FINAL PROJECT - SIMPLICITY’S MARKET ENTRY INTO SOUTH AFRICA 1

Final Project - Simplicity’s Market Entry into South Africa

Kimberly Kelly

St. Petersburg College

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Table of Contents

1. Executive Summary
2. Situation Analysis
a. The Company
b. Product /service overview
3. Marketing Environment
a. PEST Analysis
i. Political and Legal Environment
ii. Economic Environment
iii. Social/Cultural Environment
iv. Technology and Infrastructure Environment
v. PEST Conclusions
b. Industry Trends
c. Competitive Analysis
4. Market Segmentation, Targeting, and Positioning
a. Market Segmentation
b. Geographical Market Segmentation
c. Primary Target Market Estimation
d. Positioning Strategy
5. Marketing Strategy
a. Product/service Strategy
b. Pricing Strategy
c. Promotional Strategy
d. Place/Physical Distribution Strategy
6. Market Entry
7. Summary Conclusions
8. References
9. Appendices
a. Map of Location
b. Appendix I
c. Appendix II
d. Appendix III
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1. Executive Summary

Simplicity has great potential in the global market. South Africa will be an excellent

place to begin expansion. By using a joint venture strategy, the business risks will be minimised.

The economy of South Africa is on the up and people there are begining to have more

expendable income to enjoy non essential items like luxury soaps and lotions.

2. Situation Analysis

a. The Company

Simplicity is a US based company that produces all natural, organic soaps and lotions at an

affordable price. The company has recently begun planning to introduce its product

internationally.

b. Product /service overview

Simplicity prides itself on using all natural, locally sourced products. We aspire for our

luxurious, yet affordable soaps to be highly sought after on a global scale. In South Africa, there
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has been a great deal of recent growth in the area of men’s and women’s skin care products.

Also, the semi-recent modernization of several African countries makes it a good location for

new businesses (Redazion, 2017). The market is growing quickly, and people in the area are

beginning to find themselves with more disposable income to spend on things like fancy soaps

and lotions.

3. Marketing Environment

a. PEST Analysis

i. Political and Legal Environment

The government in South Africa is divided into three parts: the executive, the legislature ,

and the judiciary (SAHO, 2017). The executive branch is responsible for executing laws. The

judicial branch interprets the laws. And the legislative branch creates the laws. The US and

South Africa have strong economic and trade relations. South Africa signed the Trade,

Investment, and Development Cooperative Agreement (TIDCA) with the United States in 2008;

this “establishes a forum for consultative discussions, cooperative work, and possible agreements

on a wide range of trade issues, with a special focus on customs and trade facilitation, technical

barriers to trade, sanitary and phytosanitary measures, and trade and investment promotion”

(BOAA, 2016). Because of this an American soap company, like Simplicity, would likely be

welcomed.

ii. Economic Environment

Recent controversy surrounding President Jacob Zuma will likely increase economic

instability in the near future. “Endless political bickering constitutes the biggest stumbling block

to faster GDP growth, and it continues to weigh on business confidence and stave off future

investment” (FocusEconomics, 2017). That being said, in the twenty plus years since becoming a
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democratic country, South Africa has grown immensely both socially and economically. The

charts in Appendix A show South Africa’s GDP and GDP per capita from the 2012 to 2016. As

of 2016, the country's GDP was 296 billion and the GDP per capita was 5229 (FocusEconomics,

2017). “Between now and 2040‚ the country’s Gross Domestic Product is predicted to increase

by 40% as its population increases by only 16%” (Jordan, 2017). The chart in Appendix B shows

how the value of the rand has changed since the year 2000. The current US to South African

exchange rate is about 1 USD to 14 ZAR.

iii. Social/Cultural Environment

It is difficult to generalize South African culture and etiquette because it is one of the

most multicultural countries in the world (Commisceo, 2017). The graph on Appendix C shows

the distribution of males vs females of different age ranges. The country has a noticeably higher

number of females than males; and the largest population seems to be 35 years of age and below.

The ethnic makeup of South Africa’s population is approximately 75% black, 14% white, 9%

Colored, and 3% Indian (Commisceo, 2017). The religious makeup consists of about 68%

Christian, 2% Muslim, 2% Hindu. The other 28% of South Africans are animists or have their

own indigenous beliefs. As far as language goes, there are 11 official languages. English is

spoken throughout, as well as Afrikaans, Ndebele, Northern Sotho, Southern Sotho, Swazi,

Tsongo, Tswana, Venda, Xhosa and Zulu (Commisceo, 2017).

iv. Technology and Infrastructure Environment

In preparation for hosting the 2010 Fifa World Cup, the government of South Africa

invested heavily on the energy, transport, and telecoms infrastructures needed to host such a

massive event. Because of this, the country is able to meet the demands of a growing economy

and population (Brand South Africa, 2017). A recent G2O Infrastructure Hub report estimated
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that South Africa will need to invest $464 billion by 2040 in order to keep up with its projected

increase in GDP and population (Jordaan, 2017).

v. PEST Conclusions

Endless political controversies make the future economic condition of South Africa

uncertain. However, the US and South Africa have very strong economic trade relationships.

South Africa's principal foreign policy objectives are to promote regional economic integration

and to promote the peaceful resolution of conflict (BOAA, 2016). It is projected that GDP and

population will increase dramatically in the near future and as a result, the government will be

investing in improved infrastructures.

b. Industry Trends

The global soap industry reached a value of more than US$ 17 billion in 2016 (EI,2017).

This growth is due to a recent increase in disposable income, as well as a semi-recent increase in

the awareness of personal hygiene.

c. Competitive Analysis

Unilever is the leader of the soap market in South Africa with a 32% share of value sales

in 2016 (EI, 2017). Unilever’s strong brands, such as Lux, Sunlight and Lifebuoy, are go-to

products in South African households (EI, 2017). In order to make Simplicity a contender in the

soap industry, heavy price promotions will be offered. This will help drive volume growth

amidst the tough economic environment (EI, 2017). Simplicity will also promote the fact that it

is locally sourced and made from ingredients that complement the darker skin types. This should

set it apart from its competitors.

4. Market Segmentation, Targeting, and Positioning

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a. Market Segmentation

There are more females than males living in South Africa so Simplicity will gear its

marketing more towards women. In general, women are more interested in handmade soaps than

men anyway. 75% of South Africa's population is black, so the company will also make an effort

to use ingredients and scents that complement darker skin types.

b. Geographical Market Segmentation

Gauteng is the smallest province in South Africa but it houses the largest percentage of

the population (SSA, 2014, p12). With almost a quarter of the South African population so close

together, it only makes sense to introduce Simplicity into that area first.

c. Primary Target Market Estimation

The current population of South Africa is 55,913,401. Of that, 28,208,888 are females. If

approximately a quarter of the people in south africa live in Gauteng, then there are around

7,052,222 in that province. In that province, about 75% of the population is black. Therefore, one

can estimate that there are around 5,289,167 black women in that area. This will be the target

market of Simplicity.

d. Positioning Strategy

Simplicity’s soaps will be made from natural products that are derived from Africa.

Ingredients such as cocoa butter and shea butter, that are popular with the target demographic,

will be used. The ads will generally feature black women in their 30s. These ads will be

distributed through multiple channels, but mostly on transportation. Simplicity will place

advertisements on the side of busses and inside trains. Simplicity prides itself in using all natural,

locally sourced products. This will appeal to the country and its target market.

5. Marketing Strategy
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a. Product/service Strategy

Our company will be different than existing soap companies because we are passionate

about the environment and we strive to use only locally sourced supplies. Our packaging will be

minimal and made entirely from recycled materials. Because of this our scents and style will

truly reflect the local target markets. This will appeal to people with strong earth and community

loyalties.

b. Pricing Strategy

Soap is an obvious need, but I believe that the natural ingredients and exotic scents will

allow our company to stand out among its competitors. High-end cosmetics, such as MAC, are in

short supply in Africa, and they cost three times as much as they do in the United States (Powell,

2012). The pricing for Simplicity soaps will be on the higher end, because the company wants

the consumer to associate its product with more expensive brands and because pricing low may

cause buyers to think that the product is poor quality. Simplicity will, however, offer a number of

discounts and promotions because the company wants its product to be affordable to people with

less disposable income.

c. Promotional Strategy

Simplicity will use colorful billboard ads on streets and public transit as its main avenue

of advertising. They will offer a number of rewards and coupons to repeat customers, and to

consumers who recommend their product to others.

d. Place/Physical Distribution Strategy

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The most densely populated area of South Africa is Gauteng, so the physical location of

Simplicity’s South African headquarters will be in Johannesburg, Gauteng’s capital. Our

Products will be distributed by truck or train to locations throughout the rest of South Africa.

6. Market Entry

Simplicity will begin its journey into the global market by using the joint venture market

entry strategy. This will allow the company to learn about the new market environment more

easily.

7. Summary Conclusions

“Africa is the next frontier for global luxury goods brands, said Fflur Roberts,

Euromonitor’s global head of luxury goods, noting that the continent is projected to have double-

digit economic growth by the end of the next decade” (Powell, 2012). The economy, and

business opportunities are rising in Africa. This is a good time to start a business there, and by

using joint venture as the market entry strategy, Simplicity will be able to expand globally with

minimal risk. We believe that our product will be welcomed by the South African people.
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References

Bronkhorst, Q. (2016). How far the rand has fallen: from 2000 to 2016. Retrieved from <https://

businesstech.co.za/news/business/108555/how-far-the-rand-has-fallen-from-2000-to-

2016/>

Commisceo Global. (2017). South Africa Guide. Retrieved from https://www.commisceo-

global.com/country-guides/south-africa-guide

Euromonitor International (EI). (2017). Bath and Shower in South Africa. Retrieved from

<http://www.euromonitor.com/bath-and-shower-in-south-africa/report>

FocusEconomics. (2017). South Africa Economic Outlook. Retrieved from <http://www.focus-

economics.com/countries/south-africa>

Jordaan, N. (2017). SA under pressure to invest trillions in infrastructure development. Retrieved

from <https://www.timeslive.co.za/sunday-times/business/2017-07-28-south-africa-

under-

pressure-to-invest-trillions-in-infrastructure-development/>

Powell, A. (2012). Finding the Beauty in African Sales. The New York Times. Retrieved from

<http://www.nytimes.com/2012/11/16/fashion/16iht-fbeauty16.html>

Redazione. (2017). Africa: the next frontier of cosmetics. Retrieved from <http://www.

kosmeticaworld.com/2017/04/01/africa-next-frontier-cosmetics/>

SAheritage. (2017). A Heritage trail through the provinces of South Africa. Retrieved from

<http://www.sahistory.org.za/topic/heritage-trail-through-provinces-south-africa>

SAHO. (2017). Structure of Government in South Africa. Retrieved from <http://www.sahistory.

org.za/article/structure-government-south-africa>
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Statistics South Africa (SSA). Mid-year Population Estimates. Retrieved from

https://www.statssa.

gov.za/publications/P0302/P03022014.pdf

The U.S. Bureau of African Affairs (BOAA). (2016). U.S. Relations With South

Africa.Retrieved

from https://www.state.gov/r/pa/ei/bgn/2898.htm
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Appendices

Map of Location

Map from (SAhistory,2017)

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Appendix A
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Table data from (FocusEconomics, 2017)

Appendix B
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Table from (Bronkhorst, 2016)

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Appendix C

Table from (Commisceo, 2017)