Case Study of Espoir Cosmetics

11 November 2016

Compiled is a case analysis of the Espoir Cosmetics Company’ decision as to whether develop a Global Branding initiative or to carry on with the firms existent Domesticated marketing concept. This document breaks down the operational environment of the firm, and proceeds o avail some recommendations as the best courses of action that Espoir can take. The firm exits within the personal care industry, whose key success factors and industry structure is oriented as below.

The personal care industry is characteristic of a few dominant firms, which have often built their brand equity over a long period. The industry is a competitive oligopoly in nature. Success within this industry is dependent on a firm’s ability to adapt products to suit the local market and detect potential opportunities within those markets. ?Customer‘s Needs/ Preferences Incorporating a multi –domestic approach is one of the more effective strategies as it satisfies each markets unique need. A global campaign would be quite effective for larger market segments with similar needs. Packaging Practicality is of essence depending on which market segment Espoir targets. For example, the Asian market demanded bottles of nail polish that were smaller than the standard 12-milliliter. The size and packaging of products in this industry has influence on the success. ?Economies of scale With many more local and international players joining the industry, cost reduction is a favored competitive tool. The potential for economies of scale have increased as players seek to reduce the cost of production by producing in volumes ? Brand Equity

To succeed in the personal care industry the firm has to build a strong brand that will compete against other brands. Espoir aims to cultivate the image of the smart, independent risk taker woman. It is crucial to build the image of beauty, status and fashion in the mind of the consumer. A strong brand image captures the ever changing preferences of customers. ?Competitive forces New entrants into the industry are; fashion designers, celebrities who also offer competition from unfamiliar and unexpected quarters. The main competitors are Revlon.

Existing strategy is Multi-domestic, which is characterized by localized tailoring of production to suit the, culture, needs, and income of the local consumer. ?Innovation Continuous and incremental innovation is a must so as to keep up with the changing preferences and trends of users. This enables a firm to keep ahead of its competitors and create more value to the consumers. Espoir enjoys some of the following advantages; i. e. its sources of Competitive Advantage: (and can tap further more into its strengths to grow) -Technology-Sales and marketing Low costs,-Better product design -Better marketing systems-Economies of scale INDUSTRY SUCCESS FACTORS To be successful in the industry a firm requires: ?Learning curve experience – Time taken to introduce a product in new market takes a shorter period. ?Innovation –It is necessary to come up with new products as the market progresses. ?Brand recognition – The product should be well known. ?Sound marketing strategies –These should facilitate proper positioning and market segmentation. ?Consumer responsiveness. Knowledge of the consumer consumption patterns as well as created need. ?Continuous R & D –To ensure growth a company needs to research on new trends and products for its market. ?Efficiency in production –

This ensure there are no wastages. ?Availability – Customers should find it when they need it. ?Diversification – A company should have a portfolio of its beauty products and others for risk control. ?Leadership – Ensuring you have a larger market share compared to our competitors. CASE ISSUES The identified challenges of Espoir were; Changing consumer Trends – There are emerging a different class of customers in India who have a preference for foreign/ global brands. This is a result of the exposure to the western way of life through television and movies ? Different tastes and preferences were also prevalent in the different market segments. i. e. America, Asia, Europe. ?Recession in the US economy – This was affecting Espoir key market which was US. The global branding plan was to be highly dependent on a marketing budget which would financed by other offices in different countries. The US economy provided 80% of Espoir’s revenue. Competition – There increase in price based competition from local brands which was driving down revenues, while competitors such as Revlon, had already promoted movies, compounded with stiff competition from Asian brands in the Asian market. ?Leadership – The marketing function was not well coordinated across the countries and the role of the Head of Marketing was not well defined. The country mangers were supposed to be independent and accountable to the Head of marketing at the same time. Communication was a challenge within the organization, Resistance to change ?

Positioning – The brand was not well positioned as a global brand and brand management was not coordinated across all countries of operation. Different approach of promotions needed for different markets; Easter Europe needed beauty business promotions. ?Cultural issues different customers in the global market have different culture and this calls for a different strategy to handle their needs ? Distribution channels challenge – The distribution of the products through departmental stores was not effective because it was cutting off a large number of customers in India. Globalization was I itself becoming a challenge, as illustrated in India – with some customers identifying with more global brands. The quality of global marketing campaigns done is better than local campaigns and evident was increased complexity within the organization with emerging conflicts between the regional heads and headquarters.

He has to make a decision on whether to adapt a global marketing strategy or sustain its existing multi-domestic marketing approach, all the while his intention is noted to be geared towards enhancing / growing the company, with the best laid strategy in hand. He has to give the direction on how Espoir Cosmetics is to Brand itself in the face on newly emerging global trends.Threat of new entrants Industry penetration by new firms on dominant positions was difficult, as existing firms had built significant brand equity and recognition.

However, as the industry was not capital intensive, firms in the fashion industry were gaining inroads by creating their own brands of cosmetic products. There were also smaller players who competed in various regional markets, without having any global presence. For example, several Asian brands had launched their products in India. ?Bargaining Power of suppliers Raw materials are sourced from Africa, Asia and Latin America and Pacific Islands. The materials usually fetched low prices due to the availability of the products an indication that the suppliers did not yield much power.

Also the suppliers were small scale and dispersed. However, future trends show that the bargaining power of suppliers will improve given the high technology advancement available in the market. For example, a Bio Organic Concepts has been created to serve the unique raw material needs of the Personal Care Industry. This is accomplished by providing ingredients that are truly derived from natural sources and contain the functional properties required by the personal care industry. It’s also dedicated to searching the world for exceptional, innovative raw materials as well as to the development of new, creative materials.

Such materials can be made available on a proprietary basis; or, these materials can be created to fill a problem-solving niche for the research cosmetic chemist. ?Bargaining Power of buyers The market was largely driven by consumer tastes and preferences. By Espoir going global, they’re simply trying to match up to the customers needs. There was a struggle by firms to reduce buyers’ power by creating brand loyalty through brand and product extensions. Despite this, buyers yielded considerable power, as there were numerous products available and were slightly differentiated.

For example in India, two teenagers couldn’t find the color of nail polish they wanted and the shopkeeper had to promise to order it for them for them before they would go away. Natasha also admits to Mazur that they had to launch global colors in India because their customers were asking why they were not available. Low switching costs to other competing brands gave buyers more bargaining power. Possibility of backward integration by using homemade products would pose a weak threat to the industry, as consumers identified with a recognized brand globally. ?Availability of Substitutes

Consumers could choose to use natural products such as herbal treatments, mud, oils, Aloe Vera, homemade remedies such as avocado, egg white, honey, cinnamon or henna for nail polish, which were available in plenty. The power of substitutes was weakening as cosmetic firms were already beginning to create products using organic substance. ?Intensity of firm rivalry As global borders became less and less obvious, the firm rivalry intensified as the firms took the competition right to their rivals’ doorstep. Rivalry focused on brand building, product differentiation and distribution channels.

For example Espoir’s main rival, Revlon had boosted top-of-mind awareness by tying in with movies like “The 2002 Bond Film” and “Die Another Day” which challenged Ed Johnson to fight back as intensely. In the regional markets like India, shop counters were full of trays containing cosmetics that had both local and global brands. This intensified competition between the firms.

Customization of the products to local standard are done by the local office ? Inbound Logistics Done locally; country offices know what works best for them. ?Outbound Logistics This was effectively done at the country level due to good knowledge of the operating environment. Therefore each country’s office should be responsible for distribution of s its own products, in the way it sees fit. ?Marketing and Sales The head office should be heavily involved in the marketing of the premium brand. Part of the marketing campaign such as posters and backlist for airports was done at the head office.

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