Now, we can raise a new question : how does Beiersdorf deal with its internationalisation in order to reach its objective (i.e. to develop global brands that meet local needs) ?
The group’s head office is in Hamburg (in Germany) and there are 100 affiliates worldwide, with a centre of production, a marketing and sales department, a R&D department, etc…For example, in Thailand, there is the second largest manufacturing base of the group in Asia, with a production capacity of over 62,000 tons and 180 employees. This important base has both administrative and production facilities, it provides support, supervises production and inspects the affiliates throughout the Indo-Chinese peninsula.
The internationalisation of Beiersdorf is based on this principle : the head office in Hamburg gives a globally oriented marketing strategy based on uniform international rules, and the affiliates implement locally this global marketing strategy in order to satisfy the regional requirements. Consequently, Beiersdorf’s messages reach their target and are understood equally well everywhere.
That is why, for instance, French people think that NIVEA is a French brand, people in Italy are convinced that NIVEA is an Italian brand. The originality of Beiersdorf is that it develops global brands (like NIVEA) but people, from very different countries, consider them as their own local brands and this partly explains the success of the group worldwide.
Subsidiaries are quite “free”, the power is not centralised in the German headquarters. They can launch products adapted to meet local needs and are free to launch a communication campaign which also fits the local needs. They are organised according to category management, that is to say there is a manager for each category of products (a manager for NIVEA Beauté, a manager for NIVEA Visage, a manager for Labello, a manager for NIVEA Sun, etc…).
➔ In conclusion, Beiersdorf is a transnational group, not a global group, that thinks globally but acts locally.
But how does Beiersdorf generally expand internationally ?
Its expansion strategy is based on two aspects. The first aspect is the gradual expansion into new countries. Most of the times, when entering a new country, Beiersdorf first launches some NIVEA products (generally the crèmes because they are the most famous products); then, it launches more NIVEA products, then, it launches some LABELLO products and other products from other brands, and so on… Beiersdorf gradually expands into new countries by gradually launching its different brands and products.
The second aspect of the strategy is investing in the individual countries. For instance, in 2001, the group built a last up-to-date cosmetics factory in Poznan, in Poland. This investment represented a capital expenditure of 22 million Euros and it is a big commitment of the group in Poland.
Now that we know that Beiersdorf is a transnational group, it would be interesting to look closer at the relations within the group.
Thanks to the Intranet, there is a permanent communication between the German head office and the affiliates. Moreover, internationalisation is promoted in the company, there is a high rotation of the employees between the affiliates, the transfers increased by 30% in 2001. All this enables a transfer of experience and knowledge between the employees of the group and this contributes to make Beiersdorf be a real international group.
Internationalisation strategy of Beiersdorf – Two dimensions
The international strategy of Beiersdorf relies on two dimensions : opening up in new countries and opening up in new market segments.
When opening up in new countries, the group decides to break into a new foreign country to sell its products.
When it wants to open up in new market segments, Beiersdorf develops new markets step by step, in countries where it has already broken into, in line with their strength. It does so to make “the right decision in the right place at the right time”. For instance, the group rolls out the different NIVEA categories (first, it launches NIVEA Crème, then NIVEA Bath care, and so on…); in other words, when opening up in new countries, Beiersdorf uses gradual expansion as we have seen before.
Sometimes, Beiersdorf makes some acquisitions to strengthen its current position in the market. For example, in France, it bought Onagrine and Nobacter to enter the French pharmaceutical market. Another example is the acquisition of Elastoplast, the plaster brand, that enabled the group to use the business “know-how” of the acquired company and to become a global leader in the plaster market.
Illustration of Beiersdorf’s strategy – NIVEA
NIVEA is the “star” brand of Beiersdorf : invented in 1911 in Hamburg, this nowadays global brand, traditionally symbolised by the blue logotype, reached worldwide sales of over 2 billion Euros in 2000 (four times the amount of sales reached in 1990 !).
NIVEA is an umbrella brand that offers, under the same brand name and with the same “promise”, products belonging to the same universe of consumption. In consumers’ mind, the brand NIVEA insures quality products.
As the years go by, NIVEA has expanded its position as the world’s greatest skincare brand through organic growth. 20 years ago, it broke into the Asian market thanks to a successful joint venture with a Japanese chemical company (Japan’s Kao Corporation). And today, NIVEA is the top-selling skin-care brand in the world, holding 15% of the world market in skincare products (source : AC NIELSEN 1999).
Why is NIVEA so successful worldwide ? Because it always orientates its marketing towards consumers; it invests in Research and Development and is leader in terms of marketing policy because it always tries to proactively anticipates and satisfy the needs of consumers.
But also because its international development enables it to reach many consumers worldwide and in the following paragraphs, we will focus on the international strategy of NIVEA.
First of all, how does NIVEA choose to enter a market ?
NIVEA uses the export market selection tool to evaluate opportunities prior to select foreign markets to compete in. The brand is proactive in its export market selection process, that is to say it actively seeks business in foreign markets and is not passive.
Before entering a foreign market, NIVEA realises studies to know the characteristics of this market and of the consumers. If there is an obvious gap in a moving, dynamic market with high growth level and if NIVEA has the products to meet consumers’ needs, to fill in this gap, therefore it breaks into the market. For instance, in Ireland, there was a gap for quality shower and deodorant products, and NIVEA was able to offer these kinds of products, so the brand broke into this market.
A more traditional method consists in launching products in a country very close (geographically, but also culturally, economically and politically) to another country where these products are already available, in order to make economies of scale. In this case, we can say that NIVEA uses an expansive method because it builds markets based on similarities in the environments between existing markets and potential new markets, it uses the nearest neighbour approach. For instance, NIVEA used this expansive method with the UK and the Irish markets. To realise economies of scales, NIVEA Ireland usually prepares a parallel launch when NIVEA UK introduces products on the UK market, because many British advertising media are available in Ireland and the main feasibility study is done in the UK.
Secondly, how does NIVEA choose to launch a new product in a foreign country ?
When NIVEA wants to launch new products in a foreign country, they are often products which currently exist in the NIVEA product portfolio, that have already been launched in other countries and are considered as “suitable” for introduction to other markets, with maybe some modifications to do to meet local consumers’ needs.
NIVEA collects as much information as possible about the segment it wants to target (e.g. the Spanish males) and produces a product that will attract this target. Then, it does a feasibility study, develops a prototype if the feasibility study is positive, and implements a test marketing (based on observation and discussion with the targeted consumers) before beginning mass production. If this test is positive, the marketing team can launch the product into its own local market, has to create a financial plan and communication strategy for its local market.
Now, we will look closer at the way NIVEA promotes its products.
Beiersdorf has its own marketing approach, its own style of advertising, totally different from L’Oreal’s marketing approach, for instance.
The group thinks globally but acts locally also in its way of advertising. Indeed, the local subsidiaries can adapt the promotion means to the country, but they have to respect some general international guiding lines, some codes that enable consumers to identify the brand NIVEA. For example, they have to use soft colours for their advertising supports, the models on the picture must be an “unknown” model, not a famous actress or singer, so that consumers can identify themselves with this model (contrary to L’Oreal’s philosophy); the colour blue must be present in order to remind people the traditional NIVEA Crème famous all around the world, etc… Generally, the model present on the advertisement for one category is the same in all countries (for example, the model that represents NIVEA Beauté products is the same in France, in the USA, in Germany, etc…) except in Asian countries : in Japan, the models on the advertisements are Asiatic people, so that consumers can really identify themselves with the models.
Moreover, it seems that NIVEA uses the same commercials in Europe : for instance, the TV commercial for one product of NIVEA Deodorant was the same in France, as in the Netherlands, as in Hungary; some weeks ago, NIVEA Visage launched a new product, “crème d’énergie” and the same poster was used on the bus stops in both France and in the Netherlands, at the same time (of course, the language was adapted). NIVEA uses the same advertising support for countries that are close to each other, from a cultural, social point of view.
But, on the other hand, the different subsidiaries can implement a local promotional strategy to meet local specificities, especially for the sales promotion. For instance, they can offer samples in magazines or in shops, they are free to create original gifts offered when consumers purchase a certain product (manicure sets, necklaces, etc…).
In conclusion, NIVEA advertising strategy is a mix of global directives and local specificities, and it is loyal Beiersdorf’s philosophy : thinking globally but acting locally.
To end with NIVEA, we would like to present some results which show how successful is the strategy used by this brand all around the world.
NIVEA has increased the number of international markets where it is the market leader and it has become the world’s largest skin and personal care brand (with an amount of total sales of 2.5 billion Euros in 2002). The brand’s sales have increased by 17% and the growth is especially strong for some categories (NIVEA Hair care, NIVEA for Men, NIVEA Beauté and NIVEA Deodorant) as well as in Eastern Europe.
As far as the skin care sector is concerned, NIVEA has the leadership in Australia and in Turkey for the first time in 2002. NIVEA Deodorant became leader of the market for the first time in 2002 in Bulgaria, Poland, Portugal and Turkey; and so on with the other categories.
And finally, NIVEA is now the market leader in the following product categories:
Skin creams in 28 countries
Skin lotions in 33 countries
Facial care in 23 countries
Facial cleansing in 26 countries
Sun protection in 16 countries
Deodorants in 14 countries
So, NIVEA is a very successful brand around the world and its growth will not stop especially thanks to its consumers-driven orientation and its desire to meet local demands.
Comparison of NIVEA’s marketing-mix in France and in Hungary
➔ We can observe that there are more NIVEA product categories in France than in Hungary. It might be because NIVEA broke into the French market prior to the Hungarian market. But also because French consumers’ needs are different from Hungarian consumers’ ones, so that French people need a wider range of products to be satisfied.
Another reason could be that France is closer (geographically, but also culturally, historically and economically) to Germany, NIVEA’s “home country”, where all the products and categories are first launched. Consequently, NIVEA is more present in France than in Hungary, but we can imagine that it will follow its “roll out” process, its gradual expansion, and that in the next few years, as Hungary develops, NIVEA will launch new categories like NIVEA Beauté, for instance, in this country.
➔ The price of the same product is 0.11 Euros more in Hungary than in France, so we could say that products are sold at approximately the same price in both countries. However, it is important to keep in mind that the level of incomes differs from France to Hungary (where it is lower) : it seems that NIVEA products are more “expensive” is Hungary than in France, compared to the average level of incomes.
➔ NIVEA products are practically sold through the same channels of distribution in France and in Hungary. We think that if there is a difference (for instance, NIVEA products are sold in Department stores in France and not in Hungary), it is due to the fact that the general channels of distribution are different from one country to another.
➔ As far as promotion is concerned, NIVEA practically uses the same means of promotion in France and in Hungary. It seems that promotion is more developed and more active in France, but once again, this might be explained by the fact that there are more product categories in France, so that more promotion is needed to promote each category.
After having considered the internationalisation process of Beiersdorf and illustrated it through the concrete example of NIVEA, we are going to present the internationalisation of L’Oreal, Beiersdorf’s main competitor, in order to compare the strategy of both companies.
III . Internationalisation of l’Oreal and comparison with Beiersdorf
When a company decides to internationalise, in most of the cases it has to face a keen competition on the host-country’s market. Thus the way of going international (market entry strategies, marketing mix, standardization or adaptation etc.) is highly influenced by the strategy of the competitors as well.
For the Germany based Beiersdorf, L’Oreal means the biggest challenge. Indeed, if Beiersdorf is the world leader in skincare, L’Oreal is the number 1 in hair care, colour cosmetics and sun care, markets on which the German group is also present, but not at the top rank.
For the better understanding of Beiersdorf’s way of internationalising we give a sketch of L’Oreal’s strategy.
L’Oreal - Company overview
L’Oreal was founded in 1907 by Eugene Schueller, a chemist who tramped the streets of Paris to sell his patented hair dyes to local hairdressers. When Schueller died in 1957, his deputy, Francois Dalle, took over as chairman and chief executive. After the company went public in 1963, Dalle became preoccupied with the need to internationalise.
In the battle for global beauty markets, the $12.4 billion L'Oreal has developed a winning “formula”: a growing portfolio of international brands that has transformed the French company into the United Nations of beauty. L'Oreal has sold 85 products around the world, from Redken hair care and Ralph Lauren perfumes to Helena Rubinstein cosmetics and Vichy skin care. Thanks to this strategy, masterminded by Lindsay Owen-Jones - CEO of L'Oreal since 1984 and chairman since 1988 - the French company has not only enjoyed a decade of double-digit growth but has also pioneered new rules for staying on top in a fiercely competitive industry.
L’Oreal goes international
In spite the fact that L’Oreal is present in many countries throughout the world, it still insists on conquering new ones. Although Asia's economy is a mess and Latin America is tottery, L'Oreal gains successfully a stabile foothold in these markets. The secret is: conveying the allure of different cultures through its many products. Whether it is selling Italian elegance, New York street smarts or French beauty through its brands, L'Oreal is reaching out to more people across a bigger range of incomes and cultures than other beauty-products companies in the world.
L'Oreal's particular skill is to buy local cosmetics brands, give them a facelift and export them around the world. While actress Catherine Deneuve is the official face of the company's main French brands, L'Oreal is French only when it wants to be. The rest of the time it is happy being African, Asian, or anything else that sells. It is the story of L'Oreal's own corporate makeover. A decade ago, about 75% of the company's $5.5 billion in annual sales was in Europe, the majority in France and the L'Oreal name was indelibly linked with Parisian sophistication.
But as the competition intensifies, Owen-Jones is likely to continue making acquisitions. He has purchased five companies in six years. Already huge in established markets such as Europe and the U.S., L'Oreal is venturing further. The company is actively exploring acquisition targets elsewhere in Asia. A few years ago, it acquired Soft Sheen, a U.S. line of hair-care products aimed at African-American women. Owen-Jones intends eventually to use it as a springboard for expanding into Africa. Since 1997 L'Oreal is rapidly expanding in India. In Mexico the company ranks No. 1.
Below we highlight the internalisation process of L’Oreal through the example of two countries with strategic importance for the company.
USA
The $758 million purchase of Maybelline in 1996 was a really risky venture. The goal was to make the Memphis cosmetics firm a global mass-market brand, and people found this odd, because just 7% of Maybelline's $350 million in annual sales was outside the U.S.A. Since its creation in 1915, Maybelline had found its core market in Middle America, where it earned a safe, steady income by selling lipsticks and nail polish. At the end of 1996 “O.J.” had shifted Maybelline's entire management operation from Memphis to New York City. Meanwhile, Maybelline began an international rollout, with "New York" added to the brand name overseas because, as Owen-Jones says, "there are lots of people in the world who think that American street smart is just as much fun as French chic." Maybelline's latest results prove the point: in the last years 56% of the brand's $1 billion in sales came from outside the U.S. Maybelline was the leading medium-priced makeup brand in Western Europe with a 20% market share and is now sold in about 90 countries.
Japan
L'Oreal has struggled in Japan, the world's third-largest cosmetics market (after the U.S.A. and Europe). Owen-Jones partly blames L'Oreal's sorry showing there to market regulations ranging from a protectionist distribution system to strict scrutiny by health and safety authorities. While its luxury brands are starting to gain, the company's problem has been selling Maybelline to the mass market. To fix the problem, L'Oreal formed a strategic alliance in November 2000 with Shu Uemura, a large Japanese cosmetics company rapidly expanding into China and other Asian countries. L'Oreal owns 35% of Shu Uemura. "We want to be able to understand how the Japanese approach cosmetics," says Owen-Jones. "The only way to do it is to buy a Japanese brand."
➔ We can notice that L’Oreal ‘s strategy is mainly to take over some companies or to make strategic alliances with companies active in the foreign market it wants to break into. This strategy differs from Beiersdorf’s one : the German group acquired some plaster brands to break into this market, but most of the times, when it wants to go international, Beiersdorf uses its own brands and gradually develops its products in the foreign market.
Of course, L’Oreal also launches its own products in the different foreign markets, but its strategy seems more “aggressive” and it seems that it more often uses foreign companies to break into foreign markets.
Moreover, when it decides to go international, L’Oreal often exports “the concept” associated to the brand (the Parisian chic or the Italian elegance, etc…). For instance, when it exports Maybelline, it uses the reference to the New-York trendy style. So, even if it pretends to try to adapt to local cultures, we think that L’Oreal focuses less on local needs than Beiersdorf. In fact, we have seen that NIVEA is often considered as a local brand by people in several countries, whereas it cannot be the case with Maybelline, for example, because it is associated to “New-York”.
The beauty of global branding
L'Oreal's uses global branding to speed its growth even when global markets themselves are shaky.
Owen-Jones said: “I've tried to be a hyphen between France and English-speaking countries. We have made a conscious effort to diversify the cultural origins of our brands.'” That philosophy is one of the keys of L'Oreal's success. Instead of homogenizing the brands to make them easily adaptable to different cultures, Owen-Jones wanted the products to embody their country of origin.
Building global brands requires good brand portfolio management in order to hit “ the right audience with the right product”, says Lindsay Owen-Jones. The range of products offered by L’Oreal goes from a bottle of Ralph Lauren's Safari perfume to a tube of Garnier's Elseve conditioner or a jar of Vichy, a skin cream sold chiefly through pharmacies. "Each brand is positioned on a very precise [market] segment, which overlaps as little as possible with the others," according to Owen-Jones.
L'Oreal's main mass-market brand, L'Oreal Paris, responsible for about 38% of the group's sales, has been internationalised without losing its French cachet. "Anyone around the world who believes in French fashion," says Patrick Rabain, president of the company's consumer-products division, "will be interested in L'Oreal Paris."
➔ Beiersdorf also has a good brand portfolio management in order to target at the right segment. But, there is still this difference based on the fact that L’Oreal seems to sell an image with its products; for instance, it estimates that people attracted by French fashion will be interested in products sold under the brand “L’Oreal Paris”. We think that this concept is really different from Beiersdorf. Of course, Beiersdorf sells global brands, but it always looks for adapting them to local preferences, and it seems that on the other hand, L’Oreal tries to impose its style to the country in which it sells its products.
Conclusion
There are 5 key success factors in the internationalisation process of L’Oreal:
- Effective organization structure
- Strong distribution channels
- Strength of R&D
- Brand portfolio management
- Acquisitions
If we look at these factors, it seems that they are the same as Beiersdorf, but we think that the German group has something more : its closeness to the customers, its consumers-driven orientation. As L’Oreal, Beiersdorf owns global brands but we perceived that it makes more efforts to adapt to local specificities than L’Oreal. And this might be illustrated in their way of promoting their products : L’Oreal uses famous people (actresses, singers, sportive men, etc…) , maybe to make consumers dream or to influence their purchase, whereas Beiersdorf prefers to make its promotion with unknown people, so that people can easily identify with them.
So, in conclusion, Beiersdorf and L’Oreal are two groups quite similar, but their way of reaching people internationally are quite different, they do not have the same “style”.
Conclusion
Beiersdorf is a transnational group, selling global brands to individual consumers, that has always been very successful worldwide. We think that one of the reasons explaining this success is the fact that the group “thinks globally, but acts locally”. Indeed, subsidiaries are quite free to adapt their strategy to the local needs, and Beiersdorf gives them the material means to do so. One of Beiersdorf’s particularities is its closeness to consumers : people are often convinced the brands of the group as local brands and this proofs that Beiersdorf’s strategy is very efficient.
We estimate that, in order to compete with its very big “rivals”, like L’Oreal for instance, Beiersdorf should keep this international strategy, its own style to work with foreign markets, because this specificity can make the difference : foreign consumers might be sensitive to the efforts made by the German group to adapt to local specificities.
Annex 1
“20 Years of Beiersdorf (Thailand) Co., Ltd.
January 08, 2003
Sold in more than 170 countries, NIVEA products are trusted around the world. In Asia, NIVEA was first launched in 1976. Regarding quality as a dynamic process of continuous improvement in all activities, the products have gained tremendous success. In Thailand, NIVEA made its presence in 1982. Click to see the whole chronology of NIVEA's success in Thailand.
Beiersdorf Thailand is the second largest manufacturing base in Asia, in the Beiersdorf Group of Companies with a production capacity of over 6,000 tons per annum, that employs a skilled workforce of 180 people.
In this region the Company has administrative and production facilities, providing support and supervision for production and inspection at affiliates throughout the Indo-Chinese Peninsula. Its wide array of products has been exported to over 44 countries around the globe.
With a vision, our greatest asset is the trust of our customers, Beiersdorf Thailand has always maintained a strong commitment to all its customers in terms of quality. The company time and again has received many prestigious awards from various renowned agencies such as "Outstanding Factory" from The Ministry of Industry, "Good Manufacturing Practice (GMP)" from the Ministry of Public Health.
Beiersdorf Thailand has been instrumental in the development of innovative products in the Cosmetics & Personal Care industry. The company has continuously put emphasis on upgrading operations, services and human resources, providing its workforce with essential job knowledge, skills and attitudes. This is the key element in the accomplishments of Beiersdorf Thailand. “
Source :
Chronology of NIVEA’s Success in Thailand
Annex 2 : some results achieved by Beiersdorf in 2001
Business development by division
Business development by region
Source: Beiersdorf Annual Report 2001
http://www.beiersdorf.com/gbericht_2001/index_e.html
SOURCES
Books
E-materials
“Market Report, Mass Skincare Goes International” by
“L'Oreal's Global Makeover”
Articles
“Building brands, building business”
Study case designed for an Irish University
“L'Oreal: The Beauty of Global Branding”
Article from Businessweek online, written by Karen Nickel Anhalt (June,28 1999)