Crème Rouge Organizational Structure Case
Crème Rouge is a bath and body cream for women that is manufactured by the Derniers Jours (DJ) beauty company in Montreal, Canada. In the early eighties, DJ began exporting Crème Rouge to French-speaking countries in Europe. Though sales were slow for the first few years, the cream has become very popular in France, Belgium, and Luxembourg since the early nineties. Then they expanded into Ireland and the UK, thanks to efforts of one of their distributors, Continental Traders. But the European importers started positioning the product in different ways to different audiences in various countries, and the equity of the brand began to suffer. For example, Crème Rouge was positioned as an upscale product in Ireland and the UK, while it was targeted to the middle class on the continent. This led to parallel imports in the UK and Ireland, which damaged the brand equity and created problems with distributors. DJ thus determined to take a more active approach to marketing the Crème Rouge product in Europe. They decided to stop exporting the product to European importers and instead manufacture the product in Europe for European customers. They would also have to create an in-house sales force to distribute the product in the various country markets they were targeting.
This was an expensive decision, as it required foreign direct investment in Europe. Untimately, DJ chose to set up a manufacturing and distribution center in Nivelles, Belgium. They chose Nivelles, as it was a French-speaking city not too far from Brussels, the administrative heart of the European Union. They also wanted to take advantage of the EU customs union and market Crème Rouge throughout the EU without paying customs duties, so a French-speaking city in centrally located Belgium seemed ideal.
DJ had three goals for their formal entry into the European marketplace. First, they wanted to provide a quality product that met the needs of their various target markets on the European continent. Second, they wanted Crème Rouge to target women ages 25 to 55 in the relatively large European middle class and to not position it as an upscale bath and body cream, as Continental Traders had done in Ireland and the UK. They wanted it to maintain a consistent positioning across the EU market. Third, they wanted to achieve economies of scale by creating a homogeneous product that could be marketed throughout the European Union using the same mix of price, promotion, and distribution.
In looking at their current operations, DJ realized they had been using a home replication, or export strategy, with an international division when Crème Rouge was manufactured in Montreal. However, all that changed when they invested in manufacturing and distribution facilities in Belgium, as senior management realized they would need to change their organizational structure to meet their new goals for the product. In looking through the international management literature, they identified four different organizational structures that might help them succeed in their European venture. They could replace their current international division structure with a global(or regional) products division structure, a global matrix structure, a geographic area structure, or a holocracy. There were pluses and minuses with each organizational structure.
Why is the home replication (export) strategy with an international division no longer appropriate for DJ? Be specific about what has changed.
Which of the four remaining organization strategies should DJ choose? Why? Be specific in showing how your new choice will better help DJ to succeed in the European market.
