Brand Analysis of Global Brands Versus Local Brand in Indonesia CosmeticMarketCHAPTER ONEINTRODUCTION1.1. BackgroundThegeneral term cosmetics are applied to all products used externally to enhanceand beautify the appearance of the body, by cleaning, coloring, softening, orprotecting the skin, face, hair, nails, lips, or eyes. Many multinationalcompanies and local brands in Indonesia starting to enlarge their cosmeticmarket and challenged the Indonesian cosmetic industries with the circulationof imported cosmetic product in domestic market.
It happens because customerdesire of wearing cosmetic drastically increase which makes cosmetic industriesstart to produce any kinds of products, such as various skincare and make-up (Burhanuddin, 2016).The cosmetic consumer also more aspirational when choosing the brand accordingwith their needs and desires concerned on their appearance. Generally, cosmeticcompanies only targeted female users but the reality of today is slightly different.They targeted both woman and man now.
For example, men are more concerned ingrooming and expressing the appearance that the made demand for men’s cosmeticswith any kinds of product, including anti-aging and whitening products (Indonesia: Personal Care & Cosmetics Products, 2016).Ina time of globalization, many of the multinational companies come throughemerging markets bring their global brands to strategically appealing a growingsegment of consumers around the world with similar tastes and preferences (Roy & Chau, 2010). Numerousresearchers have found that a product’s country of origin (COO) is often usedas a determinant that affects consumers purchase decision (Prendergast & Tsang, 2010) So, it becomesstrategically profitable for multinational companies to expand their marketacross emerging country starting from manufacturing until marketingcommunication (Roy & Chau, 2010). COO is a powerfulvariable that has been used to influence a company competitive position tosuccess in the global marketplace. Generally, the construct ofcountry-of-origin is based on the assumption that the country in which a productis manufactured is related to the brand in which it originated (Prendergast & Tsang, 2010).US brands have long presence in the market so it well-recognized by consumersaround the world. They established their identity for a long time ago and itmake consumers perceived it have high status and quality (Anholt, 2005).
While consumers seek for self-esteem and competence, they choose a brands thatlook prestigious and modern. Those positive associations differentiating USbrands power in international markets (Min-Young, Knight, & Youn-Kyung, 2008).Consumers’ acknowledgement of U.S. products is moderately high and they arewell positioned in the Indonesian market. U.S. products include Procter & Gamble, Clinique, Estee Lauder,MAC, Revlon, Neutrogena, Olay, Bath & Body Works, and Victoria’s Secret (Cosmetics & Toiletries Market Overviews, 2015).
All well-known high-end cosmetics companies located in Europe and L’Oreal issolely a leader cosmetics company with high brand recognition and worldstandard products make them use global strategy to expand. Coming off arecord-setting in 2000 in both sales and profit, L’Oreal remains the globalleader in cosmetics with a 16,8% market share (Kumar, 2005).Another European brand is Unilever based in UK region, Oriflame Cosmetics,Nivea based in Germany and many others European cosmetic companies. Thesedays Korean cosmetic brand also becomes a huge popularity in Asia.
The presenceof Hallyu Culture or Kpop that come to Indonesia affect people to be aspired tobe what they idolized from that culture (Burhanuddin, 2016). Quoting talks KoreaBuys founder, CEOAlex Won, He did not think much to invest in Indonesia. It’s the biggestpotential of the e-commerce market in Southeast Asia, with a great number ofK-star (Korean celebrity and fashion) fans. Alex estimates there are upwards of13 million fans of Korean pop culture and fashion in Southeast Asia, with 4.
4million in Indonesia alone (Crouch, 2015). The hot issues regarding South Koreacosmetic brand are when Unilever agreed to pay 2.27 billion euros ($2.
7billion) for one of South Korea’s biggest makers of beauty products, CarverKorea Co. Itis huge acquisition for British-Dutch companies includes the fourth-biggestcompany with its skincare market, in accordance to Bloomberg data compiled.They aim to gain a big part of Korea booming business. South Korea has anexpectation of skincare sales to reach $6.
3 billion this year, in accordance toresearch firm Euro-monitor. Ads featuring musicians, idols, singers andtelevision actors endorsing the cosmetics has been boosted export demand higher(Buckley & Wong, 2017).