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The objective with which this research is being made is to develop as well decide on the selection of a foreign market for the business expansion as well as a market expansion strategy for Dollar Shave Club (DSC). For any company, it is very important to keep on expanding its business and services to the other nations for increased profitability as well as sustenance of the business strategy or model. The requirement of the expansion can generate from the saturation of the domestic market of the company or a high level of competitiveness in the same.
DSC which was launched in the USA in the year 2012 has seen a lot of growth in the current domestic market of the company. Hence the next logical step for the company is to expand into other ideal as well as manageable countries and for this the company has raised approximately 10 Million USD from venture capitalists Venrock. The objective of the investors and venture capitalists is to ensure that the company can rival companies like Gillette which is the leading personal care company globally. As per direction of the investors, the company will be looking for target market in Eastern or Western Europe.
For DSC the most important factor which calls for the market expansion is to utilize its novelty factor and the positive word of mouth and mileage it has gained globally from its widely viewed social media adevertisements. The existing scale of the company being much smaller to its direct competitions including Gillette, it is necessary that the expansion is tested and then made to continue to receive investment from the venture capital companies.
The international marketing strategy which will be developed for the company will be done through considering these aforementioned factors.
Task A: Market Selection for DSC
Selection of countries and reasons for selection
The countries which have been selected for performing this analysis includes France, Italy, Portugal and Spain. The reason for which these countries have been initially identified is that these countries are geographically closer to the domestic market of the company. Also since these countries belong to the developed market and the regions which have been earmarked by the investors for the company, these have been identified. Also these countries have a high degree of similarity with the domestic market of DSC. Also the market of men’s grooming products are significant in all of these nations.
Problem in gathering accurate and up to date information
While gathering the data for all of these countries, it was fairly difficult to gather the data for the specific industry of men’s grooming products in view of the fact that there is a lack of validated and relevant data and research reports on this industry. Also few of the readily available industry reports were not updated as of year 2015. Hence it was difficult for this researcher to collect data that can help in quick and easy analysis of the industry basis which the countries selected can be evaluated through the criteria decided. Along with the lack of access to the Passport was instrumental in making it really difficult to collect as well as analyse secondary data
Choice of Criteria
For deciding on an international marketing strategyas well as the mode of entry in the international market, it is necessary that the country to which the expansion will be done is selected with utmost care. Without a robust market selection strategy it will not be possible for the company to decide on an appropriate market entry strategy and implement the same effectively and efficiently (Daniels, 2014).
To carry out this analysis for the selection of the market, it will be required to decide on the factors basis which the selection of the market will be carried out. Hence it will be necessary to first identify some of the factors which can be utilized for the purpose of this evaluation. Following are the factors basis which this will be performed:
- Market size in the target country
- Opportunity of growth in the target country
- Level of competition in the target country
- Various risks and their levels in the target country
- Production costs in the target country
- Shipping costs in the target country
This set of logics and criteria are very important to be looked into for assessing the expansion option for the company since this helps the company in understanding various micro-economic and macro-economic factors which can have a lot of influence on the success of the company in the country. Out of these criteria chosen the most important of them market size as well as the level of opportunity in the target market. These are necessary in view of the fact that without a favourable result of these criteria, in spite of the fact that the country or countries are performing well in other factors, the feasibility of the target market diminishes significantly (Daniels, 2014). Hence these are the first two factors which are needed to be tested while evaluating the target market. The rest of the factors can be taken up later in no specific order.
The other factors look into analysing the international competitiveness in an opportunistic manner. For example, through utilization of the easily accessible information on level of competition in the target country as well as the various risks and their levels in the target country, it is possible for the companies to understand the viability of the target market as the preferred one.
Also for understanding the market shares held by other individual companies is an important decision making before entering a new market. Also, analysis based on an examination of global market shares may not help answer another crucial strategic management question. Hence it is also important to look into the effect as well as importance of production cost for the specific countries which are being planned to be entered. Production costs are very important for decision on the selling price, make-or-buy, cost reduction, product design, evaluating new production process and product discontinuation decisions. Product costs when used directly in decision-making tends to be more important than those that were used as attention directing information and they were more important in product mix, output level and product discontinuation decisions in continuous production processes manufacturing. In general, the importance of product costs in decision-making is immense. Similarly shipping cost is also important in decision making.
Critical evaluation of the chosen countries basis the criteria selected and choice of any one
As mentioned the chosen countries for performing this analysis are France, Italy, Portugal and Spain. These countries are geographically closer to the other alternatives for the domestic market of the company. Also the overall demographic factors and customer behaviour of the target consumers in these countries are relatively similar to the domestic market of the company. Also the market of men’s grooming products are significant in both of these nations. An analysis of these countries will be done basis the selected criteria.
Market size in the target country
Although in the year 2014 the market of men’s grooming products went to through a negative performance in which the overall sales volume decreased by 3% to 551 million Euros, the private labels grew in the Spain. In spite of less experience of the Spanish men regarding trying out revolutionary new products and new innovations as far as grooming products are concerned, they are becoming increasingly more concerned regarding their look and appearance (Euromonitor, 2014). This coupled with the lower price point of DSC and the unique offering, it is expected that the brand will have a significant pull. On the other hand, Italy, Portugal and France have a more evolved and matured men’s grooming product’s market, which has all the global giants in the space established in the country firmly. The new trend in Europe for the unshaven look has led to a muted growth for men’s grooming and shaving products in countries like France, Germany, and Portugal. But as far as the Spanish market is concerned, men prefer the traditional habits for grooming which is dominated by shaving (Euromonitor, 2014).
Opportunity of growth in the target country
The consistent performance and resilience which this segment has shown during the last few years of global economic recession in Europe and especially the countries mentioned confirm the fact that the opportunity of sustenance as well as growth of this segment in both the selected countries is significantly possible. Over the period of last couple of decades, the male consumers of the European nations have started adopting products which are malespecific. Also the skin care products are expected to fuel growth in both of these countries in the future.
As far as the comparison between these countries are concerned, due to the fact that southern European countries which include Spain are more economically troubled than the other nations as a result of the latest global recession, the private label brands with lower pricing strategy is expected to receive a significant gain in shares in nations like this. Also especially in Spain, the presence of the private label brands was minimal pervious to year 2007. This also leads to an increased opportunity for the average growth which can lead to better business for the companies like DSC. The current smaller private labels present in Spain have achieved double digit growth between year 2007 to year 2012. This led to the increase in the market share of the private label brands in Spain from 7% in 2007 to 18% in 2012 (Euromonitor, 2015). This can be utilized by DSC and these factors weight heavily towards selecting Spain as the preferred target country (Euromonitor, 2015). Spanish magazine “Men’s Health” has indicated that Spanish men are adopting more purpose-specific and sophisticated products for grooming which can be beneficial for the company as well.
Level of competition in the target country
Despite the loss of aggregate sales for the industry in the year 2014 for Spain, the smaller companies were the ones which lost the least. However the most significant competition which exists for DSC in Spain as well as France is Gillette. This series is the globally leading brand for men’s grooming products and the brand belongs to Procter & Gamble. This is also currently number 1 in France, Portugal and Italy. As of 2014, Procter & Gamble France SNC is the leading player in France with 29% share of the market, in Portugal with 29% of the market share and in Italy with 28% of the market share. The second biggest brand in this space for these countries is Unilever with around 10% to 12% share of the market. As of 2014, in Spain, Procter & Gamble is the leading player with 29% of market share (Euromonitor, 2015). However in Spain, the brand of Gillette lost some ground in the year 2013 and 2014. This was led by the growing competition from various smaller private label brands which are present in the razors and blades section of the men’s grooming products. The other competitive entities include Portugal men’s skin care brand Bulldog which started its sales in Spanish market in the year 2012 through department store Corte Inglés.
Various risks and their levels in the target country
The most significant risk which the company face in terms of its strategy of international expansion is the competitive risk. The most dominant brand in various nations which can be identified by DSC as the target country will have Procter & Gamble’s brand Gillette as the market leader. Due to the size of the company and the very strong brand name the company has in all over the world, this risk is very significant for all the other companies which includes DSC.
The other risks include the behavioural risks of the customers. There is a new trend in various markets of the Europe, including the countries which are being discussed here, in which a slightly unshaven look has become the preferred one for the men. This can lead to diminish in the business as well as growth of the companies in this this industry. In this scenario expanding to a different country which requires a high level of capital expenditure can backfire significantly. There are multiple countries including Italy, France etc. which used to have dominance of shaving have seen recent declines in the same trend.
Production costs in the target country
The production cost for the company will not be much different than the current one if the company continues to manufacture in its domestic market. However if as a part of the strategy of the brand it decides to manufacture in other nations, the production cost will be high since the same will also involve the capital expenses of setting up of the entire manufacturing facility. Especially the countries like France are very costly in terms of labour costs etc. and hence this will be significant factor to be considered by the company.
Shipping costs in the target country
The shipping cost will be higher for the company if it ships the products to the countries which are far from the domestic country of the company and hence the shopping cost will be higher for Portugal, France and Italy for the company.
As discussed, in view of fact that in almost all of the above mentioned factors are favourable for Spain, the target market chosen should be Spain. Spanish magazine “Men’s Health” has indicated that Spanish men are adopting more purpose-specific and sophisticated products for grooming which can be beneficial for the company as well. This will be beneficial for the company with its unique offering. Also the leading brands have been losing its stronghold over this market and it will be god time to make an entry there. Since Spain is more economically troubled than the other nations due to the latest global financial recession, the private label brands with lower pricing strategy is expected to receive a significant gain in shares in these nations. The shipping cost will also be lower for Spain for DSC since it will be shipping from its domestic market, which is the USA.
Task B: Market Entry Strategy
In this section of the report, a feasibility analysis of a Joint Venture (JV) between DSC and Bulldog will be looked into. For this it would be necessary to look at the definition of JV as well as the critical success factors for the same.
Critical Success Factors for a Joint Venture
Alignment of the brand value, corporate culture and long-time objective
Bulldog is more of a traditional men’s grooming and skincare company, which has a modus operandi significantly different from that of DSC. Although both the companies are in the same market space, but the brand outlook and the elements are vastly different. DSC has a strong underlying flavour of startup and a quirky way of appealing to the psyche of the customer. These are the factors basis which the company has achieved a lot of success in its domestic market. There will be high potential of loss of all of these factors if the company enters into a JV of Bulldog (Lymbersky, 2008). Also coping with differing management styles, cultures, and working relationships prevailing in these companies may not be easy for any of them. Also in view of the fact Spain is a new country with a different dialect used it may be difficult for the employees to manage communication with senior managers and employeesin both the companies so the objectives of the joint venture is not lost. This can also be difficult in this scenario.
Strength of the entities in the target country
The possible target countries which have been chosen in the previous section of the report is Spain, Italy, France and Portugal. Bulldog has very limited presence in some of these countries. This UK men’s skin care brand started its sales in Spanish market in the year 2012 through department store Corte Inglés. This is not very favourable for the JV to work out in view of the fact that DSC also has no presence or brand representation in the target country. The same reason applies for France and Italy and Portugal as well. Basis these factors it can be said that the option of JV with Bulldog as market entry strategy in Spain is not advisable and there are other better alternatives which can be pursued by the company to ensure a smooth and more successful market entry.
Alternate market entry strategy - Direct Exporting
The recommended market entry strategy for DSC will be direct exporting. In this mode of international market entry the company sells directly to the target market with the similar brand and delivery experience with that of the domestic market. The company can be represented by multiple distributors in the target country who will be accountable for the delivery of the product to the end users for that specific market. Agents and distributors will be work closely with DSC in this arrangement by becoming the face of the company. Hence it will be significant to choose the agents and distributors correctly.
However this mode is most pertinent keeping the current business model of DSC in mind. Since this does not dilute the brand and its elements, which are most important drivers of the business of the company, this should be the preferred mode of operations. Also this will enable the company to maintain its low production cost in its domestic country without any additional capital expenditure in the target country (Bardhan, 2004).
- Lymbersky, C.: (2008) "Market Entry Strategies", p. 364; Management Laboratory Press
- Bardhan, Ashok Deo, and Jaffee, Dwight (2004), "On Intra-Firm Trade and Multinationals: Foreign Outsourcing and Offshoring in Manufacturing" in Monty Graham and Robert Solow eds., The Role of Foreign Direct Investment and Multinational Corporations in Economic Development
- Daniels, John; Radebaugh, Lee; Sullivan, Daniel (2014) International Business: Environments and Operations. Pearson
- Euromonitor (2015) Men's Grooming in Spain Jul 2015
- Euromonitor (2015) Men's Grooming in France Jul 2015
- Wienke, C., Negotiating the male body: men, masculinity, and cultural ideals, The Journal of Men’s Studies, vol. 6, no. 2, 1998, pp. 255-282.
- Caroline, P. ?Reaching to feminine side of men?, Marketing week, vol. 28, no. 4, 2005,pp. 38-39