2. Company Profile
• Incorporated in Texas in 1963 by Mary Kay Ash
• A direct selling cosmetics company
• Offering Skin care system as opposed to individual product
• Products: Skin care, Personal care, Cosmetics
• 2,75,000 independent salespeople worldwide known as “Beauty
Consultants”
• Unlimited opportunities for women in business with distinctive
compensation & recognition plan
3. Background
• In 1992,MKC’s international sales represented 11% of the $1
billion retail sales
• In contrast, Avon products derived over 55% of its $ 3.6 billion
retail sales
• Formulation of critical success factors for MKC internationally
• Evaluation of two market entry opportunities:
Japan- mature but lucrative market
China- rapidly growing but relatively unknown market
4. Cosmetics and Direct Selling Industries
• MKC competed in both cosmetics and direct selling industries
• Top four companies in US cosmetics market in 1992 were
Procter & Gamble
Estee Lauder
Avon
Revlon
• L’Oreal, subsidiary of Nestle dominated the world market with
$5.9 billion in retail sales
• Two approaches to direct selling:
Repetitive person-to-person method
Party plan method
5. International Operations
• Australia and Argentina not chosen for strategic reasons
• Challenges MKC faced internationally:
Canada Market research indicated that MKC was perceived as
outdated
Australia- In 1992, MKC had low brand image
Mexico- Brand awareness was high, brand image was positive
Taiwan- Rapid expansion had generated $3.3 million in sales
6. Contd.
• Factors inhibiting growth include:
Direct application of U.S. marketing strategy without
modification in local markets
Low consumer brand awareness
Insufficient marketing resources
Cultural barriers impeded use of party plan
7. MKC in ASIA
• Taiwanese subsidiary became profitable and promised good future
sales growth
• Asia had evolved as one of the fastest growing and dynamic regions
of the world
• GDP was expected to reach 32% by the year 2000 as compared to
24% in 1988
• MKC’s long term market position depended on competitive
advantages to develop a market entry strategy
8. Market Environment of China & Japan
• In 1992 Japan was the largest direct selling market in
the world with an estimated $19.2 billion retail sales
• 1,120,000 women engaged in direct selling in 1992
• 1993 might prove to be an opportune time for MKC to
launch in Japan
• Economic recession created more demand for part time
employment
9. Market Environment of China & Japan
• China covered 3.7 million square miles and was divided into
22 provinces, 3 municipalities and 5 autonomous regions
• The Chinese population was predicted to grow up from 1.1
billion in the year 1992 to 1.5 billion in the year 2020
• Out of 310 million of urban population 156 million were
female
• “Open Door Policy’’ indicated a series of wide ranging
economic reforms
10. Consumers
• In 1992 over 50% of 51.8 million Japanese women aged over
15 years were employed (on a part time basis)
• Annual cosmetic expenditure in Japan was above $ 260 per
household in 1992
• In Japan 40% of cosmetics were sold to women aged between
20 to 30 years
• Consumer habits in China varied by region:
Northerners were more concerned with clothing and
appearance
Southerners preferred household products and customer
electronics
• Brand name were highly appreciated by Chinese consumers
who would pay up to four times to avail a foreign brand than a
local brand
• 87% of Chinese women were employed
11. Products
• Skin care products accounted for 40% of all cosmetics sales in
1992
• Products tailored to the Japanese market included Whitening
products and wet dry foundation cakes.
• Kao and Shiseido dominated Japan’s skin care market.
• Foreign manufacturers were successful in selling make-up
products.
• Products in China were mainly segmented into 2 parts:
Skin Care Category
Make Up Category
12. Competitors
• Top five domestic cosmetics manufacturers in Japan in the 1992:
Shiseido, Kao, Kanebo, Pola, Kobaysashi Kose
• Foreign competitors in China and Japan in 1992 were:
Avon
Johnson & Johnson
Kao
Unilever
L’Oreal
Procter & Gamble
Revlon
Shiseido
13. Distribution
• Distribution in Japan:
Franchisee System
General Distributorship
Door-to-Door Sales
• Distribution in China:
• 280000 outlets accounted for 40% of all consumer product retail
sales.
• Cosmetics display in stores tendered to be confusing.
• In department stores imported brands were sold in separate cases.
• Shelf space were taken for rent in departmental stores.
14. Advertising
• In 1992 advertising expenditure was less than $1 but was
expected to grow.
• Newspapers were rarely used for print advertising.
• Regional TV channels were more popular than single national
TV channel.
• Advertisement on national channel was liable to censorship.
• For a foreign importer the cost of 30 second prime
advertisement on Chinese national television was $4000.
15. Marketing Mix of Mary Kay Cosmetics for Asia
Product:
• MKC emphasized on “teaching skin care and glamour”.
• MKC wanted to enter market with both skin care and make up
product.
• Developing a product line in Japan would require three times
as much resources as compared to developing a line for
Chinese market.
• MKC believed that there current product line was already
global in appeal.
16. Positioning:
• MKC’s product positioning muddled up between glamour
provider and skin treatment.
• Confused about the basis of differentiation and which age
group to target.
• Communication strategy:
Level of emphasis to place in MKC’s communication
17. Pricing:
• Product sold in Japan would be twice as high as for
corresponding products sold in China.
• Start-up cost in China would be lower.
• Chinese market entry was expected to break even within 24
months as opposed to 3-5 years for Japan.
• MKC product should be priced in relation to both domestic
and foreign competitors.
18. Promotion:
• Consultant recruitment programs have to be developed.
• Print advertising, public relations and service workshop have
to be developed.
• In Japan MKC thought of establishing a toll-free
number, developing travelling showroom in suburbs, etc.
• MKC’s advertising expense in Japan would cost around $3
million/year, whereas in China it might require $100,000/year
for the first three years.
