Bare Esentuals in Bangkok

Executive Summary Bare Escentuals, Inc. is an innovative cosmetic company in the United States and the leader in mineral-based cosmetics. They sell not only in the United States, but also internationally in four other countries: UK, Japan, France, Germany, and Canada. However, we are seeking to expand into the Southeast Asia region; specifically, Bangkok, Thailand. The country is considered to be an emerging economy in the take-off stage. The cosmetic market in Thailand is rapidly growing and new entrants are beginning to recognize the opportunity for a growing market share within the region. Within the city, there are a few brand name cosmetic leaders, but none with a mineral-based product. Bare Escentuals hopes to fill the gap in the market with a new type of lightweight mineral-based powder which is in high demand. Thai culture is driven by the all-natural, eco-friendly perspective and we believe our mineral-based cosmetics company will offer a highly-differentiated, healthy, and lightweight product. We feel that our line of powders will best suite this market. The Company utilizes a distinctive marketing strategy and multi-channel distribution model to develop, market, and sell cosmetics, skin care, and body care products under its bareMinerals, RareMinerals, and namesake Bare Escentuals brands. Introduction Since the introduction of Bare Escentuals in the public sector, sales have steadily grown reaching 556 million in 2008. With sales expected to sustain current growth, we have decided to enter a new foreign market in Southeast Asia, beginning in January of 2010 by introducing our product line during the peak of tourist season in Bangkok, Thailand. We have experienced much success in our other foreign markets, and we believe Bangkok is the best city for our product line to continue its strong growth. As this market grows, other investment opportunities could bring us to openings in other major Southeast Asian cities such as Chiang Mai, Phuket, and maybe Singapore. We offer a healthy and lightweight alternative to conventional cosmetics while providing light to maximum coverage for all skin types resulting in broad-based appeal to women of all ages. At Bare Escentuals, we believe that our multi-channel, integrated business strategy enables us to build brand awareness and increase consumer loyalty by providing the best makeup experience possible. Cultural Analysis Religion Bangkok’s primary religion is Buddhism, accounting for 96% of the population. Beautiful temples are all over the city, and it is not uncommon to see monks walking around downtown early in the morning. It is a part of their everyday life, and our company must understand the importance of their religious traditions. Thais believe that supporting the order of monks, or Sangha, brings one closer to Buddhist ideals, and increases the likelihood of better life beyond this one. They make regular offerings to local monasteries as acts of merit-making. Each of the temples in Bangkok is unique, having its own architecture, history, and spiritual importance. Most people visit the temples early in the morning. Insight into their religion allows the company to take certain character traits into consideration when advertising, marketing and promoting the Bare Escentuals product in Bangkok {draw:frame} Language Thai is the country’s national language. It is confusing to many tourists because it utilizes the Khmer script and is spoken tonally. Many westerners focus on speaking Thai, whereas taking the time to learn Thai script would be more beneficial to understanding the basic foundation of the language. The reason for the confusion is that various reference materials written about the language each use a different phonetic spelling with the western alphabet. It is sometimes difficult to see the connection between the letters with multiple sources of information. Foreigners are usually allowed more leeway, since the effort to speakingThai is widely appreciated. Family Life Cultural Values Thais place a strong emphasis on ensuring that everyone has good time, no matter where they are. This emphasis is also common in the workplace. Emotions play a very strong role in their society, which leads one to assume it plays an even stronger role in their decision making. Thais prefer to avoid stressful, personal confrontations or anything unpleasant. They usually make a conscious effort to ensure their feel-good emotions are reserved. The priority which Thais give to their emotional state is perhaps one of the main features of their society that has made the country a rather special place in the hearts of many foreigners over recent years. The Thai enthusiasm for sanuk, or having a good time, is infectious and is a cultural aspect often envied by visitors to Thailand, as it encourages people to listen more often to their feelings, rather than their hea ds. In contrast, most Western societies encourage and reward the use of rational values in the decision-making of their people. Consumer Habits We must know how our customers shop, socialize, entertain, and of course purchase products. Most of Bangkok’s residents prefer to shops in local malls, which house many floors with almost anything one could imagine. In order to reach our target market, we must understand the habits which influence buyer behavior in the region. â€Å"The youth market is critical not only to marketers marketing youth targeted products, but also all consumer products. Building brand awareness in youth is a mainstay for many large consumer products and services. Companies such as Bare Escentuals, who wish to build brand loyalty not only now but for the future, must look towards this market with enthusiasm. Building brand loyalty has the largest potential with the youth market. Certainly the youth market controls a still increasing proportion of disposable income throughout most developed and developing countries in Asia. Entry level salaries are increasing from very low levels in years past, and many middle to upper-class parents are extremely generous with allowances to their children. Thai youth attitudes are affected by the same Buddhist religious and national culture that pervades Thailand generally. In comparison to Chinese Buddhism and Confucianism, this culture encourages individualism, youthful idealism and tolerance and respect for divergent views. It also shares the respect for age and family. At the same time however, it is conservative- embracing change very slowly. Hospitality As a culture in general, Thais go out of their way to make others feel at home and comfortable. Their selflessness is evident in their friendships, too. For example, it is common for the wealthier friend to pay for the bill when having dinner or drinks. When conducting business in Bangkok, our representatives must know the ranks of all employees so as to address each one properly with the correct gestures. It is very important when conducting business with Thailand to show respect. Thais address each other by their given names, preceded by Khun, and reserve family names for formal occasions. In formal situations, foreigners may address Thais by using â€Å"Mr. ,† â€Å"Mrs. ,† or â€Å"Miss† with the given or family names. {draw:frame} The City Bangkok is not only the capital of Thailand but is both the region’s and the country’s major transportation hub. It has one of the most efficient airports in Asia, not the most modern, but very large. The city also has three bus terminals and a centrally located train station. An elevated rail line opened in 1999 to make all parts of the city accessible. Bangkok has a terrific infrastructure to support our business and the delivery of our product to the end consumer. Numerous multinational corporations base their regional headquarters in Bangkok, making it a regional force in finance and business. Its increasing influence on global politics, culture, fashion, and entertainment underlines its status as a global city. In 2009, it was the second most expensive city in South-East Asiabehind Singapore. † The city's wealth of cultural landmarks and attractions in addition to its notorious entertainment venues has made it synonymous with exoticism. The large percentage o f wealthy citizens within the city is due to its rapid modernization, which is often seen in the cityscape and the urban society. Bangkok draws in 11 million international visitors each year, trailing just Paris and London. Bangkok has a population of approximately 6,355,144 residents while the greater Bangkok area has a population of 11,971,000 (January 2008). The capital is part of the heavily urbanized triangle of central and eastern Thailand which stretches from along Bangkok to the heavily Industrialized Eastern Seaboard. Bangkok borders six other provinces: Nonthaburi, , , , and ; all five join to become the Bangkok Metropolitan Area. Political System {draw:frame} Joint Ventures Government Social Programs and Health Care Thailand has an excellent medical care system, with most medical personnel speaking fluent English, as many were trained overseas. One of the larger hospitals with an English-speaking staff is Bumrungrat Medical Center and Hospital. It offers 24-hour emergency room care and ambulance service. Economic Description With a well-developed infrastructure, a free-enterprise economy, and generally pro-investment policies, Thailand was one of East Asia's best performers from 2002-04, averaging more than 6% annual real GDP growth. However, overall economic growth has fallen sharply- averaging 4. 9% from 2005 to 2007- as persistent political crisis stalled infrastructure mega-projects, eroded investor and consumer confidence, and damaged the country's international image. The growth rate fell to 2. 6% in 2008. Exports were the key economic driver as foreign investment and consumer demand stalled. Export growth from January 2005 to November 2008 averaged 17. 5% annually. Business uncertainty escalated, however, following the September 2006 coup when the military-installed government imposed capital controls and considered far-reaching changes to foreign investment rules and other business legislation. Although controversial capital controls have since been lifted and business rules largely remain unchanged, investor sentiment has not recovered. Moreover, the 2008 global financial crisis further darkened Thailand's economic horizon. Population The population of Thailand is 65,905,410. It is the 20th largest in the world. Exchange Rate The official currency used in Thailand is the baht. It is considered a stable currency whose rate is based on the US dollar. Exchange rates are best at banks and authorized money changers. The baht per US dollar is 33. 37 (2008 est. ), 34. 52 (2007), 37. 882 (2006), 40. 22 (2005), 40. 222 (2004). So over the past five years the baht has been gaining value over the US dollar. Inflation Rate The estimated inflation rate for Thailand in 2008 was 5. 5%. GDP per capita $8,400 (2008 est. ) {draw:frame} {draw:frame} Labor Force Transportation Modes The automobile is the most common form of transportation used by Thais; however, taxis are commonly used because of their great value. The starting fares are 35 baht or $1. 17 US dollars for the first three kilometers and 5 baht or $0. 16 US dollars for every additional kilometer. This is considered to be a great value and is great for not only Bangkok locals, but even for foreigners. Motorcycle taxis are also very common in Bangkok particularly because of common traffic jams. Because of their small size they are the fastest way to navigate through traffic jams. The drivers of the motorcycle taxis can be easily spotted by their bright-colored vests and helmets that are worn by both, the driver and the passenger. Because motorcycle taxis do not have meters, fares are agreed on before take-off. The metro is another mode of transportation that is commonly used in Bangkok, but is more commonly used to travel around the whole country. It is almost like an underground, tunnel enclosed railroad on which trains are able to travel through. The metro is most commonly used by those who have to travel long distances from one Thailand city to another. Fares are based upon distance traveled. Real Estate Foreign Investment Thailand’s government maintains an open, market-oriented economy and encourages foreign direct investment as a means of promoting economic development, employment and technology transfer. Foreign investment in Thailand significantly influenced the buoyant economic growth of the last 15 years, spurring Thailand’s transformation from an agriculture-based economy, to one balanced with industry and manufacturing. International Trade Statistics Thailand's exports were $174. 8 billion (2008 est. ), up from $150 billion (2007 est. ). Thailand's imports were $157. 3 billion (2008 est. ), up from $124. 5 billion (2007 est. ). Their highest-valued imported products were capital goods, intermediate goods and raw materials, consumer goods, and fuels. Trade Regulations Import duties are generally levied on any imported goods before releasing them from the custody of Customs; except for goods receiving specific privilege that qualifies according to the law. If they receive these privileges, then the duty will either be reduced or be taken off completely. An importer has only three types of duties to pay before the imported goods are released from the custody of Customs: Customs Import Duties with an ad valorem rate Excise Tax for Excise Department and Interior Tax Value Added Tax (VAT) for the Revenue Department There are six duty rates for imported goods, excluding vehicles which have special rates. These duty rates are as follows: Duty rate is 0% for goods that government policy provides not to collect duties Duty rate is 1% for raw materials Duty rate is 5% for primary products and capital goods Duty rate is 10% for intermediate products Duty rate is 20% for finished products Duty rate is 30% for government protected goods All duties shall be levied in accordance with the provisions of Thai Customs Law and the Law on Customs Tariff. Payment of duties shall be made to the Competent Officer at the time of passing the entry. Duties can be paid either by cash or check. Checks must be drawn on the Bank of Thailand but certified checks from other commercial banks will be accepted. Duties or acceptable guarantee must be paid to Customs prior to the examination of the goods. Our duty rate is 20% and will be paid on the profit which we make within Bangkok. If we request a clearance of goods subject to a dispute, such goods can be released either by: Paying the maximum rate of duty and reserving the right to settle the dispute at a later time or Paying the amount of duty declared together with an additional amount covering the maximum payable duty as a guarantee â€Å"In valuing any imported goods for duty assessment, Thai Customs uses the True Market Value principle for such purpose. True Market Value of the goods is defined as the wholesale cash price (exclusive of duty in the case of imports), for which goods of the like kind and quality would be sold without loss at the time and place of importation or exportation, as the case may be, without any deduction or abatement. † For the vast majority of imports, the CIF invoiced price is accepted. However, in some exceptional cases, the value is established by reference to the maximum prices of the goods of a like kind and quality brought into the country in a previous limited period, generally not more than three months for finished goods. Trade Regulations (cont’d) â€Å"As the GATT Customs Valuation Code is now being increasingly adopted by many trading nations for uniform and neutral valuation of goods as well as prohibiting arbitrary or fictitious Customs value,† Thai Customs realizes this necessity and is proceeding towards adoption of this Code. Importers or agents authorized by importers and approved by Customs must comply with the Customs laws and other customs related laws. Importers or agents must pay the full amount of duties and taxes or deposited cash security. Import entry has to be made quadruplicate, accompanied with supporting documents as follows: Invoice Packing list Bill of lading/airway bill Import license (if any) Foreign transaction Form 2 if an import value exceeds 500,000 Baht Other documents (if any) e. g. Form D The cosmetic industry, 446120, is definitely a mature industry, and many of its leaders have been producing quality cosmetics for almost a hundred years. Many of those who are leading the cosmetics industry are oil or cream- based foundations and powders. The Bare Escentualsproducts are mineral-based powders and are made from all natural products. Their powders reach a new market of women, those who are looking for alternative, more natural makeup products. By finding a niche in the market, our company believes in that expanding into the international market will lead to faster growth rates and greater profit margins. With every new market entry, we must realize that the cosmetic industry is different in other regions of the world, especially in Southeast Asia, where our company will open a new store in Bangkok, Thailand. SWOT Analysis Main Competitors Elizabeth Arden Estee Lauder L'Oreal cosmetics. They all have been in business for nearly 200 years combined. With many years of experience comes an elite, high end, and loyal clientele that has been accrued over the many years of operation. These are the biggest threats to the success of Bare Escentuals mainly because of a few points that provides them with a slight competitive advantage in certain geographical areas. These large cosmetic corporations are able to satisfy the desires of so many of their customers mainly because of the large scale of which they operate on. Their demand is driven by the economic conditions of each country they do business transactions in. Although confronted by three of the primetime players of the cosmetic industry, Bare Escentuals still holds their own by maintaining a competitive edge through an alternate way of conducting business. One thing that Bare Escentuals pride themselves on is how readily available their products are made, thanks primarily to the numerous ways in which their customers may accommodate their products. Another edge that Bare Escentuals maintain over the larger companies is how conveniently priced the majority of their products are. Not only can they place a comparable product of their own directly across from your top cosmetic producers such as Elizabeth Arden, but they definitely have the upper hand when it comes to the final price tag. By aggressively pricing their products, they force the entire industry to accommodate in order to maintain a clientele that could change at the drop of a hat in the economy that we find ourselves in today. Elizabeth Arden, Inc. Elizabeth Arden goods are sold in over 90 countries worldwide, with major markets in the United States and Europe and have been a world leader in the cosmetics industry since the 1920s. Strengths: Strong celebrity backing from celebrities such as Mariah Carey, Hilary Duff, and Britney Spears Wide variety of cosmetics Strong growth prospects Weaknesses: Poorly performing retail stores world-wide Steady narrowing customer base Declining market share and profits Opportunities: New business strategy acquisition New product line launches Revamping of customer orientation with hopes to regain market share Threats: More price conscious competitors in the global market Consumer preference Increased competition Counterfeit goods Declining global market Estee Lauder Bringing the best to everyone we touch. † â€Å"By â€Å"the best†, we mean the best products, the best people and the best ideas. These three pillars have been the hallmarks of our Company since it was founded by Mrs. Estee Lauder in 1946. They remain the foundation upon which we continue to build our success today. â€Å"- Estee Lauder’s Mission Statement. Strengths: High-end prestige cosme tics Innovation of new and ingenious products World class marketing strategies to prevent their household products from cannibalizing one another Wide international presence Strong research and development teams Efficient use of all resources Strong growth prospects Weaknesses: Reliance of few customers Diminishing market share Poor reaction to increased competition and global economic change Opportunities: Keeping current customers Reaching new customers (i. e. the teen market) Continuing to grow globally Threats: Increased size of market and level of competition Poor reaction to foreign laws during global business transactions U. S. economic slowdown is halting business around the world L'Oreal This company is a global powerhouse that markets over 500 brands and more than 2,000 products in various sectors of the beauty business. Such products included hair colors, permanents, styling aids, body and skincare, cleansers and fragrances. Indeed, the L’Oreal Group has reached the peak that all cosmetic brands are seeking after. Strengths: Percentage penetration of fragrances and some cosmetics High brand loyalty Customer base that is willing to try new and innovative products Large amounts of resources to spend as far as market analysis, development, and advertising Wearing these premium cosmetics give off an indulgent feel High prices also lead to high profit margins Wide availability of products Weaknesses: Peak sales tend to be very seasonal with severe drop-offs depending upon the time of year or special event in a specific country Decentralized organizational structure can make control very difficult for all employees Opportunities: Direct concentration on the fastest growing fields in the beauty industry (one of which just happens to be cosmetics) Benefiting from increasingly ageing and affluent population in more developed countries, including Bangkok Concentrating on emerging markets mainly because emerging markets is where a large percent of your global economic growth may occur Threats: Increased number of competitors in the industry with comparable products which may also be more price friendly Economic downturn that is quite evident in other countries Spending habits of consumer and the economic crunch that most countries are experiencing Bare Escentuals Since 1976, Bare Escentuals has focused on using only the finest ingredients in their products to insure a new level of customer satisfaction without having to break the seal of their clientele’s wallets. Bare Escentuals, Inc. s one of the fastest growing prestige cosmetic companies in the United States and a leader in mineral-based cosmetics. The Company utilizes a distinctive marketing strategy and multi-channel distribution model to develop, market, and sell cosmetics, skin care, and body care products under its bareMinerals, RareMinerals, and namesake Bare Escentuals brands, and professional skin care products through infomercials, home shopping television, specialty beauty retailers, company-owned bout iques, spas and salons, and online shopping. Strengths: Inexpensive when compared to competition Well formulated to provide the best results for all end users Makes use of all their resources Convenient location and distribution Award winning products for just about every sub-class in the cosmetic industry Weaknesses: Use of many resources trying to convert customers Smaller clientele base Reliance of certain channels of distribution Limited coverage area Opportunities: Newest entry into the Global market Rapid growth in new areas of Tourism Declining customer service from competitors may lead to increased customer base Capitalization of innovative technology that may provide a competitive edge Threats: Economic downturn and inability to adapt to consumer buying habits Instability within the country and the political environment Demand for product Greater competitive growth stream than your own Market Analysis The overall growth potential for the cosmetic market during the 2006-2008 is expected to grow between 15-20%. Superior quality, international branded cosmetic products are expected to do better due to good brand image, brand loyalty, and perception of good quality. Products from the US lead the import market. Meanwhile competition from France, Japan, the United Kingdom, and Germany is getting stronger. Hair care and makeup products maintained single digit growth, while skin care and perfume showed better growth at 17 and 15 percent. The product lines of problem-solving cosmetic have good growth potential. These include products such as anti-wrinkle cream, anti-aging facial cream, whitening facial and body lotion. More cosmetic products especially designed for men are becoming popular. Thailand remains a strong manufacturer and exporter of shampoos and other hair care products, color cosmetic and skin care products. Health and Beauty Health and beauty are taken seriously by Thai women. Thai women are known for their beauty all over the world. Therefore, Thailand cosmetics manufacturers are in great demand. Thailand's cosmetics market has experienced a huge improvement over the years following an apparent change in women's behavior, with cosmetics now being seen as a luxury. {draw:frame} Political and Legal Forces There are many political and legal forces that companies must understand. Regulations in labor, pricing, supply chain and consumer protection all have a part in governing our industry. Political and legal forces influence the stability of the business environment. It is an external force that has impacts no one business can avoid, but only can adapt to it. When the government suddenly alters taxation policies, it creates an unfavorable effect of increased taxes and results in prices of goods and services increasing. When the prices of goods and services increase, the cost of production in the business will increase. Laws Make sure the company is aware of all licensing requirements and the requirements of applicable import and export control laws Make sure the company observes all privacy and data protection laws and regulations of other countries and authorities Paying bribes to government officials is not allowed, even if the bribes are common practice To enter into an agreement with an agent (or a department store, in our case) that relates to business outside the US, it has to be approved by Bare Escentuals. {draw:frame} Target Market We want to target two different populations which consist of middle-class women ranging from 15-64 years of age and also the Katheoy population in Bangkok. Thailand has a very high percentage female population with something over 70%. Kathoey or katoey generally refers to a male-to-female transgender person or an effeminate gay male in Thailand. Ladyboy is the term used in English conversations with Thais. Kathoeys are often identified at a young age, and are considered to be â€Å"born that way. † They spend a lot, both in terms of money and time, to appear as beautiful as possible. As a matter of fact, some of these ladyboys or the katoey are so beautiful that they are objects of envy for many women as well. Within that 70% of the Thai population being women, there are a high number of guys who, it might be said, are on the edge. They are male, but with a strong sense and feel of being and wanting to be female. Mission Statement The mission of this company is to make you look and feel your absolute best. Our objective is to provide you with a flawless look, giving your skin a healthy and improved condition and appearance. We help you discover your inner and outer beauty. We are committed to providing and supplying the most creative and innovative mineral-based cosmetics. We provide luxurious skin and body care products that perfectly indulges the complexion and enhances the quality of life for you. By focusing on only the finest natural ingredients and developing pampering formulas that soothe, nourish, and protect, this revolutionary line will take the concept of natural beauty to a whole new level. Marketing Plan Product Bare Escentuals, Inc. is one of the innovative cosmetic companies in the United States and the leader in mineral-based cosmetics. The first Bare Escentuals boutique opened its doors in 1976. Their all-natural and eco friendly approach with their minerals line, which was the first of its kind to launch in the industry, uses ground-up, earth-mined minerals and high percentages of botanical essences. This revolutionary makeup is the perfect mix of makeup and skincare. We will be starting out by putting our starter kit in a store, which consists of 4 powders and 4 brushes. This will give people a taste of the Bare Escentuals brand. This will be the starting point and we may further expand depending on the response of our Bangkok target market. BareMinerals Cosmetics: Is free of preservatives, talc, oil, fragrance and other potential skin irritants Is free of fillers and binders Is weightless Provides adjustable coverage-from light to full Will improve the condition of the skin over time All ages and skin types can benefit from bareMinerals, especially those concerned with skin sensitivities, allergies, scars, blemishes, rosacea, wrinkles and pigmentation. The foundation provides impeccable coverage for every skin type and skin tone, and also protects with a natural SPF 15 broad spectrum UVA/UVB protection. Makeup options are very limited for women in Bangkok, so bringing in not only a new makeup option but a revolutionary one at that should have a great response. Most woman want pale skin and need some sort of protection from sunlight in order to maintain a light skin complexion. Our product has SPF 15 built into the makeup itself which would prevent their skin from getting damaged and making their skin darker than they would want it. Also, the humid weather that is common in Bangkok makes normal makeup run off the face and requires one to completely redo their makeup. Our mineral makeup is soaked into the skin when applied and is made to withstand humid conditions and all day wear. Overall, our product provides women with not only a makeup, but a makeup that actually cares for their skin’s health. Pricing When pricing our product we are going to be using psychological pricing. Price has a psychological value. Buyers will buy a higher priced product because they believe that the high price is a good indicator of value. Their perception is not reality based, it is psychologically based, and therefore buyer behavior is affected by more than the product and price tangibles. Psychological pricing is based on factors such as signals of product quality, popular price points, and what the consumer perceives to be fair. Our product is a high end line of makeup and is considered to be a luxury good. It also is a new type of makeup for Bangkok and therefore they do not have a lot of other makeup to compare it to. For this reason, psychological pricing in combination with marketing and placement of our product, we create a certain worth for our product that gives our market an idea of the high quality and uniqueness of our cosmetics. The price of our product will be based on what our target market psychologically sees it as being worth through all of these things and in comparison with other prices of international cosmetics. We will be using a Revenue Maximization pricing strategy for our starter kit. We are seeking to maximize current revenue with less emphasis on profit margins. The underlying objective is to maximize long term profits by increasing market share and lowering costs. Thailand’s monetary unit is the Baht. 1 US dollar is equal to about 33. 37Baht. We are planning to sell our product for 59. 95 which is equal to about 1998. 3 Baht. The women of Thailand are willing to pay around 600 Baht for a tube of designer lipstick, which is around 20 US dollars. Also, usually a compact of makeup is approximately 1350 Baht which is around 45 US dollars. Our product includes 4 powders and 4 brushes, which more than accounts for the price we charge in comparison to other cosmetics. Also, our product is som ething that is new and very popular. International cosmetics are very popular in Thailand as they do not have a wide variety of makeup locally and they are not of very good quality. Breakdown of Pricing (per unit): Cost of Product : $15. 00 Logistics: $5. 00 Marketing: $10. 00 Total Cost: $30. 00 Retail Price of Product: $59. 95 Potential Profit: $29. 95 As you can see from our breakdown of pricing, we should be able to make a profit from the sale of this product. The cost of the actual product is relatively low and although marketing is a big cost for us it is well worth it and needed for the launch of this product in Bangkok because it is not currently sold there. Overall this should be a rather profitable operation. Promotion We plan on promoting and advertising our product through the use of magazines, billboards, tradeshows, and the internet. One of the main ways of advertisement in Bangkok is with magazines. We plan on placing ads in several of the major magazines like Elle Thailand and Narak, which is actually an online magazine in Bangkok. This will place our product in popular magazines so that people will be able to read a little about our product in order to get them curious enough to then come and try it out in stores. Also placement of our product’s advertisements in some of Bangkok’s most popular magazines will relate our products to what is â€Å"in† and in turn make people wonder what our products are all about. Also, we will advertise through the use of billboards in order to grab people’s attention and to draw them in to learn more about our brand. Mainly our product will shine when people are able to see our product in person where someone can show them how it actually works, but with the billboards we will get the bareMinerals name out there. Since this is most likely the first time many of these people have seen or heard about our product, our first step is just to get people to start asking questions and wanting to know more about us and our products. draw:frame} Though advertising through billboards and magazines will be part of promoting our product, one of the main ways we plan on getting our product out there is by having our product in one of the most well known cosmetic trade shows around Asia. In-Cosmetics has been at the forefront of the Asian cosmetics industry. Rotating between Malaysia, Indonesia, The Philippines, Korea, Thailand and Chine and attracting visitors from 59 different countries, the show has enabled many suppliers and buyers from across the continent to meet face to face. For this reason, In-cosmetics Asia is the perfect platform to help us launch and promote to a captive audience from throughout the region of Asia. There are many exhibitors that will be showing world known top quality brands of perfumes, cosmetics, hair care, skin care, toiletries, salon and spa products and equipment. In-Cosmetics Asia is the leading scientific, business and networking trade event for personal care ingredients in Asia. They rotate the region annually, and the show attracts finished product manufacturers keen to meet international ingredients exhibitors and features highly popular educational seminars. This tradeshow will get us in with some of the best cosmetics in Asia along with some very influential people and companies. This part of our promotion is what could give us that jump start along with a good outlet to possibly expand our business more later on in other parts of Asia. The tradeshow that In-cosmetics held in Singapore last year was attended by 2,202 qualified visitors. These are people who can get the bareMinerals name out there and have it be known by people in Asia, along with possibly wanting to put our product in a store near them. To further help us, this year’s In-cosmetics tradeshow will be held in Bangkok, Thailand. This will put us in the perfect position for us to be in because our product should be in The Emporium by then and the tradeshow will be in town for everyone to really learn about our product. It will be a big exposure event for us. {draw:frame} {draw:frame} Placement {draw:frame} We are planning to be located in Bangkok, Thailand which is a key point on round-the-world air routes. It is the political, commercial, cultural, and transportation center of the country, with the only port that can accommodate oceangoing vessels. Specifically our product will be placed in The Emporium Department Store located in The Emporium of Bangkok. It is home to top local and international brands, local and visiting celebrities, and also Kateoy or â€Å"ladyboy† beauty consultants along with high society shoppers. The Emporium is like a polished magazine come to life. It has seven layers of shopper’s paradise, where the first three floors are dedicated solely to world-class, international designer fashions. The Emporium Department Store is a classic among malls of its kind, featuring deluxe fashion brands like Chanel. There is also a never ending Beauty Hall with porcelain faced experts who will consult and help customers like no other. The Beauty Hall is specifically where we will be located in the Department Store. In this space our product will have experts that will be able to show and tell customers what our mineral makeup is and how it works. This mall attracts our target market and will be the perfect outlet to sell our product from. The Emporium Department Store’s Beauty Hall draws in people who are looking for higher end international brands of makeup and are looking for that one-on-one help that this area offers. With this location we will be able to show people how to use and apply our makeup and show them the benefits while they are in the store. This location in itself will aide to the sales of our makeup especially because it is a new product, so many people may not know what it is or how exactly it works. By having a location that has personnel on hand just to help customers with the product we will be able to further spread the word of this new product to Bangkok’s women. Logistics Bare Escentuals, Inc. already has some global exposure in countries such as the US, UK, Japan, France, Germany, and Canada. They are able to deliver their cosmetic products through various distributors; however, wholesale distribution will be the only mean of distribution in Bangkok, Thailand. Due to Bare Escentuals’ company resources; it would be too costly to design a department within the company that would take care of making sure our products would arrive to their Bangkok retail destinations. Instead, a much more cost-effective and reliable option was chosen. Bare Escentuals will be outsourcing their full logistics strategy to APL Logistics, Ltd. APL Logistics offers a wide range of logistic services that include international logistic services. They also have a 250,000 sq. ft. facility located in Bangkok. From this facility, APL Logistics is able to warehouse and distribute products to retailers in the area. Almost half of APL Logistics’ operations come from transporting consumer products to retailers. It is evident that APL Logistics will provide Bare Escentuals with all of our logistic needs. APL Logistics will take our cosmetic products from the US, ship them overseas to Thailand, store them in their local Bangkok warehouse, and distribute our cosmetics products to local retailers of our choice. {draw:frame} Sales, net For our sales, net, we recognize total Bangkok’s population to be 11M with 70. 5% being between 15-64 years old, 35. 6% being women, and 54% considered to be middle-to-upper class. That gives us a total of 1,490,821 as our target market. However, not every single person in our target market will buy our product. We assume that about half of our target market (745,411) will buy our product. If our products cost each person $59. 95, our total sales would reach 44,687,389. However, returns are calculated in our sales, net. We assume that about 25% of our buyers will return our product. That leaves us with total sales, net of 33,515,542. We do not want to make more products than we expect to sell, but we also do not want to make fewer products than we expect to sell. Therefore, a median of 1,118,116 products will be made. Assuming that to make one product it costs us $15. Therefore, our cost of goods sold in Thailand is 16,771,740. Our gross profit is our sales, net minus our cost of goods sold. Selling, General, and Administrative Expense Our selling, general, and administrative costs include third-party fulfillment costs by APL Logistics, research and development costs, legal costs, and advertising costs. Budgets for all the following categories are as follows: 5,000,000, 500,000, 30,000, and 5,000,000 respectively. Depreciation and Amortization Bare Escentuals will not have to buy neither property nor equipment to operate in Thailand. Therefore, neither depreciation nor amortization related to Thailand’s operations will be recognized. Although our new operation in Thailand, may increase stock-based compensation in the US, no stock-based compensation in issued on the international level. No company restructuring will occur for our operation in Thailand to exist. Our operating income comes from our gross profit less all expenses incurred. Interest Expense All of our Thailand’s operations will be funded by Bare Escentuals. Therefore, no interest expenses will be incurred for our Thailand operations. No current debt has been recognized and no debt will be incurred to operate in Thailand. Other Income, net Other income, net decreases is attributable to foreign currency transaction losses resulting from fluctuations in the value of the US dollar as compared to certain foreign currencies. Income B*efore* Provision of Income Taxes Provision of Income Taxes Thailand has 20% duty tax for finished goods that are brought into Thailand that we need to expense for. The 20% tax is taken from income before provision of income taxes. Net Income Net income comes from income before provision of income taxes minus provision of income taxes. Action Plan Marketing Strategy Marketing Objectives Increase product awareness among our target market Inform target market about the benefits of our product and its competitive advantage Decrease or remove potential customers' resistance to buying our product by promoting awareness on how mineral-based cosmetics are better than oil-based cosmetics Goal In the first five years of operation in Bangkok, Bare Escentuals’ hopes to reach at least 25% of our target market. Strategy Implementation TV advertising Print advertising Promote and demonstrate our product at health and beauty tradeshows Because consumers are frequently hesitant about buying a product they know little about, gaining the consumer’s confidence is crucial. We will create a marketing campaign that emphasizes the quality and value of our product while showcasing the benefits of using an all-natural product. We plan to carry out this plan in the beginning of the year with an advertising budget of $5 million. Potential Results Worst case scenario: 0% of our target market or 447,246 people will buy our product at $59. 95 Our cost of goods sold and expenses would be $27,301,740 Even before reaching net income on the financial statement, we have a deficit balance that would prevent us from further business transactions Regular case scenario: If the return of the product remained at 25%, about 186,353 buyers would return our product We would have an operating income of $6,213,802 E ven after reaching net income on the financial statement, we would have a sufficient operating income to continue to operate Best Case Scenario: 0% of our target market or 894,493 people will buy our product at $59. 95 If the return of the product remained at 25%, about 223,623 buyers would return our product Our cost of goods sold and expenses will be $27,301,740 We would have an high operating income of $12,916,901 Even after reaching net income on the financial statement, we would have a superior operating income that would allow us to continue to operate and perhaps start looking at other possible international markets Contingency Plan Bare Escentuals, Inc. ill expand into other foreign markets if we successfully sustain the growth in Thailand as we have in the United States. With careful consideration, we will focus on emerging markets for expansion. We need to look at cost and timing of expansion, economic climate, culture issues, and cash flow of our company. Our company will do ongoing research and rely on solid market analysis in maintaining sales and growth in these markets. If we see that we are not generating revenue or meeting our full potential in Thailand, we will better position ourselves successfully in the market. We will cut advertising costs, conduct research surveys, and focus groups to better determine the needs of our current target market. If we fail to sustain sales and increase market share, then we will be forced to stop selling our product at the Emporium in Bangkok. Though we have suffered a loss, we could develop new marketing strategies and put our focus on other foreign markets. 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