Mac Cosmetics

MAC (Makeup Art Cosmetics) is originally a Canadian company that have been operating for more than 20 years and it has already penetrate to many countries all around the world, in the North and South America at most. It sells brand cosmetics of high quality that is intended for professional as well as everyday usage. The brand is sought-after also by many celebrities, fashion models, and photographers because of its delicate texture, huge choice of colors, and durability. The products are usually very well tolerated on every skin type and MAC make-up items are also suitable for women with sensitive eyes (MAC, 2007, p. 1). The prices of the MAC cosmetics are comparable with other high quality world brands, i.e. those which cannot be bought in drugstores, but in the specialized cosmetic stores or international perfumeries that the company has a contract with. That hinders the company from further expansion into other countries, mainly in Central and Eastern Europe, because of the limited ways of sale.

Problem definition

In the recent years, MAC has slowed down its spreading out around Europe and does not intend any sale strategy changes or new retail sale contracts. Since there is no online sale through Internet outside the United States, Central and East Europeans have no possibility to buy the MAC cosmetics except traveling for it abroad. Additionally, weak promotion causes awareness decline and lower sales for the last fiscal year. The company uses celebrities (actress, singers) as representatives or models for MAX cosmetics. However, there is lack of advertisements and promotional campaigns that would attract ordinary women to try the brand make-up.

Justification for the problem’s causes

Recent slow expansion of the company is caused mainly by the limited ways of sale and by the worries about the loss of control in the case of penetrating new markets. The company does not think about any other practices than retail contract sales and refuse the offers from abroad to get MAC products in there. “The demand for MAC Cosmetics is there, but the supply is not. While MAC is one the cosmetic lines highest in demand, finding discounted products is actually not that easy” (Vasen, 2007, p. 1 ) Moreover, there are no media advertisement outside the United States and people often do not even know about the products and their advantages. The statistics show that the leading way to get information about MAC products is via referrals (Bates, 2006, p. 2). Since there is a lack of promotional campaigns with no free samples, the company can only rely on the existing customers to spread the information about MAC products.

Alternative solutions

There are several alternatives how MAC can penetrate new markets, mainly Central and East Europe and also how to make people more aware of its high-quality cosmetics. It is good to consider different ways of the sale strategy, such as exporting, franchising, or retail sale via contracted distributors.

First alternative that can help the company to get its products further abroad is exporting. Exporting can be performed by the company itself or it is sometimes good to use export agents that work as intermediaries between the company’s home country and the foreign country (or even more foreign countries) to which the company wants to export its products. The following SWOT analysis shows the advantages and disadvantages that have to be considered while choosing the best way to penetrate new markets.

SWOT Analysis for Exporting

Strengths Weaknesses

reaching new markets high initial and administrative expenses

low fixed costs adjustments

higher revenues formalities

corporate growth distributor contracts

Opportunities Threats

innovation tough competition

global expansion political and economical impediments

international awareness of the brand

MAC can benefit from exporting because of getting its products everywhere at relatively low costs. The products can be distributed by external intermediaries and sell at the worldwide markets without any direct involvement of the company. However, it requires several adjustments of the products to be made by the company itself, such as packaging, and some other modifications that would suit to different nations. Also, there can be some administrative obstacles that the company has to solve in order to make good agreements with the distributors. On the other hand, exporting can provide international awareness of the brand connected with the desire to innovate even more. The threats that can occur in the case of exporting can actually occur also in other ways of marketing practices, that is tough competition or political and economical impediments that make the product offering harder and more costly (Advantages & disadvantages..., 2007, p. 1).

Second alternative in order to reach new markets is franchising. Franchising is one of the most widespread forms of cooperation between companies all around the world. A franchisor is the founder of the whole system and represents a core for the whole network of franchisees. The parent company develops and manages the conditions at which the franchisees function and actually sells its business objective. In the chain of franchisees, each one is an independent business unit but its operation is partially controlled and limited by the parent company’s marketing conception. Therefore, franchising provide both advantages and disadvantages for the franchisor as well as for a franchisee.

SWOT Analysis for Franchising

Strengths Weaknesses

money inflow high marketing costs

new market penetration lower flexibility

cooperation with local people personnel training

Opportunities Threats

creativity possible loss of control

global expansion cultural differences

international awareness of the brand worsening reputation

One of the greatest advantages of franchising is money inflow from the franchisees,