MBA630 Discussion 3 Week 3

VIDEO 7-5

Mary Kay Video Case

kerin.tv/13e/v7-5

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 products specifically 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 specifically 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, Richard Rogers, who currently serves as executive chair 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 Page 200$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 reside 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 virtually any situation could be easily 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, family 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 Horatio Alger American Citizen 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, manufacture, and packaging of skin care, makeup, spa and body, and fragrance products 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 Hangzhou, 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 opportunities for Mary Kay, Inc. These markets for Mary Kay, Inc. include Australia, China, Hong Kong, India, Korea, Malaysia, New Zealand, the Philippines, Singapore, and Taiwan.

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 currently has some 200,000 independent sales representatives or “beauty consultants” in that country.

Part of Mary Kay’s success in China has been attributed 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 philosophy 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 product 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 generalization, 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 overwhelmingly young and optimistic. This youthful population continues to push consumerism as the line between luxury and basic items continues 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 percent of the country’s middle-class women reside.

Senior management also believed that India’s socioeconomic characteristics in 2007 were similar in many ways to China’s 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 benefit the company’s venture into this market. For example, industry research has shown that continuing modernization of the country has led to changing aspirations. As a result, the need to be good looking, well-groomed, and stylish has taken on a newfound importance.

	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 cosmetics/skin care sales	3.3%	3.0%

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

Mary Kay initiated operations in India in September 2007 with a full marketing launch in early 2008. The initial launch was in Delhi, the nation’s capital and the second most populated metropolis in India, and Mumbai, the nation’s most heavily populated metropolis. Delhi, with per capita income of U.S. $1,420, and Mumbai, with per capita income of $2,850, were among the wealthiest metropolitan areas in India.

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According to Rhonda Shasteen, chief marketing officer at Mary Kay, Inc., “For Mary Kay to be successful in India, the company had to build a brand, build a sales force, and build an effective supply chain to service the sales force.”

Building a Brand

Mary Kay, Inc. executives believed that brand building in India needed to involve media advertising; literature describing the Mary Kay culture, the Mary Kay story, and the company’s image; and educational material for Mary Kay independent sales representatives. In addition, Mary Kay, Inc. became the cosmetics partner of the Miss India Worldwide Pageant 2008. At this event, Mary Kay Miss Beautiful Skin 2008 was crowned.

Brand building in India also involved product mix and pricing. Four guidelines 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 consumer between the ages 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. Following an initial emphasis on offering high-quality, high-value products, Mary Kay introduced more technologically advanced products that commanded higher price points. For example, the company introduced the Mary Kay MelaCEP Whitening System, consisting of seven products, which was specifically formulated for Asian skin in March 2009. This system was “. . . priced on the lower price end of the prestige category with a great value for money equation,” said Hina Nagarajan, country manager for Mary Kay India.

Courtesy Mary Kay, Inc.

Building a Sales Force

According to Adkins-Green, “Mary Kay’s most powerful marketing vehicle is the direct selling organization,” which is a key component of the brand’s marketing strategy. Mary Kay relied on its Global Leadership Development 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 representatives 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 demonstrations, sales presentations, professional demeanor, the company’s history and culture, and team building.

“Culture training is very important to Mary Kay (independent sales representatives) because they are going to be the messengers of Mary Kay,” said Hina Nagarajan. “As a direct-selling company 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, western, and northeastern regions of the country.

Creating a Supply Chain

Mary Kay, India, imported products into India from China, Korea, and the United States. Products were shipped to regional distribution centers in Delhi and Mumbai, India, where Mary Kay Beauty Centers were located. Beauty Centers served as order pickup points for the independent 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 development, company infrastructure, and building its brand in India. “There is a tremendous opportunity for growth,” says Sheryl Adkins-Green. India represents a particularly attractive opportunity. Developing the brand and brand portfolio and specifically formulating products for Indian consumers will require her attention to brand positioning and brand equity. 31

Questions

1. Is Mary Kay an international firm, a multinational firm, or a transnational firm based on its marketing strategy? Why?

2. What global market-entry strategy did Mary Kay use when it entered India?

3. Is Mary Kay a global brand? Why or why not?

Chapter Notes

1. “Dell India regains Top Spot in Domestic PC Market,” ibnlive.in.com, May 24, 2014; “Dell India Plans to Open More Exclusive Brand Outlets in India,” www.business-standard.com, December 13, 2013; “Dell’s Next Big Agenda,” www.crn.in, February 21, 2012; Dell India Opens Its Exclusive Store in Hyderabad, www.greatandhra.com, September 12, 2012; and “How Dell Conquered India,” www.CNNMoney.com, February and 10, 2011.

2.  Unless otherwise indicated, all trade statistics and practices are  provided by the World Trade Organization, www.wto.org, downloaded May 10, 2015.

3. Dennis R. Appleyard and Alfred J. Field, International Economics, 8th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2013), Chapter 15; Tansa Mesa, “Africa and Carribbean Fear EU Latam Banana Tariff Cuts,” International Herald Tribune, August 26, 2008, p. 8; Yuri Kageyama, “Selling Rice to Japan? U.S. Plans to Try,” www.msnbc.com, March 7, 2004; “A Shoe Tariff with a Big Footprint,” The Wall Street Journal, November 23, 2012, p. A13; and Economic Report of the President (Washington, DC: U.S. Government Printing Office, 2012).

4. “Time to Put Trade Above Politics,” Time, March 7, 2015, p. 24.

5. This discussion on the European Union is based on information provided at www.europa.eu, downloaded March 5, 2014.

6. These examples provided at ustr.gov.

7. For an overview of different types of global companies and marketing strategies, see, for example, Masaaki Kotabe and Kristiaan Helsen, Global Marketing Management, 6th ed. (New York: Wiley, 2015); Warren J. Keegan and Mark C. Green, Global Marketing, 4th ed. (Upper Saddle River, NJ: Prentice Hall, 2005); and Michael Czinkota and Ilkka A. Ronkainen, International Marketing, 10th ed. (Mason, OH: South-Western, 2013).

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8. Johnny K. Johansson and Ilkka A. Ronkainen, “The Brand Challenge,” Marketing Management, March–April 2004, pp. 54–55.

9. Kevin Lane Keller, Strategic Brand Management, 4th ed. (Upper Saddle River, NJ: Prentice Hall, 2013).

10. “Purchase Power of Teens Tops $819 Billion,” insights.mastercard.com, November 21, 2012; “Coca-Cola, Nike and Adidas Top Brands for Teens Globally, TRU Study Finds,” www.teenresearch.com, March 2, 2009; “Global Habbo Youth Survey,” [email protected], downloaded March 20, 2009; www.mtv.com/company, downloaded January 10, 2014; Bay Fong, “Spending Spree,” U.S. News & World Report, May 1, 2006, pp. 42–50; and “Burgeoning Bourgeoisie,” The Economist, February 14, 2009. Special report on the new middle classes.

11. “The Pocket World in Figures: 2015 Edition,” The Economist.

12. “Industrial Espionage: Data Out the Door,” Financial Times, February 1, 2011, p. 8; “FBI’s New Campaign Targets Corporate Espionage,” The Wall Street Journal, May 11, 2012, p. B4; and “The Staggering Cost of Economic Espionage Against the U.S.,” www.thepochtimes, October 22, 2013.

13. For comprehensive references on cross-cultural aspects of marketing, see Paul A. Herbig, Handbook of Cross-Cultural Marketing (New York: Halworth Press, 1998); Jean Claude Usunier, Marketing Across Cultures, 4th ed. (London: Prentice Hall Europe, 2005); and Philip K. Cateora, Mary Gilly, and John L. Graham, International Marketing, 16th ed. (Burr Ridge, IL: McGraw-Hill/Irwin, 2013). Unless otherwise indicated, examples found in this section appear in these excellent sources.

14. “Bribery Law Dos and Don’ts,” The Wall Street Journal, November 15, 2012, pp. B1, B2.

15. “Greeks Protest Coke’s Use of Parthenon,” Dallas Morning News, August 17, 1992, p. D4.

16. “How Did Kit Kat Become King of Candy in Japan?” www.cnnmoney.com, February 2, 2012.

17. “Terrence A. Shimp and Subhash Sharma, “Consumer Ethnocentrism: Construction and Validation of the CETSCALE,” Journal of Marketing Research, August 1987, pp. 280-89. For a review of research on this topic, see A. Alsughayir, “Consumer Ethnocentrism: A Literature Review,” International Journal of Business and Management, May 2013, pp. 50-54.

18. “Burgeoning Bourgeoisie,” The Economist.

19. “Mattel Plans to Double Sales Abroad,” The Wall Street Journal, February 11, 1998, pp. A3, A11.

20. “Strong Dollar Squeezes U.S. Firms,” The Wall Street Journal, January 28, 2015, pp. A1, A2.

21. For an extensive and recent examination of these market-entry options, see for example, Johnny K. Johansson, Global Marketing: Foreign Entry, Local Marketing, and Global Management, 5th ed. (Burr Ridge, IL: McGraw Hill/Irwin, 2008); A. Coskun Samli, Entering & Succeeding in Emerging Countries: Marketing to the Forgotten Majority (Mason, OH: South-Western, 2004); and Keegan and Green, Global Marketing.

22. Based on an interview with Pamela Viglielmo, Director of International Marketing, Fran Wilson Creative Cosmetics; and “Foreign Firms Think Their Way into Japan,” www.successstories.com/nikkei, downloaded March 24, 2003.

23. Small and Medium Sized Exporting Companies: Statistical Overview (Washington, DC: International Trade Administration, April 16, 2012).

24. “About Us,” www.strauss-group.com, downloaded March 15, 2015.

25. “Dannon Pulls Out of Disputed China Venture,” The Wall Street Journal, October 1, 2009, p. B1.

26. “FedEx Expands Reach in China with Buyout of Joint Venture,” The Wall Street Journal, January 25, 2006.

27. “Target’s New CEO Makes a Bold Decision to Leave Canada,” www.forbes.com, January 15, 2015.

28. This discussion is based on Keller, Strategic Brand Management, pp. 709–10; “Gum Makers Cater to Chinese Tastes,” The Wall Street Journal, February 26, 2014, p. B9; “Global Sales of Lay’s Chips Top $10 Billion in ‘11,” Dallas Morning News, March 12, 2012, pp. D1, 10D; “Machines for the Masses,” The Wall Street Journal, December 9, 2003, pp. A19, A20; “The Color of Beauty,” Forbes, November 22, 2000, pp. 170–76; “It’s Goo, Goo, Goo, Goo Vibrations at the Gerber Lab,” The Wall Street Journal, December 4, 1996, pp. A1, A6; Donald R. Graber, “How to Manage a Global Product Development Process,” Industrial Marketing Management, November 1996, pp. 483–98; and Herbig, Handbook of Cross-Cultural Marketing.

29. Jagdish N. Sheth and Atul Parvatiyar, “The Antecedents and Consequences of Integrated Global Marketing,” International Marketing Review 18, no. 1 (2001), pp. 16–29. Also see D. Szymanski, S. Bharadwaj, and R. Varadarajan, “Standardization versus Adaptation of International Marketing Strategy: An Empirical Investigation,” Journal of Marketing, October 1993, pp. 1–17.

30. “Where Wal-Mart Isn’t: Four Countries the Retailer Can’t Conquer,” www.businessweek.com, October 10, 2013.

31. Mary Kay, India: This case was prepared by Roger A. Kerin based on company interviews.