Launching Cosmetic Industry in India - Essay Example

MARCH 2009 Research Project On Launch of Cosmetic Industry in India Diva For the beautiful Diva in you… Submitted Submitted By: INDEX CONTENTS 1) EXECUTIVE SUMMARY 2) INTRODUCTION 3) CULTURE OF THE COUNTRY 4) RESEARCH METHODOLOGY 5) FINANCIAL ANALYSIS 6) SERVICE & PROMOTIONAL STRATEGIES 7) PORTERS FIVE FORCES ANALYSIS 8) CONCLUSION 9) WORKS CITED EXECUTIVE SUMMARY Launch of Cosmetic Industry in India Cosmetics and toiletries have seen tremendous growth in 2007. Growth was partly due to high levels of inflation but volume sales also saw dynamic growth. Rising income levels resulted in lower-income groups being able to afford more cosmetics and toiletries and also saw many trading up from unpackaged to packaged products. Meanwhile, mid- and high-income consumers in urban areas began to seek out value-added mass brands and premium products. I am taking India as the country to sell the product as Indian females are considered an epitome of beauty and they are more and more becoming beauty and fashion conscious. The product to be marketed is a wide range of cosmetics (100%Vegetarian) especially lipsticks, and it would be launched in the Indian market by the name: Diva For the beautiful Diva in you… To enter into a new market firstly a Market Research has to be done and thus, I have prepared a questionnaire for the females between 16-55 yr as a part of my Primary Market Research analysis. Also I have applied Porter’s Five Forces Model i.e. the threat of substitute products, the threat of the entry of new competitors, the intensity of competitive rivalry, the bargaining power of customers, and the bargaining power of suppliers. Introduction "People will forget what you said, people will forget what you did, but people will never forget how you made them feel." - Bonnie Jean Wasmund Truly said, people will never forget about the services given by any service based organizations like restaurants, beauty parlors, consultancy firms etc and specially the cosmetic industry. I chose India because the increasing urbanization and a growth in the number of office workers have resulted in a strong focus on grooming. Indian Culture:- Culture is the manner in which things are performed within a society, community or nation. Culture is not a trait that comes with birth but it is learnt over a span of several years. The major things that can be observed amongst Indian culture are as follows:- The Terpstra and Sarathy Cultural Framework helps marketing managers to assess the cultural nature of an international market. The Eight categories are Language, Religion, Values and Attitudes, Education, Social Organizations, Technology and Material Culture, Law and Politics and Aesthetics. 1. Language: - There are as many as 22 official languages in India. The national language of the country is Hindi and most of the people in the country are quite well versed with English as well owning to the British rule in the country for around 200 years. 2. Religion: India is considered to be a land of unity in diversity. Many religions are practiced in the country including Hinduism, Jainism, Buddhism, Islamism, Sikhism, Christianity etc. The cow is considered sacred in Hinduism. She is the one who should be worshipped for the various graces she bestows on humanity. 40% of the total population is Vegetarian. 3. Values and Attitude:- Generally people in India have a high regard for their elders. Although traditional roles are changing, especially in urban areas, there are important values shared by most Indian families. Normally, Indians hold family progress, unity and support in high regard throughout their lives. Mostly people live in an extended family, in which every member has their own role, often determined by age and gender. There is typically a head of the family who takes the major decision with respect to the family and his decision is respected by everyone in the family. Elders are supposed to use their experience and wisdom to help guide younger members of the family. 4. Education:- As per the data of 2000-2004 from the Education for All Global Monitoring Report, UNESCO (2006), India has an adult literacy rate(15+ years old) of 61 percent and a youth literacy rate (15-24 years old) of 76.4 % which shows that India as a country has started to realize the importance of education reflective in its much higher youth literacy rate which indeed is a positive sign for the country. 5. Technology and Culture: - India has recently been identified on the world map as a preferred Information Technology destination. Moreover 65% of its population is below 35 years of age who are really enthusiastic and technology savvy. 6. Aesthetics: - Although India has a diverse culture, yet a lot of similarity can be observed in aesthetics. There fundamental ingredients of Aesthetics include rasa (pleasure), buddhi (reason), kama(pleasure), natya shastra(dance) and emotions. 7. Social Organizations: - what is the role of women in a society? How is the country governed - centralized or devolved? The level influence of class or casts upon a society needs to be considered. For example, India has an established caste system - and many Western countries still have an embedded class system. So social mobility could be restricted where caste and class systems are in place. Whether or not there are strong trade unions will impact upon management decisions if you employ local workers. 8. Law and Politics: - The political ideology on which the society is based will impact upon the decision to market there. India is a market-driven, democratic society with political parties like Congress, BJP etc. Product target market The target market to be initially focused on is females between 16-55 yr and specially youngsters between 14-25 yrs i.e. the college and school goers. Market Research (Primary Research): Before entering into the market a Primary marketing research has to be done in order to know the likes and dislikes of the consumer. So I did Primary Research which is collected for the first time. It should be original and collected for a specific purpose, or to solve a specific problem and my purpose was to enter lavishly in the market of cosmetics. I considered taking interview the most proper and interacted primary research. I organized, Telephone Interview, also conducted Face to face Interview. I appointed some of the market researchers; mostly they were college students and gave them the target market list. They then contacted them and took their appointment to conduct the face to face interview. I made several questions; some were open ended questions and some were close ended questions and based on that made questionnaire: Do you use cosmetics? a) Yes b) No If yes, how often do you use them? a) Daily b) Once in a week c) Very less With whom do you shop for a cosmetic? a) Family b) Friends c) Boyfriend/Girlfriend d) Colleagues Do you go for a particular brand while buying a cosmetic? a) Yes b) No If Yes, which of the following brand you buy: a) Lakme b)Revlon c)Elle 18 d) Lisome e) Avon If any other please mention- What do you expect from a new cosmetic company? Ans-------------------------------------------------------- Name- Age- Gender- Occupation- I also conducted Interview on the Internet by pop up windows and flashes. We also thought of launching a website so will ask the visitors to complete the electronic questionnaire. Internet being relatively economical and easy to access could definitely help us in future also. The Visuals of our products like the shades of lipsticks, nail polishes and other USPs can be very easily shown through the internet. FINANCIAL ANALYSIS: Expected Revenue FY09-10:- We will take the base price as Indian Rupees as we are doing the manufacturing and selling in India. The approx. rate of conversion of rupees as compared to dollar is:- 1 Dollar = INR 50 Also, As per the definition from Investopedia (2009) An average business gives an ROI of 17 % in India. There are around 450 million females in India. 65% of the total population of India is below 35 years of age (Singhal, 2006). Considering that only around 30% of the women use lipsticks in India, keeping in view the earning capacity, it can be assumed with fair accuracy that the target consumer base for lipstick market is around 66 million in India per year (considering that an average lady purchases lipstick once in a year). If we therefore target our market share to be around 1% initially, we should hope to produce around 660 thousand lipsticks in the country per year. The average cost price for a lipstick in India is around INR 80. The logistics require another Rs. 10 every lipstick and the packaging forwarding plus additional expense requires another 25. This sums to a total of Rs. 115. The average selling price of a branded lipstick in India is approx. Rs. 800. If we hope to make a profit of around 17% on our investments post tax , which is the ideal return on investment in India, the financials should look as follows:- The tax rate in India is approx. 30%. Let us say our cost price is CP and Profit as P then:- 0.7P = .17CP (assuming 70% of Profit as 17 percent of Cost Price) CP + P = 800 Solving these two equations we find that the cost price including marketing cost should be around Rs. 643 and we can hope to spend Rs. 528 on production of each lipstick our cost including the marketing should come to Rs. 684. So we can look forward to investing Rs. 528 (643-115) per lipstick as marketing a cost. Therefore our company is targeting an average 528* 660 thousand Rupees or around 6.8 million dollars for the marketing of the project and a total budget of around 7.6 million dollars as the cost of entire operation. Manufacturing and Distribution Network: Manufacturing Unit: Silvassa is the capital of the Indian Union Territory of Dadra and Nagar Haveli which enjoys a cosmopolitan mix of non-local people. I selected this city for the manufacturing unit because of the tax exemptions offered to locate manufacturing in this (commercially) backward area. Distribution and Sales Headoffice: In order to focus on building urban and rural sales as well a strong distribution network must be there in both urban and rural areas. Mumbai is the capital of Maharashtra and I have chosen that city to have a Sales headoffice to target East and Northeast India, North India, South India and West India. Service Strategies Promotion and making aware of what is available to the customers and what the offerings are is the important and an essential part of any marketing strategy; keeping this in mind we at The Diva Cosmetics, promoted the Unique Selling Proposition (USP) i.e. good quality at an affordable price to the customers. Name and the Logo- Diva And the Punch line- For the beautiful Diva in you… Also, We can make attractive pamphlets and distribute them through the volunteers to our target customers. Publish & telecast a print or an electronic advertisement of ‘The Diva’- For the beautiful Diva in you... Offer some discounts through contests or college fests. Offer free gifts like soft toy or a gift set to beautiful ladies. Most importantly, made them feel great through the great shades and flavors of the cosmetics so that a good word of mouth can be spread. Also, a very popular beautiful Indian Model who has recently been a finalist on a Beauty Pageant can be chosen by us as our Brand Ambassador. We also thought of launching a website named as thediva.com as we know that technology plays a very important role in the delivery of service today. Internet being the revolution is the easiest way for the customer to order for. Porter’s Five Forces Analysis helps the marketer to contrast a competitive environment. It has similarities with other tools for environmental audit, such as PEST analysis, but tends to focus on the single, stand alone, business or SBU (Strategic Business Unit) rather than a single product or range of products. The threat of entry. The entrance in a new market in a different country becomes difficult for a new company. The company has to know the economies of scale, its access to the distribution channels, the competitor’s action and reaction etc. Government’s role, politics and legalities become important. Innovation and creativity decreases the threat of entry but this recession period can increase the threat. The power of buyers. Buyer is the King and so the product should be offered to them with a planned promotional activities. There must be a proper distribution of our products in the market. The power of suppliers. The power of suppliers tends to be a reversal of the power of buyers. We have selected Bajaj Industries to be our supplier for the containers. Supplier has power when there are more competitors in the market. But if the brand is powerful, power is high. The threat of substitutes Talcum Powder can be used rather than compact, or Petroleum Jelly can be used rather than using a lip gloss or a lipstick; this is the threat of substitutes. Competitive Rivalry List of Competitors: (Cosmetics and Toiletries – India) Cavinkare Pvt Ltd., Cholayil Pharma Pvt Ltd., Colgate- Palmolive India Ltd., Dabur India Ltd., Emami Ltd., Godrej Consumer Products Ltd., Hindustan Unilever Ltd. (Lakme, Ponds), Marico Ltd., Nirma Ltd., Wipro Ltd., Revlon, Avon, Oriflame etc. CONCLUSION Cosmetics and toiletries are expected to see even stronger growth during the forecast period in constant value terms. This will be chiefly due to rising income levels and consumers trading up. In addition, distribution is expected to improve for cosmetics and toiletries and consumers will have greater access to a wide range of cosmetics and toiletries, ranging from cheap basic products in small pack sizes through affordable value-added mass brands to super-premium global brands. Cosmetics and toiletries will therefore effectively cater for a wide range of Indian consumers, driving sales growth as a consequence. Works Cited: “Aesthetics in Asia – India.” 12 March 2009 Aesthetics in Asia - India “Anterior Segment Laser Vision.” Dr. Smith Optometry. 13 March 2009 “Bajaj Industry.” Maps of India. 10 March 2009 “Cosmetics and Toiletries in India.” June 2008. Euromonitor International. 13 March 2009 “Five Forces Analysis.” Marketing Teacher. 11 March 2009 “International Marketing and culture.” Marketing Teacher. 11 March 2009 Kotler, Philip. Marketing Management. 11th ed. New Delhi: Pearson Education (Singapore), 2003. “Languages of India.” webindia123.com. 13 March 2009 Sengupta, Subroto. Brand Positioning; Strategies for Competitive Advantage. New Delhi: Tata McGraw Hill, 2006. Wirth, Ross A., Ph. D. “Integrated Marketing Communication.” 23 September 2008 Entarga.com. 10 March 2009 < http://www.entarga.com/mktgplan/imc.htm> Read More