1 growing a business by developing products and markets

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Introduction

A business that grows is often better placed to meet its customers' needs. Growth can also help a business to stay ahead of its competitors. Beiersdorf is the skincare company behind leading brands NIVEA, ELASTOPLAST, ATRIXO and EUCERIN. Over the past 10 years the company has grown consistently and rapidly through a carefully controlled and well managed expansion of its portfolio of products.
 
This Case Study looks at how the company has experienced consistent growth by developing new products and markets. It uses Igor Ansoff's business matrix, with real Beiersdorf cases, to illustrate ways in which a company can plan its growth successfully.

Growth

Growing a business can involve increasing:

  • turnover (the value of sales)
  • profits
  • size and share of the market
  • number and range of products
  • company's geographical spread
  • number of employees.

When a company grows it will expand into areas that offer new opportunities. It will also cut back in areas that are not performing as well or are in permanent decline. A company can grow internally by ploughing back profits into the business and building on its successful areas. This is organic growth. A business can also grow externally by taking over other successful businesses. Beiersdorf engages in both types of activity. It concentrates, however, on organic growth. This is not surprising. The NIVEA brand is so well known worldwide that it makes sense for the company to build organically on an established success story. Beiersdorf's recent developments illustrate three main ways in which firms can achieve organic growth. It has done this by:

  1. Developing new product categories, e.g. NIVEA FOR MEN.
  2. Moving into new countries. Since the 1980s, Beiersdorf has expanded into many Eastern European economies. Today, it has a growing presence in China, a rapidly expanding market.
  3. Expanding market share in established markets. NIVEA has continuously expanded its share of the Lipcare market over a number of years, despite the fact that previously this market was quite a mature and established one.

Ansoff's growth strategies

The business analyst Igor Ansoff outlined some important strategies for business growth. He identified four key approaches to growing a business. Beiersdorf's development illustrates all four.

  1. Market penetration: Increasing market share for a firm's products in its existing markets. Several approaches help to achieve this, including product improvement; updating and building/improving existing products.
  2. New product development: developing new products for existing markets.
  3. Market development: finding and developing new markets for current product lines. This is most suitable when existing products require only minor modifications to be suitable for new, overseas markets. It also helps if the product life cycle is similar in the different markets that the business serves. This will not always be the case.
  4. Diversification: developing new product markets outside the existing business. A firm will pursue this strategy where new markets are highly attractive. To do so, it may switch resources from some of its existing markets that it believes to be in permanent decline.

We can illustrate Ansoff's ideas on how to grow a successful business by taking examples of Beiersdorf's growth in recent years.

Beiersdorf's growth strategies

Market penetration

Selling more products involves either growing the market as a whole or taking market share from competitors. NIVEA increases its sales by adjusting the marketing mix:

  • Product - reformulating products to make them more effective e.g. better at moisturising.
  • Price -reflecting good value but at a premium to retailers' own or private labels to represent quality.
  • Place - finding new outlets through which to sell the products.
  • Promotion - finding more effective ways of reaching the target market, e.g. samples on beauty magazines.

NIVEA Lip Care is a good example of the way in which NIVEA is building an existing product in an existing market, i.e. market penetration. Despite the seasonal nature of demand for lip care products and their relatively low selling price. NIVEA lipcare has developed the brand through monitoring trends in the market and matching these with its existing core competencies in skin care. The core products of this range are 'Essential', 'Repair', 'Rose' and 'Sun'. However, NIVEA has extended the product range with:

  • (2000) Strawberry and Cherry
  • (2002) Pearl & Shine
  • (2003) Gold & Shine and CareGloss & Shine.

The launch of new products, which combine cosmetic trends with NIVEA's traditional skincare expertise, has been very successful. The brand which has around 90% brand awareness, is well recognised by the consumers, whilst the new launches reinforce and reflect known standards. By Christmas 2003, Pearl & Shine had become the market's best selling product.

New product development

Beiersdorf's investment across a broad range of existing products illustrates its commitment to new product development. NIVEA is the master brand that drives the success of the whole NIVEA portfolio of sub-brands. It is the No. 1 skincare brand worldwide. Beiersdorf continually strives to strengthen this position through research in products and markets.
A further example of new product development was the launch of NIVEA Visage Soft Facial Cleansing Wipes in 1999. Market research at the time showed only 66% of UK women used a facial cleanser, whilst only 27% has a face care regime (cleanse, tone, moisturise). Women were looking for an easy, convenient, face care routine. NIVEA's Soft Facial Cleansing Wipes remove eye make-up and cleanse and tone in one simple step thus meeting customers' known requirements. This is the basis of the product's success. Not surprisingly, NIVEA rapidly became the No.1 brand.

Market development

Market development

The UK launch of NIVEA deodorant is a good example of market development within the NIVEA range. This is Europe's No. 1 brand. The chart shows 2004 figures for selected countries in Western Europe. It indicates the growth potential for NIVEA deodorant in the UK.
The UK deodorant market is currently worth £300m annually. It is a highly competitive market, dominated by one major manufacturer, Unilever, who account for over 60% of all sales. NIVEA believes its traditional skincare expertise will help to bring new UK consumers into the brand. Currently, 5 million UK consumers buy into the NIVEA brand, all of whom are potential NIVEA deodorant users. By capitalising on this potential Beiersdorf intends to maintain its rapid and consistent growth.

Launching the product in the UK required careful product and market research. Recognising Unilever's dominance of the market, through pre-launch research, NIVEA identified a strong match between traditional NIVEA brand values and those required in a skincaring deodorant, i.e.:

  • protection
  • suitable for my skin
  • mild/skin friendly
  • pleasant fragrance
  • reliable brand
  • high quality.

This allowed NIVEA to enter the market in the more specialist skincaring deodorant segment, away from the bigger, high-performance focused brands, with which the NIVEA brand image had fewer synergies. This market segment gives greater scope for expansion than the entire deodorant market. NIVEA aims to become the number 1 skincaring deodorant in the market, and to control this area, rather than to control the market as a whole. Given the size of the UK deodorant market, dominating the skincaring segment, which accounts for nearly 20% of the market, can be as rewarding as being the leading brand in a smaller market.

Diversification

Beiersdorf has a history of being an innovative company. It has always been prepared to develop new products for new markets. This is well illustrated by the development of the NIVEA FOR MEN range. This development results from several trends. These include:

  • The softening and blurring of "male" and "female" gender roles
  • Increased spending on lifestyles with more people attending gyms and caring about their appearance
  • New media developments, e.g. the revolution in men's magazines provide direct contact with men through advertising.

NIVEA was the first mass-market brand to set out to develop male facial care/moisturising. The NIVEA FOR MEN range provides straightforward practical solutions to men's skincare needs. It targets men who value their appearance and who see it as a key contributor to self-confidence i.e. NIVEA has diversified into the male sector of the market. The NIVEA FOR MEN range built on the NIVEA brand heritage. At its launch in the late 1990s, the product range included:

  • shaving foam
  • shaving gel
  • aftershave balm
  • sensitive aftershave balm
  • moisturising lotion
  • intensive cream.

The emphasis was on encouraging men to consider using face care products as a route to building a good self image and self confidence.

Conclusion

Beiersdorf is Europe's leading skincare company. It continually seeks to grow through developing its products and its markets. Beiersdorf UK's development of the NIVEA brands fits in well with Igor Ansoff's ideas. The company continues to build a successful business by developing new and existing products and markets as well as diversifying into new markets with new products.

Beiersdorf | Growing a business by developing products and marketslock