Indonesia Cosmetics

Brand Analysis of Global Brands Versus Local Brand in Indonesia Cosmetic Market

CHAPTER ONE

INTRODUCTION

1.1. Background

The general term cosmetics are applied to all products used externally to enhance and beautify the appearance of the body, by cleaning, coloring, softening, or protecting the skin, face, hair, nails, lips, or eyes. Many multinational companies and local brands in Indonesia starting to enlarge their cosmetic market and challenged the Indonesian cosmetic industries with the circulation of imported cosmetic product in domestic market. It happens because customer desire of wearing cosmetic drastically increase which makes cosmetic industries start to produce any kinds of products, such as various skincare and make-up (Burhanuddin,

Numerous researchers have found that a product’s country of origin (COO) is often used as a determinant that affects consumers purchase decision (Prendergast & Tsang, 2010) So, it becomes strategically profitable for multinational companies to expand their market across emerging country starting from manufacturing until marketing communication (Roy & Chau, 2010). COO is a powerful variable that has been used to influence a company competitive position to success in the global marketplace. Generally, the construct of country-of-origin is based on the assumption that the country in which a product is 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 consumers around the world. They established their identity for a long time ago and it make consumers perceived it have high status and quality (Anholt, 2005). While consumers seek for self-esteem and competence, they choose a brands that look prestigious and modern. Those positive associations differentiating US brands power in international markets (Min-Young, Knight, & Youn-Kyung, 2008). Consumers’ acknowledgement of U.S. products is moderately high and they are well 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 is solely a leader cosmetics company with high brand recognition and world standard products make them use global strategy to expand. Coming off a record-setting in 2000 in both sales and profit, L’Oreal remains