Case Study

Case of a Brand Called NIVEA

Strategic Opportunity Matrix (Ansoffs Growth Model)

Present Product Present Market New Product

Market Penetration Market Development

Product Development

New Market

Diversification

Growing a business by developing products and markets

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. 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. The Beiersdorf company began with the work of Paul C Beiersdorf, a German pharmacist. In 1911 it developed NIVEA Crme, the first modern cosmetic skincare product and the beginning of NIVEA, now the world's largest skincare brand. Soon afterwards, it marketed NIVEA Crme in the blue and white tin, so familiar today. Currently, an estimated one billion people worldwide use NIVEA Crme.

 The company has regularly extended its product portfolio in line with changing consumer demand. In the 1980s, for example, its new products included sun protection, aftershave balm, soap, shower and bath products. Beiersdorf continues to pursue a policy of extending its product range. Between 1991 and 1993, the company launched: NIVEA Deodorant worldwide Revolutionary new Anti-Age products the first mass market male skincare brand - NIVEA FOR MEN, which entered the UK market in 1998. Other Beiersdorf brands currently available in the UK include ATRIXO, ELASTOPLAST and EUCERIN.

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 Lip care market over a number of years, despite the fact that previously this market was quite a mature and established one.

 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.
Current Products New Products

Current Markets New Markets

Market Product Penetration Development Market

Development Ansoffs Product Market Expansion Grid

Diversification

 i. 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. ii. New product development: developing new products for existing markets.

 iii. 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. iv. 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.

 i. 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 moisturizing. 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 lip care 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 also. 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 recognized 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.

 ii. 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, moisturize). 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.

 iii. Market development

Launching the product in the UK required careful product and market research. Recognizing 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 skin caring deodorant : protection, suitability, skin friendly, pleasant fragrance, high quality.

 This allowed NIVEA to enter the market in the more specialist skin caring 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 skin caring 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 skin caring segment, which accounts for nearly 20% of the market, can be as rewarding as being the leading brand in a smaller market.

 iv. 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/ moisturizing. 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 selfconfidence 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, moisturizing 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.