International Expansion Strategy of NIVEA towards the South Korean Market

Table of Contents

Table of Figures

1. Beiersdorf’s NIVEA
1.1 History
1.2 Product

2. South Korean Market
2.1 Business Environment
2.1.1 PESTEL Analysis
2.1.2 Hofstede’s Dimensions
2.1.3 Culture Map
2.1.4 Business Particularities
2.2 Target Group
2.3 Strategic Goals

3. Marketing Plan
3.1 Marketing Mix (4Ps)
3.2 Long-term scope

References

Table of Figures

Image 1: Paul C. Beiersdorf (left) and Oscar Troplowitz (right)

Image 2: Development of NIVEA Cream Design 1911, 1925, 2021

Image 3: Hofstede's Country Comparison between Germany and South Korea

Image 4: Erin Meyer's Culture Map

Image 5: Value Distribution of the South Korean Cosmetic Market 2019

Image 6: Visual Examples of Target Group

Image 7: Adapted Product Packaging Example

1. Beiersdorf’s NIVEA

The brand NIVEA belongs to the German private limited company “Beiersdorf” and was first registered in the year 1905.¹ NIVEA is now a global umbrella brand with several products for cleaning and skincare of face and body. Due to its wide product portfolio in the following paper it is focused on the international expansion of its main product; the plain moisturising cream for face and body.

1.1 History

Abbildung in dieser Leseprobe nicht enthalten

Image 1: Paul C. Beiersdorf (left) and Oscar Troplowitz (right)²

Beiersdorf was founded as a pharmacy and laboratory by Paul C. Beiersdorf in 1880 in Hamburg, Germany. Its headquarter is still located in the northern port city Hamburg today.³ In 1890 the Jewish pharmacist Oskar Troplowitz bought the corporation Beiersdorf, which was specialized on the production of medical band aids. The company quickly grew from eleven to approximately five hundred employees by 1918. Troplowitz progressively improved the working conditions for all his employees by shortening the working hours one third per week, installing paid vacation and an early version of company childcare for single mothers. Moreover, he offered free lunch and arranged a pension fund, which is still present today in modified form. With the help of his employed chemists and dermatologists he developed several products like toothpaste, bandage, care products for skin and hair, or scotch tape. Many of these products later formed brands with a wide product portfolio under Beiersdorf and are well known and successful until today.

Troplowitz was not only innovative when it came to research, production, and work conditions. Promotion and international thinking along with making international business contacts soon lead to the distribution of Beiersdorf products worldwide already in 1914 and the foundation of subsidiaries outside its home country Germany.⁴

Shortly after the company’s 50-year anniversary, in 1933 the company Beiersdorf was put under high pressure by National Socialists. All Jewish board members were forced to step back⁵ and inflammatory campaigns were lead against the company due to its Jewish background.⁶ During the second world war, Beiersdorf’s international subsidiaries were confiscated and sold to the corresponding countries. Fortunately, Beiersdorf was able to repurchase all its global trademark rights country by country until 1997. By the end of the 1990s, the company comprised 74 international subsidiaries and generated almost 70% of its turnovers outside its home country Germany.⁷

Beiersdorf today is one of the leading listed companies and its shares were included in the German Share Index “DAX”.⁸ Today the company NIVEA is led by an executive board of eight people, with Stefan De Loecker as Chairman.⁹

1.2 Product

Beiersdorf’s NIVEA cream, a moisturising skincare was first sold in 1911 in a small, flat, and yellow metal can. ­As the strongest brand from Beiersdorf, NIVEA was one of the driving engines for the international success of the enterprise.¹⁰ The brand name NIVEA was derived from the Latin word for snow: “nix, nivis”¹¹ due to the products white colour. The appearance of the flat metal can, NIVEA cream is still typically sold in, was changed to dark blue with white text on it in 1925, six years after Troplowitz death. With minor adaptions over the time the simple design is still recognizable today, as one can perceive in image two. The NIVEA packaging is a great example for a colour trademark. This means, that not only the brand name and logo is protected but also its unique colour: Pantone 280C.¹²

Abbildung in dieser Leseprobe nicht enthalten

Abbildung in dieser Leseprobe nicht enthalten

Image 2: Development of NIVEA Cream Design 1911, 1925, 2021¹³

To the brand’s product catalogue today also count amongst other things deodorant, soap, shower-gel, face cleaning wipes, sun protection, perfume, make up, care products for men, anti-aging cream and scrubs.¹⁴

Beside Beiersdorf’s and the brand’s success NIVEA products have been the subject of criticism lately. The environmental protection organisation Greenpeace announced that many NIVEA products contained microplastic, what is estimated as an environmental thread.¹⁵ Moreover, questionable ingredients, which are suspected of causing cancer and allergies were found.¹⁶ Beiersdorf reacted to those charges by claiming to reduce microplastic in its NIVEA products¹⁷ and be microplastic free by 2021.¹⁸ Furthermore, NIVEA states on the company’s website, that all ingrediencies are of high quality and safe to use. The brand offers transparency by listing and explaining every component.¹⁹ The parent company Beiersdorf in the meantime presents a sustainability agenda for the future and the plan, to actively contribute to goals and principles of the United Nations in regard of sustainability. Besides the sustainable use of resources, Beiersdorf aims to reduce its emissions, switch to recyclable packaging, and reduce waste.²⁰

2. South Korean Market

South Korea is a densely populated country located in East Asia. The country boarders North Korea, and three different seas.²¹

With the help of different analysing methods and comparison tools the target country South Korea is elaborated in the following chapter. Consequential, the business environment with special regard to cultural differences and the target group are perused in order to understand the business customs and other country specific features to later on discuss the relevant variables in the marketing plan. Derived from the findings the main goals of NIVEA’s expansion to the South Korean market is outlined.

2.1 Business Environment

For the purpose of a successful market entry, it is crucial to first elaborate and evaluate the foreign business environment. Therefore, this section thematises the cultural features and points out significant differences of South Korea towards the company’s home country market Germany.

2.1.1 PESTEL Analysis

The dimensions of the PESTEL analysis are indicators about the p olitical, e conomic, s ocial, t echnological, e nvironmental, and l egal settings of a certain country or region. The mentioned aspects are further elaborated in the following chapter.

Political

Regarding the political environment South Koreas president Moon Jae-in aims for increased stability by pushing the country towards denuclearization and peace. As a democratic state there exist lasting tension towards its neighbouring dictatorship North Korea.²² Nevertheless, when it comes to the freedom of press, South Korea scores 41 out of 180 on the world rank. As comparison, Germany is in 11th place, North Korea ends the list on the 180th rank.²³ On the Freedom House index for political freedom, South Korea is considered as free and scores 83 out of 100 points,²⁴ while Germany scores 11 points higher. The index evaluates factors like the electoral process, participation, freedom of expression and believe or functioning of government among others.²⁵ The country is global highly connected and has a notable global influence as it is part of the Organisation for Economic Cooperation and Development (OECD), the Asia-Pacific Economic Cooperation (APEC), the Asia-Pacific Trade Agreement (APTA)²⁶ and the international G-20 forum, among others.

Economic

The current global coronavirus pandemic of course also effects the economic situation of South Korea, but the country will be the first to recover, as real GDP is expected to grow by 2.9% in 2021.²⁷ Nevertheless South Korea is located rather near by the coronavirus outbreak region China, they were able to handle the corona crisis exemplary. This also has to do with the cultural attitude and the technological lead, which are mentioned in the following paragraphs again.²⁸

South Koreas current GPD is $1.6 trillion²⁹ and the GDP per capita based on the PPP is $44,292.³⁰ With the 11th highest nominal GDP as well as the 12th strongest PPP worldwide, it is an economically stable and interesting country.³¹ As a highly developed, high income nation³², with mixed economy³³, South Korea is a progressive nation. In 2018 it was the top 5th exporter and 10th top importer globally.³⁴ A dominant role is prognosticated for South Korea in the global economy by the middle of the 21st century.³⁵ According to Erin Meyer, “The centre of business gravity has shifted from America to Asia”³⁶, promising a future oriented market.

Social

Regarding social aspects, it is to say that the population exceeded 51.1 million people, what makes South Korea the 28th highest populated country. Over 80% of its inhabitants live in urban areas. Its biggest city Seoul is also its capital.³⁷ Buddhism and Christianity are the most practiced religions, but most people are not religious. Nevertheless, Confucianism influences the society as such. The main language is Korean³⁸, but English is common as business language³⁹, what makes the communication between home country nationals and host country nationals or third country nationals easier. The life expectancy is rather high with approximately 83.5 years. The medium Age is 43.7 years.⁴⁰ One can say that South Korean population is highly educated but the school system is also highly demanding. Traditional food, arts, architecture, and holidays are key features of the Korean culture.⁴¹

Technology

South Kore is among the most technological advanced countries worldwide with one of the fastest broadband speeds.⁴² Nearly every household is connected to the internet. Instant messaging and gaming are highly popular.⁴³ Moreover, South Korea is known for great progress in robotics, biotechnology, and engineering.⁴⁴ On Bloomberg’s Innovation Index, South Korea ranks second, after Germany in 2020, meaning it is a leading centre for information and communication technology.⁴⁵

Environmental

South Korea is known for its beautiful landscape and traditional as well as futuristic architecture. In recent years, it has become popular for tourism, with attractions like three UNESCO World Heritage Sites or big cities.⁴⁶ However, the nation faces environmental challenges. The most threatening environmental issues in South Korea are air pollution, the dealing with waste and global warming.⁴⁷ But South Korea was one of the first countries to embrace green growth as a development strategy. Green growth means environmentally sustainable economic growth.⁴⁸

Legal

South Korea has a democratic government. The legal system is based on the civil law, just like Germany.⁴⁹ South Korea is one of Germany’s most important trading partner.⁵⁰ Since 2011, South Korea has a free trading agreement (FTA) with the European Union, which ensures that trading between the nations is facilitated.⁵¹

Nevertheless, South Korea faces the challenge of corruption and bribery. Former president Lee was charged with a 17-year prison sentence for corruption charges.⁵² On the global comparing corruption perception index it ranks 33rd place out of 180 with a score of 61/100. In comparison, Germany ranks 9th place with a score of 80/100.⁵³

2.1.2 Hofstede’s Dimensions

Hofstede’s dimensions are shown in image three and allow a country comparison by cultural variables. In the following the target market South Korea is compared to the brand’s home country Germany.

Abbildung in dieser Leseprobe nicht enthalten

Image 3: Hofstede's Country Comparison between Germany and South Korea⁵⁴

Power Distance

The first dimension is about power distance, the attitude of a culture towards inequality of power distribution. As one can see, the two nations differ here a lot. At a score of 60, South Korea is rather hierarchical compared to Germany, with a score of only 35. South Korean subordinates expect clear instructions and the ideal boss is autocratic but complaisant. While in Germany codetermination is important and the management expects participation. Leadership is accepted the most when it’s based on expertise.⁵⁵

The most crucial issue in this first dimension is the different leadership styles and employer - employee relationship. While South Korean employees are used to get instructions and bosses expect obedience, German employees want to actively participate in management discussions and leaders are chosen after they had to proof their skills.

Individualism

The variable of individualism is the one with the most visible difference between Germany and South Korea. The factor of individualism measures the degree of interdependence among society’s members. With a relatively high score, Germany is an individualistic society with a score of 67. This means people tend to have small families and aim for self-actualization. Loyalty is based on personal preferences and responsibility. Whereas South Korea scores 18, as a collectivistic community. Loyalty is paramount and everyone takes responsibility for others. The relationship between employer and employee is a moral one, comparable with a family link. Offense leads to shame and the ‘loss of face’. Management in South Korea mean the management of groups, not the management of individual employees.⁵⁶

Potential conflicts could arise due to the different self-images of employees in the German home country and South Korea as host country. While people in South Korea value the benefit for the group and society, Germans put their personal interests first. Again, the employer – employee relationship differs a lot. While in South Korea the employer holds a certain personal responsibility for his employees and their families, the personal life of employees does typically not influence management decisions in Germany.

Masculinity

The issue addressed by masculinity is the extent of how a society is driven by competition, achievement, and success. A low score reflects a feminine society, where caring for others and the quality of life is admirable, and it is not strived to stand out. With a score of 66, Germany is rather masculine. Performance is already required from children at an early age and highly valued. People draw self-esteem from their tasks and status symbols are often presented. Germans have the attitude to “live in order to work”, while South Koreans “work in order to live”. South Korea is considered as feminine with a score of 39. People value equality and solidarity. Managers strive for consensus and solve conflicts by finding compromises through negotiations. Status is not shown, and the focus is on well-being.⁵⁷

One can perceive a clear difference between Germany and South Korea. While Germans find themselves in a rather rough environment, where it is important to stand out through performance, South Koreans do not display their wealth and put solidarity first. This may influence the need for adoption of the product, advertisement and the leadership style of subsidiaries.

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¹ Cf. Deutsches Patent- und Markenamt, 2021

² Beiersdorf (f), n.d.

³ Cf. Beiersdorf (e), n.d.

⁴ Cf. Kühl, 2018

⁵ Cf. Beiersdorf (a), n.d.

⁶ Cf. Johannsmann, 2011

⁷ Cf. Beiersdorf (b), n.d.

⁸ Cf. Tagesschau, n.d.

⁹ Cf. Beiersdorf (c), n.d.

¹⁰ Cf. Beiersdorf (b), n.d.

¹¹ Cf. Kühl, 2018

¹² Cf. Meyer-Dulheuer MD Legal Patentanwälte, 2019

¹³ Own illustration based on NIVEA (a), n.d.

¹⁴ Cf. NIVEA (b), n.d.

¹⁵ Cf. Greenpeace, 2017

¹⁶ Cf. Kolossa, 2020

¹⁷ Cf. Vennemann, 2020

¹⁸ Cf. Beiersdorf (d), n.d.

¹⁹ Cf. NIVEA (c), n.d.

²⁰ Cf. Beiersdorf (d), n.d.

²¹ Cf. Bae-ho, Hahn et al., 2021

²² Cf. Export Enterprises SA, 2021

²³ Cf. Reporters Without Boarders, 2020

²⁴ Cf. Freedom House (a), 2020

²⁵ Cf. Freedom House (b) (2020)

²⁶ Cf. GlobalEDGE (n.d.)

²⁷ Cf. Nordea (n.d.)

²⁸ Cf. Breen (2020)

²⁹ Cf. Trading Economics (n.d.)

³⁰ Cf. Knoema (2020)

³¹ Cf. The National Law Review (n.d.)

³² Cf. The National Law Review (n.d.)

³³ Cf. GlobalEDGE (n.d.)

³⁴ Cf. OEC (2020)

³⁵ Cf. Spence (2014)

³⁶ Cf. The Genius Works (2019)

³⁷ Cf. Worldometer (2021)

³⁸ Cf. BBC (2018)

³⁹ Cf. Korea4expats

⁴⁰ Cf. Worldometer (2021)

⁴¹ Cf. Brinkmann (2012)

⁴² Cf. Cooke (2020)

⁴³ Cf. BBC (2018)

⁴⁴ Cf. TAO (2020)

⁴⁵ Cf. International Trade Administration (2020)

⁴⁶ Cf. The National Law Review (n.d.)

⁴⁷ Cf. Ipsos (2019), pp. 5

⁴⁸ Cf. The Woeld Bank (2012)

⁴⁹ Cf. The National Law Review, n.d.

⁵⁰ Cf. Federal Ministry of Education and Research, n.d.

⁵¹ Cf. Ministry of Trade, Industry and Energy, n.d.

⁵² Cf. Hyung-Jin, 2020

⁵³ Cf. Transparency International, n.d.

⁵⁴ Hofstede Insights, n.d.

⁵⁵ Hofstede Insights, n.d.

⁵⁶ Hofstede Insights, n.d.

⁵⁷ Hofstede Insights, n.d.