Internationalization in France

Table of Contents

1. Introduction

1. Description of organization and its products and services
2. Reasons for wanting to go abroad and to the selected country

1. External Analysis

1. Economic analysis (market demand, industry analysis, major competitors, competitor’s strengths and weaknesses)
2. Political and legal analysis
3. Cultural analysis (cultural dimensions, norms, and ethical issues

1. Internal Analysis

1. Company strengths and weaknesses, regarding internationalization
2. Organizational structure

1. Implementation Issues

1. Timeline
2. Entry mode

1. Conclusion

Introduction

Aveda Corporation was founded in 1978 by Horst Rechelbacher. It is a cosmetic company that offers skin and body care, hair products, cosmetics, and perfumes. The company also has Aveda Institutes for Cosmetology for several cities in the United States and Canada. Aveda is owned by Estee Lauder Companies and is headquartered in Blaine, Minnesota.

Horst was inspired by the ancient art of Ayurveda Indian healing benefits on a trip he took to India. The art revolves around the health of the body, mind, and spirit as the forefront of one’s goal of ultimate beauty. Aveda is the first major beauty company to strive for full organic ingredients and a complete social responsibility of environmental sustainability. In 2013, Aveda rolled out their “Full Circle” recycling program where the entire process of the product, from ingredients to disposal is done in an environmentally responsible manner.

“Our mission at Aveda is to care for the world we live in, from the products we make to the ways in which we give back to society. At Aveda, we strive to set example for environmental leadership and responsibility, not just in the world of beauty, but around the world.”

                                -Horst Rechelbacher, Founder

The Aveda Institutes are cosmetology schools all over North America in cities such as Atlanta, New York City, Orlando, Denver, Toronto, and Vancouver. They offer classes for students to gain knowledge to start a career as a hair stylist, colorist, esthetician, massage therapist, or salon operator.

While Aveda has expanded throughout a few cities in Canada, internationalization for Aveda into Europe is a fantastic opportunity to expand and grow the company. France has been a leading country in fashion and beauty dating back to the reign of King Louis XIV in 1643. France has existing successful relations with companies in the United States. Just behind the United States, China, and the United Kingdom, France ranks the fourth largest cumulative stock in foreign direct investment. The country has a stable political and economic environment that hand help foster the growth of a successful foreign investment.

External Analysis

The cosmetic and beauty industry is massive and very prominent in France. It is estimated that in 2015, the French beauty market is worth $16.84 billion. With a population of 66 million people in France, there is a huge growing market for the industry. The global market demand is one that regardless of economic status is an industry that is not likely to fluctuate as dramatically such as larger priced items. One of the most recent untapped potential markets that the industry is seeing growth in is cosmetics for men.

There are many factors to consider when determining the competition of Aveda Corporation. The cosmetic industry is one of the top growing sectors in the French economy right now. Aveda products are considered premium to super premium products. The customer decision to purchase high-end products is the specific need for the product, the quality, and the price the consumer is willing to pay. If we take a closer look at the purchasing behavior of the French market, they tend to be impulsive buyers of for-pleasure products. They tend to purchase items as gifts and most of the population has a considerable amount of disposable income. They are affluent in their purchases while still maintaining a desire for geo-friendly products. Aveda’s premium cosmetic and beauty lines are all organically formulated and packaged in environmentally responsible packaging. This is the type of products that appeal to the French markets.

There are several major competitors that pose a threat to the internationalization of Aveda entering in to the French market. L’Occitane, Estee Lauder Origin, and Kiehl’s Fresh are all organic cosmetic and beauty lines. L’Occitane is by far Aveda’s biggest competitor because it is based out of Manosque, France and has already established itself as an international brand located in over 90 countries. Origins was also originated in France in 2000 however, they experienced devastating distribution problems and pulled the line from stores. L’Oréal is the world’s largest cosmetic and beauty company worth over $25 billion. Some of the most well-known brands such as Lancôme, The Body Shop, Kiehl’s, Gorgio Armani, Diesel, and Ralph Lauren are all a part of the French-based L’Oréal group. Their worldwide brand recognition and matured proof of concept create a threat to a growing company such as Aveda. L’Oreal has also been in the news for some controversy for their use of animal testing and litigation involving racial discrimination.

        France is a country that is a member nation of the European Union. The United States and the European Union have had outstanding trade relations for many years. It is the largest trade relationship in the world accounting for approximately one-third of all products and services that are traded. The transatlantic trade between the United States and the European Union fosters enormous economic growth for all the countries and economic blocs involved.  In every trade relationship, there is bound to be some government-regulated trade barriers that protect the sovereignty and economic interest of all parties. The European Union is an economic union in which each member country adopts the same monetary policy to allow the free movement of currency, trade, and capital. Since France is a member country in the European Union, it is required to abide by all the policies and trade agreements set forth by the union. Therefore, if Aveda decided to enter France, then all entry barriers that they would face would be those set forth by the European Union. The most common import tariff is the Community Integrated Tariff (TARIC). This is the duties that are charged to import into the European Union from non-EU countries. While the duty amount varies depending on the product, they are small duties. Foods, especially ready-to-eat foods have a harder time when it comes to trade tariffs, however, this will not affect Aveda’s products as most are not perishable. There is approximately a 66.6 percent tax on profit in France, whereas in the United States it is only about 45.8 percent. It is also difficult to begin construction in France unlike the United States where construction permits are a lot easier to obtain. One of the largest considerations companies must consider when entering into France is the intense labor restrictions and expensive labor taxes. Around fifty percent of profit used towards labor taxes. Because of France’s strict labor regulations that do not allow “at-will” employment, it is hard for companies to fire employees if their labor costs become too high for them to bear.