The Potential of Liquid Soap in the Thai’s Market

Introduction

In this report, we decided to explore the possibility of introducing Simple liquid soap from the United Kingdom (the fifth largest exporter) to Thailand. Although the general soap market in Thailand is declining, the liquid soap market is growing continuously. For example, the leader of the soap market, P&G, had a 15 per cent decline in its bar soap due to the consumers switching to liquid soap. It is a new style of soap, and Thai people seem to appreciate it. Also, the weather in Thailand is hot, so Thai people pay careful attention in selecting skin care products especially liquid soap. In addition, Thai people always feel excited about new kinds of products, and they always try to use them. Therefore, the liquid soap market seems to have a good fortune in Thailand due to the good number of the Thai population, GDP growth, inflation rate and growth rate of soap in the Thai market. The scopes of this report are the potential of liquid soap in the Thai’s market, product strengths and weaknesses, positioning issues, timing, and entry method and mix tactics.

Company Background

Accantia Health and Beauty Ltd. is a dynamic, “can do” company, which produces skincare and healthcare products. All head offices functions are based at Alum Rock, Birmingham. Accantia has subsidiaries in South Africa, Australia and New Zealand. The company formed as a result of a leveraged buys out of the consumer business from Smith and Nephew Plc. There are many skincare and skincare products under the Accantia Company, which is Lil-lets, Simple, Simple Skin Define, Cidal, Wrights and retail brands. The highly successful brand of the Accantia Company is Simple, Cidal and Wrights. This report will emphasize Simple liquid soap, which is a good quality product at a reasonable price. There are many product lines under the Simple brand, which are skincare, oil control, sun care, toiletries, and soap skin defence (Kotabe, M, and Helsen, K, 2001, pp. 117-28).

Country of choice

The country in which the company can expand the market would be Thailand. This part of the report will be based on the factors below:

• Economic factors
• Demographic factors
• Economic factors
• Gross Domestic Product (GDP)

Thailand GDP continued to increase in 2001-2003 from around $115 to $135, which demonstrates economic recovery in Thailand. Moreover, the goal of the government is to develop consumer finance to stimulate the spending of the citizens by easy access to cheap credit and mortgages. Private consumption expanded 5.0 per cent each year in the third quarter of 2002. In 2002, Thailand became one of the fastest-growing economies in Asia, apart from Vietnam and China. The household debt stands at only 17 per cent of GDP and 27 per cent of disposal income, compare to household debt in South Korea of 69 per cent of GDP and 105 per cent of disposable income. Having a growing economy would be important for new products to be successful in Thailand. It means there will be a higher flow of money in the economy.

Inflation Rate

The inflation rate in Thailand was decreased between 1997 and 2001 from the highest, 8.1%, to 1.6%. However, it was estimated that the inflation rate would continue to decrease in the year 2003 because it was decreased over 4 years. Furthermore, the forecast indicates that it would remain to decrease for a few years except Thailand is challenged with another economic crisis. Presently, the economy is recovering because of the government policy of keeping the inflation rate low to stimulate the customers’ spending (Roth, Kendall and Tatiana Kostova 2003, pp. 314-330).

Growth in the liquid soap market

Procter & Gamble (Thailand) Ltd, the local unit of the US-based consumer-product maker, said yesterday that it plans to invest a further Bt5.9 billion to make Thailand its largest production centre in Asia. This company has seen growth in major product categories, including 10 per cent growth in hair-care products, 5 per cent growth in Whisper sanitary napkins, 15 per cent growth in Pampers diapers, and 40 per cent growth in Pringles potato crisps. However, the company has witnessed a 15 per cent decline in its bar-soap business due to consumers switching to liquid soap. As sales of bar soap in the Thai’s market is declining due to consumers’ switching to liquid alternatives, there is increasing need and demand for the product. Therefore, this is a great opportunity for Accantia Health & Beauty Ltd. to lunch the liquid soap in Thailand (Kotabe, M, and Helsen, K, 2001, pp. 117-28).

Potential Market Size

The potential market sizes for a product such the liquid soap in Thailand is the one that is difficult to quantify due to the lack of available current data. In order to assess the potential market size for this product, the chosen methods are the Chain Ratio Method and Analogy method. (Roth, Kendall and Tatiana Kostova, 2003, pp. 314-330)

Perceived Risk

Product and Brand’s perception are important for making consumers’ decisions—their thinking processes concern about the specific characteristic, especially the core component and the reputation of the company. However, Simple is one of the illustrious liquid soap companies in the United Kingdom, which presents a special soap product. Therefore, it will not be hard to make Thai consumers acknowledge its product and brand. The knowledge of using liquid soap came from consumers’ experiences in the past (Assael, 1998, p. 105). This affects consumers’ decisions when they want to buy the product in the future. Nevertheless, Thailand imported liquid soap products from other countries in the last decade, and Thai consumers had positive attitudes toward these products. As a result, the process of consumers’ learning is variable, which can make consumers recognize the product and buy it. Changing to the Simple liquid soap is not likely to face major resistance because Simple is the well-known global brand that could be sold by it. For this reason, the resistance to change of Simple liquid soap is low. A company’s motivation has an influence on consumers’ behaviour. The company use a marketing strategy such as pricing to attract its target market. Both low price and high quality of the product can persuade consumers to buy. Therefore, Accantia will adopt a price strategy of low pricing with high quality.

For Thai people, liquid soap product is in accordance with their lifestyles, by providing the quality standard and consumable price which will give satisfaction to the customer and also create brand loyalty. Therefore, the frequency of purchase will be high. As Thailand is a country with high uncertainty avoidance, there is a low tendency of rejecting the product. This means regardless of a complaint or previous experience; the customer may still purchase the product. Thai consumers have different behaviours and decisions that they can change their minds for buying the product all the time. For a consumer to be loyal, the company should focus on an advertisement, which presents attractive sources and beliefs. At this point, consumers have a various choices to choose from until they do not believe in terms of brand loyalty. The trustworthiness of the company can change consumers’ attitudes. Most Thai people have a positive viewpoint for liquid soap because of its credibility (Wasik, J. F 1996, pp. 123-32).

Relative or conceptual advantage

Liquid soap is an inexpensive consumer’s product that makes them take easier decisions to buy the product. Also, the Simple liquid soap has good quality at a reasonable price. This product is well distributed and available at supermarkets, drugstores and shopping malls, which make it easy for the consumer to buy. Simple liquid soap had a fragrance smell that comes from the great combinations of flowers, herbs and fragrances. It foams well and good for all skins. It could be used for baths and shampoo ( Elenkov, D. 1997, pp. 297-302).

Compatible with values

Thai people have a very careful selection in body care and skincare products. The reason is that Thailand has a hot climate, so Thai people will have a shower quite often. So good quality body care and skincare products play an important role in Thai people daily lives.

Low complexity

Normally, fast moving consumer goods (FMCG) are easy to use. Therefore, it is a low complexity product.

Ease of testing and trialability

The product is well tested and proven through consumers since 1960. It is the first fragrance and colours free soap. Ease of trialability can be done by giving a free example or provide a discount coupon to the consumers for their next purchase. (Wasik, J. F 1996,123-32)

Observable benefits

Simple liquid soap can be washed out easily. It contains good quality components, which create a good smell and soften skin. Containing rich moisture creates thick crème, and it will stick on the palm whenever the consumers use it. Simple liquid soap can be used last longer than bar soap, so consumers can get financial benefits by using it ( Elenkov, D. 1997, pp. 297-302).

International Marketing Strategy

According to Greenley’s framework of five components of marketing strategy, the international marketing strategy involves the combination of the Prahalad Doz model and the components, which are marketing mix, market-entry mechanism, product positioning, market positioning or segmentation and timing (Kotabe, M, and Helsen, K, 2001, pp.  117-28)

Market entry strategy

Choosing the mode of entry into Thailand is based on two classes of decision criteria, which could be external (environment-specific) or internal (firm-specific) (Assael 1998, pp. 15-19).

External criteria

Some of the major external criteria that may be considered in choosing the mode of entry are:

• Market Size and Growth: In many instances, the key determinant of entry choice decisions is the size of the market. Large markets justify major resource commitments in the form of Joint Ventures or wholly-owned subsidiaries. Thai’s market is a large market with a market potential of between 5 million and 14 million approximately.
• Risk: risk relates to the instability in the political and economic environment that may impact the company’s business prospects. Thailand is a democratic state with an emerging economy; hence, the risk of doing business in this country is low.
• Government Regulations: No stringent trade barriers of any kind that will restrict the entry choice decision.
• Competitive Environment: This is a highly competitive environment with major MNCs like P&G and products such as Lux and Palmolive.
• Local Infrastructure: The local infrastructures like roads, water, electricity, and telecommunication are available and in a good state in the urban areas. The above factors determine the overall market attractiveness of Thailand (Shama, A. 1994, pp. 289-309)

Internal criteria

Company objectives: The Company is an ethnocentric company that has subsidiaries in South Africa, Australia and New Zealand and would like to expand its scope to Asia with total or major control.

• Need for control: control may be desirable for any element of the marketing-mix plan: positioning, pricing, advertising, product designing, branding etc.
• Flexibility: To cope with the increasing changes in the local operating environment, Accantia Health & Beauty ltd will apply some flexibility in its strategy (Wasik, J. F 1996, pp. 123-32).

Entry mode

The proposed entry mode should be in the form of a Joint Venture. The company should agree to share equity and other resources with a company in Thailand. The equity stake should be in the form of a majority stake in which Accantia will hold more than 50% ownership. The partner must be a company has to experience in fast-moving consumer products (FMCG) and also has good and well-established distribution network. The reasons behind the decision of Joint Venture proposal are;

1. Simple liquid soap is not available in Thailand presently.
2. Very high competition on liquid soap market in Thailand. Several brands presently the leaders in the market.
3. The cultural barrier no previous experience of Thai’s culture. Also, language may be one of the problems.
4. Risk-sharing possibility.
5. The investment will be less demanding.
6. There is the potential of Synergies. (Roth, Kendall and Tatiana Kostova 2003, 314-330)

Timing and know-how

The current trend in the Thai market indicates the growing liquid soap market. This is an emerging market in the soap market. Since Simple liquid soap is an established product in the United Kingdom, going into the liquid soap market will give Accantia a first-mover advantage to capitalise on the growing stage. Also, to transfer our technological competence in producing a colour-free liquid soap since Accantia is the first producer of perfume and colour-free soap.

Marketing segmentation strategy

We are using demographic factors to select our target market, focusing on the population size and urbanisation degree:

1.  The market segment will be the people between the age of 15-65 years old.
2. The focus is on the urban population within the age bracket 15-65 years.
3. The focus will be on the innovative buyers, early adopters and the early majority. This is because the product is relatively new to Thai consumers.

Reason

• Population of the people within 15-65 years in urban areas between 5-14 million people, which is approximately between 8-23 per cent of the population.
• The high and medium income earners populate urban areas.
• These categories of people belong to the influencers’ buyers and decision-makers in consumers’ behaviour, such as children, housewives, and husbands   (Elenkov, D. 1997, pp. 297-302)

Product positioning

Once the company has decided on which segment of the market to pursue, the next step is to decide on what positioning strategy to use to appeal to the chosen segments. The product positioning will be based on consumer culture. This strategy adopted is global consumer culture positioning (GCCP)- buying the brand reinforces the consumer’s feeling of being part of a global segment. It also fosters the buyer’s self-image of being cosmopolitan, modern, and knowledgeable. Thai consumers are classified as people that culturally value design, style and fashion above. In buying any product, people look for design, style and fashion. Based on the above, the strategy going to be adopted is the global consumer culture positioning, which fosters the buyers’ self-image of being consumed, modern, and knowledgeable. And this is applicable in the urban areas in Thailand. The uncertainty avoidance is very high, which means that the prospect of Thai consumers accepting Simple liquid soap is very high. Also, Thailand is a feminine society (Roth, Kendall and Tatiana Kostova 2003, pp. 314-330).

Marketing-Mix

Product

• Simple liquid soap must offer the same benefits and features as the other in the United Kingdom.
• The quality should be standardised.
• It is must culturally bound i.e. branding and packaging should be attractive.
• Dutta’s Product Attribute Model
• Core Product Augmented Symbolic
• Colour free.
• Economical.
• First perfume
• Fruit Flavoured.
• Easy to use
• colour Fragrance-free soap
• Tangible.
• In plastic.
• Simple is well known.
• Product natural plant container skincare brand name
• Extracts since 1960
• Treat Foaming.
• Three different ability sizes
• Long lasting1. Easy to find1. Made in the UK
• Smell2. Reasonable
• Allergy-free.
• High-quality product
• Smoothen, and 3. Good
• Excellent Cleaning Effect
• Moisturises skin
• Lightweight
• Freshness

Price

An analysis of price survey liquid soap in the Thai’s market shows the relationship between price and product quality of the simple liquid soap compares with the other brands in Thailand. The company fixes the reasonable price, which is not quite expensive for buyers. Generally, Thai consumers consider price more than quality of the product. However, both pricing and quality of product are similarly important for consumers’ decisions; if the company emphasises this point, it will increase the number of consumers’ purchases as Lux, which is liquid soap leader. To achieve economies of scale, the price of Simple liquid soap has to be in this high quadrant quality and low price, more so that it is relatively new in the market. The product will mainly lunch in urban areas such as Bangkok and other major areas. This will directly attract the target market, which has more purchasing power than sub-urban.

From the chart that illustrates above, normally fast-moving consumer goods must get a high degree of access to the customer. So, the manufacture should distribute the product to the wholesaler, such as a discount store or supermarket. Then from the wholesaler move to the local retailer, or they can sell directly to the customer so, this will provide more reachable to customer. In addition, the company should emphasise the high level of product available in the market to increase the brand awareness to the customer (Kotabe, M, and Helsen, K, 2001, pp. 117-28).

Place

The place is broadly concerned with both the location of the business and the method of distribution between producers and consumers. Only in rare circumstances does the initial producer or manufacturer of products also act as the first and final link to consumers. The complexity of modern society makes it necessary for intermediaries to act as a direct links between producers and the ultimate consumers of products and services. A distribution channel refers to the type of intermediary or linkage between producers and consumers. A one-channel distribution network involves only the retailer between producer and consumer. Two-channelled distribution may include various intermediaries such as wholesalers. Direct distribution occurs when the producer directly supplies the product to the buyer. The choice of distribution channel is dependant on a variety of factors, for example, the type of product. Some products are not suited for direct distribution. A channel specialists such as a warehouse or wholesaler may provide an effective link with retailers as an existing relationship may already be in existence (Assael 1998, pp  15-19).

Promotion

The strategy that will be used in advertising will be both push and pull strategy. The company should offer the promotion to the wholesaler and retailer to stimulate them to bring the company product to their store. It can also increase brand recognition as the customer observes the product more often. By this strategy, the wholesaler and retailer will attempt to persuade a customer to buy the company product, as they will benefit from the promotion. Subsequently, the pull strategy the company probably uses the advertisement to pull the customer to purchase the product. The advertisement will use female celebrities to motivate customers, as Thailand is the country that focuses on the woman. Moreover, Accantia should use sales promotions such as a free trial or discount coupon to attract customers, as this is a new brand for Thai customers. The sales promotion such as discount coupons will let customers repurchase, and it can create brand awareness as well. By these two strategies, the company will stimulate both distributor and customer. (Roth, Kendall and Tatiana Kostova 2003, pp. 314-330)

Time

The diffusion curve shows the category of Thai consumers in the liquid soap market. The company’s target markets are innovative buyers, early adopters and early majority consumers, who would like to taste the new product in the market. In this case, the company uses Mass communication such as advertisement to persuade its target. The most attractive medium is advertising on television because people can recognize in a picture of the product and a specific characteristics of the brand (Wasik, J. F 1996, pp. 123-32).

Prahalad and Doz model

The approach to internationalisation requires a clear vision, permanently updated, of the environment in which each internationalising company operates (Dunning & Kundu, 2005 33-46). It will obviously depend on the degree of globalisation of the company, which stems from its positioning between two axes (Porter et al. 1986 40-49, Prahalad & Doz, 1987, pp. 67-74).

Conclusion

There may be a problem in the Joint Venture if the level of trust is in doubt. If the credibility of their partners is in doubt, not offering the expected capabilities in cultural adaptability and distribution channels, Accantia may decide to pull out of the venture. There may be other associated problems in Join a Venture like the risk of creating competitors and lack of control. Because of these likely problems, we suggest that Accantia should only try the Joint Venture for 3 years and decide on the next strategy depending on the outcome.

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