Swisse: International Business and Internationalisation Process
Swisse Wellness has grown from it’s one product start up in 1969 to Australia’s current number one vitamin and supplement brand and one of Australia’s largest suppliers of multivitamins. It’s exponential growth both domestically and internationally over nearly fifty years had led to its high reputation and trust with its global consumers with its aim and philosophy customer focused. Swiss aims to help is customers gain a happier and healthier life through natural supplements, scientifically proven, whilst considering it a priority to maintain an environmental responsible business.
This report provides information on the current and background information on Swisse Wellness, analysis of recent development, issues resulting from its internationalisation processes and suggestions on a strategy for Swisse going forward.
Through the investigation of Swisse Wellness’ history and background, from conception to current day processes the issues arising from its international attempts are thoroughly analysed in this report. The overview of Swisse management international operations found in recent development, a joint venture formed by The Procter & Gamble Company and Teva Pharmaceutical Industries along with the acquisition by Biostime of 83% interest of Swisse found these international. This analysis led to the findings of Wanderlust 108’s partnership with Swisse and its aid in internationalising with the markets in The United States of America and furthering its connections in its home market, Australia. Although, despite the positive perception of the international development this report discusses, through further research, many issues of Swisse Internationalisation process were unveiled and analysed Swisse encountered problems with emerging into new markets.
Firstly, Swisse lack if readiness along with bad timing of entry lack of knowledge led to rising issues when attempting to tap the American market. Moreover, issues arose when Swisse internationalisation process was affected through healthcare distribution rights, particularly in Asia, changed. Similarly, importing and tax laws have and continue to change within the markets Swisse has expended into. From this analysis this reports concludes with a suggested strategy for the future of the organisation. This strategy includes Swisse Creation and Product Development At the time of conception in 1969 Kevin Ring, the entrepreneur behind the Swisse movement created his own range of health supplements. This passion, resulting from a trip to Switzerland in the 1960’s, led to Ring founding an organic bakery in Melbourne upon his return to Australia. The creation of Swisse and its first product. Swisse’ first product, the Pollen tablet, stemmed from Rings organic bakery consisting of wholefoods and fresh bread, and jumpstarted Ring’s development in formulating and manufacturing vitamins and health supplements his health food shop in St Kilda.
After ten years at this shop in St Kilda Ring moved Swisse to Niddrie, Melbourne into a new office. This led to major growth and the development of Swisse Ultivite multivitamin having a flow on effect with Swisse expanding its products into athletic and sport performance support in the 1980’s. This growth continued, presenting Swisse with another relocation to a warehouse in Airport West, Melbourne. Australian universities partnered with Swisse’ professor Avni Sali and in 1991 created Swisse Women’s Ultivite, a product the claim as their ‘flagship product’. Four years later the Men’s Ultivite tailed. At the end of the decade Swisse found itself to be the market leader in multivitamins in Australia and appointed Michael Saba as managing director (2000-2007). This creation and growth of Swisse Wellness, resulting from growth and networking created a strong foundation for Swisse to internationalise in the near future.
Internationalisation planning
The new millennium saw Swisse’ rapid growth both with domestic products and globally with internationalisation movements. With testing and releasing more than two hundred health supplements, Swisse also started publicly advertising in mainstream media around the country and moved to their current location is Gipps Street, Collingwood. During this time Radek Sali also joined Swisse in 2005 and by 2008 became Swisse first CEO in 2008. This induction of Sali as CEO. Sali solidifying his knowledge of the state and stability of Swisse was used as planning for its international activities and led to the successful planning and involvement internationally by Swisse. International Movements From 2010 inwards was Swisse’ first and major move out of the domestic market resulting from the networking connections it had created over the last forty years. Swisse signed three major partnerships, joining PGT healthcare LLP, The Procter & Gamble Company and Teva Pharmaceutical Industries Ltd. This led to Swisse growth into Europe, Asia and Latin America. This partnership shows an overview of Swisse planning of its international activities as Sali argues ‘milestones like this show that the long term plan will pay back in a very big way for us as an Australian company. " From 2010 to 2011 Swisse turnover had grown from $100 million to a turnover in 2012 to 2013 of $240 million expanding into 200, 000 drug stores in the US. Two years after the international partnership agreements were signed Swisse Biostime bought 83% of Swisse, creating a partnership between Swisse and one of the leading infant nutrition producers in Asia.
However later that year Swisse CEO Radek Sali and Adem Karafili, managing director, announced their resignation. Oliver Horn was appointed Managing Director and the remaining seventeen percent of Swisse was purchased by Biostime. Swiss have many plans for international growth, aiming to launch its products into 30 countries in the next five years.
International Development: The Procter & Gamble Company and Teva Pharmaceutical Industries
International development within Swisse has seen significant and drastic changes that has enabled the company to become more innovative with products and their adaptation towards the global markets. Swisse Vitamin in 2013 saw a dramatic transformation that instigated their fast growth and success, was predominantly due to PGT health LLP. As a joint venture organisation that was formed by The Procter & Gamble Company and Teva Pharmaceutical Industries, was tasked to successfully launch Swisse vitamin products towards Asia and European countries. Predominantly targeting Italy, Singapore and Hong Kong where the density of the population was significantly higher, therefore providing brand recognition and promotion for Swisse vitamin products. PGT successfully developed a new licensing deal that aligned both companies core strengths and capabilities to facilitate rapid expansion of Swisse vitamin, mineral and supplements (VMS) products into different countries, significantly producing a “megabrand” together. The collaboration benefitted from the deep consumer understanding of the product, unrivalled marketing scale advantages and go-to-market expertise of PGT healthcare. VMS product development expertise developed a portfolio of more than 100 premium products and integrating a unique marketing model of Swisse Wellness. Before the collaboration Swisse was only available in Australia, New Zealand and attempted markets in the United States. With the collaborative effort of PGT Swisse instead developed all new products in Europe, Asia and Latin America.
Results
Both of these companies adopt very aggressive marketing strategies towards foreign market, this enabled them to align their vision and goals to have the capability to set certain milestone throughout the joint venture. Swisse heavily focuses on manufacturing and international logistics and materials management through providing a sustainable licensing deal with PTG. This, therefore enabled Swisse vitamins to grow in sustainability and provide higher quality of products significantly for the brand. These two organisations producing with congruent values of improving the health and wellness for consumers were a vital reason behind the success of these companies successfully joining together. Developing these aligned goals creates trust between these companies, which is a fundamental structure of any international development.
International development: Biostime
Biostime is one of the leading premium infants’ formulae, baby food and baby care producers in Asia with revenues of $934 million in 2014. Biostime, also known as H&H Group, in 2015 acquired Swisse Wellness for $1. 67 billion securing 83% overall interest of the company (Evans 2017). This acquisition provided Swisse an opportunity to build a stronger trusted brand internationally and benefit from a well-established e-commerce platform that is supported through a large customer loyalty program in China and Hong Kong. The Swisse brand is synonymous with Australia’s clean, green and healthy lifestyle along with the positioning and quality that it upholds it being a premium brand providing a strong appeal to Chinese consumers. This partnership was significantly seen as Biostime providing a substantial platform for Swisse to enter a new market with innovative products, targeting all-round nutrition and care for the entire family. After acquiring the last 17% of Swisse Wellness, Biostime saw an opportunity to promptly diminish re-sellers of vitamins, such as the commonly known, daigou, who were purchasing vast amounts of Australian products while reselling them online in China. Swisse adopted these new developments and provided its own online channels dominating and maintaining its No. 1 position in e-commerce.
Results
Under new management chief executive Luo Fei’s vision for the company reflected the importance of maintaining a premium nutritional value for adult and baby care. Diversifying into different business segments: children and adult nutrition, Swisse instigated tremendous expansionary growth internationally through this rapid diversification of products into foreign countries.
International development: Wanderlust 108
Wanderlust 108 is founded on the core values of mindful living and educating individuals about the benefits of body health, through providing yoga and meditation classes to balance the body, mind and wellbeing. Swisse strived for providing similar health and wellness through creating nutritional vitamins. The corresponding core value of these companies instigated a partnership that dwells on celebrating the mind and nutrition movement that was heavily demanded. The four-year partnership with Wanderlust enabled Swisse Wellness to heavily market their product across Melbourne, Brisbane, Perth and Queensland providing a substantial platform for Swisse Wellness to rapidly grow within the Australian market. Wanderlust 108’s events has also significantly contributed to a heavy presence within U. S; expanding Swisse vitamins across Brooklyn, Philadelphia, Washington D. C and Detroit, these global events engage in manifesting communities to experience Swisse vitamins products.
Issues of Swisse Wellness’s International Process
Readiness and knowledge for internationalisation Unlike Swisse wellness Internationalisation onto certain Asian and European markets, the internationalisation of Swisse Wellness in the United States (US) in 2013 demonstrates an unsuccessful expansion by the lack of international readiness regards with bad timing of entry and the unawareness of the competitive intensity of different foreign countries. The World Health Organisation describes the health supplement market to be highly lucrative with an estimated value of 83 billion dollars. The US’s socio-demographic status with shocking obesity rates presents opportunities for international firms to target the US epidemic. In 2013, Swisse Wellness had expanded to the US where its products were sold over the counter nationwide through a partnership with American retailer Walgreens to focus on their target market (Swisse Wellness, 2013). With only one year of internationalising in the US, the firm had temporary concluded its operations in the US market due to a new partnership agreement with PGT Healthcare; the Procter & Gamble Company and Teva Pharmaceutical Industries to effectively expand globally. Swisse’s re-entry into the US market after 3 years highlights differences in strategies from only over the counter sales to only online intermediaries and ‘brick and mortar’ events to meet their American consumers’ demand who had continually purchased via their Australian website. This international process presents an internationalisation issue with its overeager organisational readiness which resulted in bad timing of entry and the immerse competitive intensity in the US.
Gallego, et al. (2009) states the factor ‘timing of entry' becomes unrecognised or insignificant in the international process due to overeager readiness to grow and expand. Swisse Wellness’s US international process demonstrates limited effectiveness to target potential opportunities in the US’s health supplement industry and should reconsider its timing to entry and readiness to internationalise into the US market and its intense competition.
Changes in Market Circumstances
The purpose of an international strategic alliance offers businesses to venture for further opportunities and achieve competitive advantage in new markets during its international process. The operation of a global business and its international alliances can result in issues with incompatibility and change in business circumstances.
Biostime; the Hong Kong company acquired 83% of Swisse in 2015 prompting changes and issues with the internationalisation operations with PGT Healthcare. The 2013 agreement granted PGT Healthcare the rights to internationalise Swisse’s product throughout Europe and South America, excluding Australia and China. Swisse Wellness demonstrates incompatibility with market circumstantial changes through the conclusion of the partnership with PGT Healthcare in 2017. Change to the circumstances within the business is evident through the conclusion with its international alliance ceasing all PGT Healthcare distribution rights especially its operations with Hong Kong and Singapore for 131 million dollars. Swisse Wellness (2017) highlights an solely e-commerce strategy for the US while reinforcing improved visions and goals of Swisse Wellness with Biostime as a major stakeholder where the China market is recognised as a primary target market instead of the US and South America with the PGT Healthcare partnership. This international process involving international alliances also prompt incompatibility issues where Biostime and Swisse Wellness were unable to continue the partnership with PGT Healthcare. Das and Teng (1999) identifies the importance of managing risks with selection of strategic alliances to achieve success. The business must require the most compatibility fit partners through deep understanding of its business and best meet both business circumstances to most effectively provide value to Swisse’s internationalisation chain for the US. Further, Cullena, et al. (2000) reveals psychological factors that determines the success for Swisse Wellness’s future alliances where lack of commitment and trust can negatively impact the overall international process performance due to differences in business culture or goals. International strategic alliances can present commercial risk regarding weak or undesirable partners as compatibility and commitment and trust in both business circumstances can result in successful selection, hence effective value adding.
Effects of Importing Laws on Internationalising
The process of internationalisation into an emerging market can present risks as international business can be complex and unpredictable. Swisse Wellness have been recognised to be the most commonly known companies in China’s emerging market in the health supplement industry. In result Swisse has focused China as its one of its primary target markets from its significant demand in dietary supply. China had introduced a revamp to its import laws where the announcement on the changes had resulted in major decline in Swisse’s sales. Grigg (2016) states the new tax laws would be at 11. 9 cents when goods are sold via e-commerce to reinforce the limited restrictions on tax, targeting offshore e-commerce businesses. This highlights an issue where the new taxation law can create potential problems with forecasting and decline in revenue. Further, issues involving government intervention prompt by the indefinite implementation on the new taxation laws. This is demonstrated as the Chinese government provides global businesses a one year wait period before the new laws are introduced. Basu (2008) states the impacts on e-commerce taxation laws for both business and government growth performance due to the nature of the internet. Until 2019 for the changes to be legislated, Swisse must undergo challenges with their international process involving their planning and forecast strategies to strive for success after the changes to e-commerce taxations. The new changes also can result in unsuccessful entry or create further barriers involving finance payments and exporting requirements for Swisse’s products to enter or expand into China’s market. The implementation and the delay on the Chinese e-commerce taxation law depict political instability within the Chinese government and greatly impact Swisse’s internationalisation process due to uncertainty.
