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Case Study 4 Nu Skin International

Introduction

Founded as Nu Skin International back in 1984, Nu Skin Enterprises is a global direct selling company that is primarily engaged in the development and distribution of personal care and nutritional products. Going international during the 1990s and currently expanding globally, NSE had 2004 revenue of $1,140,000,000 from its operations worldwide. The company has three divisions: Pharmanex (maker of natural nutraceutical products), Nu Skin (markets personal care products) and Big Planet (marketing technology services). The company is headquartered in Provo, UT.

Strategic Marketing

The objective of Nu Skin International is to recruit people who want to become entrepreneurs, by selling merchandise and signing up new distributors. They collect commission income and bonus, and have the chance to build their own sales network. The focus of the market segment is to sell to the public through independent distributors. This is accomplished not only in the United States, but internationally also.

The Issue

The question in the case of Nu Skin is whether it is a multilevel marketing business, or not. The purpose of multilevel marketing is to sell the product to the customer, through service distributors. According to the case, Nu Skin International selling pyramid is being questioned as to whether its main objective is to sell to customers or recruit more distributors. The distributors have to meet certain requirements when they start out, such as paying a fee and purchasing a kit. In order for the distributors to become successful, they must continue selling and recruiting, which in turn means meeting a quota.

Team B will substantiate the issues raised by providing proof of Nu Skin's current market analysis. A SWOT analysis will be used to outline specific strengths, weaknesses, opportunities and threats and from that point we will use information researched to address the company's position in the market as an MLM business and relate the information located back to the issues presented. We will then conclude with our findings regarding Nu Skin's position in the market.

Situation Analysis

Company

Product line Nu Skin

Image in the Market Skin care company

Technology and experience Through partnerships with the Stanford University School of Medicine and the Nu Skin Professional Advisory Board Ð'-- innovators in the fields of dermatology, ethno-botany, and nutritional and cosmetic sciences we develop products that benefit from some of the most advanced ingredient technologies available today. (www.nuskin.com)

Culture High priced, international selling product

Goals

Continue to develop innovative products that support the health and longevity of skin and hair. (www.nuskin.com).

Collaborators Customers

Ð'* Independent distributors

Ð'* Outside manufactures Ð'* Market size and growth

Ð'* Market segments

Ð'* Motivation behind selling and purchasing

Ð'* Consumer information sources

Competitors Climate

Ð'* Amway (Quickstar)

Ð'* Shaklee

Ð'* Avon

Ð'* Clinique Ð'* Technological environment

Ð'* Economic environment

SWOT Analysis

Strengths

Weaknesses

Ð'* Diverse product range

Ð'* Improved operating strength

Ð'* Stock Overhang no longer an issue Ð'* Reliance on Asian markets

Ð'* Lack of synergies between product units

Ð'* Weak North America results

Opportunities Threats

Ð'* Geographic expansion

Ð'* Continued growth within key markets

Ð'* Growth of weight management market Ð'* Presence in volatile country markets

Ð'* Interest rate risks

Negative revenue trends in Japan

Strengths

Diverse product range:

Nu Skin's three main business units offer a diverse range of products and services. The diversity of the range offers the company protection against the underperformance of any one-product segment, giving the company stability that less diversified groups cannot match.

Improved operating strength:

In the third quarter of fiscal 2003, the company's last reported set of financials, Nu Skin reported EPS up 19% from the previous quarter, indicating a good solid performance. Overall, operating margin was ahead of forecast and the company's balance sheet and cash flow trends were relatively strong.

Stock Overhang no longer an issue:

Towards the end of 2003, Nu Skin announced a major share repurchase initiative as well as the conversion to just one class of common stock. As the company's stock overhang issue has now subsided, the company is in a more stable position.

Weaknesses

Reliance on Asian markets:

Although Nu Skin has a presence in more than 30 countries, the group's sales are highly skewed towards the Asian markets, which account for around 80% of group sales. The company has a heavy reliance on these markets, particularly China and Japan, to drive group performance. The performance of the group as a whole is too highly correlated with the performance of these individual markets, and the company should address this issue by focusing on driving growth within other markets. This would serve to lower Nu Skin's risk profile and put the company on a more financially sound footing.

Lack

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