Davines: internationalizing a Niche

Davines is an Italian beauty company that makes and distributes hair-care and skin-care products. Davines targets the professional product niche, mostly sold through hair salons, representing a small but profitable part of the global beauty industry. The products distinguish themselves for high quality with an Italian heritage as well as scientific innovation and environmental friendliness. Davines is a small-medium firm that operates in an industry populated by global giants and has mainly grown its business through international expansion. The company started its internationalization in 1994 and is present in more than 80 countries at the end of 2016. The case presents the dilemma now facing Davide, the president of the company, who is considering plans for opening a new subsidiary in Hong Kong, to serve the booming Chinese market. As a small-medium firm, Davines faces resource constraints. Therefore, Davide should consider both issues of entry mode (how should the Hong Kong subsidiary be organized to succeed in the Chinese market?) and of allocation of resources (would a large investment in China make sense for Davines, given continuing opportunities for growth in other major markets?).