external and internal analysis of Biotech

Phase I: Internal and External Analysis of Biotech Asia Division, the Cosmetic Industry and Business Strategy for Market Entry

Introduction

The rapid growth of the Asian cosmetic industry in the last few years has caught the attention of global players in the sector, with global and local companies competing to tap the massive profits expected from the market (Tan, 2016). In particular, the rapid growth of the industry goes along with the increasing growth of the economies in the region, which has remained steadfast since 1980s. Apart from the rising of the economies, the rapid growth of the Asian cosmetic industry is also attributable to the change in lifestyles, gravitation of the people towards natural and green products, and the consumption of new and innovative products and technologies for development (Gursharan, & Kumar, 2018). Biotech, an American family owned multinational manufacturer and marketer of cosmetics and health products, is seeking to enter into the Asian market with its Asia Division. The specific target markets are India, South Korea, Japan, Singapore, Philippines, China, and Thailand. From these countries, the company seeks to market its products into the entire Asian market within the next ten years. Consequently, the company needs a comprehensive analysis of the market as well as a plan for entry that will help it develop an effective strategy for the new market (Gursharan, & Kumar, 2018). Based on this view, the purpose of this paper is provide a detailed report on the analyses of internal and external factors affecting the company and the market as well as a comprehensive business strategy for Biotech as it seeks to enter into the fast growing and competitive industry.

SWO Analysis of Biotech and the Asian Cosmetic Industry

Strengths

Biotech is a global, family owned American company whose specialization is on natural products for maximum health and beauty. The company has built a strong and influential profile and name since it was founded in early 20th century in the United States. Over the decades, the company has become a household name in North American, Europe, and Brazil, where it has become a successful player in the industry. Consequently, when entering the Asian market, Biotech will ride on its global fame and brand name to attract considerably large number of consumers that will help it compete with the local and international players. Secondly, Biotech mainly designs, manufactures, and sells natural-based products with focus on both health and beauty. Indeed, the company’s fame in North America and Europe is primarily attributable to this characteristic. In Asia, the demand for natural products has been rising and is still increasing as more people seek to go natural or green. With its global name, Biotech will use its long history of professionalism and innovativeness in developing natural products to convince and influence consumers.

The Asian cosmetic industry is large and highly diversified as it reflects the nature of the society. The large population in the region implies that there are chances for survival and growth for new entrants into this market. It should be noted that the target market is about 3 billion people, with India and China leading each with a population of above one billion. Secondly, the population is highly diversified and cultural factors affect the industry in different ways. In the recent past, the increasing change of lifestyle in the Asian market has seen many people, especially women, gravitating towards the use of cosmetics contrary to the traditional ways of life that restricted their use. Furthermore, natural products are popular in Asia. Body moisturizing lotions, facial wipes, sun screen creams and lotions, face wash, hair gels and other products are increasingly being developed with natural products due to the excessive demand for such. At the same time, there has been an increase in people’s consciousness regarding personal appearance. Also, the rise in disposable incomes for individuals in many parts of Asia in the recent past implies that the market is increasingly becoming strong and able to sustain competitors as well as new entrants in the industry.

In addition, the presence of large and rapidly developing economies in Asia means that the market is strong and able to sustain multiple competitors, thus reducing the barriers that could discourage new entrants like Biotech.

Weaknesses

An important weakness likely to affect Biotech’s entry into the Asian market is the fact that it is new to the region. As a new player in the industry, Biotech will need aggressive strategies to fight off the competitors, some of which have a long history of specialization in the market, where they have established strong, household names with brands such as Kao, Shiseido, Oriflame, Unilever, Avon, L’Oreal, Procter & Gamble, Biotique, and Revlon. In the recent past, these companies have developed strong brands of natural products that have flooded the Asian market (Chung, 2014). Therefore, consumers are likely to stick to the brands they are familiar with, which might prove difficult for Biotech to break this barrier.

For the industry, there is a weakness in that the population and the economies in the target market are highly diversified, which means that different people have different behaviors that affect their preference and use of products. For instance, the cultures of India, Japan, Korea, China, and Thailand are relatively different from each other and greatly affect consumer behavior at the marketplace (Cecilia, 2014). It is difficult to determine what people in Thailand prefers based on what people in China or India wants. Also, the cultures are different and tend to affect the market in different ways. For instance, the Indian culture is more gravitated towards the traditional Indian way of life and religion while that one in Japan and South Korea seem to be western oriented (Cecilia, 2014). Therefore, it is difficult for new entrants like Biotech to understand this market, which makes it a market weakness. Secondly, the economies in the target market are different and quite dynamic in nature. While almost all of these markets have indications of strong and continued growth, constant dynamisms cannot be ruled out. For instance, each nation as well as the entire region is prone to global and local recessions, which might affect sales and growth, especially for new entrants.

Opportunities

Opportunities are many for Biotech to enter and establish itself as a strong competitor in the Asian market. First, the company has a long history of developing expert products with natural products. Its profile and name are well known in Europe and North America, which means that it has the opportunity to use these characteristics to establish itself in the new Asian market. Secondly, Biotech’s profile shows that it entirely specializes in natural products whereas other market leaders and major competitors in the Asian market have a mixed product profile. This means that the company has the opportunity to present itself as a wholly natural brand developer. As such, it is likely that consumers will develop trust with the company’s products based on the realization that it has always been a producer of natural products since it was founded almost a century ago.

The ever growing economies in the targeted Asian nations provide strong opportunities for Biotech to establish itself as a reliable developer and provider of natural cosmetics. In the recent past, the economies of India, China, Thailand, Singapore, South Korea, and the Philippines have recorded massive and generally uninterrupted growth, attracting global players in various sectors. These economies are supported by large populations, which provide ready markets for manufactured goods and services (Jiao, Wang, Xiao, Zhou, & Zeng, 2017). In addition, the growth in GDPs in the region has come along with increase in income per person, which has improved the purchasing power of the people (Cecilia, 2014). Consequently, these economic factors are an opportunity for Biotech to establish itself as a competitive provider of natural cosmetics.

Threats

As far as Biotech is concerned, the major threat to its entry in the Asian market is competition. It should be noted that the company, despite having a long history of providing natural cosmetics and drugs, it is only known in North America, Brazil, and Europe. Its entry into the Asian market means that it is new to the area and that many people are less likely to understand its history and profile. At the same time, there are many competitors in the market, including local and regional players like Kao, Shiseido, and Avon as well as multinational corporations like L’Oreal, Unsilvers, and Procter & Gamble (Cecilia, 2014). Competing with these brands in the market could prove to be problematic for a new company.

In regards to the industry, a number of threats exist and are likely to affect Biotech’s entry and growth in the market. For example, the change in laws and politics at the global and local level might prove to be a real threat to multinational companies like Biotech. The diplomatic relations between Asian nations and the United States tend to have impacts on the trade between the two sides. In the recent past, for instance, China and the US have had stressful trade relations as the latter opposes mass importation of Chinese made products, to which the former has responded by imposing extra taxes on American companies and products. Being an American company, Biotech is likely to be affected by these trade problems between the two sides.

PESTEL Analysis of the Cosmetic Industry

Political factors

Political factor are the actions of governments that have influence on the economy such as laws and regulations on labor, tax, consumer protection, employment, environmental, trade, and standards. In addition, the diplomatic and trade relationships between nations equally affect the economy as well as the players in the sector. When entering the Asian cosmetics market, Biotech will feel the effect of political factors. While China and India are the largest markets in Asia, their potential to support foreign companies’ growth and proliferation is always affected by political factors. For instance, the China and the US have in the recent times imposed taxes targeting products imported from each other. Also, China and Japan have had similar trade issues in the past, which equally affects businesses (Umemura, & Slater, 2017). China, in particular, has increased import tax on cosmetic products from 50% to 60% in the recent times, which means that Biotech will have to establish manufacturing plants in China to avoid these tax regimes (Yang, 2016).

Legal factors

Labor laws are likely to affect Biotech as it enters the Asian market. While India, Philippines, and Thailand do not have strict laws on employment such as restrictions on wage levels, Japan, South Korea and Singapore have strict laws that dictate the minimum wage level for employees in various sectors. These laws will affect Biotech when entering in these markets as it seeks to establish manufacturing units as well as sales outlets.

Economic factors

Inflation, interest, and exchange rate as well as other economic growth elements have significant impact on any economy as well as the players therein. In Asia, the target economies grow at and perform in different ways. Inflation rates tend to be dynamic in Thailand and Philippines compared to the other target nations. Interest rates tend to be different across the region. According to () decreased interests rates influence people to borrow and withdraw more, which means that individuals have money at their disposal for investments and spending. As such, companies are likely to make more sales in an economy where growth and interest rates are lowered. Consequently, it is evident that countries with low interest rates will attract more sales and perform better.

Social

Social factors are the different contributions of cultures, population, age distribution, growth rates, career attributes, social and ethnic backgrounds and others have on an economy. These factors are important for the market segmentation of Biotech as it seeks to enter the Asian market. According to Makos, as the economies and human income levels increase, people concentrate on the necessities of life and luxuries. Spiritual needs and personal appearances become a concern to many people, which means that they are likely to spend on cosmetics and beauty. As such, this trend proves to be a real opportunity for cosmetic companies to excel in the market. India, China, and South Korea are new large economies while Thailand and the Philippines are currently emerging. On its part, Japan is a large market whose economy has been one of the largest in the world for the last four decades. Combined, these factors imply that the market is fast growing and provides an opportunity for cosmetic companies to thrive.

Technological factors

Biotech, as the name suggests, works with technology. The company relies on technology to develop natural products in unique ways and designs, which makes its competitive advantage in the market. In Asia, technology is one of the factors that are driving the economy. Indeed, the target markets are considered technology reliant as they have utilized technological innovations to improve their economies. China, Japan and South Korea are home to some of the largest technology companies in the world. In addition, these countries’ governments are large consumers of technology. In essence, the economy in most of these Asian nations is run by technological developments and innovations. People tend to prefer products that result from modern technologies in these nations. The implications of these factors is that Biotech will need to portray itself as a high-tech company whose products are made from innovations and modern technologies to meet the needs of the people.

Porters Five Forces Analysis

Competitive rivalry

It is worth noting that the Asian cosmetic market, despite being large, continuously growing and offering opportunities for new entrants, it is flooded with many players. Competition, therefore, is very stiff in this market. Apart from having many small and medium companies manufacturing and selling cosmetic products, the market is dominated by multiple corporations that includes Kao, Shiseido, Oriflame, Unilever, Avon, L’Oreal, Procter & Gamble, Biotique, and Revlon. Recently, these companies have added natural products to their profiles in response to the market demands. This implication of the stiff competition in the target market is that Biotech should develop highly efficient products and marketing strategies to meet the expectations of the consumers. In particular, the company should ensure that its products are developed from natural products and that the design, production, and marketing strategies are as innovative as possible.

Supplier power

Developing cosmetics with natural products require adequate supply of the plants and other raw materials at all times. Fortunately, there are many potential suppliers of such in the Asian market. India, China, and Thailand are some of the leading producers of plants used as natural herbs for developing cosmetics in the region. As such, establishing manufacturing plants in these states means that the company will be as close as possible to the suppliers. Nevertheless, it should be noted that the presence of many manufacturers in the region means that the demand for the natural raw materials is high and that the suppliers have available alternatives to which they can switch if the company does not offer a good deal. As such, Biotech will need a comprehensive approach that will ensure that the suppliers will always be readily available to provide the crucial materials as required.

Buyer power

The buyer power in the target markets is relatively high. Specifically, Biotech targets mostly adult consumers, with women making the largest portion of the market. In general, Asian markets are considered to have a high buyer power because consumers have the opportunity to switch to other brands or product lines if they feel that a company or brand does not meet their needs in the expected manner. It should be noted here that the large number of companies in the cosmetic manufacturing and sales business offers the consumers the chance to switch from one product or brand to another.

Threat of substitution

For natural products, the likelihood of customers finding a different alternative is quite low. In fact, these are always made of raw materials naturally obtained from the environment. It is worth noting that one cannot develop natural cosmetics without having a good supply of natural raw materials and most of which come from plants. As such, it is quite difficult for consumers to find alternatives for substitution as long as they are looking for naturally made cosmetics.

Threat of new entrants

In the Asian cosmetics industry, a company’s position can greatly be affected by the ability of other players to enter the market. In particular, the natural products segment of the market is rather lucrative as it is relatively a new area of interest and many companies are willing and interested in entering. Secondly, there are no strict regulations that restrict new entrants. Indeed, any company can enter the market and offer products to the consumers as long as it needs the legal and regulatory requirements in each market.

Explanations of the results for SWOT, PESTEL, and Porter’s Five Forces Analyses

From the SWOT, PESTEL, and Porter’s Five Forces analyses, it can be deduced that Biotech has an opportunity to enter the new market and establish itself as a worth competitor in the natural products line of business. Specifically, the analyses show that the strengths outdo the weaknesses for both the company and the industry. Specifically, the fact that the markets are characterized by large populations, increasing people’s purchasing parity, strong and increasing GDPs and changing lifestyles imply that there are more chances for survival for new entrants like Biotech. Furthermore, the political, social, economic, environmental, and legal factors and their influence on the market are different for each country, which means that the company has an opportunity to design customized entry strategy for each of these markets. Nevertheless, it is also worth noting that the buyer and supplier power are quite strong in these markets, which provides evidence that Biotech should have an effective strategy that will ensure that its position in the market is maintained and strengthened continuously.

Major goals for the Business Strategy

Based on the findings of the SWOT, PESTEL, and the Five Forces analyses, Biotech’s business unit strategy should look to attain 5 important goals. First, the business unit should seek to attain an entry strategy that will give the company an initial competitive edge. In this case, the idea should be to ensure that the market is well studied and the existing gap identified and the product developed is oriented towards addressing the hiatus. Secondly, an initial promotion and marketing strategy should be established at the start of the venture. Here, the idea is to give Biotech a good start that will create awareness of its natural products in the marketplace. Third, the business unit strategy should achieve the objective of a sustainable approach from the initial point of entry onwards. In this case, the aim of the plan is to give the company an approach that it will use to consolidate its market after entry and retain a competitive advantage over the rivals. Fourth, the business unit should achieve the goal of meeting the existing as well as new needs and demands of the market. As the company enters the Asian market, it should have a clear view of the market and a picture of what the people wants in cosmetics. By stating that the products are natural, the company ought to provide the relevant information about the ingredients as well as the effects of the products. Finally, the business unit should have a readily available market response strategy through which it will be able to address the emerging market forces, customer requests, and other dynamics in the market. Such aspects include customer demands for customization of products to meet the local needs in each of the Asian countries being targeted. In this case, social and the Internet media approach should be considered as an effective strategy for engaging and communicating with the customers to understand their needs and concerns.

References

Beyer, D.L., & Haug, R. (2015). Organizational Culture: Diagnosing a Customer Contact Company. New York: SAGE