge potential market#p#分页标题#e#

For the promotion, it is better for The Body Shop to change its promotion strategy of no advertising as China is a new market and most consumers in China do not know The Body Shop. Traditional promotion method such as posters and commercials and by-products should be implemented. In addition, it also could hold some skin care demonstrations to promote the product. 

For the distribution, online and offline integration should be emphasized by The Body Shop. The Body Shop could push out multiply channels including chain stores, The Body Shop At Home™, Body Shop.Com & Body Shop Hotline, and B2C platform.

5.4 International marketing budget and profit plan

Cost of entry model:

Forecast of future sales:

Projected income statement:

Break even analysis:

 

6. Rationale for the specific internationalization modality selected for the company选择的公司的具体方式国际化的理由

6.1 Export-Import Strategy

Export strategy is the production is manufactured in the outside of target country and export to target country for market. Export strategy could be divided into direct export and indirect export. It is a traditional mode for enterprise entering into international market and is the method that international market entry generally adopts at present as it requires low capital investment, is helpful for enterprise to achieve regional advantages and advantage of scale economy, and has high flexibility (Whalley, 2006). However, the tariff and non-tariff barriers exist in export strategy and this may lead enterprise loss competitive advantages compared with local product. In addition, export strategy needs high transportation cost, long transportation time, and it is hardy to maintain supervision for local agent. 

The process of export strategy in China shows in the Figure 8.

Figure 8: export process in China

 

 

(Source: Whalley, 2006)

6.2 Documents required for the operation

Registration Documents for cosmetic products entering China market shows as Figure 9.

Figure 9: required registration documents

(Source: Chang, 2013)

Cosmetic products are divided into normal cosmetic and specific cosmetic and cosmetic importing to China needs to obtain approve of Ministry of Health of PRC (MOH). Hygienic quality test is required to obtain the certificate of approval of MOH (Yang, 2014). 

The certification of cosmetic products includes three steps. First step is the test of safety and health quality which is managed by MOH which appoints organization to perform the test. The test often will spend 2-6 months and the cost depends on the complexity of test and the type of the cosmetic. The second step is the certificate for imported cosmetics which is conferred by MOH and it spends two to eight months. The third step is to wait for the results which may spend 4-5 months and 8-9 months for common cosmetic and special cosmetics respectively. #p#分页标题#e#

6.3 Involved tax and custom duties 

Exporting to China often has three kinds of taxes which are value-added tax, consumption tax, and customs duties. At present, normal skin care product needs to pay 6.5 percent customs duties, 30 percent consumption tax, and 17 percent value-added tax in China and China reduce relevant customs duties to 5 percent in 2012 (Yang, 2014). The taxation price calculates based on CIF value. 

6.4 Facilitate the operation

At present, China has built more than 20 LFTZ relating to 32 countries and areas and signed 12 trade agreements relating to 20 countries and area (Yang, 2014). In recent years, there are two affairs which may have core influence for the exporting of cosmetic productions to China which are China-Korea free trade agreement and the building of Shanghai Free Trade Zone

The negotiation of China-Korea free trade agreement started in 2012. According to relevant negotiation result, the proportion of liberalization on commodity trade for both sides all exceeds 90 percent tax items and 85 percent value of trade. If China-Korea free trade agreement takes effect, the custom duties of Korea cosmetic products will exempt from 6.5 percent and this will enhance the competitiveness of Korea cosmetic products in China market (Hahm, 2015). 

Shanghai Free Trade Zone is the regional free trade zone China government establishes in Shanghai in 2014 and it is the first free trade zone in mainland. At past, importing cosmetic mainly adopt two methods which are direct customs clearance and bonded warehouse (Yang, 2014). A transnational cosmetic enterprise often implements direct customs clearance and most second- and third-tier importing brands often choose bonded warehouse. However, if cosmetic enterprise establishes factory in free trade zone and introduce semi-finished cosmetic product to make secondary operation, then making customs clearance to domestic market and this is hopeful to save great costs (KITA. ORG, 2014). For example, if an enterprise intends to import 10 single items, recording a trade name needs RMB 10,000 and test costs need RMB 10,000. The total process spends 2 to 3 months. It is clear that it should invest more than RMB 200,000. However, introducing barrel of raw material in free trade zone only need RMB 30, 000 within one month and need RMB 20, 000 customs clearance for container. 

6.5 Method of payments and technical detail

For exporting, Letter of credit is a safe method of payments. Letter of Credit is buyer applying to issuing bank to open written guarantee document with certain amount of money and pay according to stated receipts in certain time limit (Zhang, 2014). It is the main and the most common payment method in international trade. As the payment for goods treats obtaining stated receipts as condition, Letter of credit avoids the risk of payment in advance. Thus, it could solve the conflict of payment and delivery product for importer and exporter to a large extent. #p#分页标题#e#

In addition, there is some technical detail about labeling should be emphasized. With the reference of national standard, some information (Figure 10) should be mentioned in the labeling of cosmetics product in China.

Figure 10: information for labeling

 

(Source: Yang, 2014)

7. Conclusion 总结
 

In conclusion, the paper discussed the international marketing strategy of The Body Shop. It compared several high potential markets and select China as the target market. Franchising is the best enter mode for China market and the paper give the market plan to the Body Shop. In finally, some detail information about cosmetic products exporting into China market was given.

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