Foreign Cosmetics in Japan
A while ago, a student of mine (yes, I’m also a professor at a business school), has written an interesting term paper. The general topic was – of course – failure in international business, and the student who was working for a US-based mid-sized cosmetics company decided to focus on cosmetics in Japan. The outcome was not surprising, but still highly interesting. Highlighting three foreign companies’ (Avon, Mary Kay, Boots) failed attempts at entry into the Japanese market, there seemed to be recurring patterns. Avon’s Japanese adventure started as early as 1969. For a number of years, Avon struggled as it failed to understand the Japanese consumers – the product portfolio was too Western, the low price strategy didn’t appeal to the market, and Avon’s distribution strategy that relied on the ‘Avon Lady’ was a complete cultural mismatch. Avon eventually worked out all the kinks, but in 2010 decided to exit the Japanese market by selling its business to a TPG, a private equity firm, as there were questions about future competitiveness. In one interview, the head of Avon’s Japanese operations, Terrence Moorehead, also characterized decision-making behavior in Japan as rather cumbersome. Mary Kay entered Japan in 1994 only to pull out again seven years later. Products had to be reformulated due to legal and cultural restrictions, but more importantly for Mary Kay, the entire company’s mission didn’t align well with the Japanese environment. Boots Cosmetics is of course a bit different from Avon and Mary Kay as it is a chain of drugstores and not just a cosmetics manufacturer. Having said that, 40 % of their revenue comes from the sale of cosmetics, mostly their own brands. In all fairness, Boots tried to be intelligent about bridging the huge differences that set Japan apart from other markets where they had been successful before. However, their choice of a joint venture partner – Mitsubishi – may have been less than ideal. Mitsubishi had access to capital and was well respected in Japan, but didn’t have experience in the drug store retail or in the cosmetics business. Mitsubishi’s might may also have lured Boot into a type of entry that was ‘too much, too fast’. Japan is often considered one of the most advanced markets in Japan – a fact that often lets foreign companies underestimate the difficulties associated with it.
It is fascinating how countries and cultures differ from others. Taking a business internationally opens up new markets, and along with these markets come a variety of differences, such as different taste preferences, and social norms. Aspects that may be acceptable in one culture, such as the use of specific colors and their meanings, could send a completely difference message to consumers in another culture. Unfortunately for these companies in the Japanese market, failing to understand consumers led to their failure. By trying to use the same techniques that they do in Western markets, they are more likely to alienate their target market. Just as McDonalds initially went into India with beef burgers, though Hindus do not eat beef, a lack of understanding consumers meant that projected success failed to be realized, until such issues were corrected. This shall be important for other companies to remember in order to avoid such failures through a lack of knowledge about the specific market environment they are attempting to enter.
It is highly shocking to me that all three of the cosmetics companies that tried to enter the Japanese market did not do their market research properly. A company needs to understand its customer base first and foremost before introducing products to them that will be appealing. For example, asian skin tones and european skin tones differ, as well as the type of cosmetics they like to use for their eyes since they have a different shape. Merely introducing the same type of cosmetics that these companies sold in their home country is clearly ineffective in this case.
This problem is compounded by not having a firm grasp of consumers in Japan, who tend to buy beauty and fashion products based on celebrities or models wearing them in magazines that they read. In the case of Avon representatives, this type of sales model is unheard of in Japan.
I find it interesting that Mary Kay didn’t learn from Avon’s mistakes. That’s one good thing about not being first to tap a market is the ability to avoid competitors’ mistakes and/or emulate their successful strategies. These comapnies may have been overconfident in their product or business model and did not feel the need to tailor them to the new market, obviously a huge mistake. Extensive research should always be done before entering a new market or developing a new product to determine viability. Boots found a remedy (but not a very good one) for Avon’s and Mary Kay’s mistake by partnering with well-known Japanese company, Mitsubishi. This might have worked if they’d chosen a company with a cosmetics background; it wouldn’t make sense for a Japanese cosmetic company to partner with Ford or General Motors. I hope the next cosmetics company that decides to enter this market makes note of these companies’ mistakes and develops their strategy accordingly.
It said in the article that the results weren’t surprising, but to me, that is surprising. Though Japan has very different cultural styles, they are very big on makeup and cosmetics. My speculation would be that Avon, Mary Kay, and Boots did not understand how to market their products properly. Another thing is that most large businesses would research their target market before entering that segment so that the business can be successful.
I find it very ironic that all three of those companies failed in Japan. They didn’t learn from any of the other mistakes before them. I have learned in many of my business courses, here at CLU, that a company needs to understand its customer base before introducing products to them that will be appealing; the customer is the most important part of any business. You have to know who your customer is in order to succeed.
It is interesting to me that with all of the money and power these three companies have, that their marketing departments could not come up with a way to bridge the cultural gap between Japan and the western world. I don’t personally know much about cosmetics, but it seems that the marketing departments of these three companies should easily be able to come up with a viable way of market penetration in Japan. It is amazing that not even one could grab a spot in Japan’s cosmetic market.
Being an international student at CLU, I know how important it is to do some research about the new culture one is entering to. Asia is a growing industry and from reading this article I would say that the Western companies were trying too fast to succeed, and have not research the culture and the people living there properly enough to understand what they need in the market. It is the customer and the customer’s needs that are vital to become a successful business. You have to do an audience view of your customers before one does the actual actions. In addition, I would also like to point out that Boots and Mitsubishi are two very different companies what works in different field. This can give the customers mixed signals of what the companies are actually offering.
That is interesting that Avon had such difficulties in the Japanese Market. It make sense because when a company goes into another country you have to know what appeals to that market to be successful. The same problems with Mary Kay and Boots. You may be successful in the US market, but when you try to advertise the same way in another country, then it probably is not going to work. Different cultures value different things. These companies need to do their research and think of the pros and cons before entering another market.
The time is still off. I submitted mine at 8:34 am not 3:35 pm.
Is it possible that maybe some companies and some products just aren’t made to fit in other countries? Mary Kay and Avon are based on some theories that aren’t quite relatable to Asian countries. So these companies would have to change to be able to fit into an Asian society. Is that desirable? If I were a part of those companies I would not want to change what my company stood for just to sell more products. I grew up with my mom having Mary Kay parties and Avon parties, and I think those companies may just be American. There’s nothing wrong with that.
The differences between different countries markets is amazing to me. The entire world is connected and most countries rely on each other, but our markets are all very different. It’s interesting that none of the three companies did enough research of Japanese markets before spending all that money on a getting into the Japanese market. I also think i is interesting that Mitsubishi wanted to join with Boots to open stores, as they have very different products.
This topic is interesting to me as these are very large companies who have failed drastically in Japan. I am surprised that their sales and marketing departments did not do better research for the amount of money they were investing. Better luck with the Japanese next time.