In China, there are factories and manufacturers of various scales in the hair color industry where supervision is no in place. Because of this particularity, hair color industry has been in chaos until now, especially for low end color cream market, which is filled with fake, unstable and even dangerous products. As the leading color cream manufacturer in China, produced by Colornow has been considered as quality and stability for long time. The In 2011 Colornow decided to wage a “Bargains Storm” with its low tier price hair color cream by reducing price by 15%. The order quantity has doubled since the new policy was introduced. It is predictable that a large number of small-scale manufacturers will be forced out of the market in the near future.
Why is Colornow so confident in waging the “Bargain Storm”?
Colornow, formerly known as a major supplier of pigments and formulation for hair color cream, once accounted for 70% of the market share in China. In 2002, Colornow introduced the most advanced hair color production line put into operation within three months. For a decade, Colornow expands production scale, increasing the plant production capability from 10,000 units per day to 100,000 units per day, increased by 10 times, and now has the China’s leading production base of color cream.
Let’s take a closer look at the strategies that Colornow apply:
1. The overall strategy of Colornow
A. Specialization strategy
Colornow growth period in the overall strategy is to focus on the core point, that is transfer from the original large-scale industries operating resources to the new option of “Color Cream” project, evacuate to focus all resources operation on this new “point”, and take the road of specialization. This focus on the establishment of barriers to entry is an important part of a little strategy. Colornow’s performance in this area is very prominent, including: first, constantly develop new products and know-how in the premise of same or lower cost; second, focus on the total cost as a leading edge, low cost to market good quality products and expand market share. Third, the key research and development of formulas, on the above basis, Colornow started to use its technology to develop key components, and put into production, further reducing overall manufacturing costs.
B. Internationalization strategy
Colornow Foreign Trade has realized not only the integration of the world advanced production equipment and technology, but also in: firstly, the globalization of markets, from a global perspective of the market allocation of resources to form our own brand or OEM/ODM products to the global market; Secondly, the internationalization of R & D in Canada and the US. R & D institutions and organizations jointly develop China’s own technology and new products; thirdly, the internationalization of human resources, hiring foreign personnel to meet international business needs.
C. Large-scale strategy
Colornow adopted a “puerile” strategy to achieve maximum size and the highest concentration of manufacturing industries to enhance the market competitiveness and reduce business risk; and then use the “maximum size” of the positive reaction “small profits more markets “strategy to promote a virtuous cycle of business to show the developing trend, which no doubt for Colornow is very successful in terms of marketing strategy.
2. Cost leadership strategy and economies of scale
Colornow sums up the core competitiveness as two words: scale manufacturing.
Colornow into hair color industry has always maintained overall cost leadership strategy, and it is so often that a significant price reduction in its cost much lower than the competitors, whiling keeps a large enough profit margin. On the one hand, the rapid expansion of production capacity, achieve economies of scale; on the other hand, sales through price cuts to expand market capacity, increase market share, and get the rapid increase in strength in a short term. Economies of scale, simply speaking, are to increase the input of production, expand production scale, by the scale of operations, and achieve an extraordinary development of the enterprise.