Oriflame Cosmetics Sa Case Study

TABLE OF CONTENTS

TABLE OF CONTENTS        

1.        Background of Oriflame Cosmetics SA        

2.        Situation Analysis        

2.1.        Current Performance        

2.2.        Industry and Competition        

2.3.        SWOT Analysis        

3.        Goals and Objectives for Marketing Strategy        

3.1.        Qualitative Goals        

3.2.        Quantitative Goals        

3.3.        Justification of Goals and Objectives        

4.        Segmentation, Targeting and Positioning Strategies        

4.1.        Description of Customer Group        

4.2.        Benefits Sought by this Customer Group        

4.3.        Internal theme of the marketing strategy        

5.        Elements of the marketing strategy        

5.1.        Product        

5.2.        Pricing        

5.3.        Placement and Distribution        

5.4.        Promotion and Communication        

6.        Integration of Strategy        

6.1.        Implementation of Strategy        

6.2.        Profit Analysis        

6.3.        Breakeven Analysis        

7.        Further Strategies        

References        

1. Background of Oriflame Cosmetics SA

Oriflame is a Swedish direct selling company in beauty and personal care (BPC) market founded in Sweden in 1967. Today, Oriflame’s products are distributed through independent sales consultants that reached to over 3 million people from different cultures and ethnicities in more than 60 countries. The company is built on the basis of regional sales units so it is based on the geography such as Turkey, Africa & Asia, Latin America, Europe and CIS countries (Oriflame, 2014a). Additionally, Oriflame’s local presence in each geographical region is formed in a wholly-owned sales business type in its 55 markets.  Oriflame embarks upon franchise arrangements with local merchandisers in 11 markets rather than upon subsidiaries (Oriflame, 2014b).

1. Situation Analysis

1.  Current Performance

Oriflame’s marketing performance exhibits a negative trend which started with the global economic crises in 2009. A declining stage in terms of operating margins and net sales within the previous two years period is also evident the Figure 1.

Figure 1: Net Sales and Operating Margins of Oriflame (Q3 13- Q3 15)

[pic 1]

Source: Oriflame (2015a)

One of the most significant reasons for Oriflame’s decline is the company’s over expansion in Russia where Oriflame generates 26 percent of 2014 revenues. The increasing political tension and geo-political risks followed by Western sanctions and falling oil prices, Russia has faced with a deepening economic recession by the end of 2014 (Oriflame, 2015b). So, Oriflame’s high strategic focus on Russian market resulted with problems in value development that showed us one more time the crucial significance of target market diversity for managing market risks in global marketing strategies. Most of the strategic projections demonstrate that the company’s dependence on the Russian market will continue to be a source of challenge as Russia’s economy is influenced by the political risks. Another reason for the declining operational margin is increasing pressure from large competitors which use higher scale economies and cost advantages compared with Oriflame.

1.  Industry and Competition

Since the global beauty products market is a highly concentrated and consumer oriented market, it is dominated by huge international brands. Because the top 10 brands generate approximately 50 percent of total value of sales in industry, for most companies trends related with share development is too slow (Passport, 2015:12). Oriflame Cosmetics S.A. has a total share of 0.4 of BCP market and its ranking has declined from 22th to 30th during the past 5 years.

Figure 2: BPC market Value Share and Ranking (2009-2014)

[pic 2]

Avon is Oriflame’s direct competitor and they operate almost the same markets. Both of the companies also share similar objectives considering high growth potentials through the same marketing mix. Although Avon applies the same business model, its market share is more than five folds higher than Oriflame. For many years, Avon’s growth strategies focused on achieving larger scale economies for retaining lower income customer segments in emerging markets.  Similarly, marketing objectives of large scale sellers in the industry such as Mary Kay and Amway are also based on price competition by using higher scale economies compared with Oriflame’s (Sharma & Kaur, 2014: 36). Finally, other important direct sellers in the BPC industry that gained market share during the past five years such as Nu Skin and Natura needs to be evaluated through their pricing, retailing and positioning practices.