Executive Summary Shanghai Pehchaolin Daily Chemical Co.,ltd was founded in 1931 inShanghai. It brought to customers a strong marketing message whichfocused on bring out the unique Asian beauty in every woman andproduce Chinese legendary product using herbal ingredients.However, Pehchaolin’s sales have been stagnant in China due toover-concentrated market and saturated brands. To venture intoSingapore market is a viable option to boost its stagnant domesticsales. Singapore has one of the highest GDP in the world, stableand business-friendly environment, high education level and an openculture. The cosmetic market in Singapore have fewer brands thatfocus on herbal ingredients compared to China. Singapore alsoenjoys high-skilled labour and advanced technology. There arehowever risk factors such as high operating cost and intensecompetition from other international brands. For Pehchaolin tosuccessful market itself in Singapore, it should adopt exportingmethod of venture to save cost and increase profit margin. In termsof marketing, it can introduce herbal essence series and hydratingseries first through standardization production followed byadaptation to the market. Pehchaolin should adopt high valuestrategy for pricing and use TV commercial as media to promote thebrand awareness. Lastly, it should use retailers like Wastons tosell its products. To better manage risk factors, Pehchaolin shouldreduce raw material and labour cost by sourcing them from homecountry and export the product to Singapore. It should also placemore emphasis on its unique selling proposition which is herbalessence to differentiate itself from competitors.

Content 1. Company overview1.1 Company Background1.2 Current Situation and Moving forwardinternationally

2. Understanding the Market 2.1 Size2.2 Pestel Analysis2.3 Competitive environment 2.4 Risk Factor2.5 Success Factor

3. International Marketing Strategy 3.1 Entry Mode3.2 Price/Product/Place/Promotion3.3 Risk Management Regimes

4. Conclusion Reference

1. Company overview

1. 1 Company Background

Shanghai Pehchaolin Daily Chemical Co.,ltd was founded in 1931 inShanghai with its first generation of product called Pehchaolincream: a herb infused all natural moisturiser. It sold to millionsof Chinese women and become the best- selling product of thecompany. This time-tested product was based on a German formula andthe cream was packaged in a mental box which becomes symbolic ofthe brand over the years. Its branding and product features alsostarted to shift from “protection of skin damage” towards“nourishment and care with all natural ingredients”. It alsobrought to customers a strong marketing message which focused onbring out the unique Asian beauty in every woman and produceChinese legendary product using herbal ingredients.

1.2 Current Situation and Moving Forward Internationally

Today in 2015, China’s cosmetic market growth has been consistentlyaround 22% since 2010 (Diagram 1). However, 80% of market share andsales generated in Chinese cosmetics market belonged tointernational brand names such as Loreal, Estee Lauder and P&G. Forhome brands, their market share is further squeezed as more foreignbrands ventured into China. Pehchaolin’s sales have been stagnantand not increasing as fast as foreign brands. International brandssuch as Chanel and Loreal have substantial bargaining power overconsumers and high Research and Development investment that homebrands fail to compete with. This posed threat to Pehchaolin thatbrands it product based on natural ingredients and traditionalChinese herbal supplement. This provides one of the reasons forPehchaolin to expand into Singapore’s cosmetics market as itsunique selling proposition of Chinese herbs appeal to the largelyChinese female population in Singapore. Singapore’s market alsohave less concentration of products that focus on targeting Asianwomen skin type compared to China cosmetics market and make us oftraditional natural ingredients. As one of the cosmetics withlongest history in China, Pehchaolin could brand self as a time-tested brand overseas to increase its credibility. This relatively

untapped market offers great earning potential to Pehchaolin if itcan adapts and strategies its marketing in Singapore successfully.

Diagram 1: China Cosmetics Retail Markt 2011-2017e

Source: China Internet Watch

Susie:

Understand Singapore market

1. Size1) Location and Topography:

Nowadays with the rising of Asia as the new economic powerhouse,multinationals are looking towards to the region to expandbusiness. Singapore’s strategic location in the heart of SoutheastAsia, as the No.1 logistics hub in Asia in the 2014 LogisticsPerformance Index ranked by the World Bank.Singapore is a small andheavily urbanized island with a total area of 778km squared. Itdoes not face the danger of volcanoes, earthquakes, typhoons orhurricanes.

2) Climate:

People here is working and studying in air conditioning room foryear after year that’s usually caused dry and uncomfortable of theskin, people more and more care about their skin health condition,typically for female, almost every one of them brings along withthe skin product anywhere and anytime, aim at relieving the itchingcaused by dry skin or sunblocking cream.

3) Demographics:

Singapore’s social and ethnic fabric is a unique blend of culturesand people – Chinese 74.2%, Malays 13.4%, Indians 9.2% and expatsfrom various countries 3.2%. Cosmetics product widely used forfemale, but nowadays, men have an increasing need for cosmeticsproduct as well. Pehchaolin cosmetics provide different products todifferent gender and age groups, provide customer various choices.

4) Culture:

Though many residents speak several languages in Singapore, butEnglish and Chinese being the primary, there are several firstlanguages that appear among Singaporeans. Rates of first languagespeakers: English 32.3%, Chinese 49.9%, Malay 12.2% and Tamil 3.3%.Singapore as an international country but Chinese nation stillremains traditional custom very well. Pehchaolin cosmetics producedin China with traditional herbal formula, resonant to the Chinesenation in Singapore, attract them as potential customer.

5) Potential:

Cosmetic products market in Singapore has been witnessingsignificant growth, with rising influence of many internationalbrands, which are offering innovative cosmetic products. Moreover,the cosmetics market in the country is anticipated to grow. Risingbeauty concerns among both men and women are further growth in theSingapore cosmetics industry, and the entry of new cosmetic brandscoupled with product launches is creating an exceptionally brightfuture for the cosmetics sector in the country.

Pehchaolin as strategic cooperative partner with the most popularentertainment show “The Voice of China” which held in China since 3years ago, now the qualification trails hub available in Singapore,Mediacorp bought the rights and play back the show in the next day.This is an opportunity in corporation with Singapore to attractmore customer by raised awareness of Pehchaolin product. Bloggersand social media to be more influential for Pechaolin in future.

2. Pestel analysis:

A. Political and Legal

Singapore is a republic with a parliamentary system of government. Theregulatory framework is one of the world’s most efficient with openmarket to the world. Singapore boasts of a competitive, corruption-free, open business environment. The Port of Singapore is one ofthe busiest in the world as the country focuses on electronics andchemical exports to richer industrialised nations.

B. Economic

Singapore is the second most competitive economy in the worldaccording to the World Economic Forum’s ‘Global CompetitivenessReport 2014-2015‘. According to the Heritage Foundation’s ‘2014Index of Economic Freedom’ Singapore is the second freest economyin the world. The country is also known for its low tax regime. WithGDP in excess of $55,000, the Singaporeans' spending power arestrong.Singapore is emerging as the favourite destination among theSoutheast Asian countries for global cosmetic players, with high spendingon cosmetic products (according to a new report from market researcherRNCOS).

C. Technology:

Singapore as an expansive base of leading global logistics players,world-class infrastructure and excellent global connectivity,Singapore is the preferred logistics and supply chain managementhub for leading manufacturers across industries. The communicationtechnology is meet world standard, whole country fully covered 4Gnetwork, broadband and fibre network. The three major communication

companies which are SingTel, StarHub and M1 provides convenient andefficiently services to customer.

D. Social:

In Singapore, Widely use of English is appreciated and attractsforeigners, about 37% of the population consists of internationalmigrants and many citizens are descendants of migrants. Singapore’slifestyle is multi-cultural with each of these ethnic communitiesmaintaining their unique way of life and at the same time livingharmoniously. Customer purchase behaviour is connectivity andinteracting, for the cosmetics products, the natural ingredientswidely used in the products nowadays more and more popular.Singapore is a modern, westernized environment with multi-culturalsociety, hence, it’s a country with very high acceptability of newproducts.

2.3 Competition Environment (using 5-forces) to develop MOE

Rising competition between international and domestics brands inSingapore, although international players continued to account fora larger value share, there was also a bigger presence of domesticsbrands, particularly ones from South Korea and Taiwan, over thereview period. The popularity of South Korean pop culture led tothe popularity of Korean beauty brands in Singapore as consumerswere enticed by the natural and flawless-looking skin of Koreancelebrities. On the other hand, Taiwan beauty variety shows gainedinterest among local consumers. More Singaporeans perceivedproducts by regional brands to be more effective as those brandowners are familiar with Asians’ skin type and hence their productsare likely to be more suitable for them.

The cosmetics market in Singapore is intensively, strongcompetitive among various brand and product. To the star-productVaseline cream of the Pechaolin in Singapore market, the maincompetitor is Vaseline (Unilever). It’s an famous internationalbrand actively in the global market for many years. To the herbalproduct of Pehchaolin, also facing many other competitors of Asiabrand products, which are made from herbal formula too. Such as TheFace Shop from Korea and Himalaya Hebals from India.

Both of them are well known brand in the cosmetics market inSingapore. Pehchaolin as the new entry, lower awareness by customerso weak bargaining power with customer and supplier, its highbarrier to entry in this market, lower competitiveness than theinternational brands. Its significant importance to positioningPehchaolin brand before entering Singapore market, find out thecompetitors and adopt appropriate marketing strategies to generateown core competitive advantages.

Singapore boasts of a highly efficient, hassle-free and affordablepublic transportation system, which includes taxis, buses and themodern Mass Rapid Transport (MRT) rail system. These modes oftransport are air-conditioned and operate from 5:30 am until 12mid-night and link the entire city. They are safe, clean andefficient.

Singapore employs low trade tariffs, efficient customs services,efficient import/export procedures, transparent borderadministration, top quality transport infrastructure, and efficientregulatory environment.Singapore was found to be the one of Asia’sbest investment destinations for those multinational companies,Singapore has benefited from them as they bring in capital,technology, management know-how and access to international exportmarkets.

2.4 Risk factor

1) Intensive of competition:

Many international and regional brands in the market, intensity ofcompetition is quite high.

2) Expensive operation cost:

Singapore is an expensive country for living or running business,Pechaolin must be careful o deal with financial issues.

3) Different culture influence customer behaviour:

Although Chinese nation is the most important part in Singapore butthey are not purely Chinese culture compare China, they are moresensitive about the price and the brand.

2.5 Success factor

High quality transport and world-class infrastructure, helpoperation efficiently.

Modern, westernized environment, Wide use of English isappreciated and attracts foreigners, highly acceptability bypeople.

Educated citizen provide quality employees such as sales or manageperson for business operation.

Chinese nation as the main ethnic group in Singapore, resonantlywith China brand with herbal formula products.

Social influence of celebrity, China’s first lady using thisproduct, also Pehchaolin as the state gift effort for foreignaffairs.

Cooperate with public social media, is rising awareness of thebrand to customer.

Pehchaolin core technology and knowledge into the brand, goodquality and nostalgic package.

3.International marketing strategy

3.1 Entry mode

To enter successful into Singapore market, Pehchaolin should utilizeexporting as the most appropriate and mostly likely to succeed entrymode. Exporting refers to sale of products to overseas market withproducts made from ingredients and materials sourced in the home country

and only complimentary changes such as packaging or branding of productis done in the foreign country.

Pehchaolin’s brand is hinged on the unique selling proposition ofusing herbal extracts and created naturally without impurities forAsian skin type. Such brand impression should not be tinted ordiluted by partnering or acquiring another company that hasdifferent values and product propositions. Furthermore, in theSingapore cosmetics market, not many home brands are using thisconcept and merging them could easily lead to brand dilution andconfusion which decrease the credibility of Pehchaolin’s products.Therefore, directly exporting to Singapore, Pehchaolin retains theprestige of its brand.

Management control needs to remain strong as Pehchaolin is one ofthe brands with longest history and customer relationship in China.The company does not intend to loosen its management control in thenew market, rather, it attempts to tighten the relationship betweenthe new company overseas and its home company in Shanghai. Greatermanagement control is essential for internal communication,aligning company’s strategy overseas and disseminating companyvalues.

3.2 Adaptations of Marketing Strategy (4Ps)Product

Currently Pehchaolin has 4 product categories: Deep Hydratingseries (19 items), Herbal Essence series (33 items), Classical skincare series (47 items) and Men’s Facial care series (12 items).Pehchaolin should launch its herbal essence and deep hydratingseries first in Singapore using standardized method. Firstly,Singapore female working population have long time exposure to air-conditioning environment and skins are drier for longer time. Thisprovides potential market for the hydrating product line. Also,many female clients in Singapore are attracted to natural and non-chemical products which are deemed to be more healthy and safe touse. Pehchaolin can promote its herbal essence series to market

them to safety-conscious and natural loving customers. Mostimportantly, the herbal essence products have fewer competitorsincluding Faceshop, Bodyshop and Burt’s Bee compared to other morecosmetics product such a Loreal, DHC and Estee Lauder which usedenhanced ingredients with cutting-edge technology. Afterstandardization, Pehchaolin could slowly modify and adjust itsingredients to suit local customer preferences. For example, it cancombines hydrating with sunscreen function for customers becausesun exposure in Singapore is another reason for aging skin. Afterits initial success in launching these two product lines, it cangradually introduce man’s skin care as grooming of men in Singaporeis getting a larger growth on a year to yare basis.

Price

Instead of charging a premium as what other international brandssuch as Loreal and Estee Lauder has done, Pehchaolin should adopt ahigh value strategy according to Diagram 2 below. It intends tooffer high quality product and charge a medium price range (S$10-S$25) to attract customers to try out the products first. Bycharging a high premium price like other brands, Pehchaolin maypotentially face low sales level as customers generally do notintend to pay a premium price to a brand that they are not sofamiliar of. With customer experience coupled with Pehchaolin’spromoting activities, it can start to charger a slightly higherprice. Customers who are loyal and personally experience thebenefits of the products will continue to have repeated purchase.

Diagram 2: pricing strategy

Promotion

Pehchaolin should utilize two message channels. Firstly, throughmedia exposure which mainly includes TV commercials, Pehchaolincould increase its brand awareness by airing commercial duringprime time shows with Media Corps. The viewers number for TV inSingapore is high as many working adults and students preferwatching TV as pastime at night. Secondly, Pehchaolin could sponsortalent shows on TV or sponsor other events in the public to getcustomers’ attention. For example, its popularity reached a newpeak when Pehchaolin sponsored the famous Voice of China singingcompetition in China. The Voice of China show airing right was alsobought by Media Corp to broadcast in China.

The second channel of promotion is through Facebook and Instagram.Like other brands such as Chanel, Pehchaolin should set up itsFacebook page for customers to get the most updated information of

new products and features. It also provides a platform for companyto gather feedback and make adaptations to the products.

Place/Distribution

Pehchaolin should establish long-term dealership with Wastons,Guardian and Sasa. It is too costly to a new company likePehchaolin to set up exclusive distribution store like Channelwhich has high budget and profit margin. Hence, Pehchaolin canpurchase shelf space from personal care convenience stores likeGuardian to promote its product. To increase brand visibitliy,Pehchaolin could also pay a premium price to hire sales promoterand agents to stand next to its shelf space and introduce productsto customers interested in trying or buying them.

3.3 Risk management regimes Pehchaolin confronts high marketing cost, labour cost, utility costand cost of securing shelf space and distributing. To reduce therisk of having minimal margin and incurring loss, Pehchaolin shouldmake use of existing labour and raw materials in China market toreduce the production cost. This could give Pehchaolin an advantageand may even give them a cost leadership position because eventhough materials and ingredients price and labour cost areincreasing in China, they are still relatively cheaper than othercountries. Once Pehchaolin has achieved higher brand awareness, itcan reduce its TV commercial times to cut cost and use more freesocial networking advertising.

To compete successfully with other brands such as Body shop fromthe UK and Burt’s bee from the US, Pehchaolin has to usedifferential marketing to make its unique selling proposition knownto the customers. It should emphasize on the use of traditionalChinese herb as ingredients to appeal to the Chinese racepopulation in Singapore.

Conclusion

Pehchaolin’s sales have been stagnant in China due to over-concentrated market and saturated brands. To venture into Singaporemarket is a viable option to boost its stagnant domestic sales.Singapore has one of the highest GDP in the world, stable andbusiness-friendly environment, high education level and an openculture. The cosmetic market in Singapore have fewer brands thatfocus on herbal ingredients compared to China. In terms ofmarketing, it can introduce herbal essence series and hydratingseries first through standardization production followed byadaptation to the market. Pehchaolin should adopt high valuestrategy for pricing and use TV commercial as media to promote thebrand awareness. Lastly, it should use retailers like Wastons tosell its products. To better manage risk factors, it should alsoplace more emphasis on its unique selling proposition which isherbal essence to differentiate itself from competitors.

Reference

Singapore population now at 5.47 million, slowest growth in 10years, retrieved on May 17,2015 from

http://www.straitstimes.com/news/singapore/more-singapore-stories/story/singapore-population-now-547-million-slowest-growth-10-y#sthash.BO0rEhl6.dpuf

Income distribution:

The ratio of income of the top 20% to the lowest 20% ofresident employed households is 12.9%. This figure is growing,having increased from 12.7 in 2009. This places Singapore withthe 29th highest incidence of income inequality among nationsaccording to the World Bank.

Economic

Singapore enjoys a highly developed market-based economy. Itis known as one of the freest in the world. This is due to itsstrategic location in Asia and proximity to major shippinglanes as well as its industrious people. The economy isresilient, however, the government is expecting to performstimulus spending to help counter the effects of the globaldownturn. Despite this, GDP for the country is one of thehighest in the world among against nations. The monetarypolicy of the county is set by the Monetary Authority ofSingapore, the central bank, however, doesn't determineinterest rates as a monetary policy tool.

Industry:

Singapore is known for purchasing raw materials, then refining themfor trade.  Examples of this include the wafer fabrication and oilrefining industries. Goods producing industries, includingmanufacturing, construction, and utilities, contribute 28.3% of theGDP. Services Producing Industries contribute to the remaining67.6% of GDP.