Discusses the international marketing strategies applied by The perfume shop for achieving the expansion and the objectives, along with a brief review of the Indian perfume market scenario.
Brands and products that are created in one country are readily accepted in other countries unenthusiastically. The reason is the international marketing strategies applied by the companies for huge marketing and spreading awareness about the product among the users. One such company is The Perfume Shop. It plans to expand its business in India in association with the Indian business giants. This study discusses the international marketing strategies applied by The perfume shop for achieving the expansion and the objectives, along with a brief review of the Indian perfume market scenario.
The Perfume Shop is a perfume retailer established in United Kingdom in 1992. In 2005 the company was acquired by the largest beauty and health retailer of the world, A.S Watson group. By 2014 it had 263 locations in the world. The distribution of the company has seen many changes over the time as the trade expanded from smaller shops to big retail giants, an finally expanding worldwide. Online trading was started in 2004 by the company, which has now expanded to fully fledged e-commerce teams. The real success was hit by The perfume shop in 2010 after it introduced shop in shop concept in Superdrug stores. The project proved to be a big hit after it was trialed in 11 stores initially. The company launched its own loyalty card scheme named “reward club”. The scheme was helpful in getting more information about the customers, and enabled the customization of offers accordingly. In 2012 store to door service was started making the availability of the product more customers friendly. By 2014, The perfume shop was placed third time among the top 100 best companies to work with. Now the company is looking forward to an expansion in India, and spread its business through appropriate strategy implementation (www.theperfumeshop.com).
The Perfume shop plans to enter the Indian market through joint venture arrangements. The ventures would be with Westside, which is a retail arm of the TATA group. The retail operation of the company is via the Superdrug stores in United Kingdom. A joint venture is also planned with the E-commerce giant Myntra, which has been undertaken by Flip kart.
The estimation of the Indian fragrance industry is estimated to be of around $ 20 Billion, which constitutes to 10% of the fragrance industry worldwide, which is $ 2000 Million. The population which have potential customer base makes around 17.8% of the total count (www.fafai.org). More than 35% of the Indian population makes the young count and among them more than half of the population has got disposable income. By 2030 the expected rise in the count of working people is 75%. Indian market have got enough potential for foreign expansion to happen, as it have got immense proportions in the market that proves to be profitable in sectors like fast moving consumer goods. India is also a gateway to other developing countries, like those in East Africa and Middle East. The East Asian markets can be well accessed through India, which also a major searching ground for the suppliers. As the world’s largest democracy, India is a politically stable since it got independence in 1947. The free market model adoption by the country gave valuable returns to the companies investing there (www.ibef.org). India also offers low cost manufacturing and an outsourcing base for carrying out production or outsourcing parts and services for giving a competition in the current market. A huge pool of talented professionals and skilled as well as unskilled labor for developing a competitive edge in the market is present in India.
5.1 Marketing mix strategy
The crucial stage of any market strategy planning is the construction of the marketing mix. The objectives for marketing and the long term goals of the company decide how the marketing mix has to be built and implemented (Zeybek, 2013). Not only from the point of view of the organization, the marketing mix of any company hugely depends on the structure of the target market as well as the different condition that affects market. The various internal along with external factors that have a direct interference with the market functioning, have crucial role in the strategy built up of marketing.
Figure 1: The 4Ps of Marketing
(Source: Yang et al. 2013)
Marketing mix is comprised of four Ps, that segregates each of the factors, that has to be kept in mind for planning a perfect strategy for a product (Khan, 2011, pg-94). The application of the 4Ps varies from company to company. However, here the implementation of the mix by The perfume shop will be assessed.
Product: the product offered by any company is not limited to only the tangibility. The product can be non-tangible as well, which we more precisely refer as a service (Vos, 2013). Any product can have three segmentation in it that is the core product, the second one is the actual product and the third segment is concludes with augmented product. The core product represents the thing that is bought by the consumer, where as the features of the products make the actual product. Augmented product makes the part that proves to beneficial to the consumers.
The Perfume Shop provides tangible product, which contains the core product that the consumers are buying, the actual product is the brand value of The perfume shop, the quality that it offers and augmented product is the after sales service by the company.
Price: The price of a product is the main deciding factor of profits that the company will make. Pricing effects the complete process of distribution as it is directly linked to the supply and demand of the product. High price of any product has to face consumer switching to other brands, however value for money concept is not applied in all product category. The pricing strategy applied for any particular product depends on lots of factors including the internal and Among the various modes of pricing The perfume shop applies price skimming method, as the price of the product is set high. Price skimming involves high pricing of the product and lowering the cost later as per the market circumstances and requirement (Siddiqi, 2013).
Place: the place of the product here indicates that where and how the product is going to be available for the customers. The perfume shop plans to expand in India via joint ventures with the Westside. It is one of the premium retail brands in India, which has separate sections for the variety of merchandise. Distribution of the product will be done by the Westside itself. An intensive distribution strategy by TATA will help in better availability of product throughout the country. Apart from this Myntra is the online shopping partner of The perfume shop which will enable online availability of the product.
Promotion: promotion of the brand will help in building a high value presence through advertisement campaigning via television, social media, newspapers, radio, and posters (Sheth, 2011). Another strategy is sponsoring sports teams like Mumbai Indians in IPL matches through logo, sponsoring Bollywood and fashion shows by top Indian designers. Application software development for customers for anytime access and utilization of TPS card will directly approach the customers.
The SWOT analysis by The perfume shop will give an insight of the marketing environment of India, and what are the situations that are favorable or unfavorable for the expansion by The perfume shop (Miller and Mills, 2012). The analysis explains the strengths of the brand which it can use for establishing feet hold in India, the opportunities include the economic, political, social environment factors which would prove beneficial for The perfume shop. Weakness indicates towards the areas which are to be concentrated on for avoiding any hindrances in the expansion by the company. And threats are the possible hindrances in India that the company has to be aware about and can cause negative impact in the establishment. This portfolio building strategy helps in the internal environment analysis and also gives an over view of the external business environment (Schertler and Tykvová, 2011).
Figure 3: SWOT analysis of The perfume shop
(Source: Melnyk et al. 2012)
Internationalization is practices by the companies for making its products or services adaptable to the conditions and population of the respective countries (Lee and Carter, 2011). There are many types of internationalization process followed by companies worldwide. These include:
However, The perfume shop follows the Equity based internationalization method. Joint venture is a kind of a equity based strategy. Following the strategy will give relief to The perfume shop for bearing the cost and risk of loss in a foreign market. The venture firm is responsible for taking the risks and the costs. In this case the Westside chosen by The perfume shop for that particular market, receives all kind of support, promotion and marketing from the company itself for building a better product experience for the consumers. The global recognition of The perfume shop has made it a dependable brand for the companies getting into ventures. However, this internationalization method tends to build the presence of the company more global, which in turn contributes to development of the brand globally (Jolivot, 2008). The preference to equity system results in much more cheaper expansion in context of overseas, as the companies in the joint ventures are suppose to be more familiar with the culture of the respective country.
Foreign joint ventures have lots in common with the licensing strategy, though the major difference is that in a joint venture, The perfume shop has an equity position and a management voice in the Indian firm, which is Westside here, the retail arm of TATA. The partnership in between the host and home country firm will be formed. This agreement will give a control over the operations and access to local market knowledge to The perfume shop. It will have access to the relationship networks and is very minimally exposed to risk expropriations.
But, along with the advantages there is certain negative perspective of the internationalization process. The formation of ventures can give a cost cutting advantage to the perfume shop but the control over the quality of the product will not be there (Johanson, 2012). The quality factor may vary from country to country. Apart from this it does not allow the transfers of profit from one country to raise the profit of other country. Other common issue can be a tiff within the organizations, which The perfume shop might have to be alert about.
According to Granleese (2014), for looking into the global marketing strategy of a firm from all the possible directions and angles three dimensions should be taken into consideration. The GMS model explains the extent to which the firm globalizes its marketing strategies in various nations through the standardizing variables of marketing mix, concentrating and coordinating the activities of marketing and integrating competitive moves across the global markets. The global marketing strategy is not only beneficial financially but also strategically.
Figure 4: The GMS model
(Source: Eckman et al.2015)
In view of Chikweche (2013), the standardization perspective follows the basic logic of scaling economies, including low-cost and simplification ultimately leading to the efficiency, consistency, and idea transfer of the firm, whereas configuration-coordination perspective gives comparative advantage, interdependency and specialization which leads to efficiency and synergies as well. Integration perspective have got the basic logic of cross subsidization along with competitive dislocation and rationalization which increases the effectiveness in the competition and give competitive leverage over other products in the global market (Styles and Wilkinson, 2012).
The perfume shop is implementing various strategies for entering India and getting established in the market. First strategy is partnership with Indian global company and secondly establishing a brand presence with high value. the joint venture strategy will provide the perfume shop with opportunity to gain new capacity and expertise and allows the company to enter the related businesses as well as the new geographic areas and learn new developments in technology (Budde-Sung, 2011). Joint venture will give the company access to more and more resources, which includes workforce in the form of specialized staff and technology. The risk factor will get shared with the venture partner, which is Westside. This joint venture can be flexible as well, if it includes limitation in the life span and coverage of the part done by the company, which limits the degree of commitment and the exposure of business, offering an innovative way of exiting from the non-core businesses. Company can gradually separate the business from the rest of the organization and eventually also sell it to the other company involved in the joint venture (Cavusgil and Cavusgil, 2012).
The business expansion by The perfume shop will reap huge benefits for the company. The company will have an expanded customer base, which will raise huge financial benefits for the firm. Expansion gives access to larger talent pool as it will give greater access to qualified professionals, skilled workforce. The technological advancements and updates is easily accessible as well. Creating a brand presence will add value to the product, giving it an edge in the global competitive market. As said by Casillas and Acedo, 2013), brand awareness is indirectly related to the raising of return on investment as the ultimate motive of profit maximization will be achieved by the company.
Indian retail industry is developing in a full pace with the entry of numerous international luxury brands. Statistically India has been ranked as the most brand conscious country after Hong Kong and Paris. India’s total retail market is estimated to be $160 billion which covers more than 8 million consumers. Among them more than 50% of the consumers prefer to shop from the luxury brand segment of the retail outlet. Westside is one of the leading premium retail brands which have gained high consumer preference over the years. The perfume shop in association with Westside has huge scope of profitable expansion in India not only for the brand value of Westside but also due to the appropriate implementation of global marketing strategy (Arndt et al. 2012). The analysis of the business environment, both internal and external indicates towards the areas of concentration and the advantages that the company has got over the competitive brands. Joint venture with Myntra made the scope of merchandise availability and directly contact with the buyers. The favorable market situation in India calls for market entries by foreign companies and invest in its luxury goods market. With the current situation, the retail industry seems to develop rapidly which might indicate, that switching to a franchising system would not be a bad approach.
The study gives me a clear understanding of the various international marketing concepts and strategies. The expansion by The perfume shop in India demands many strategic approaches which would beneficial in creating foothold by the company. The report enhances my knowledge on the concept of joint ventures and the reason of this strategy being chosen by majority of the luxury brands while investing in the Indian retail industry. I have understood the importance of creating a brand image and increasing brand image in the target global market and how it is connected to financial and strategic benefit of The perfume shop. The internationalization process by the firm elaborates the various other ways of expansion in host countries. Due to the study I also got an insight of the Indian retail industry and luxury consumer product users. The statistical data clearly indicates that the decision by The perfume shop to expand in India will give it huge opportunities and benefits.
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