Marketing Case Study (Nestle Ice Cream In Cuba)

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Each course participant will hand in one independently written case analysis report.  Each write-up should be restricted to 6 pages- double-spaced, normal 12 font  (includes the executive summary but excludes tables, exhibits, etc.). . Make sure you address all the assigned case questions (already posted as a Bb Learn announcement and sent out as an email) as part of your analysis and include an executive summary (1 page) at the beginning of the case analysis that briefly summarizes the case’s main issues and the marketing decisions you have made and the rationale behind those decisions. All individual case write-ups are due to be submitted by 6 pm (EST), Thursday, July 21, in the Bb Learn Assignments Dropbox. Late submissions will not be accepted.

 

Case discussion questions:

1. How would you characterize the operating environment for foreign firms in Cuba?

2. Has Nestle’s ice cream business in Cuba been a success? Use available data from the case to estimate Nestle-Coralac profits to support your answer?

3. How can Nestle position itself for future success, given current market position and potential changes on the horizon?

4. What are the prospects for future investment and economic growth in Cuba?

  • ©2015 by the Kellogg School of Management at Northwestern University. This case was prepared by Kyle Bell ’15 under the supervision of Professor Russell Walker. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United States or Canada) or e-mail [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Kellogg Case Publishing.

    RUSSELL WALKER AND KYLE BELL ’15 KEL919

    Nestlé Ice Cream in Cuba

    Elsewhere in ice cream, we inaugurated a new factory in Cuba in April.

    With those thirteen words buried deep in the company’s 2003 annual report, Nestlé announced to the global investor community that it was officially open for business in Cuba. The announcement had been a long time coming. In 1996, as the Castro regime began welcoming limited international investment back to the island, Nestlé signed a letter of intent with the Cuban government to build an ice cream factory in Havana’s El Cotorro neighborhood. The plant, a joint venture between the Cuban government and Nestlé, was to produce high-quality helados for tourists and affluent Cubans.1

    Nearly twenty years after this initial decision to enter the Cuban market, it was not clear how successful the investment had been and what the future might hold for Nestlé on the island. The 2014 announcement of intentions to normalize diplomatic relations between Washington and Havana made answering these questions increasingly urgent, as U.S. companies began to eye the Cuban market and existing foreign investors in Cuba prepared for new competitive threats and expanded market opportunities.

    Stakeholders inside and outside Nestlé needed to evaluate the firm’s investment in Cuba as well as its strategy for future growth.

    Nestlé

    Tracing its roots to the establishment of the Anglo-Swiss Condensed Milk Company in 1866, Nestlé grew to become one of the world’s leading consumer products companies. By 2014, the company had grown to over 300,000 employees and reached approximately $100 billion in annual sales; its market capitalization eclipsed $250 billion in early 2015 and the company reported a return on equity of 23 percent globally.2 Many analysts labeled the Swiss firm the world’s largest food and beverage company (see Exhibit 1).3

     

    1 “Nestlé, Coralsa Make Ice Cream Together,” CubaNews, June 1, 2003. 2 Nestlé, “Key Figures,” http://www.nestle.com/aboutus/keyfigures (accessed May 1, 2015); “Nestlé SA,” Financial Times, http://markets.ft.com/ research/Markets/Tearsheets/Financials?s=NESN:VTX (accessed September 14, 2015); “Nestlé: Food Giant with Compelling Dividend,” Seeking Alpha, http://seekingalpha.com/article/2469755-nestle-swiss-food-giant-with-compelling- dividend (accessed September 14, 2015). 3 For example, “World’s Most Admired Companies 2015,” Fortune, http://fortune.com/worlds-most-admired-companies/nestle-33 (accessed May 27, 2015); Alexander Hess, “Companies that Control the World’s Food,” USA Today, August 16, 2014.

    For the exclusive use of Y. Hong, 2016.

    This document is authorized for use only by Yinan Hong in Global Marketing Summer 2016 taught by Lawrence K Duke, Drexel University from June 2016 to December 2016.

     

     

    NESTLÉ ICE CREAM IN CUBA KEL919

    2 KELLOGG SCHOOL OF MANAGEMENT

    As Nestlé grew, the firm’s product portfolio dramatically expanded. For nearly seventy years, the company specialized in condensed milk and infant cereal. It was not until the 1930s that Nestlé launched successful businesses in powdered beverages and instant coffee (Milo in 1934 and Nescafé in 1938).4 Rapid innovation and numerous acquisitions accelerated the growth of Nestlé’s portfolio over the ensuing decades. By 2015, the company sold over 3,000 brands in thirteen distinct product categories ranging from bottled water to pet care (see Exhibit 2).

    In addition to product diversification, international expansion helped fuel Nestlé’s corporate growth in the twentieth century. As of early 2015, Nestlé operated in 197 countries, giving the firm global scale and extensive experience navigating new markets. The firm divided the world into three main operating regions: Europe, Americas, and Asia/Oceania/Africa. Nestlé Americas accounted for 43 percent of corporate sales and employed 33 percent of Nestlé workers; the region also earned a trade operating profit margin of 18.8 percent in 2014, compared with a corporate trade operating profit of 15.5 percent over the same period (see Exhibit 3).5 While a significant portion of Nestlé’s sales came from developed economies such as the United States and the EU, the company also built strong businesses in China, Mexico, Brazil, and the Philippines (see Exhibit 4) and was a pioneer in formerly closed markets such as Myanmar.6

    Nestlé’s stated corporate strategy focused on transforming the company into a global leader in nutrition, health, and wellness. The firm planned to use its brand portfolio, research and development capabilities, global reach, and talent to deliver healthy results for both consumers and investors. In particular, Nestlé’s leadership identified four potential growth areas for the firm: nutrition, emerging markets, out-of-home consumption, and “premiumization”7 (see Exhibit 5). The firm planned to apply this roadmap to all business units and markets.8

    Despite this nutritional focus, ice cream was an important part of the company portfolio. Nestlé sold ice cream and ice cream–based products under the Nestlé brand and other well-known brands such as Häagen-Dazs, Edy’s, Dreyer’s, and Skinny Cow. “Milk products and ice cream” was the firm’s second-highest selling category after powdered beverages, accounting for 18 percent of global revenue and 28 percent of regional sales in the Americas (see Exhibit 6). Ice cream products alone made up 4.5 percent of 2014 corporate sales and earned a trade operating profit of 16.4 percent that year.9

    Surprisingly, Nestlé ice cream may have succeeded in part because of the firm’s new health and wellness goals. In 2010 the company began selling a new line of smaller-scale ice cream cups under the Dreyer’s, Häagen-Dazs, and Skinny Cow brands in the United States as a way of translating key elements of its strategic roadmap to the U.S. ice cream business. The cups provided portion control (wellness), were portable (on-the-go consumption), and allowed consumers to buy a range of interesting flavors (customization, premiumization). Following a concerted retailing campaign, the new cup line became a successful part of Nestlé’s U.S. ice

     

    4 Nestlé, “About Us: Key Dates,” http://www.nestle.com/aboutus/keydates (accessed May 27, 2015). 5 Nestlé 2014 Annual Report. 6 Peter Vanham, “Nestlé: Nescafé for Myanmar,” beyondbrics (blog), Financial Times, October 5, 2012. 7 Nestlé defines “premiumization” as a strategy for “enhancing consumers’ lives, whilst creating additional value per consumption moment: many consumers are not looking to eat and drink more; they are looking to eat and drink better.” Nestlé, “The Nestlé Roadmap to Good Food, Good Life,” http://www.nestle.com/asset-library/Documents/About_Us/Nestle_Roadmap.pdf (accessed September 25, 2015). 8 Nestlé, “About Us: Strategy,” http://www.nestle.com/aboutus/strategy (accessed June 1, 2015). 9 Ibid.

    For the exclusive use of Y. Hong, 2016.

    This document is authorized for use only by Yinan Hong in Global Marketing Summer 2016 taught by Lawrence K Duke, Drexel University from June 2016 to December 2016.

     

     

    KEL919 NESTLÉ ICE CREAM IN CUBA

    KELLOGG SCHOOL OF MANAGEMENT 3

    cream business, increasing cup category sales by 35 percent in the first six months after the launch.10

    Foreign Investment in Cuba

    In the nearly six decades since the Cuban Revolution, the Cuban government’s positions on foreign investment—and economic policy in general—had shifted dramatically, bringing important changes for multinational companies operating in or evaluating opportunities on the island (see Exhibit 7).11

    The early years of the regime were characterized by Soviet-style central planning and expropriations of foreign assets. Foreign investment was largely discouraged, as the regime sought to assert national economic sovereignty. Nevertheless, in the 1990s, after the fall of the Soviet Union, Cuba suffered an economic crisis and the Castro regime was forced to change the country’s policies to prevent economic collapse and maintain power. The government liberalized regulations on foreign investment and Fidel Castro made personal appeals to attract multinational companies. The change was short-lived. As the economy began to recover by the early 2000s, the Castro regime reversed its position towards foreign investment, canceled joint venture contracts, allowed input prices to spike, and halted other market-oriented policies. Between 2002 and 2008 the number of foreign joint ventures in Cuba fell by half (see Exhibit 8).12 After taking power in 2008, Raúl Castro passed a number of economic reforms, including a new foreign investment law that reinforced—and perhaps even advanced—policies of the 1990s.

    Under Cuban law, foreign investment could take three forms: joint ventures, international economic associations, and wholly owned foreign ventures. Joint ventures between the government and a foreign multinational were the most common. All business ventures were required to be approved by the Cuban government; approval was granted for a fixed time period (typically ten or fifteen years) after which the government could, and often did, change the investment terms. The limited approval period and threat of renegotiation had important implications for project valuations and financing, lowering the potential net present value of investment opportunities, incentivizing higher levels of debt, and discouraging investment towards the end of the approval period.13

 
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New Coke Case Study

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Let’s assume that among the marketing strategy solutions for Coca-Cola in 1985 was the strong consideration of introducing a new cola product (in some form) in the marketplace. As we know, Coca-Cola did in fact reformulate their flagship Coke product and relaunch it in 1985 – but was that the right decision? Now it’s your turn to determine what would be the best product mix for the Coke brand, given the competitive marketing environment in the soft drink market of 1985.

Recap: Why Coca-Cola Introduced New Coke in 1985

  • Coke was being outsold by Pepsi in segments where consumers had a choice of the brands, such as supermarkets,
  • Overall Coke’s market share was steadily declining (down from 24.3% in 1980 to 21.7% in 1984) ,
  • Coke had increased their advertising and promotional spending from $50m to $200m in recent years. Their $200m promotional budget was 1/3 more than Pepsi’s spend of $150m), but failing to stop Pepsi’s gains in market share,
  • Coke was having to resort to conducting aggressive sales promotions and discounting in stores (to reduce the impact of the Pepsi Challenge advertising),
  • Coke’s own market research was indicating that “taste” was the main reason for their erosion of market share,
  • Pepsi’s “new generation” advertising campaign was designed to position Coke as old and tired and boring,
  • Pepsi now had Michael Jackson at the height of his career,
  • Coke’s R&D area has developed a new cola formula that was preferred over both Pepsi and existing Coke in blind taste tests,
  • Plus the new Coke formula was cheaper to manufacture, which would add up to a $50m pa increase to the bottom line.

The New Coke Strategy

Coca-Cola’s management believed that the introduction of New Coke would completely destroy Pepsi’s competitive strategy. In fact, Pepsi’s own management initially believed that this was a masterstroke by Coke.

Firstly, the New Coke product was to be positioned as new, exciting, modern and young; directly confronting the “Pepsi Generation” campaign and stealing Pepsi’s market positioning.

Secondly, the New Coke product tasted better which would stop the Pepsi Challenge taste-test advertising. In fact, Coke had plans to run their own taste-tests and run their own TV commercials in order to win back lost customers.

Therefore, you can see why Coke’s management was so confident, as they believed that they had boxed Pepsi into a corner and destroyed their competitive strategy, as highlighted in the following perceptual map.

Alternative Product Options to Consider

You need to consider whether if and how Coca-Cola should launch a new product or whether there are better non-product solutions to their competitive battle with Pepsi.

Here are the different approaches to a new product to consider.

A. Develop a NEW product

  1. Launch the new product as a replacement for Coke (as they did first) or
  2. Launch the new product under Coke brand in addition to Coke (as they did later) or
  3. Launch the new product under a new brand name (as a multi-brand strategy) or
  4. Slowly change the Coke formula over time to become New Coke (without consumers noticing) or
  5. Undertake market testing of the new product first (before a full launch)

B. Do NOT develop a new product

  1. Increase promotional activity and spend
  2. Increase in-store promotions and discounting
  3. Increase retailer penetration
  4. Reposition the Coke brand
  5. Attempt to reposition Pepsi
  6. Try something else (your own ideas)

C. Do nothing different

Questions:

  1.  From the above list, what would be the best option for Coke to pursue in 1985?
  2. If you decided to introduce some form of new product, how would you position the new product relative to both Pepsi and any remaining Coke products?
  3. If you decided to reposition the Coke brand outline your positioning goals. If you decided NOT to modify the product mix, outline why this approach would be successful given that Coke has already implemented many of these marketing tactics.
  4. Outline why your proposed competitive strategy will be successful in this aggressive period of the Cola Wars.
  5. In what ways, do you think, that Pepsi may respond to your proposed strategy?CASE LINK: https://www.youtube.com/watch?v=jL_oKq4ddCs

     

    Let’s assume that among the marketing strategy solutions for Coca-Cola in 1985 was the strong consideration of introducing a new cola product (in some form) in the marketplace. As we know, Coca-Cola did in fact reformulate their flagship Coke product and relaunch it in 1985 – but was that the right decision? Now it’s your turn to determine what would be the best product mix for the Coke brand, given the competitive marketing environment in the soft drink market of 1985.

     

    Recap: Why Coca-Cola Introduced New Coke in 1985

    · Coke was being outsold by Pepsi in segments where consumers had a choice of the brands, such as supermarkets,

    · Overall Coke’s market share was steadily declining (down from 24.3% in 1980 to 21.7% in 1984) ,

    · Coke had increased their advertising and promotional spending from $50m to $200m in recent years. Their $200m promotional budget was 1/3 more than Pepsi’s spend of $150m), but failing to stop Pepsi’s gains in market share,

    · Coke was having to resort to conducting aggressive sales promotions and discounting in stores (to reduce the impact of the Pepsi Challenge advertising),

    · Coke’s own market research was indicating that “taste” was the main reason for their erosion of market share,

    · Pepsi’s “new generation” advertising campaign was designed to position Coke as old and tired and boring,

    · Pepsi now had Michael Jackson at the height of his career,

    · Coke’s R&D area has developed a new cola formula that was preferred over both Pepsi and existing Coke in blind taste tests,

    · Plus the new Coke formula was cheaper to manufacture, which would add up to a $50m pa increase to the bottom line.

    The New Coke Strategy

    Coca-Cola’s management believed that the introduction of New Coke would completely destroy Pepsi’s competitive strategy. In fact, Pepsi’s own management initially believed that this was a masterstroke by Coke.

    Firstly, the New Coke product was to be positioned as new, exciting, modern and young; directly confronting the “Pepsi Generation” campaign and stealing Pepsi’s market positioning.

    Secondly, the New Coke product tasted better which would stop the Pepsi Challenge taste-test advertising. In fact, Coke had plans to run their own taste-tests and run their own TV commercials in order to win back lost customers.

    Therefore, you can see why Coke’s management was so confident, as they believed that they had boxed Pepsi into a corner and destroyed their competitive strategy, as highlighted in the following perceptual map.

     

    Alternative Product Options to Consider

    You need to consider whether if and how Coca-Cola should launch a new product or whether there are better non-product solutions to their competitive battle with Pepsi.

    Here are the different approaches to a new product to consider.

    A. Develop a NEW product

    1. Launch the new product as a replacement for Coke (as they did first) or

    2. Launch the new product under Coke brand in addition to Coke (as they did later) or

    3. Launch the new product under a new brand name (as a multi-brand strategy) or

    4. Slowly change the Coke formula over time to become New Coke (without consumers noticing) or

    5. Undertake market testing of the new product first (before a full launch)

    B. Do NOT develop a new product

    1. Increase promotional activity and spend

    2. Increase in-store promotions and discounting

    3. Increase retailer penetration

    4. Reposition the Coke brand

    5. Attempt to reposition Pepsi

    6. Try something else (your own ideas)

    C. Do nothing different

     

     

    Questions:

    1.  From the above list, what would be the best option for Coke to pursue in 1985?

    2. If you decided to introduce some form of new product, how would you position the new product relative to both Pepsi and any remaining Coke products?

    3. If you decided to reposition the Coke brand outline your positioning goals. If you decided NOT to modify the product mix, outline why this approach would be successful given that Coke has already implemented many of these marketing tactics.

    4. Outline why your proposed competitive strategy will be successful in this aggressive period of the Cola Wars.

    5. In what ways, do you think, that Pepsi may respond to your proposed strategy?

 
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Marketing Case

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MKTG 2101: NewShoes INITIAL MARKETING STRATEGY

MKTG 2101 Sec (001 or 002):

Team #:

Leader’s Name:

DUE: FRIDAY, OCTOBER 12 @ 11:59 PM

Submit Digitally (on Canvas) to: NewShoes / NewShoes INITIAL MARKETING STRATEGY

1 Submission per NewShoes TEAM

The objective of this Assignment is to develop an overall marketing strategy for your NewShoes TEAM that will be applied as you consider other elements of your marketing plan.

As background, read the “NewShoes CASE” which is posted on Canvas / NewShoes. The CASE provides information about the firm’s current strategy and operations. Recall that YOUR marketing team was brought in specifically to turn this struggling company around and to begin to operate profitability … so rethinking all aspects of the existing strategy is appropriate.

YOUR team will prepare a 1-1½ page document addressing the following:

(1) CREATE an effective, market-oriented MISSION STATEMENT for YOUR team. (Your MISSION STATEMENT should comply with the guidelines provided on page 71 of the textbook.) (1/3 grade)

(2) EXPLAIN YOUR team’s initial MARKETING STRATEGY by answering BOTH of these questions.

a) TARGET MARKET – What market segment(s) will YOUR team TARGET? What factors make this market segment – or these segments – attractive? (1/3 grade)

b) POSITIONING – How will YOUR team DIFFERENTIATE and POSITION your brand in this domain? What criteria do customers use to evaluate competing products, and how will you distinguish YOUR offering from competitors’ products? (In other words, what are YOUR competitive advantages?) (1/3 grade)

REQUIREMENTS

· Final written submission should NOT exceed two (2) pages

· Use standard 8.5″ by 11″ page size with appropriate margins

· Double space your submission and use an 11- or 12-point font of your choice

· Include your SECTION #, NewShoes TEAM #, and TEAM LEADER’s name

· DUE: FRIDAY, OCTOBER 12 @ 11:59 PM; SUBMIT on CANVAS

GRADE

· 1 POINT for complete paper (answering all parts) submitted before DEADLINE

· Work that is incomplete or not submitted in proper form will receive a zero (0)

LATE SUBMISSION PENALTIES

· −50% If submitted AFTER DEADLINE, but BEFORE 11:59 AM on SATURDAY, OCTOBER 13

· −100% If submitted AFTER 12 NOON on SATURDAY, OCTOBER 13

MKTG 2101: NewShoes INITIAL MARKETING STRATEGY 10.12.2018

 
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Case Assignment : Mary Kay In India

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CASE 4-8 Mary Kay in India

China accounts for the largest sales revenue outside the United States, representing about 25 percent of annual Mary Kay, Inc., worldwide sales. The company entered China in 1995 and cur- rently has some 200,000 indepen dent sales representatives or “beauty consultants” in that country. Part of Mary Kay’s success in China has been attrib uted to the company’s message of female empowerment and femininity, which has resonated in China, a country where young women have few opportunities to start their own businesses. Speaking about the corporate philoso phy at Mary Kay, Inc., KK Chua, President, Asia- Pacific, said, “Mary Kay’s corporate objective is not only to create a market, selling skin care and cosmetics; it’s all about enriching women’s lives by helping women reach their full potential, find their inner beauty and discover how truly great they are.” This view is echoed by Sheryl Adkins-Green, who notes that the Mary Kay brand has “transformational and aspirational” associations for users and beauty consultants alike. Mary Kay, Inc., learned that adjustments to its prod uct line and message for women were necessary in some Asia-Pacific markets. In China, for example, the order of life’s priorities—“God first, family second, and career third”—has been modified to “Faith first, family second, and career third.” Also, Chinese women aren’t heavy users of makeup. Therefore, the featured products include skin cream, anti-aging cream, and whitening creams. As a general- ization, whitening products are popular among women in China, India, Korea, and the Philippines, where lighter skin is associated with beauty, class, and privilege.

MARY KAY, INDIA Mary Kay, Inc., senior management believed that India represented a growth opportunity for three reasons. First, the Indian upper and consuming classes were growing and were expected to total over 500 million individuals. Second, the population was overwhelm- ingly young and optimistic. This youthful population continues to push consumerism as the line between luxury and basic items con- tinues to blur. Third, a growing number of working women have given a boost to sales of cosmetics, skin care, and fragrances in India’s urban areas, where 70 per cent of the country’s middle-class women reside. Senior management also believed that India’s socio-economic characteristics in 2007 were similar in many ways to China in 1995, when the company entered that market (see Figure 1). The Mary Kay culture was viewed as a good fit with the Indian culture, which would ben efit the company’s venture into this market. For exam- ple, industry research has shown that continuing moderniza tion of the country has led to changing aspirations. As a result, the need to be good looking, well-groomed, and stylish has taken a newfound importance. Mary Kay initiated operations in India in September 2007 with a full marketing launch in early 2008. The ini tial launch was in Delhi, the nation’s capital and the sec ond most populated me- tropolis in India, and Mumbai, the nation’s most heavily popu- lated metropolis. Delhi, with per capita income of U.S. $1,420,

Sheryl Adkins-Green couldn’t ask for a better assignment. As the newly appointed vice president of brand development at Mary Kay, Inc., she is responsible for development of the product portfolio around the world, including global initiatives and prod ucts spe- cifically formulated for global markets. She is enthusiastic about her position, noting that, “There is tremendous opportunity for growth. Even in these economic times, women still want to pamper themselves, and to look good is to feel good.” Getting up to speed on her new company and her new position topped her short-term agenda. She was specifi cally interested in the company’s efforts to date to build the Mary Kay brand in India.

THE MARY KAY WAY Mary Kay Ash founded Mary Kay Cosmetics in 1963 with her life savings of $5,000 and the support of her 20-year-old son, Rich- ard Rogers, who currently serves as execu tive chairman of Mary Kay, Inc. Mary Kay, Inc., is one of the largest direct sellers of skin care and color cosmetics in the world with more than $2.5 billion in annual sales. Mary Kay brand products are sold in more than 35 markets on five continents. The United States, China, Russia, and Mexico are the top four markets served by the company. The company’s global independent sales force exceeds 2 million. About 65 percent of the company’s independent sales representatives re- side outside the United States. Mary Kay Ash’s founding principles were simple, time-tested, and remain a fundamental company business philosophy. She adopted the Golden Rule as her guiding principle, determining the best course of action in virtu ally any situation could be eas- ily discerned by “doing unto others as you would have them do unto you.” She also steadfastly believed that life’s priorities should be kept in their proper order, which to her meant “God first, fam ily second, and career third.” Her work ethic, approach to business, and success have resulted in numerous awards and recognitions including, but not limited to, the Hora tio Alger American Citi- zen Award, recognition as one of “America’s 25 Most Influential Women,” and induction into the National Business Hall of Fame. Mary Kay, Inc., engages in the development, manufac ture, and packaging of skin care, makeup, spa and body, and fragrance prod- ucts for men and women. It offers anti-aging, cleanser, moisturizer, lip and eye care, body care, and sun care products. Overall, the company produces more than 200 premium products in its state- of-the-art manufacturing facilities in Dallas, Texas, and Hang- zhou, China. The company’s approach to direct selling employs the “party plan,” whereby independent sales representatives host parties to demonstrate or sell products to consumers.

GROWTH OPPORTUNITIES IN ASIA-PACIFIC MARKETS Asia-Pacific markets represent major growth opportuni ties for Mary Kay, Inc. These markets for Mary Kay, Inc., include Australia, China, Hong Kong, India, Korea, Malay sia, New Zealand, the Philippines, Singapore, and Taiwan.

cat29974_case4_01-024.indd 22cat29974_case4_01-024.indd 22 12/10/12 5:11 PM12/10/12 5:11 PM

 

 

Cases 4 Developing Global Marketing Strategies

and Mumbai, with per capita income of $2,850, were among the wealthiest met ropolitan areas in India. According to Rhonda Shasteen, chief marketing officer at Mary Kay, Inc., “For Mary Kay to be suc cessful in India, the com pany had to build a brand, build a sales force, and build an effective sup- ply chain to service the sales force.”

Building a Brand Mary Kay, Inc., execu tives believed that brand building in India needed to involve media advertis ing; literature describing the Mary Kay culture, the Mary Kay story, the com pany’s image; and educa- tional material for Mary Kay independent sales rep resentatives. In addition, Mary Kay, Inc., became the cosmetics partner of the Miss India Worldwide Pag eant 2008. At this event, Mary Kay Miss Beautiful Skin 2008 was crowned.

Brand building in India also involved product mix and pricing. Four guide lines were followed:

1. Keep the offering simple and skin care focused for the new Indian sales force and for a new operation.

2. Open with accessibly priced basic skin care products in relation to the competition in order to establish Mary Kay product quality and value.

3. Avoid opening with products that would phase out shortly after launch.

4. Address the key product categories of Skin Care, Body Care, and Color based on current market information.

Brand pricing focused on offering accessibly priced basic skin care to the average middle-class Indian con sumer between the ages

India 2007 China 1995

Population (million) 1,136 1,198

Population age distribution (0–24; 25–49; 50+) 52%, 33%, 15% 43%, 39%, 18%

Urban population 29.2% 29.0%

Population/square mile 990 332

Gross domestic product (U.S.$ billion) 3,113 728

Per capita income (U.S.$) $950 $399

Direct selling sales percent of total cosmetic/skin care sales

3.3% 3.0%

Figure 1 Social and economic statistics for India in 2007 and China in 1995.

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Part 6 Supplementary Material

of 25 and 54. This strategy, called “mass-tige pricing,” resulted in product price points that were above mass but below prestige competitive product prices. Fol- lowing an initial emphasis on offering high-quality, high-value products, Mary Kay introduced more technologically advanced products that commanded higher price points. For exam- ple, the company introduced the Mary Kay Mela-CEP Whiten- ing System, consisting of seven prod ucts, which was specifically formulated for Asian skin in March 2009. This sys tem was “. . . priced on the lower price end of the pres tige category with a great value for money equation,” said Hina Nagarajan, coun try man- ager for Mary Kay India.

Building a Sales Force According to Adkins-Green, “Mary Kay’s most powerful mar- keting vehicle is the direct sell- ing orga nization,” which is a key component of the brand’s mar- keting strategy. Mary Kay relied on its Global Leadership De- velopment Program directors and National Sales directors and the Mary Kay Sales Education staff from the United States and Canada for the initial recruitment and training of independent sales repre- sentatives in India. New independent sales representatives received 2 to 3 days of intensive training and a starter kit that included not only products, but also information pertaining to product demon- strations, sales presentations, professional demeanor, the company’s history and culture, and team building. “Culture training is very important to Mary Kay (inde pendent sales representatives) because they are going to be the messen- gers of Mary Kay,” said Hina Nagarajan. “As a direct-selling com- pany that offers products sold person-to-person, we recognize that there’s a personal relationship between consultant and client with every sale,” added Rhonda Shasteen. By late 2009, there were

some 4,000 independent sales representatives in India present in some 200 cities mostly in the northern, west ern, and north- eastern regions of the country.

Creating a Supply Chain Mary Kay, India, imported prod- ucts into India from China, Korea, and the United States. Products were shipped to regional distribu- tion centers in Delhi and Mumbai, India, where Mary Kay Beauty Centers were located. Beauty Centers served as order pick-up points for the indepen dent sales representatives. Mary Kay beauty consultants purchased products from the company and, in turn, sold them to consumers.

LOOKING AHEAD Mary Kay, Inc., plans to invest around $20 million in the next five years on product develop- ment, company infrastructure, and building its brand in India. “There is a tremendous oppor-

tunity for growth,” says Sheryl Adkins-Green. India represents a particularly attractive opportunity. Developing the brand and brand portfolio and specifically formulating products for Indian consum ers will require her attention to brand positioning and brand equity.

QUESTIONS 1. What information should be included in a written position-

ing statement for Mary Kay? 2. How would you draft a formal, written positioning statement

for Mary Kay using the information detailed in question 1? 3. Is Mary Kay a global brand? Why or why not?

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