ACADEMY OF ECONOMIC STUDIES

FACULTY OF BUSINESS ADMINISTRATION (ENGLISH SECTION)

DEUTERIA COSMETICS
WATER'S SECRET LIFE'S SECRET BEAUTY'S SECRET

Professor Tudor Edu

Adelina Barbalau, 131 Andreea Mag, 132 Alexandrina Niculescu, 132 Anamaria Stoica, 137

Bucharest, 2010

The product Deuteria Cosmetics Line The Romanian product we chose to launch internationally is the cosmetics brand Deuteria, more precisely its range of medical cosmetic products, Deuteria Lux, which are offered under the Skin Care Program Deuteria Cosmetics. These are medical cosmetics based on deuterium depleted water and a complex mixture of natural substances. This range of cosmetic products are in fact cosmeceutical products (term coming from the combination cosme(tic) + (pharma)ceutical), which are claimed to have medicinal or druglike benefits. Cosmeceutical products are marketed as cosmetics, mostly anti-wrinkle skin creams, but are reputedly known as containing biologically active ingredients. Deuteria Cosmetics thus comprises a range of cosmeceutical products created by a Romanian doctor, Ioan Nedelcu, professor and expert in dermato-venerology, head of the Dermato-venerology Clinic and Department at Carol Davila Central Clinical Emergency Military Hospital in Bucharest and member of the American Academy of Dermatology. Deuteria Lux medical cosmetics products, of an absolute originality and with spectacular effects, offered in the framework of Deuteria Cosmetics Skin Care Program are the result of profound scientific studies and are based on the combination between the extraordinary effects of the new aquatic principle deuterium depleted water with complex, savant associations of natural ingredients: essences, oils, extracts, vitamins. They have spectacular anti-aging effects and aim at reestablishing and preserving the softness, sensuality and suavity of the skin and delicately restore the balance between skin purity and sensuality, by protecting it against the daily modern life stress, against sun, smog and urban pollutants stress. The special and most important ingredient which lays at the basis of these extraordinary products is deuterium depleted water (DDW). Deuterium depleted water, also known as extra-light water, is an aquatic product of an absolute novelty, with spectacular biologic effects, obtained in laboratories by extracting the stable hydrogen isotope deuterium from regular water. The difference between this water and regular water is that as opposed to regular water which has a deuterium concentration of 150 parts per million, deuterium depleted water has a concentration of deuterium of only 25+/-5 parts per million. Deuterium Depleted Water is also a Romanian product obtained at the National Institute of Research and Development for Cryogenic and Isotopic Technologies in Ramnicu Vilcea by using a separation-purification isotopic procedure, imagined by Romanian researches and awarded with five golden medals and three silver medals at world renowned inventors fares in London, Brussels, Budapest and Geneva. The Romanian produced deuterium depleted water, due to its physical-chemical characteristics, proved to be one of the best (probably the best in the world) by having curative properties in treating skin and stomach diseases, ensuring protection against all kind of viruses, decreasing the level of cholesterol, helping in healing some forms of cancer and expanding life duration. It is used in clinics for treating patients but it is also commercialized as drinking water under the label Qlarivia. Since year 2000, more than 100 tones of deuterium depleted water produced in Romania are annually exported in countries such as USA, Japan, Germany and Hungary. The actual idea of using deuterium depleted water in the production of cosmetics appeared at the beginning of year 2000 when professor Ioan Nedelcu, who was engaged in the dermatological testing of this water, discovered that it had amazing anti-aging and cellular metabolism proliferation and control properties. As a result of different experiments, he discovered three main properties of this water which made it the perfect candidate for producing a revolutionary skin cream. Firstly, he discovered that deuterium depleted water and by extension the products based on it, help at equilibrating and ameliorating the cosmetologic epidermal status, meaning that they provide intense hydration, softening, revitalization, energizing and freshening of the epidermal tissue and they are also good emollients and tonics which normalize the functions of sebum and skin grease. Secondly, there were the spectacular anti-aging properties which had been clearly observed in the vegetal world as a result of concluding a simple experiment. By placing two identical roses in two different vases, one filled with regular water and the other on with deuterium depleted water, it has been clearly noticed that after two weeks, the rose that was kept in regular water (photo 1) was dead, whereas the one kept in deuterium depleted water (photo 2) not only that it was still alive, but it looked really fresh like it had just I.

been picked up. Deuteria cosmeceutical products insure the revitalization of the epidermal cellular metabolism and control of the functions of epidermal aging wich in turn leads to an extrordinary anti-aging effect, by preventing the apparition and advancement of wrinkles.

Photo 1

Photo 2

Last but not least, another property of deuterium depleted water and of the products containing it is the fact that it has a strong effect upon the control of cellular proliferation thus having excellent regenerating properties. Due to the property of fostering the multiplication and reproduction of cells, Deuteria products provide an excellent regeneration of the epidermal tissue; they normalize the epidermal metabolism and reestablish a healthy and vigorous skin. Moreover, all the products in the line Deuteria Lux have excellent epidermal tolerance and rapid skin penetration, they allow a very good skin perspiration and provide increased protection against external agressors by means of containing solar protection factors. All these properties are doubled by the complete absence of irritating, toxic or allergic effects. Deuteria Lux line contains a big range of medical cosmetic products that can be used not only for preserving beauty but also for bringing a relief to most of the medical cutaneous sufferings faced by people. It contains products addressed to all skin types and problems thus comprising: normal and dry skin care products, sensitive skin care products, oily and acne-prone skin care products, anti-wrinkle and anti-aging skin care products, special needs skin care products and body care products. As previously mentioned, the line Deuteria Lux is offered under the Skin Care Program Deuteria Cosmatics, meaning that besides the actual products the company also offers extensive advice regarding the optimal and effective use of them. Deuteria Lux is a relatively new product also on the Romanian market. Despite the fact that research began in 2000, its actual commercialization began in 2003 when the company Deuteria Cosmetics SRL was founded. Regarding the Marketing Mix used by the company in selling its products there can be stated the following: Product: In addition to the actual products (Deuteria Lux cosmeceuticals), which have been previously detailed and are mainly differentiated through their excellent properties in helping skin regeneration and restoring the optimum cells metabolic activity (core product), the company also offers extensive advice regarding how one can make the best use of the products, through the Skin Care Program Deuteria Cosmetics. This represents the augmented product and it is offered upon purchase in the store or online, on the companys website. Place: Deuteria Lux products are currently sold only in Romania through one showroom located in Galeriile Victoria, Bucharest and one selling store located nearby the Medical Center of professor doctor Ioan Nedelcu, also in Bucharest. The products can also be purchased online, on the website www.deuteriacosmetics.com. It must be noted that despite the fact that the selling online platform is a dot com site, the English version of it does not exist. Price: The price of the cosmeceuticals comprised in the line Deuteria Lux ranges from a minimum of 35 RON up to a maximum price of 168 RON. Not a single product exceeds the amount of 200 RON, meaning approximately 50 Euros.

Promotion: The means one can find out about Deuteria Lux cosmeceuticals are: through the Medical Center of professor doctor Ioan Nedelcu, through the Deuteria Cosmetics showroom from Galeriile Victoria, through leaflets or other printed materials, Internet or simply through friends referrals. These products have not really been advertised in the media and they are mainly being promoted to prospective customers by their producer himself, Ioan Nedelcu, who is one of the best dermatologists in Romania. A possible explanation of this deficiency may be the fact that Ioan Nedelcu is not precisely a businessman; he mainly created these products with the purpose of offering his patients a solution to the epidermal problems they regularly face. The market The country in which we chose to launch Deuteria Lux is Japan. The reasons behind this choice are numerous and they will be further outlined. First of all, the Japanese have already shown a big interest in the deuterium depleted water produced in Romania: out of the total production of water, approximately 20% is exported into Japan. So being given the fact that Deuteria Lux products are mainly based on deuterium depleted water, a revolutionary and innovative ingredient, it is very likely that an increased interest should also be displayed towards these products. Secondly, it is widely known that Japan is facing an unprecedented demographic crisis and a rapidly aging population. More than 30% of Japans population is over 60 years and some demographers have announced that the population could fall from 127 million today to 100 million in 2050. And even though Japanese women are widely known as not getting old or fat, they still face all the problems related to aging such as wrinkles, fine lines, sagging, pigmentation or dullness, only that these become more apparent later in their life (over 50 years) as compared to Caucasians (over 40 years). Moreover, in Japan, women in their fifties and sixties continue to lead the nations consumption. According to a study undertaken in 2006, on the cosmetics expenditure per household in different age groups, persons in their fifties are the nations leaders in what concerns the cosmetics expenditure by spending more on cosmetics than any other age segment. This is mainly due to the fact that when they reach fifty they experience a change in their lifestyle. They have more time and money and this brings more opportunities for leisure, but most of all they think more about beauty care, sun care and cosmetic products in general. II.

Graph 1 Cosmetics expenditure per household In terms of money, current research showed that the segment of women aged between 60 and 69 accounts for 19% of the entire cosmetics market, meaning an approximately 6.3 billion euros in 2009.

In conclusion, there is an enormous potential in the segment of women over 50 for the range of antiaging and regenerating skin care products offered by the line Deuteria Lux, which could successfully address the needs of what constitutes not only a big but moreover a highly spending continuously increasing number of aging women. Thirdly, in Japan, the popularity of natural and organic beauty products has exploded in recent years and the natural and organic cosmetics market is rapidly growing. Due to the fact that Deuteria products are mostly based on something that simple and natural as water, the primordial element of life, and complex mixtures of natural ingredients such as essences, oils, extracts and vitamins, it seems to be perfectly fitted to a market so natural and organic conscious where products featuring natural ingredients have been very popular. As of today, however, no accreditation criteria of organic cosmetics have yet been officially established in Japan. Therefore, we can say the products certified as organic in an exporting country will be favorably welcomed in Japan. In addition to the high interest displayed towards natural products, Japanese people also display a big interest towards new and innovative products. And this is exactly what Deuteria Lux represents, an innovative product based on the aquatic principle of an absolute novelty deuterium depleted water. Romania-Japan trade a. Japans trade agreements Japans trade policy historically has centered on multilateral negotiations and dispute settlement mechanisms. Since 2000, however, Japan has shifted course somewhat by seeking free trade agreements (FTAs) with a number of countries, mostly in Asia. An FTA is an agreement between two countries or regional groupings to eliminate or reduce tariffs and other barriers on trade in goods and services. Nonmembers find their exports discriminated against. By freeing up trade in goods and services, Japan hopes to energize its economy, as well as to better compete with China for influence in Asia, objectives that seem to support Americans interests. However, Japans FTA program to date has not been robust enough to have much impact. Japans FTA program has been motivated by a combination of economic and political objectives. The most important entail avoidance of becoming isolated as other major trading countries actively pursue FTAs, energizing domestic economic activity, and promoting Japanese influence in Asia. Regarding the cosmetics market trade agreements, in 2007 the Cosmetic, Toiletry, and Fragrance Association (CTFA) announced that the cosmetics and personal care products trade associations in the United States of America. (CTFA), Europe (COLIPA), Canada (CCTFA) and Japan (JCIA) have signed and formally proposed to their respective regulators a new forum for global harmonization of regulations for cosmetics and personal care products. The regulatory harmonization initiative is part of a comprehensive international engagement strategy at CTFA. Over the last year, CTFA has been building a much more robust and proactive global strategies program in order to better support the important global market opportunities for CTFA members and to advance consumer protection, trade and industry growth globally. In the United States of America, CTFA has stepped up its engagement with the government, meeting regularly with members of Congress and their staffs and with USTR and Commerce Department representatives to ensure that cosmetics and personal care products issues are integrated into the United States of America trade agenda, including the USA Korea Free Trade Agreement and the USA Japan Regulatory Reform Initiative. CTFA also is active in key policy forums on trade issues, such as the USA Chamber, the European Institute and the Business Council for International Understanding (BCIU). After this final agreement, countries in the European Union, like Romania, can easier trade with Japan when it comes to cosmetics. Thus, it is actually convenient to export cosmetics to Japan since the cosmetics and personal care products trade associations have signed the agreement. This agreement represents a regulatory harmonization initiative in order to reduce tariffs and to support international trade. III.

b. Trade agreements between Romania and Japan Trade agreements between Romania and Japan consist mainly of trade agreements between European Union, where Romania owns membership and Japan and of course the associations and affiliations where Japan is also a member. The Asia-Europe Meeting (ASEM) is an informal process of dialogue and co-operation established in 1996. ASEM aimed to be an informal, non-binding dialogue forum based on equality and consensus. The ASEM dialogue addresses political, economic and cultural issues, with the objective of strengthening the relationship between the two regions. The ASEM members are: China, India, Japan, Mongolia, Pakistan, South Korea; ten ASEAN countries (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Burma/Myanmar, Philippines, Singapore, Thailand and Vietnam); ASEAN Secretariat; the 27 European Unions member states and the European Commission. The Economic Pillar can be seen as an instrument which fosters trade liberalization, is complementary to the WTO and facilitates bilateral trade and investment. It is built on meetings of Economic Ministers (EMM) and their Senior Officials on Trade and Investment (SOMTI), of Financial Ministers and of the Asia-Europe Business Forum (AEBF). The main focus for discussion and activity thus far has been WTO issues, regional economic integration, the implementation of a Trade Facilitation Action Plan (TFAP), aimed at the reduction and removal of non-tariff barriers to trade between the two regions and the implementation of an Investment Promotion Action Plan (IPAP), aimed at promoting two-way investment flows between Asia and Europe. A parallel independent structure organized by the private sector, the Asia Europe Business Forum (AEBF), aims to strengthen economic co-operation between the business sectors of both regions. It provides a platform for high level discussion and networking between business representatives covering trade and investment issues and recommendations to enhance the attractiveness of the Asia-Europe marketplace. At the first ASEM Senior Officials' meeting on Trade and Investment (SOMTI) in Brussels on 25 July 1996, it was agreed to establish an ASEM trade facilitation action plan (TFAP). This plan aims to reduce non-tariff barriers (NTBs) and promote trade opportunities between the two regions while complementing and considering work being carried out in bilateral and multilateral forum. The TFAP would thus contribute to the goal of promoting greater trade between Asia and Europe and facilitating and liberalizing trade between the two regions. The following principles and objectives provide direction in achieving value added ASEM work in trade facilitation: TFAP has its value in its potential for building understanding, and should be a catalyst of progress on the discussion of trade facilitation issues. It shall promote understanding and awareness among ASEM partners in these areas. The TFAP should aim at reducing non-tariff barriers (NTBs) and transaction costs, as well as promoting trade opportunities between the two regions The TFAP shall provide the framework to determine thematic priorities and concrete goals for trade facilitation, to set guidelines for their successful achievement and to follow these through to implementation. The TFAP shall further provide a system for monitoring progress and for ensuring that partners contribute toward this progress in a balanced way. Actions stemming from TFAP should be non-discriminatory, with respect both to ASEM and non-ASEM partners. In order to achieve synergy and mutual reinforcement, the TFAP should further be consistent with, support and stimulate bilateral and multilateral efforts for trade facilitation, by highlighting work on specific priority areas not sufficiently covered in other forum and by identifying possible "best practice" approaches to be considered by ASEM for implementation. Business-sector participation in the TFAP process is essential in order to help identify issues and priorities and to generate support for their implementation. Participation of the business sector is encouraged and

facilitated, in particular through the ASEM Business Forum. Actions in the TFAP context are carried out with particular attention to issues of importance to SMEs. Transparency and deregulation are promoted, as general measures to enhance the environment in which the business sector operates. c. Customs procedures In supporting the on-going cooperation between customs authorities, the TFAP will aim at promoting simplification, harmonization and transparency in customs procedures. This should include inter alia: - Accelerated alignment and harmonization of tariff nomenclatures with WTO and WCO standards; - Accelerated implementation of obligations with respect to customs valuation procedures; - Promotion of standardized and simplified documentation, including if possible paperless systems; - Promotion of transparency of customs regulations and procedures; - Collection and dissemination of information on ASEM partners' respective rules of origin; - Exploration of possible common positions of ASEM partners in WTO and WCO. d. Standards and conformity assessment - Enhancing the exchange of information among standards bodies and establishing national contact points as appropriate; - Promoting and facilitating the alignment of domestic standards of ASEM partners with international standards; - Promoting simplification and transparency in standards and certification information and procedures, drawing on electronic media where appropriate; e. Intellectual property rights - A broad-ranging dialogue among ASEM partners on IPR-related issues, - An enhanced understanding of the application of intellectual property rules in both the public and the private sector. f. Economic Relations between EU and Japan Japan is one of the EUs most important economic partners. Both economies cover together 40% of worlds GDP and 30% of international commerce. The total volume of imports and exports are of 121 billion euro in 2007. In 2002 was signed the Mutual Recognizing Agreement between EU and Japan which regulates the access of products on the EUs and Japans market. According to the European Commission, the main difficulties that EU companies are confronting with when entering Japans market are technical and administrative import barriers and structural obstacles that are very frequent in the Japanese economic system. g. Economic Relations between Romania and Japan In 2007 the total volume of bilateral exchanges was up to 541,3 million USD, with a 32,1% increase from 2006. In 2008 the total volume of commercial exchanges of Romania and Japan was 392,6 million USD, from which 75,5 million USD was the Romanian export on the Japanese market. According to the Japan Tariff Association the medium level of custom taxes is in the present one of the lowest in the world, that is 3,6 %, even though for some manufactures products the taxes are still high. One measure of encouraging imports is that Japan had decreased the number of products for which customs taxes are not applicable from 7000 to 3000. The EU supports all initiatives of companies from member states to involve in international trade. Therefore, the Commission of European Union has a lot of documentation that that every company needs in

order to understand and benefit from all existent trade agreements. There are available a lot of databases with all the countries that are members trade agreements made by the EU as well as exports helpdesk and news that are important for trading companies. The Japanese Cosmetics Market a. Regulations Cosmetics regulation in Japan is based on different laws and ministerial ordinances consisting mainly of the Pharmaceutical Affairs Law (PAL) Ministry of Health and Welfare Notification no 331/2000, which states the standard for cosmetics. For legal purposes, cosmetics are divided into quasi-drugs and cosmetics. In the PAL quasi-drugs are defined as items that have a middle action in the body, and include those stipulated by legislation and those designated by the MHLW. Quasi-drugs stipulated by law are for example products intended to prevent bad breath, body odor or heat rush; to promote hair growth, prevent hair loss. Cosmetics are intended to use on the body, for cleansing, beautifying, or increasing the attractiveness of the body, for changing the appearance and their actions on the body are mild. Although in Japan both are differentiated in legislative terms, there is no difference whatsoever between them in the microbiological context and its not properly clear the classification. The Japanese skin care market has been known as having the most stringent regulations in the world regarding ingredient formulations and usually imported products must undergo very extensive testing before they are brought into the Japanese market. This process could take years before a foreign skin care manufacturer is allowed to retail its products in Japan. However, in the last decade Japan has eased the standards for cosmetics and has deregulated the cosmetics industry, so the old system of obtaining prior approval and licenses for products has been abolished in principle. This represents a strong argument sustaining the decision of exporting Deuteria products on the Japanese market because this basically means that there are lower entrance barriers that facilitate the entrance of foreign companies on the Japanese cosmetics market. Japan has built a good example of a nation where costly pre-market registration procedures were replaced with manufacturer responsibility for product safety and with post-market surveillance (similar to the systems in the USA and EU) without compromising consumer safety. At the first glance this system appears to be more relaxed than these of the other Asian counterparts, but the Japanese cosmetic industry has a high level system of quality, with the presence of industry guidelines and in fact, depending on the cosmetic company, some of the in-house standards are even more stringent than the voluntary industry code. The introduction of a regulation asking for higher quality is actually an advantage for Deuteria products because they have an extremely high quality and are made based on formulas which are in accordance to the Japanese law. Considering these agreements which link Japan to Romania, the cosmetics trade takes place easier than before due to the diminishing of bureaucracy and to the decrease of Japan import tariffs and taxes. The global economic recession has influenced various industrial sectors across the globe and the cosmetics market in Japan is no exception. In particular, the sales in department stores have become remarkably weak. However, the Japanese cosmetics market still remains the second biggest worldwide, behind only the USA, as it has been for decades. However lucrative, appealing and highly potential it may be for foreign manufacturers, the Japanese cosmetics market is also a highly competitive and sophisticated market. Retail prices on the Japanese cosmetics market are slightly higher than in US or EU so overseas cosmetics manufacturers have great potential for business in such a lucrative market but they should also consider several unique aspects related to it, which should not be overlooked. Japans cosmetics market is different both in its distribution and retail system than the US or EU market but it is also different in its ways of marketing and advertising a product or a brand. IV.

b. Cosmetics Import in Japan Since deregulation was implemented in 2001, an ever-increasing volume of cosmetics has been imported into Japan. The Cosmetic Importers Association of Japan reported that the cosmetic imports in the first half of 2010 recorded 85.1 billion yen / US$ 946 million, up 20% over the same period of last year. In 2009 cosmetic imports accounted for approximately 12% of the total cosmetics market, which translates into an estimated 153.6 billion yen/US$1.71 billion. The main segment of this huge market, which was reportedly worth 11.4 billion Euros in 2009, is represented by the skin and body care products which account for approximately 43.8% out of the total market.

Graph 2

Market Segmentation Global marketing segmentation has been defined as the process of identifying specific segments of potential customers with homogenous attributes who are likely to exhibit similar responses to a companys marketing mix (Hassan & Katsanis apud. Keegan & Green, 2005). This process starts with the choice of one or more variables to use as basis for grouping customers. A market can be segmented by various bases and depending on the characteristics of the product only some criteria of segmentation are relevant. In the case of the cosmetic market in Japan the following segmentation bases are important and they will be further detailed: -segmentation by age -segmentation by gender -segmentation by income -segmentation by generation -segmentation by preferences -segmentation by needs -segmentation by trends -segmentation of the offer -segmentation of the demand a. Segmentation by age Segmentation by age is a marketing concept that utilizes different marketing approaches for different age categories of the population depending on age. The concept is based on the fact that consumer needs and desires change with age. This type of segmentation is important in our study conducted on Japan because ageing is certainly the strongest characteristic of the Japanese society today, which has one of the most rapidly ageing populations in the world. This segmentation is particularly relevant for our research since Deuteria Lux comprises a rather vast range of products which are each addressed to an age segment but on the whole they comprise virtually all segments of age: the normal and dry skin care products and the sensitive skin care products are addressed to persons of all ages having this problems; oily and acne-prone skin care products are mainly addressed to adolescents and teenagers; anti-wrinkle and anti-aging skin care

V.

products are mainly addressed to persons over 40 years old; the special needs skin care products which comprises products such as depigmentation creams and anti eye concealor crmes thus being mainly addressed to persons over 30; and body care products which are addressed to persons of all ages. The age segmentation of the Japanese population is the following: 0-14 years: 13.5% 15-64 years: 64.3% 65 years and over: 22.2% The following picture displays the percentage of the cosmetics market shares corresponding to different age segments.

Graph 3 b. Segmentation by gender Gender segmentation consists in dividing a market into different groups based on gender and this type of segmentation makes sense for companies like clothing, hairstyling, cosmetics, and magazines. Japans total population is 126,804,433 from which 61,956,539 (48.89%) are males and 64,847,894 (51.11%) are females. It can be observed that the proportions are quite equilibrated, but a slight increase exists on behalf of the number of women. A more realistic image of the population of Japan considering both the gender and the age is illustrated in the graph bellow. It can be seen that the female and male own almost equal proportion in the total of the Japanese, in virtually all age segments, and that the youth of Japan is very poor represented, this country registering high percentage of old people. By comparing the first graph with the second one, it can be concluded that the aging process in Japan is leading to a significant reduction in the population.

Graphs 4&5 Source: http://www.nationmaster.com/country/ja-japan/Age-_distribution

c. Segmentation by income Income is a valuable segmentation variable because a market consists of those who are willing and able to pay. Also income is an important macro indicator of market potential. Segmentation by income becomes important for our intentions to access the market. Although vertical data regarding the income and wealth distribution in Japan is not available, Japan is reputably known as being among the wealthiest country in the world. In Japan there does not exist population below the poverty line. According to the data provided by the IMF for year 2010, Japans GDP per capita in nominal terms is US$ 42,325, thus being the 17th country in the world from this point of view. According to the data provided by the World Bank for year 2009, Japans GDP per capita in nominal terms is US$ 39,727 and places Japan on the 18th place worldwide. CIAs World Factbook estimation for year 2009 regarding Japans GDP per capital in terms of purchasing power parity is $32,600. However varying these figures may be, it is a clear thing that on average Japanese people are among the wealthiest people in the world. Disregarding the average, it must be emphasized that Japans income distribution has been gradually shifting leftwards at lower income levels, but the change is very small. The gap between poor people and rich people is widening which means that the middle class will disappear. The rate of household on relief has rather been decreasing constantly, which means the number of the extremely poor has been decreasing. d. Segmentation by generation Generation segmentation represents the splitting of the market into common characteristics which are held by people pertaining to the same generation seen as a total of attitudes, behaviors, codes, attributes of people born in the same period. The most influent consumers in Japan are the baby boomers. The baby boomers, nowadays aged around sixty (in their early 60s) are people who spent their teens and twenties in the era of Japans rapid economic growth and have always taken the lead in the nations consumption. The baby boomers were the generation that helped transforms Japan from an impoverished and spiritually rudderless backwater, into a rich, manufacturing powerhouse. As consumers, their influence on the generations just below them is powerful. They are still prime movers of consumption in Japan and yield strong influence on the types of products that come to market. The baby boomers were very open to the American culture in particular and foreign, new cultures in general. Women of this generation have been especially quick to catch on to trends and display a great preference towards new and innovative product. The generations that can be identified in Japan and their attributes are: 1. The adaptive generation, represented by todays World War II Generation, known as being active problem solvers in order to adapt to major historical and economic changes. 2. The inner fixated idealist, represented by todays Baby Boomers, were known to be indulged kids, meoriented youth, and mid life moralizers. 3. The reactive generation, represented by todays Generation X, includes under-protected youths, alienated risk takers who burnout young, mellow into pragmatists and become conservative at middle age, and caustic as elders. 4. The civic generation, represented by todays Generation Y, are protected by adults and become strongwilled, moral, serious, and optimistic with age. These are mostly kids of the baby boomers. e. Segmentation by preferences Before entering a new market it is crucial for any foreign producer to carefully assess the target market first. With regard to the Japanese cosmetics market in particular, and any foreign market in general, there are many aspects to be considered before actually launching a product. These aspects can prove to be of paramount importance and some of them, which will be further analyzed in detail, are: consumer preferences, needs and market trends. With regard to the Japanese consumers preferences nowadays, it can be stated that they are highly conscious of quality, safety, product value and the brands of the products they buy and use; products must be

nicely designed, packaged and promoted. By focusing on the main preferences displayed by Japanese cosmetic consumers, it can be stated that they prefer: products of foreign manufacturers ( to local, except the big 5) products with very high quality (to lower mass market items ) products of smaller product sizes than in United States of America or Europe (size, weight) products from well-sounding brands (name, image) products with skin-caring ingredients (Japanese consumers do have well understanding about ingredients, preservatives, etc) product contents that are jelly, soft, mild and smooth products with little smell (less use of fragrances) products with natural ingredients (to chemical ingredients based items) products with bright and light packaging (colors, weight, size) brands that steadily introduce new products brands with excellent customer services (store, after-sales-services, etc) f. Segmentation by needs The segmentation of a market according to needs is probably the most important aspect to be assessed when deciding to enter a new market because launching a product that is not needed or does not satisfy any need existent in the market place is the secret to failure. The past provides us with examples of epic failures when it came to launching a product which was indeed good from one point of view or another, but was not needed in the market place. With the purpose of identifying the needs in terms of skin care cosmetic products, we will further identify the main skin problems faced by women, both in general but also on age groups. Generally speaking, the main skin problems faced by Asian women of all ages in Japan are: acne, acne scarring; pigmentation usually too much, not too little; sensitive skin to all kinds of things (red and irritated skin reaction); eczema; brown bumps or spots on face. Regarding the skin problems faced by Caucasian women in Japan, these are related to sun damage: brown spots, skin cancer, more fine lines and wrinkles. They tend to have acne too, but they dont scar that much whereas the Asians skin tends to have scarring after the acne is gone. The main skin problems of Japanese women are related to dryness, skin tone and hyper pigmentation. As compared to Caucasians, Asian women's skin has better biomechanical properties such as elasticity and structures (collagen) but it is also drier and raises more problems related to skin tone and hyper pigmentation. For Japanese women, troubles related to skin tone become more noticeable especially from their late forties through their fifties. Generally speaking, Asians have drier skin but from about fifty onwards, the skin tends to dry more easily so that dryness can become a big problem. The intensive moisturizing focus of a skin care product sets it apart from cosmetics made for younger skin. The following picture displays how skin concerns vary with age by displays the results of a study assessing the skin related problems of women in Japan for two different age groups: the women aged between 30-40 years, and the women aged between 50 and 60 years.

Graph 6 g. Segmentation by trends Generally speaking, no matter what are the generic needs and preferences in a market, it must be outlined the fact that these may change with seasonal trends and fashion changes thus making the consumers may eager to try something new and different now and then. So it is very important for a foreign producer and not only, to also assess the market trends before launching its products on the market. Within the very specific Japanese environment, there are several trends and opportunities to take advantage of for cosmetics makers. Ageing is certainly the strongest characteristic of the Japanese society today. More than 30 percent of the population is over 60 years old already, and the country has one of the most rapidly ageing populations in the world. Ageing is likely to boost sales in certain sectors such as hair dyes or premium anti-aging skin care products. As in many other countries, Japanese women and a growing proportion of men are ready to pay premium prices for products that can visibly reduce the external signs of ageing. There also has to be noticed the continuing interest of Japanese people for skin whitening products, since a fair, white complexion is still perceived as an important aspect of beauty. Therefore, most Japanese women prefer white skin to suntanned skin. Another trend is the polarization of products, with the increased popularity of upper premium at one end, and other consumers (or the same consumers but for other products) more inclined to choose mass products. On one hand, Japanese cosmetic consumers are known to be quite choosy when selecting a purchase, but on the other hand consumers are always heading out for new products and brands, and are constantly on the search for the most innovative, fashionable and new cosmetic item. As a matter of fact, Japanese culture has a constant need for innovation. As a nation they are always looking for something new, innovating, extreme or strange so that Japanese import trading companies, distributors, retailers and manufacturers are always on the search for innovative products, latest techniques, and new products or services to be introduced to Japan.

Mainstream products in the Japanese cosmetics market nowadays are anti-aging, skin lightening, and skin moisturizing cosmetics and toiletries. High performance and quick-acting skin care products for specific parts of body, or those cosmetics with multi/complex functional ingredients, are also popular items. Furthermore, organic or natural products, luxury products, and unique or branded products are in demand in the marketplace. Also, as compared to Western people, generally the Japanese are not frequent users of perfumes. Mens skin care and personal care products are drawing an increasing amount of attention in the marketplace in Japan. h. Segmentation of the demand Regarding the segmentation of the demand on the Japanese cosmetics market, by looking at the sales encountered in different segments of the cosmetic market we can understand the Japanese willingness to buy more or less different products. The proportion in which the Japanese consumers are interested in different cosmetic products is the following: Skin & Body care products 43.8% Hair care products 29.5% Make up products 21.8% Others 4.6% Perfumery & Fragrance 0.3%

Graph 7 It can be clearly noticed that the Japanese consumers display the biggest interest and thus demand towards skin and body care products. i. Segmentation of the offer The Japanese market for cosmetics has an established stratum of six brand segments: prestige brands segment, premium segment, national high-end brands segment, lifestyle brands segment, massive mid-priced mid market segment, mass market segment. At the top are the prestige brands, occupying about 10% of the overall cosmetics market, which are sold in the top 200 department stores around the country. Foreign prestige brands control a large part of the luxury (department store) market, with names such as Lancome (L'Oreal), Chanel, Estee Lauder and Max Factor leading the way. Sales and profits are tremendous, allowing most of the foreign makers to build their own headquarters in the most expensive areas of Tokyo, such as Chanel's new 24 billion yens headquarters in the heart of the chic Ginza shopping district. Products in the premium segment typically range from 3,000 yen to 5,000 yen for color cosmetics and skincare. The average customer purchases 2 or more items for a total of more than 10,000 yen. Sales are

made from beauty counters, which require trained beauty advisors on hand to help consumers understand and sample a product. The products are outstanding in their pharmacological qualities. The Japanese high-end brands are the answer to the invasion of the foreign premium brands, which intended to create new marquees with certain characteristics to match those of the best foreign brands. This strategy has been surprisingly successful, with companies like Shiseido creating three high-end brands at the same time (Pied Nus, Proudia and Elixir) which have helped the company weather some otherwise disappointing financial results over the last couple of years. Shiseido, by the way, owns an impressive 25% of the entire Japanese cosmetics market. The lifestyle or "make-up artist" brands represent self-expression and everyday professional use. Probably the most famous of these is the Shu Uemura brand, now owned by L'Oreal. This segment is quite small, and while the foreign companies have established a viable presence, the Japanese are fighting back successfully with a willingness to run out new lines with amazing frequency. A market segment that attracts much attention is the massive mid-priced mid-market, which is the battleground for Shiseido's Ettusais, L'Oreal's Maybelline and Chanel's Bourjois, out of a field of more than 20 players. Most products in this segment sell for 1,000 yen to 2,000 yen. In the mass market segment, skincare and color cosmetics are sold in tens of thousands of stores, including cosmetic chain stores, drug stores, GMS outlets, supermarkets and convenience stores. Products are generally sold from a self-service wall display, and are priced at 1000 yen or so. VI. Targeting Once we identified the market-segment opportunities, we can speak about targeting. Looking at the segmentation above and taking into account the opportunities that the Japanese cosmetic market offers, but still be aware of their strict regulations, we decided to adopt the concentrated marketing strategy which is a market segmentation and market coverage strategy whereby a product is developed and marketed for a very well-defined, specific segment of the consumer population. Concentrated marketing is particularly effective for small companies with limited resources because it enables the company to achieve a strong market position in the specific market segment it serves without mass production, mass distribution, or mass advertising. Taking into account the characteristics of our product we decided that relevant for us are according to the gender segmentation, the part represented by the women because usually they are those which are concerned of being beautiful all the time. A special characteristic of the Japanese women is the fact they dont want to be noticed, but they want to be admired. They are representing 50% of the population of Japan as a consequence they represent an important segment for our targeting process. Taking into account the characteristics of our product we decided that relevant for us is the segment of products represented by skin and body care products, taking into account the fact that this segment occupies almost half of the products from cosmetic market. Furthermore the skin problems faced by Caucasian women in Japan are related to sun damage: brown spots, skin cancer, more fine lines and wrinkles. They tend to have acne too, but they do not scar that much whereas the Asians skin tends to have scarring after the acne is gone. As compared to Caucasians, Asian women's skin has better biomechanical properties such as elasticity and structures (collagen) but it is also drier and raises more problems related to skin tone and hyper pigmentation. Asian skin is a very delicate skin and Asian womens major concern is about keeping their skin as light as possible. Depigmentation skin care products, whitening cosmetics, highfunction foundations, sunscreens or products that help with hyper pigmentation are highly regarded and coveted in the Japanese skin care market but those pigmentation treatment products must also be formulated for very sensitive skin as well. Asians are more inclined to have dark spots (hyper pigmentation) earlier in their lives than the problems related to laxity (loss of skin firmness) and the appearance of wrinkles. Generally speaking, the appearance of wrinkles is mostly related with the level of sun protection. As opposed to Asian women who have some natural degree of sun protection due to the pigment in their skin, Caucasian

women have less natural protection from sun because the light color of their skin so they tend to have more wrinkles. Another segment that we take into consideration in our targeting process is the women with age greater than 50 .For Japanese women, troubles related to skin tone become more noticeable especially from their late forties through their fifties. Generally speaking, Asians have drier skin but from about fifty onwards, the skin tends to dry more easily so that dryness can become a big problem. The intensive moisturizing focus of a skin care product sets it apart from cosmetics made for younger skin. Due to the fact that Japanese women have low melanin and skin redness, their skin shows little deterioration with age. However, wrinkles represent a problem also for Asian women, only that it becomes apparent later in their life as compared to Caucasians, when increased dryness of the skin also adds up as a factor. In conclusion, antiaging and regenerating skin care products are addressed to women over 50 in case of Asians in general, and Japanese in particular, whereas in case of Caucasians they are usually addressed to women over 40. "Developing specialized products targeting middle-aged and older consumers and branding that elevates companies and products above the competition will likely yield successful results, since middle-aged and older consumers in Japan are generally loyal customers who do not easily change from one brand to another." VII. Positioning Positioning is the act of designing the companys offering and image to occupy a distinctive place in the mind of the target market. The goal is to locate the brand in the minds of consumers to maximize the potential benefit to the firm. Deciding on positioning requires determining a frame of reference by identifying the target market and the nature of the competition and the ideal points-of-parity, and points-of-difference brand associations. Determining the proper competitive frame of reference depends on understanding consumer behavior and the considerations consumers use in making brand choices. a. Competitive frame of reference A starting point in defining a competitive frame of reference for a brand position is to determine category membership that is the problems or sets of products with which a brand competes and which function as close substitutes. In the moment of introduction a product on a new market it is important to informer consumer of a brands category membership. The category membership is done to ensure the customers that a brand will deliver on the fundamental reason for using a category. Deuteria products are very unique products that use the properties of the depleted water, a special water, scientific created in laboratories, with spectacular biologic properties. This range of cosmetic products are in fact cosmeceutical products (term coming from the combination cosme(tic) + (pharma)ceutical), which are claimed to have medicinal or drug-like benefits. Cosmeceutical products are marketed as cosmetics, mostly anti-wrinkle skin creams, but are reputedly known as containing biologically active ingredients. The market segment we want to enter is the premium market segment which is characterized by the fact that sales are made in specialized places , which require trained beauty advisors on hand to help consumers understand and sample a product. One of the most important requirements for the products on this segment is that they have to be outstanding in their pharmacological qualities and they have to enter this segment of market, having a brilliant idea. Competitors on the market are various and are represented by various known brands like:

Company Beauty Sales Procter& Gamble LOreal Unilever Avon Beiersdorf Estee Lauder Shiseido Kao Johnson& Johnson Henkel

(US Billions) $ 26.3 $ 25.8 $ 16 $ 7.6 $ 7.5 $ 7.3 $ 6.9 $ 5.9 $ 5.6 $ 4.4

Source: http://www.slideshare.net/lovee911/economical-analysis-of-cosmetic-industry b. PODs and POPs A sound positioning strategy requires the specification not only of the category in which a brand holds membership, but also how a brand dominates other members of its category. A starting point in developing a point of difference is to examine product features broadly construed to include the various elements of the marketing mix that might distinguish a brand from its competitors. Points of difference (PODs) is a term used for an outcome of product differentiation and are critical in defining the competitive advantage and branding strategy of a company. Deuteria products are remarkable because they have certain characteristics that differentiate them from other competitors like: 1. cosmeceutical products, outstanding from pharmacologic point of view 2. are offered in a skin-care program 3. contains biological active ingredients thus having medical or drug like benefits 4. deuterium depleted water , an aquatic principal of absolute novelty 5. cellular proliferation properties-> excellent regeneration properties 6. low production costs Points of parity (POPs) are associations that are not necessarily unique to the brand but may be shared by other brands i.e. where you can at least match the competitors claimed benefits. While POPs may usually not be the reason to choose a brand, their absence can certainly be a reason to drop a brand. Like all the other products that can be find on this market, Deuteria products have the following characteristics: 1 .products are natural & organic 2. products are environmental friendly 3. qualitative products 4. not tested on animals 5. non-irritating, toxic and allergic effects 6. good skin penetration VIII. Marketing Mix a. Product Deuteria Cosmetics are medical cosmetics based on deuterium depleted water and a complex mixture of natural substances. The special and most important ingredient which lays at the basis of these extraordinary products is deuterium depleted water (DDW). Deuterium depleted water, also known as extralight water, is an aquatic product of an absolute novelty, with spectacular biologic effects, obtained in laboratories by extracting the stable hydrogen isotope deuterium from regular water.

Deuteria Cosmetics will be launched on the Japanese market having the same composition as the Romanian products, but having a different packaging because Japanese prefer bright and light packaging. The most important characteristics of the packaging is the fact that it has to be bio-degradable and environmental friendly and also the level of the complexity of the packaging is important because at the latest cosmetic fares in Asia has been identified a preference for highly sophisticated packaging. b. Price The prices with which Deuteria Cosmetics intends to enter on the Japanese market are established based on an analysis of prices of similar products, production costs, prices that the company exercises on the Romanian market. In Romania the products have prices starting from 10 to 50 euros. The costs that the company will encounter in the exportation process will determine an increase in the production costs which will lead to an increase on prices asked on Japanese market. Furthermore, Deuteria Cosmetics will have products in Japan starting from 75 to 150 euros. By imposing these prices, the company wants to position in the mind of the customers, as products with medium price. c. Place The place element of the marketing mix is generally referred to as the way in which the customer can obtain a product or receive a service. The provision of a product or service can generally occur via any number of distribution channels, which in the specific case of Japan have become increasingly diverse. Japanese consumers nowadays have more buying options compared to the past and they can easily find the products they want in many different places. Such places are: department stores, specialty stores, import shops, variety shops, convenience stores, general merchandise stores, select shops, large drug stores, aesthetic salons and of course online platforms. Specialty stores are the leading distribution channel due to consumer convenience and low prices while sales through department stores is slowing down. Another important channel for distributing cosmetics in Japan is represented by aesthetic salons. In aesthetic salons, cosmetics are not only available for in-store use, from the treatment menu, but are also available for sale to customers for home use. Obviously, the nature and price of a specific product is the one that mainly dictates the choice of a particular distribution channel. Given the particularities of our product, its frame of reference the cosmetic market segment it falls in, the way we chose to enter the Japanese cosmetics market is by means of directly exporting to a Japanese partner. This Japanese partner will basically be our distribution channel and for the rather obvious reason that Deuteria Lux products are cosmeceutical products we will chose as distribution partner a large drug store chain. Due to the fact that Japanese are increasingly conscious of their health and well being, drug stores enjoy a great popularity. According to a report released by McKinsey in 2010, drugstores have been Japans fastest growing retail chain since 2000 so that in 2009 store numbers have increased by 4% whereas sales have increased by 8%. In addition to this partnership that will be the basis of our distribution strategy, we will also close partnerships with various medical clinics, which in Japan are enthusiastic about recommending doctors' cosmetics. d. Promotion A distinctive feature of the promotional strategy adopted by the brand Deuteria consists of the fact that it will be partly promoted by medical clinics that by recommending it, will basically position these in the minds of prospective customers as being safe, reliable and most of all healthy. Sometimes, referrals with regard to a certain product, especially when these come from a certified and authority person, value more than millions of dollar invested in commercials. Regarding the promotion to the mass market, thus not only to clinics patients, the actual means and ways of promoting will be left at the latitude of out Japanese partner, who we consider to be more qualified and most of all accustomed to the specifics of the market. However,

intensive promotion must be made and tailored to the specifics of the market, so that the level of brand awareness should be increased and it might also be useful to reinforce category membership. Extensive advertisings and campaigns will be needed to inform consumers of category membership and to educate them about a brand's point of difference. The preferred approach would be to inform consumers of a brand's membership before stating its point of difference in relation to other category members. Presumably, consumers need to know what a product is and what function it serves before they can assess whether it dominates the brands against which it competes. For new brands it usually does not work to inform consumers of membership and point of difference in the same campaign so we thought of developing concurrent campaigns where one features membership and the other the point of difference. IX. Conclusions Entering the Japanese cosmetics market successfully is mainly an issue of the ability and willingness of the foreign brand and manufacturer to adjust to the Japanese market requirements. Herewith it is of paramount importance to carefully identify the needs of Japanese customer, the trends in the market, but also to estimate ones own strength and ability to perform as required by consumers in Japan. If a clear strategy is set (product range, sales channels and marketing tools) and the right partners to perform are found, potentially high sales can be achieved by importing and marketing a foreign cosmetic brand to Japan. It is certain that the difficulties which a company faces when entering the Japanese market, regardless of its nature are counterbalanced by the benefits an exporter company can achieve. X. References

http://books.google.ro/books?id=op9zkXLpwvUC&pg=PT263&lpg=PT263&dq=age+segmentation+ Japan&source=bl&ots=h4WqfErXga&sig=1ZJHOB1vc5L9JBkMMozIMbFySzE&hl=ro&ei=RnUGTfGyGo PssgbmjoGFBw&sa=X&oi=book_result&ct=result&resnum=6&ved=0CEkQ6AEwBQ#v=onepage&q=age %20segmentation%20Japan&f=false http://en.wikipedia.org/wiki/Point_of_difference http://en.wikipedia.org/wiki/Points-of-parity/points-of-difference http://findarticles.com/p/articles/mi_m0NTN/is_59/ai_n6198055/ http://irdb.personalcarecouncil.org/ http://www.beautyworldjapan.com/en/east/first.html http://www.dailymail.co.uk/femail/article-464194/Turning-Japanese-beauty-thats-taking-over.html http://www.globaltrade.net/international-trade-import-exports/f/market-research/pdf/Japan/HygieneCosmetics-Health-Medical-Equipment-Retail-Sale-of-Pharmaceutical-Cosmetic-and-Toilet-ArticlesCosmetics-Market-Japan-2008.html http://www.indexmundi.com/japan/age_structure.html http://www.kellogg.northwestern.edu/faculty/sterntha/htm/module3/2.html http://www.nationalaglawcenter.org/assets/crs/RL33044.pdf http://www.naturalasianbeauty.com/effective-skin-treatments/ http://www.slideshare.net/lovee911/economical-analysis-of-cosmetic-industry http://www.wa-pedia.com/statistics/japan_fact_sheet.shtml https://www.cia.gov/library/publications/the-world-factbook/geos/ja.html www.deuteriacosmetics.eu www.medterms.com/script/main/art.asp?articlekey=25353 www.premiumbeuatynews.com (*) *all online sources were visited on the 9th and 10th December 2010.