Oriflame Cosmetics Sa Case Study

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- SWOT Analysis

Strengths:

- Brand equity: With its natural and Swedish roots, ethical and progressive position is in accordance with brand awareness in younger consumers globally as well as in the emerging markets.

- Easy to access: In direct selling business Oriflame created an easy system with low entrance costs for consultants and affordable credit and stock requirements which facilitate recruitment in emerging countries.

Weaknesses:

- Price position: Because of the concentrated market conditions in BPC industry, Oriflame’s prices are higher than direct competitors.

- Geographical limitations: Oriflame does not have presence in some of the highest populated countries such as China, India, Brazil.

Opportunities:

- Although the company’s presence is not visible in China and Brazil, effectiveness of company in some regional markets is growing, notably in Indonesia and Mexico.

Threats:

- Slower growth trend in direct sales market: Online shopping opportunities weakening the impact of direct selling. Although Oriflame uses online channels effectively, this will have an impact on future growth.

- Lack of scale: Compared to large companies in BPC market, the sales volume of Oriflame is smaller. This needs to be increased by expanding new markets.

- Goals and Objectives for Marketing Strategy

- Qualitative Goals

Oriflame’s current long term marketing objective is to increase shareholder value through the efficient use of capital, growth in operating profit by approximately 15 percent and sales growth by 10 percent per year (Oriflame, 2014b). In order to achieve this, our marketing strategy targets gaining share in Chinese market which amounts 28 billion USD by the end of 2014. Chinese market shows a strong growth trend during the past decade with average of 15 percent increase in sales of beauty and cosmetics products (Fung, 2015: 5).

The major growth areas for Oriflame will focus on skin care, hair care, colour cosmetics and make up sets/kits which showed strong growth trend among other product groups in Chinese BPC market (Figure 3).

Figure 3: Sales and Year-to-Year Growth of BPC Market in China

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Source: Fung (2015: 9).

- Quantitative Goals

Sales revenue of Oriflame generated from global operations accounted approximately at 1.4 billion USD by the end of 2014 where the size of global BPC market is 465 billion USD (Oriflame, 2015a). Our new target segmentation strategy assumes to gain 0.5 percent stable market growth each year in order achieve Oriflame’s marketing objective that stands for 10 percent growth in sales per year for the next three years. This equals to 140 million in terms of USD and it also covers Oriflame’s growth objectives that set as 10 percent in 2016 and respectively for the following three years. Figure (4) illustrates the growth objectives sourced from the Chinese target market penetration.

Figure 4: Revenue Growth Plan Between 2016 and 2018.

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- Justification of Goals and Objectives

Evaluation of a company’s market situation and re-adjusting the relevant marketing strategies often entails considering the marketing results of the company on both macro and micro level. According to Czinkota & Ronkainen (2007: 249) these are generally competitive activities, marketing mix, market segmentation, distribution systems, local specifications and standards and local regulations & laws on the micro level. On the other hand, macro level evaluation tends to involve with government trade policies, tariff and nontariff policies.

In order to remain competitive and regain share in global BPC market Oriflame needs to focus on new, more dynamic and potential BPC markets. Therefore the company can create competitive power to compete with its rivals on the basis of cost advantages gained from larger scale economies.

The lack of Oriflame’s visibility in the world’s highest growing, dynamic and potential BPC markets China and absence in Brazil results with a crucial barrier to company’s global competitiveness and future growth opportunities. These markets are projected to show strongest demand in the next five years is the key threat to the company’s strategic plans. Although many reports illustrate strong growth in Brazilian or Chinese markets, Oriflame holds no visible market share in China (Oriflame, 2015b).

- Segmentation, Targeting and Positioning Strategies

- Description of Customer Group

Despite the rapid growth of BPC products’ consumption in China during the past ten years, consumption per capita for BPC products only amounted at 24 USD in 2014, comparatively lower than most of the developed countries such as Japan, South Korea, France and US (Fung, 2015: 6). As a result of low cosmetics consumption per capita and weak penetration China’s BPC market is estimated to have plenty of room for growth. Oriflame’s target customers in this new market are the key growth driver and consumer group for BPC market in China:

Young people at 20s and 30s who were born under “the one-child regime” that started to be implemented after 1980.

- Benefits Sought by this Customer Group

Customers in Asian markets such as China show a strong demand for direct sales but in the developing countries direct sales losing strength as traditional retail stores increase competition through larger and convenient stores by spending aggressively on marketing. Additionally, cultural differences in China make it difficult for foreign firms to understand the local preferences of customers to provide feedback to product development efforts (Social Samosa, 2014).

Major advantages of focusing on young generation in Chinese market involve higher revenues and growth potential in such a huge market and also it has potential effects on global market share. On the other hand, concentration on the Chinese market requires high amount of capital resources and allocation of a considerable

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