This report has been set up to assess and check the initial phase of an international strategic marketing plan to launch Sephora in Pakistan. The foundation gives a concise understanding of the chosen undertaking, item, and remote market. To justify the foreign country, the environmental analysis offers perspective across the elements of economic and financial, cultural, political, and legal (PESTLE) that will affect the organization. Also to further show the more holistic overall effects of Sephora investing in Pakistan, a SWOT analysis was carried out.
Sephora is a spearheading beauty shop, established by Dominique Mandonnaud in 1970 in Paris, France. Sephora offers a wide scope of item classes from skincare, scents, body care, hair care, lipstick, grin care, and private marks owned by Sephora itself. Sephora aims to create the most experienced and talented group of beauty industry item specialists that can recognize skin types, welcome the cosmetics and fragrance sets, and how to interface with Sephora's differing customer base. Sephora brings development through its Beauty Insider program which provides backstage passes to clients for incredible beauty bargains, coupons, advancements, and free makeovers. Sephora utilizes Pantone innovation to coordinate its clients in the shading scene to their ideal establishment. In addition to this, Sephora has PCs in the realms of healthy skin and aroma which are databases of fixings and item audits and proposed use for drawing in and instructing clients while in-store to locate their ideal items for cosmetics, skin health management, and scent. Sephora is an organization which is traded on an open market. The Sephora business and industry under NAICS codes is beautifiers, magnificence items, and fragrance shops. The LexisNexis monetary reports show USD 50,000,000-74,999,999.
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Sephora is expected to grow continuously, especially as it continues to engage with millennial shoppers, the market that other department stores are searching for. Sephora generated $5.85 billion in revenue for the year as of 2013. Since then, Sephora's rating has been gaining 10 percent a year over the next five years. They've been on target for that, so far. Sephora not only gained market share in the U.S. but also significantly increased its figures internationally. Sephora has a workforce of 30,000 worldwide. Sephora operates 1,900 retail stores in more than 29 countries worldwide and continues to experience double-digit growth worldwide.
It is important to underline that there is a multifold reason for launching Sephora in Pakistan. Pakistan is home to high-density demographics with a consumer base of 180 million and rising which should not be overlooked in the coming years by any MNC or foreign brand targeting alpha-growth. Pakistani people are becoming ever more brand-conscious and quality-savvy with growing globalization, media liberalization, and rapid urbanization.
Sephora's PESTLE Review analyzes the brand's business tactics. Sephora PESTLE Analysis analyses the various external factors such as political, economic, social, and technological (PEST) that impact its business along with factors related to legal & climate. The PESTLE Analysis underlines the numerous extrinsic scenarios that affect the brand's growth. PESTLE analysis is an important tool for businesses like Sephora, as it helps them understand market trends and continually improve their business.
Sephora is the world's premier beauty and cosmetic brand. One of the major policy factors affecting Sephora is the Animal Testing Act of a nation. In 2013 the European Union issued a ban on any sale of any drug evaluated by animals. And Sephora can only market certain items that do not bear any animal testing in Europe. Additionally, Sephora has to do a proper analysis before entering a new market to know which products to introduce in that region. Sephora needs to follow the FDA standards failing to launch any new product which will lead to FDA disapproval of the product. Pakistan barely has any legislation on animal testing. The legislation has zero to partial applications. Hence Sephora can easily launch itself in Pakistan. Sephora operates in 27 countries. All of these countries have a high Index of Political Stability. Due to the political turmoil that dwells there, the organization has no presence in African nations. Pakistan has also gained political stability over the years and hence serves as a suitable ground for the company to expand.
The market price is based on primarily two factors for all brands and products. The Cost of Production is first. The other is the interaction between Supply and Demand. The ideal situation is when both demand and supply are equal. The 'Price Point' is the price at which demand and supply become the same but Sephora will know the price point to optimize its income for a given economy. The nation, too, is witnessing a decline in economic growth. Investing in countries with high unemployment as people get ready to work at low wages will be good for Sephora, thus reducing the cost of Sephora.
Consumer Perceived Quality is one of the factors that can be a key factor in the success of your company in a country like XYZ. Sephora wants to market itself in such a way that its clients know Sephora is the Cosmetics Epitome. More than 80 percent of cosmetics-using populations today are female. The priority should therefore be on women. Countries with high education levels and hence higher income levels will also like to spend more on Cosmetics. So, Sephora's investment in the U.S.A. will be more beneficial than investing in countries like Zambia, Uganda, etc. There is also a need for careful segmentation of the market i.e. In a nation with a majority of its people belonging to the lower middle class community, Sephora cannot market its luxury cosmetics. Pakistan has a high population of women and the population has been recently moving towards the high-income bracket making the country a suitable place for Sephora to expand.
Sephora's major competitors like ULTA, Nordstrom, and Lush all have an online presence on various social media sites and so does Sephora. Therefore, innovative marketing strategies need to be developed so that it can have a cutting edge over its competitors, elsewhere. Whereas if the company decides to launch itself in Pakistan it would be the only leading store and would have a market monopoly. Sephora has a mobile application that allows people to browse through all of its products and order successfully. Not all of its near competitors are present in the mobile app. To minimize the costs, timely technological advancements are required.
Intellectual Property Rights security plays an important role in determining which country to invest in. Operating in countries like India and Pakistan is a bit riskier for Sephora as it rates very low on the 45-nation Intellectual Property Index compiled by the US. Trade Hall. The organization also has to have a detailed analysis of the business laws, the job laws of the country in which it wants to invest; whether or not the laws fit its business model. Given this, the economic benefits the firm may gain from this expansion are far greater than this risk. Sephora is among the top 20 US retailers offering renewable energy. Sephora has also been a member of EPA Green Power for 5 years. Consumers like to work with the businesses that do well for the world. Having such Eco-friendly practices, therefore, helps Sephora create a neat brand image. Governments have laid down stringent rules and guidelines after the 2016 Paris Agreement, for which businesses would have to pay hefty fines. Pakistan’s government however does not have such strict environmental policies laid out as of now, this can save the company a lot of money.
As far as entry modes are concerned, there are several types of modes available to any business when it comes to entering a new market, such as licensing, joint ventures, franchising, wholly owned subsidiaries, and turnkey projects. The type of mode any business or organization would select broadly depends on factors such as barriers to technology legislation, competition, culture, etc. from the company, relevant industry, and external level. The main advantage of using licensing as the entry mode would be reducing the risk and cost, whereas the downside would be that Sephora would not be able to exercise as much independent control as it wishes. The benefit of choosing franchising as the alternative would be that the company would be operational in less time compared to the earlier option, added with lower risk and cost. The drawback with this mode, however, is that it would be quite difficult to monitor and monitor quality. As of now, the best-suited entry mode would be a wholly owned subsidiary, in line with the prevailing market conditions. The wholly-owned subsidiary owns the entity's hundred percent in this case. There is no interdependence between the subsidiary and the parent company, and the subsidiary functions completely independently, having its structure and management. The establishment of a wholly-owned company, however, entails very high costs as the entire capital cost would have to be paid and all associated operating risks would have to be borne. On the other hand, this entry mode also gives full control over the operations and also connects vertical supply chain integration. Additionally, there are two ways of establishing the subsidiaries. As a green field venture, the subsidiary or structure is built entirely in the form of scratch or, the company buys or constructs a new facility hires or transfers managers, and then launches a new operation independently without a partner being involved. This tends to be comparatively difficult though, and involves a lot of complexities. Whereas in the acquisition situation,' the corporation purchases the ownership stake of the target company and grants control of the target company. It's easy to execute and somehow the risks are that. ‘
Sephora will grant a Master Franchise License to Pakistan as it experiences an ever-increasing middle class with the discretionary and disposable income to spend prodigiously. The Parity of Purchasing Power (PPP) in Pakistan has risen. A master franchisor may usually grant the right to third-party operations within a defined territory to the master franchisor, or subfranchisor. And then the subfranchisor will assume the franchisor's position in regional matters, but will not usually own or operate the franchise. They get removed from a direct management position. This replication of the franchisor's position provides an additional layer of control within the general franchise system, resulting in some small-scale inefficiencies on a small, local scale while greatly reducing large-scale inefficiencies. Nonetheless, a master franchise enables the company holding the franchising permit to take advantage of management skills and services that are increasingly available. Combined these two factors translate into almost immediate market penetration and a competitive advantage, both of which improve the growth rate of devices. One competitive advantage exemplifies structure at the organizational and hierarchical levels. Increases the overall growth rate of the chains by encouraging the franchisor to specialize in recruiting, screening, and educating subfranchisors, who then similarly expand their region. Other advantages include faster development, a more stable financial base, consistent plans for expansion, access to capital and a regular cash flow, proximity to consumers, some flexibility, and the ability to address customer demands and local competition.
In conclusion, therefore, it can be argued that Sephora is such a brand that aims to sustain premiumization and embraces a beautifully balanced regional standardization and localization strategy in terms of product offerings to meet local tastes as well as preserve their prestige worldwide. Taping into Pakistan's competitive market would certainly bring great benefits to it. Offering products suited to Asian skin tones and introducing brands not yet available in the country Sephora can immensely benefit from an expansion in Pakistan. It can further tap into other growing Asian beauty markets, expanding in Pakistan will serve Sephora as a gateway to do so. Primarily targeting Pakistan's female population and subtly tailoring the products and brands to be sold according to the locals ' tastes and expectations would greatly assist Sephora, in expanding its client base. To show a very positive future for this already extremely lucrative industry, all these aspects come together.
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