Initial Market Penetration In Hong Kong example essay topic

Export and Import Practices Hong Kong's cosmetic and toiletries market had an estimated value of $787 million in 2002. With little domestic production of cosmetics and toiletries, Hong Kong relies on imports from China, Japan, the United States, France, Singapore, Malaysia, and Taiwan. Industry sources expect import growth to continue in the coming years despite the economic slowdown in Hong Kong. The constant demand from mainland Chinese tourists will also drive the growth of imported cosmetics and toiletries. The best prospects in Hong Kong will be in hair coloring products, skin-whitening products, nail products, color cosmetics, permanent eye makeup, and skin care products for professional beauty salons. U.S. skin care and hair care products have a reputation for quality, innovation, competitive prices, stringent quality control, and safety. While Japan is currently the market leader in color cosmetics, France is the leading perfume supplier to Hong Kong.

According to U.S. government statistics, Hong Kong was the United States' 15th-largest trading partner and 13th-largest export destination in 2001. U.S. exports to Hong Kong totaled $14.1 billion in 2001, and bilateral trade totaled $23.7 billion. U.S. exports to Hong Kong in the first quarter of 2002 were down 18.2 percent over the previous year due to sluggish domestic consumption and capital investment. There are no import tariffs or product registration requirements on cosmetics and toiletries in Hong Kong. Hong Kong accepts U.S. product labeling and there is no local mandatory labeling or registration requirement on cosmetic or cosmaceutical products. As long as the cosmetic product or cosmaceutical product does not claim to cure a medical condition on its labels, its promotional materials or in its package inserts on usage instructions, registration is not required.

Imports from the United States fell to $92 million in 2002, yet the United States remained Hong Kong's third-largest supplier. With U.S. and third-country companies increasingly manufacturing their cosmetics and toiletries in China and other low-cost Asian countries, imports from the United States should continue to decline in 2002 and onwards. More often, 43 percent of Hong Kong's cosmetic imports are re-exported, 15 percent of which are re-exported to the Chinese market. The Hong Kong market is well worth targeting on its own, never mind the allure of the mainland. The first thing a visitor notices is Hong Kong's fast-paced business climate. Because Hong Kong is among the most competitive markets in the world, U.S. companies need to make decisions quickly and respond to buyer inquiries immediately.

According to Olivia Cheng, president of California-based World Medical Trade Organization (WM TO), "Business moves quickly, and you have to be ready to act fast in Hong Kong". One of the best ways to sell products and services in Hong Kong is through agents and distributors, which minimizes initial investment in the market. Hong Kong has an extensive network of agents and distributors who are eager to buy and sell competitively priced, quality U.S. products. For many American products and services, initial market penetration in Hong Kong does not require an investment of millions of dollars of company funds. Given that Hong Kong is a "free port" with virtually no duties or tariffs, and that it has a wide-ranging network of agents and distributors, a well-managed market penetration program with a moderate investment in market development is generally all that is required initially.

Due to its open nature, however, Hong Kong is among the most competitive and price-sensitive markets in the world. Companies considering entering this market should be aware that the Hong Kong business climate is extremely fast-paced. Decisions are made quickly, and companies need to be able to respond to inquiries immediately or they risk losing the market to faster moving suppliers. Hong Kong's sophisticated, urbanized and affluent population makes it a lucrative market for high quality beauty products. The use of skin care products is a daily routine for most women rather than an occasional luxury treatment and this will influence the way in which cosmetic products are marketed. Numerous American products and services can be found in Hong Kong, and throughout China.

Many excellent agents and distributors for China are located in Hong Kong, although given China's size and diversity, it is usually necessary to work with different agents for different regions of China. Hong Kong companies are eager to talk to potential exporters and have a strong interest in representing quality, competitively priced U.S. products from companies committed to the market. One of the best ways to sell products in Hong Kong is through the use of agents or distributors. It is also an excellent way of minimizing the initial investment in the market. There is a wide range of companies that can serve as agents or distributors for U.S. firms. Other options for pursuing Hong Kong's market are establishing an office or partnering.

Many Hong Kong distributors have agreements with their overseas principals to distribute the products in China. The manufacturer must also provide launch support and be willing to invest jointly with the appointed agent / distributor in advertisements and other brand-building promotional activities. In addition, packaging and product size must be adapted to local tastes. Local importers complain frequently about the large sizes of U.S. products. Young consumers, in particular, prefer small-sized cosmetic and toiletry items that they can carry with them. Hong Kong has a well-developed network of retail outlets.

Supermarkets, department stores, convenience stores, and modern shopping malls have become increasingly popular, because of their easy access, convenient location, and seven-day availability. Consumers prefer buying products from retail outlets to buying products on-line, as they consider retail shopping a leisure activity. Direct marketing accounts for less than 1 percent of total retail sales, though it has increased in popularity following the economic slowdown. Many who lost their jobs turned to direct marketing while others who suffered pay cuts joined direct marketing companies to augment their incomes. Sales of direct marketing companies surged between 5 percent and 10 percent over the past few years.

Many local companies, particularly Chinese herbal health supplement distributors, have adopted direct marketing. The lack of homegrown e-commerce sites in the Chinese language in Hong Kong has limited the growth of on-line shopping. Because there is a well-developed retail distribution system and an abundance of conveniently located outlets, consumers in Hong Kong have no incentive to shop on-line; there is no price advantage and they cannot inspect products. The major selling factors are the same as in the United States: price, quality, timeliness in delivery, and service. Initial sales require more face-to-face contact, as Asians generally place a premium on developing personal connections.

Some sort of local presence, whether it is a branch office or an agent or distributor, is very important in getting established in the market. Business in Hong Kong (and elsewhere in Asia) requires relationships that can only be developed with some kind of local presence. Prompt after-sales service is also crucial to succeeding in this very competitive market. U.S. manufacturers looking to increase their market share or those new to the cosmetic industry market should consider organizing promotional activities jointly with department stores. They should support these activities with free samples and promotional literature. Make-up demonstrations by overseas make-up artists and makeovers at cosmetic counters within department stores and product launch events featuring visits by celebrities to the retail outlets are also well-received by local consumers.