Herborist is a subsidiary brand of Shanghai Jahwa United

Co., Ltd, Jahwa is the first domestic beauty and personal

care listed company, it is rarely in the domestic

industry that has strong ability to compete with

multinational companies. Jahwa’s development and brand

management capabilities have meet the international

standard. Moreover, it has the largest production

capabilities in domestic industry, and it is the earliest

enterprise in the industry that has obtained the ISO9000

international quality certification. Herborist launched

into the market with a brand new concept in 1998. It is

the first high-end personal cares brand that using

Chinese herbal medicine. Herborist truly believed that

“Natural and Balanced is the root of they beauty”.

Herborist personal care products are the results of the

combination of Chinese traditional herbal extract and

modern biotechnology. Using the traditional knowledge

from the Chinese herbal science that is a principle

differentiated from competitors. After the analysis, the

successful entry is benefit from both the brand position,

philosophy and images the company created and the

marketing strategy and distribution channel the company

choose. Through the comparison and careful consideration,

I suggest Herborist to expand the market in Mexico for

the further growth.

I have chosen the Mexico market through the precise

international market selection process. Indeed, the

market selection process is seen as the most crucial

determination that whether business success or failure

(Svend 2011). Currently, Herborist’s primary

international market is in Europe, such as France, Italy,

Germany, Spain and Netherland and so forth. The report

shows there was a 0.3% decrease in growth rate of the

Central European cosmetic retail market in 2012 compare

to the previous year, GDP grew slower and customers were

more sensitive to the price changes (FRONTCZAK 2013).

Moreover, there is a “potential slight decline over the

forecast period in France cosmetics market” (Euromoniter,

2013). Due to both political and economic recession

influence, the Europe cosmetic market has little prospect

of a great improvement. In terms of US, the growth rate

of cosmetics market has reached 3.4% (Skininc, 2013),

which is slower than 8% growth value in Mexico

(EuroMoniter, 2013). Thus, we may indicate that either

Europe or US cosmetics market is relatively saturation,

and Herborist has a steady and stabilized growth in these

two segmentations. In other words, it means there is no

such dramatically increased profit in the forecast

period. Therefore, I have decided to expand to a new

market for Herborist future development.

The international market selection can be divided into

two groups, one is the external environment and the other

one is internal firm characteristics (Svend 2011).

Firstly, I will explain the reason for choosing Mexico as

the right market to develop in terms of the environment.

The environment could be analyzed from two aspects: the

micro segmentation and macro segmentation. Based on the

macro segmentation consideration, elements such as,

economy, industry, political factors and geographic

location should be investigated. Mexico is the second

largest country in the South America, and it is located

between Belize and the United States (CIA, 2014), since

Herborist has stable market in the United State, which is

convenience to establish sales network between two

countries. Besides, Mexico used to be a colony of Spain,

in general two countries must be have something in common

in the post colonial history. Herborist success

experience in Spain will give huge help in analyzing the

Mexico market and making competitive strategy. The

research shows the GDP growth rate of Mexico in 2012 was

3.9%, which was higher than either 2.2% of the U.S. or

1.8% of Canada (USAEconomy, 2013). Particularly, the

Mexico skin care industry was increased by 8% in 2012

(EuroMoniter, 2013). Moreover, it also shows there is a

rapid increasing trend of skin care purchasing power in

Mexico, the economic recovery encouraged customers to

increase the consumption, especially for the middle and

low income customers (SkinInc, 2013). And the sales of

premium brand with natural positioning grow by double

digit in current value terms (EuroMoniter, 2013). Not

only the industry but also the beauty and personal care

market has broad prospects for development. In terms of

the political factors, Mexico has the “Free Trade

Agreement” with China, the imports and exports are

encouraged between two countries (USAEconomy, 2013).

Furthermore, the deregulation of the “medical” catalogue

products makes the registration process much more simple

and easy (EuroMoniter, 2013), which may indicate the

entry barrier is relatively low. The political factors

are normally affect business a lot, and the policy

support is one of the most important reasons for choosing

Mexico market. With respect of micro segmentation, Mexico

has estimated population of 120,286,655 by the July 2014

and 40.4% of the population is aged between 25 to 54

(CIA, 2014), the dominant purchasing group is matched

with the target consumer group of Herborist. In addition,

92.7% people speak Spanish, which is familiar to

Herborist as their previous development experience in

Spain.

Furthermore, the internal firm characteristics will be

evaluated through the SWOT matrix. The opportunity and

treat analyzes the external factors, and the

opportunities in terms of economic, political and

geographic factors have been discussed on the above.

Herborist meets relatively less treats in the Mexico

cosmetics market. Firstly, the possibly unique concept

and positioning of Herborist clears out the treats from

majority of beauty brands and makes Herborist at the

outstanding position. The possible competitors Biotherm,

which is a luxury brand under L'Oréal Group, it has

similar price level to Herborist, however, Biotherm

products are the results of biotechnology and water

essence, it has the concept of “Beauty From The Deep” and

it represents “pure” brand image, which is unlike the

“Natural And Balanced” of Herborist (Biotherm,2013).

Another big international cosmetics group is Avon, it has

a line of products with clean scents inspired by nature

(Avon,2013). Avon Natural has similar concept but

different products lines and target customers compare to

Herborist. Avon Natural focuses on the body care

products. In contrast, Herborist has more comprehensive

natural products line that 7 lines from facial, body to

travel. Offering products to customers who seek superior

and better quality. CANIPEC reports that “there are 64

personal companies in the Mexico market by 2012”

(Cristina, 2013), which indicate the market is not yet

mature, and has much less competition than in America and

France that both of them are big cosmetics country, the

Procter & Gamble Co and L’Oréal are two USA companies

that leading in the cosmetic market and especially France

is famous for the Cosmeceutical, Herborist is running

business successful even under this high level of

competition. One of treats need to be aware is how to

convince the Chinese herbal and medicine concept to

Mexico customers, however, making appropriate strategies

through the previous international expansion experiences

may not too hard to conquer the problem. As mentioned

before, the rapid growth in Mexico cosmetics market may

attract more potential competitors into the market, the

fierce competition is one of the most obvious weakness

that Herborist has faced. Though Herborist has opened

hundreds of stores all over the world, the sophisticated

operation systems, the professional R&D team, the

efficient production and tremendous capital capabilities,

more importantly, the benefit of the economic of scale

(Case). All of these strengths are not easy to achieve

for the new entrants especially for the middle to small

firms. “Generally, the entry market a company chooses is

either to strengthen an existing market or to develop a

new market but normally related” (Madhok, 1997).

Therefore, both external and internal conditions have

proven Mexico looks like a possible related market to

develop.

After decided where to go, how to entre into the market

is another crucial issue that need to be explicated.

Mostly, the entry modes are exporting, licensing, joint

venture and sole venture (Sanjeev, 1992). The entry mode

selection is also divided into three catalogues:

external, internal and mix (Figure 1). And the selection

is generally based on the expected profit contribution

(Adam, 2001). Through the analysis illustrated above,

Herborit’s internal sufficient resources and

capabilities, the international experience, the risk

adverse nature concluded from previous failure operating

experience in Hong Kong (Case), and also external factors

of the related market we choose. Taking all factors into

consideration, direct export is the optimal strategy at

the moment. Direct export is the way that helps Herborist

step into the international market, such as France,

America and so forth (Case). Selling products directly to

the local agent or distributors in the host country

brings more flexibility and broader development prospect.

Firstly, Mexico is the neighbor of America, shipping

products to Mexico and then use the superiority under the

Free Trade Agreement to export to America will reduce the

transaction cost drastically. Secondly, although the

control power will be shared, a good distributor will

reduce the risk and uncertainty that Herborist may not be

able to eliminate efficiently in an unfamiliar

environment at the beginning. Therefore, it is an

effective and secure way to entre into the Mexico market.

Then, the distributor determines whether success or

failure during the introduction and growth period of the

product life cycle. According to the history of

Herorist’s international expansion, Sephora is the

priority choice all the time. Sephora opens nearly 1300

stores over 27 countries, it is one of the biggest

beauty-retailers in the market (Sephora). As the previous

corporation experience, they have known each other quite

well to a certain extent. Sephora could support resources

and raise the brand awareness. More importantly, to gain

the trust of customers is not easy to achieve without

this international-known retailer due to the unacquainted

Chinese “YIN YANG” medicine philosophy. Their

collaboration has been nearly 10 years since the first

attempt to join the Sephora France in 2005 (Case). The

long-term relationship may raise Herborist’s negotiation

power and reflect in higher profits. Besides, the

official website should be established for building the

premium brand image. When sales is stable increased

Herborist needs open a flagship store, it offers

opportunities to introduce products to customers directly

and collect data to build long-term relationship.

Herborist will has the right of price making and product

choosing that implicate higher profit margin.

According to the Ansoff Matrix, the growth stategy is to

entre into a new market-Mexico. Because spending on

cosmetics are strong affected by region and state

(Sabine, 1997). In order to meet local customers’

preference, the products need to update and develop

higher moisturizing efficiency version as the dry weather

in Mexico, and the packaging is correspondence with the

Spanish version: Herborist logo with both English and

Spanish product name. As anti-aging is one of the most

desirable needs in Mexico market, and also the niche

catalogue of Men’s grooming is growing rapidly each year

(EuroMonitor, 2013). Herborist has to keep the pace with

the market and find customers needs in advance. Thus,

product development strategy should be taken, doing

research and develop new product line, current main

moisturized effect cannot be survive in long-term

otherwise. When the brand image and reputation is

established, then the diversification growth strategy-

opening Flagship store will consolidate the market

position and make further progress. The store should open

at High-end beauty concentrated area. Homogeneous

products concentrated on an area will create a good

shopping atmosphere and make opportunity to attract

potential customers. Moreover, setting price as same as

the distributors to prevent potential conflicts, it also

gives higher profit margins without profit sharing and

the dominating profits expect to be generated by Spa

services in Flagship store. For encouraging customers to

buy product in store, experience trunk is a good way to

show products, introduce concept and let consumers to

experience facial Spa and giving them free samples, it

will raise consumers’ curiosity and lead brand

recognition. Another promotion is corporate with local

travel agent, it is a win-win strategy, and customers can

win the travel opportunities through the regular events

we hold. Adding value to customers will make Herborist be

more attractive.

MNC’s operation strategy of internationalization

influenced by both home and host country, and the human

resources practices are changed by the knowledge of

management and cross-culture effect (Pramila, 2001), the

country’s culture should be evaluated and managed before

entering the market. The knowledge such as data about the

number of employees of the corporation, the market size

or the customers’ preference, retaining and developing

unique knowledge could offer stronger competitive

advantages (Pramila, 2001). Hofstede’s model of national

culture examined the Mexico market in 5 dimensions, which

guide to make Competitive and collaborative strategy and

achieve global scale efficiency for Herborist’s Mexico

development. The figure 2 concluded that Mexico has high

level of power distance and uncertainty avoidance, and

with the feature of collectivism, masculinity and long-

term orientation. The only big difference compare to the

home country is Mexico is more risk averse, which

indicates it tends to choose known people in the

selection process and the anxiety may be produced under

the uncertainty working situations (Hofstede, 1994).

Sending experienced expatriates to assist operation and

help local managers to adapt the culture differences

smoothly. The appropriate allocation of knowledge

management and the continuously updated capabilities and

strategy will show the bright prospects to Herborist.