Cosmetics Market Analysis - Essay Example

Marketing Marketing Titus Rock Manickam Order No. 264604 29 December 2008 Table of Contents Introduction………………………………………………………………………… 3 MacroAnalysis……………………………………………………………………...3 Micro Analysis………………………………………………………………………4 4Ps…………………………………………………………………………………...5 Product……………………………………………………………………………….5 Price………………………………………………………………………………….5 Place…………………………………………………………………………………6 Promotion……………………………………………………………………………6 SWOT Analysis……………………………………………………………………..7 Strength……………………………………………………………………………...7 Weakness……………………………………………………………………………8 Opportunities………………………………………………………………………..8 Threats………………………………………………………………………………9 Conclusion…………………………………………………………………………..9 Sources……………………………………………………………………………...10 Marketing Introduction Levi Strauss has a strong presence in the apparels market which undoubtedly will help in its foray into the cosmetics and fragrance business. The Levi Strauss brand has carved a fine niche in the clothes sector and its entrance in the perfume line is expected to be received well by its large international clientele. Cosmetics and fragrance consists of hair care and beauty products for skin care and color. They come in exotically shaped bottles and containers and provide feelings of comfort and freshness on application. The move to market cosmetics and fragrance is a step in the right direction and Levi Strauss will not have any foreseeable problems in this venture being already a market leader in the apparels business which is also a part of the modeling scenario. However, the ride may not be smooth and it will take the company every effort from the launch of the new products to ensure that the perfume brand does not fall short on any count. The competition is tight and the present players in the field, including the grey market, are not likely to part with their market share without a fight. Macro Analysis Internationally, the cosmetics and fragrance market is the domain of the affluent and the middle class. These sections of the population are vigilant. It is also a shifting clientele who are ever on the lookout for better products and will not bat an eyelid to change over to a new brand if it proves to be more effective. Globally, the market for cosmetics is growth-oriented. The need to look good is ubiquitous and people buy products promising results. If the results do not show, they will stop buying the product. Cosmetics and fragrance are products of personal preferences and the packaging is as important as the product. The market is in Europe, the Americas, Asia and Australia. The clients in each zone have tastes and habits peculiar to the region. Zonal cultures have a role in the preference of cosmetics and fragrance. Hence it is important to keep in view factors that influence sale of the products in different regions. After the launch, the product may require changes in content or outlook for acceptance in different regions. Do not take anything for granted and keep feedback notes so that changes wherever required can be made in the next production batch (Cosmetics market research). Micro Analysis The management of territorial markets is necessary to monitor the performance of the products in a specific region. Every outlet is a specific locality and it is important to get the views of the local players for they are knowledgeable about customer needs. Big brands like L’Oreal have strong presence in local markets almost everywhere. L’Oreal invests substantially in research and development. This enables them to keep tabs on local needs everywhere. It also helps them to move with the times and so design their products that they are consumed swiftly off the shelf (SWOT Analysis of L’Oreal). Ultimately, the battle for supremacy ends in the local place where all the brands share shelf space to win the customer’s attention. Packaging and price plays crucial roles in influencing the customer’s decision. Then there are local brands with lower prices manufactured by small scale industries and they are also doing well especially in the Asian countries. These companies in China and India export their brands and have their clientele in Europe and the Americas as well. There are spurious and fakes also. However, their use is limited if they do not provide the safety and comforts of the original (Cosmic International). 4Ps Product The product is the most basic of all functions of a company. A company cannot manage its affairs without the product. Before manufacturing quality products such as skin care creams, scrubs, lotions, cleansers, face wash, shampoos, talc, perfume, face packs, etc. companies have to carry out marketing research to find out why and how people will buy within the target market. There is also the functionality, appearance, packaging, warranty and service support that needs to be duly addressed. Cosmetics and fragrance being skin sensitive items must be made keeping this factor in mind. The labels on the containers must contain all information including likelihood of allergic setbacks in which case the use of the product must be stopped or recommended with neutralizing element. Price Prices for products are set after observing various internal and external factors. First of all, it is important to see the prices set by the competition. It is also necessary to have a fair understanding of the market share the company is expecting its products to take. Prices are dependent on the size of the market and people do not mind paying even higher prices for a good product. In China and India, there is dual policy of manufacturing one product for the local market and another for exports. This is because the export brands have to meet the competitive and regulatory requirements of the countries where their products are exported. Various factors influence price. The purchasing power of the people, the need for cosmetics and fragrance, unique sales points (USP), and break-even analysis are some of the major factors responsible for price fixation. The cost factor is a conscious decision made by the company. On this price, the company also offers discount, special offers, and a host of other bonuses to attract customers. Place For a company as large as Levi Strauss, the place is international. However, the company may choose to begin modestly from its home ground. This will help to get proper understanding of the product and make necessary modifications before the product is pushed globally. Distribution of the products may be done directly or through authorized agents. The places where the cosmetics will be sold such as shopping malls, medical shops, retailers, and even multiple layered marketing process must be determined keeping in view the target market. Locations where the buying and selling take place regularly. Apart from physical locations, the internet and mobile phone has also now become locations where sales are taking place (The Marketing Mix). Promotion The cosmetics and fragrance products are normally the choice of the youth, women, and even adults in their advanced years. In order to make the product available to these categories, the company must choose the media by which they will be able to promote their goods. It is also important to attune the promotion to the psyche of the youth and women. For promotion to be successful, the company must ensure that the goods are visible and available to the customer in the shopping outlets. Advertisements, public relations and the media play useful role in promotion. The cost of promoting a product is high. But this must not discourage the company from setting aside a budget for promotion. There is also the need for a thorough break-even analysis in order to determine the feasibility of the product in the market. The process of a break-even analysis normally takes into account the population of the local market and its target base. This process is difficult as it is not possible to predict the behavior of the customers. Nonetheless, this exercise helps to make a fair estimate on the basis of the data available with the management (Marketing Mix (4P’s): Place/Distribution Strategies). SWOT Analysis Strength Levi is one of the largest apparel brands in the world. It has huge presence in the European and the United States markets, and commands good presence elsewhere in the international market. It is on the basis of this strength that the company can hope to receive good response for the launch of their cosmetics and fragrance products. The company has seasoned and experienced marketing team. The new products must do well under the constant gaze of this team. The company has well established customer testing panel and this will identify strategies to influence customers’ choices and achieve sales targets. The average customer will find it difficult to not give in to the company’s high profile advertisements of its new products (SWOT Analysis). Weakness Although Levi Strauss is doing well internationally, its performance in the Americas has deteriorated due to the economic situation there. It also failed to maintain its momentum in Europe. It has shown improving results in Asia but its operating expenses have been high. These setbacks have been keeping the company’s performance on tenterhooks. The company closed down manufacturing operations in the United States in 2003 and outsourced its productions to Jordan and Turkey where persisting labor problems continue to haunt the management. The company had outsourced to Myanmar too but subsequently closed down this operation. Levi Strauss’ foray into cosmetics and fragrance could add to its woes if its performance turns out to be lackluster (Levi Strauss 2Q profit climbs). Opportunities The synergy in apparels and cosmetics will result in cosmetics marketed by Levi Strauss achieve success. The distribution network of Levi Strauss consists of thousands of outlets internationally. The clientele of Levi Strauss will patronize its cosmetics and fragrance moderately well in the beginning and opt to settle with the new brands if they find the results encouraging. There is growing awareness about health and the contributions of cosmetics to health care will only serve to increase the need for cosmetics. Also, newcomers will be equally enthusiastic to welcome a product with such robust background. The cosmetics market is growing due to technological advances, growing income, and pursuit of agelessness among senior citizens the world over particularly in Russia, Brazil, China and India (Category Watch). Threats The gestation period for cosmetics and fragrance is unpredictable. In case the products do not get sold within reasonable time, it will be necessary to push the products through discounts and bonuses. That is, the products will have to be sold at a discount or one given away free with every purchase. There are leading industries like L’Oreal, Unilever, etc. in the competition and they will not surrender even a part of their share in the market without a stiff fight. The buyer today is well informed. It is not easy to wean away the customer from her existing preference. She will hold on to her existing brand even if she buys Levi’s product and if she does not find any difference she may continue with her existing brand. Cosmetics have tremendous word-of-mouth advertisements. In case the products do not meet expected standards, it will be difficult to push them in the market. Conclusion As mentioned earlier, Levi Strauss has good presence in the apparels market. Although the company suffers some setbacks in the United States and Europe due to globalization and the financial meltdown, it is showing resilience and is improving its performance elsewhere, notably in Asia. Levi Strauss must invest heavily in research and development. Its strength in the market is dependent on its product. It does not do anyone any good to launch out haphazardly and then try to learn from failures. The cosmetics and fragrance market is growing. Hence, there is room for new comers. The competition may be stiff due to global giants and local, small-scale industries vying to win the customer. However, it is the superiority of the product which will decide the winners and losers. Levi Strauss is known for their superior products in the apparel industry. The company is over 250 years old. There is no other company with such a large and extensive marketing network. With this background, Levi Strauss is in a good position to embark on its designs with cosmetics and fragrance. Sources: Auric Blends, http://www.auricblends.com/pages/eg_product.html Category Watch: Five trends driving the global skin care market, http://www.euromonitor.com/Category_Watch_Five_trends_driving_the_global_skin_care_market Consumer Goods Company Profile, Mary Kay Inc, http://www.companiesandmarkets.com/Summary-Company-Profile/Mary-Kay-Inc.-SWOT-Analysis-32975.asp Cosmetics market research, http://www.allbizreport.com/indexer_eng/Cosmetics_market_research.html 4P’s Marketing and the marketing mix, http://www.4psmarketing.com/seo-and-ppc-articles/43-sem-article/87-4ps-marketing-and-the-marketing-mix Cosmic International, http://www.joycosmetics.net/profile.html Eastern Redcedar Market Analysis, 2005 Directory, http://www.centerforagroforestry.org/profit/redcedar/analysis.pdf Laura Lake, Developing Your Marketing Mix, http://marketing.about.com/od/marketingplanandstrategy/a/marketingmix.htm Levi Strauss net profit falls sharply in Q2, July 09, 2008, http://www.fibre2fashion.com/news/company-news/levi-strauss/newsdetails.aspx?news_id=59554&page=2 Levi Strauss 2Q profit climbs, SFGate, Tuesday, July 11, 2006, http://www.sfgate.com/cgi-bin/article/article?f=/n/a/2006/07/11/financial/f064557D23.DTL Marketing Mix (4Ps), http://www.12manage.com/methods_marketing_mix.html Marketing Mix (4P’s): Place/Distribution Strategies, http://www.learnmarketing.net/Place.htm Nivea Bath and Suncare Products, http://www.chemistdirect.co.uk/nivea_7_1749.html Perfume Health Warning, http://www.myproductalert.com/perfume-warning.html Pheromone Perfume, http://products.merchantzoo.com/pheromone_perfume.html Report, http://www.verslo.is/home/Int-marketing/Iceland/Year1/Report.htm SWOT Analysis, Business Teacher, http://www.businessteacher.org.uk/business-operations/swot-analysis/ SWOT Analysis of L’Oreal, http://www.swlearning.com/management/management_news/plan_0803_001.html Treatt PLC, http://www.treatt.com/Documents/Financial/2007/2007%20Preliminary%20Statement.pdf The Marketing Mix, QuickMBA, http://www.quickmba.com/marketing/mix/ The Top 10 Flavor and Fragrance Companies, http://www.reportlinker.com/p080366/The-Top-10-Flavor-and-Fragrance-Companies.html Unilever Plc - SWOT Framework Analysis, http://www.mindbranch.com/Unilever-Plc-SWOT-R3456-160/ Worldwide Business Information and Market Reports, http://www.the-list.co.uk/acatalog/kn24036.html Read More