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COMPANY PROFILE
The company adapts to China's business environment and finds its place
Dallas-based cosmetics firm Mary Kay Inc.'s mission is "to enrich women's lives"-an unusual goal for a company, but one that thousands of Chinese women have welcomed. Since Mary Kay first set up in China in 1995, it has invested $20 million in its China operations. Over $10 million was spent on a wholly foreign-owned plant in Hangzhou, Zhejiang Province-the company's first overseas manufacturing facility. (It also manufactures in NeuchAtel, Switzerland, and Dallas, Texas.) By the end of 1997, wholesale sales topped $12 million in China, and a nearly 12,000-strong sales force was making inroads into China's cosmetic markets.
Adjusting to China
In 1996, Mary Kay China opened a branch in Shanghai, and by the end of 2000 had branches in 16 other Chinese cities, mostly in east and northeast China. Mary Kay hopes to open new branches in six cities each year for the next four years. The company chooses cities in areas of the country where incomes are higher than average and cosmetics and skin care products are used most often. According to Paul Mak, president of Mary Kay China, people in eastern and northern China use these products more often than people in the south, partly because of the climate and partly because skin types tend to differ across the country.
Mary Kay sells about 200 products in China, with prices ranging from Y6 ($0.72) for an eye shadow applicator to Y380 ($45.91) for perfume. Most cost between Y40-200 ($4.83-24.16). These products fall into nine categories: skin care, dietary supplements, color cosmetics, body care, sun protection, fragrances, mother and baby care, and men's skin care. The Hangzhou factory produces everything Mary Kay sells in China. The facility also exports to Malaysia, the Philippines, and Thailand. Though the company currently exports only a small percentage of its PRC output, it plans to export 20 percent within five years. Over 90 percent of the raw materials and 5 percent of the components are imported. Mary Kay may build a second PRC manufacturing facility once sales are high enough to justify construction.
Some products differ from those sold in the company's home market. For instance, skin whitener is popular in...