09 Jun 2011

Sample essay: Opportunities and Challenges Likely to Be Encountered By Beauty Cosmetics in Its Expansion to Europe as a Foreign Market

Introduction

Expansion and venture into new market is an important component and issue that has been for business growth. Often such strategy can be achieved through various procedures such as entrance into new geographical markets and customers or expanding the current market so as to reach more of the already existing market. However, before any company expands its operation into a new market whether local or foreign, it is important that it conducts a market research so as to determine whether the proposed market would offer its products and service the most competitive advantage and best opportunities (Stevens 31).

It is on the above ground that Beauty Cosmetics being a company specialized in manufacturing and supply of beauty products opts to explore the opportunities and challenges that it is likely to face as expands to the foreign market in Europe. Although Europe seems to be a potential market for the Beauty Cosmetic products and services because of its vast market opportunities, cultural, heritage, and language similarities there are certain threats such as political and religious ideologies most probably will pose challenge in this new and foreign market expansion venture.

Screening the Europe Market for Beauty Cosmetics

Since Beauty Cosmetics desires to Europe as a foreign market, it will explore macroeconomic factors such as the stability of its currency, its level of domestic consumptions, and the exchange rates. Europe poses to be a stable market because of stable currency and strong exchange rates owing to the fact that Euro has remained stable against the dollar. This has therefore made it possible for her to possess a high domestic product that will boost sale of Beauty Cosmetic products and services (Lee 348).

The other issues that will be evaluated by Beauty Cosmetics as far as screening of Europe market is concerned would include mode of communication and the possible threats. Communication is an important component that would help Beauty Cosmetics not only to position itself, but also to find appropriate sales representatives for the right market segment ((Lee 340)). For instance, Beauty Cosmetic has to understand that besides English being used as the native language in Europe, their languages fall in four groups; Romance, Germanic, Baltic, and Slavic languages. Such procedure would help the company high and recruit its employees with communication in mind so as to segment, target, and position its products and services without communication barriers. On the other hand, possible challenges especially those that had been faced by a similar company would help Beauty Cosmetic to be prepared with appropriate strategies for addressing the challenges during its expansion into Europe (Lee 341).

Opportunities that Beauty Cosmetics is to Attain in European Market

The market opportunities that are offered in Europe are grounded on the economic, political, and socio-cultural status of Europe. Economically and politically, Europe is free trade zones and therefore would allow Beauty Cosmetic Company to easily access the markets that are vast and spread all over Europe. The free trade region principle is attributed to political good both within Europe and its neighboring countries (Doole and Lowe 104).

In addition, most countries in Europe are members of the wider European Economic Community (EEC) and the Economic Commission for Europe (ECE). These bodies have the mandate of ensuring that they there is effective regulation of the international trade (Tyson and Schell 190). Beauty Cosmetic Company would benefit from the economic integration that has been created by EEC. Similarly, the bodies have not only enabled Europe to develop strong and stable currency and market base, but have also enhance large, eager pool of labor, and well developed infrastructure which would be an asset in distribution of Beauty Cosmetic Company’s products and services  (Tyson and Schell 109-1).

The other opportunity existing in Europe for Beauty Cosmetic Company is based on size, rate of growth, and the intensity of the market. Europe has a large market size because both men and women are potential consumers of beauty cosmetic products and service (Longenecker and Gale 56). In addition, the intensity of the Europe market has minimal competition because of the presence of few similar companies. Consequently, there would be limited market congestion with high potential of growth thereby making the competition healthy (Stevens 47). With such market characteristic, there is much conviction that the size, intensity, and rate of growth of Europe market offers appropriate indicators that are required for Beauty Cosmetic Company expansion into the market.

Other financial and economic issues are market factors which include the GNP, GNP per capita and GDP as at 2010 was € 16, 228.23 billion.  The state with the least and highest GNP capita in 2009 were 61% and 271% respectively. When the gross national product (GNP) is below the demands of the country, this provides an opportunity for the company to consider investing in either country in Europe. Often such conditions would possibly lead to high demand for beauty cosmetics are than the production level (Doole and Lowe 110-1). Often countries strive to satisfy the demand of the consumers and would therefore ensure that its GDP meets the consumers demand. However, Europe has so far not majored in beauty cosmetics because it is only spending 1% of its GD P in the budget thereby making it possible for the Beauty Cosmetic Company to take advantage of such state (Lee 349). This is out of the proposed € 862 billion that was supposed to be spent between 2007 and 2013.

The Europe socio-cultural factors are other aspects that will promote sales from Beauty Cosmetic Company especially on the basis that all her socio-cultural institutions and beliefs are not against the use of cosmetics. In addition, most people from Europe are aged between 15 and 35 years thereby making a larger portion of the population to be appropriate clientele for beauty cosmetic products and services. This is because the youths are known to be on the look for new products and fashions in the market; an issues that Beauty Cosmetic Company can take advantage of as it expands to Europe as a foreign market (Hisrich 68).

Challenges the Beauty Cosmetic is Likely to Encounter as it Expands into European Market

Despite the fact that there are various opportunities for Beauty Cosmetic Company in Europe, there are a number of challenges and obstacles that it will probably face during its expansion to the foreign market (Tyson and Schell 192). The first barrier is political environment in Europe which will be as a result of difference in systems of government, political instability, ideologies, and national economic priorities. Certain governments distrust foreign investors in an attempt to maintain domestic control by enacting legal barriers that would stop foreign companies from operating in such markets (Tyson and Schell 192). Under such condition, companies such as Beauty Cosmetics can only take advantage of the regions free trade zones which allow free trade and expansion of companies into new markets (Lee 349).

Legal environment is another factor that can pose serious challenge to Beauty Cosmetic as it expands in European market. These regulations would include the tariffs, quotas, documentation, and import regulation. Other regulations include various investment tax, income tax and employment laws (Doole and Lowe 118). The company will therefore have to depend on the treaties native country shall have made with Europe so as to successfully venture into the new market. For example, General Agreement on Tariffs and Trade (GATT) is a profound treaty that will allow the Beauty Cosmetic Company to be part of the international transaction of member nations and therefore eliminate the barriers associated to trading in Europe (Stevens 67).

The other issues that Beauty Cosmetic will have to contend with are linked to Europe’s economy. For instance, the level of income and expenditure patterns on beauty cosmetics is relatively low among the population in various countries in Europe as most people would prefer to spend much in health care insurance policies as opposed to cosmetics (Longenecker and Gale 62). Consequently, as Beauty Cosmetic Company takes advantage of the wide spread and high income rate among the youths, it must consider and find ways of convincing people to invest in beauty cosmetic products and services.

Beauty Cosmetic Company might also be forced to regulate its prices for health competition at the expense of maximizing profit. That is, being a new entrant into Europe, it might be forced to reduce its prices as initial introduction that is favorable with the current market price even if the products were of higher quality that those from existing companies (Stevens 67). To address the price challenge, Beauty Cosmetic Company might be forced to lease with other companies dealing in beauty cosmetics and the government to regulate its prices. However, such move might either take longer than necessary or turn to be too expensive in the long run. This is because different countries have different means and procedures of regulating prices which might not consider quality of the products and services (Hisrich 68).

Socio-cultural might also pose challenge to Beauty Cosmetic Company. For instance, some people might simply ignore the products irrespective of their quality because they are manufactured by a new or foreign company. The literacy level, general education, language, and religious affiliations of the company’s clientele would determine their take and subsequent purchase of the Beauty Cosmetic Company’s products and services especially after adverts. Similarly, the ethical consideration of beauty cosmetics in Europe has been rated as low as 20% thereby posing threat on the purchasing ability of the clients (Lee 350).

At the same time Beauty Cosmetic can choose to be mobile by introducing the beauty products that are required in the market at the moment and later on changing the strategy based on market demand. Although most of the population in Europe is literate, still majority are better speakers of their native language which will directly influence how Beauty Cosmetic Company is to be received. In fact, most people prefer and understand adverts made in native language than English. Similarly, the most countries in Europe are Catholic, Protestant, and Pentecostal faithful. These religious beliefs have trained their followers to shun the use of cosmetics (Tyson and Schell 193). Consequently, Beauty Cosmetic Company’s successful expansion will largely depend on its ability to advertise in native language and promote the use of descent work, success, clothing, food, and language. It must also respect the social values and religious beliefs, and cultural norms (Tyson and Schell 193).

World Political and Economic Effects on New Market Expansion Plans

Political uncertain can adversely affect the growth and expansion of a company to a foreign market. Its risk often results from political instability and unrest. These aspects can lead to lose of equipment and overall lose to the company and therefore poses challenge of not only lose of profitability, but also closure of the company. These effects influence the fiscal, monetary, trade, industrial, and labor development. Moreover, governments may find it hard to settle some diplomatic or military executions that might be a risk to foreign investors (Doole and Lowe 121-2).

Certain global economic factors such as recession often cause rise in the cost of production (Stevens 95). This is an issue the Beauty Cosmetic Company must explore so as to determine whether cost of raw material and the overall production of its products and services would commensurate prices of the finished products. In addition, recession has sometimes caused fluctuation in the dollar standing against Europe thereby causing changes or instability in the transaction rate (Stevens 95).

In conclusion, Beauty Cosmetic Company’s expansion to Europe as a foreign market is often aimed at taking its products and services within the reach of consumers. In doing so, the company would be able to maximize profit by taking advantage of the opportunities existing in the foreign market. However, various challenges are bound to occur which if not properly addressed by appropriate new market venture strategies might result into lose and closure of the company. Therefore for Beauty Cosmetic Company expand to Europe as a foreign market successfully, it must meet new markets regulations, demands, legal requirements, environmental requirement, and consider the changing market parameters.

Works Cited

Doole, Isobel and Lowe, Robin. International Marketing Strategy: Analysis, Development and Implementation. London: South Western Cengage, 2008.

Hisrich, Robert. International Entrepreneurship: Starting, Developing and Managing a Global Venture. Los Angeles: Sage, 2009.

Lee, Seongil. Computer-Human Interpretation. Berlin: Springer, cop, 2008.

Longenecker, Justin and Gale, Thomas. Small Business Management: an Entrepreurial Emphasis. Mason: Thomson/South-western, 2006.

Stevens, Robert. Market Opportunity Analysis: Text and Cases. New York: Best Business Books, 2006.

Tyson, Eric and Schell, Jim. Business Opportunity Analysis: Small Business for Dummies. Hoboken: Wiley Pub, 2008.

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