Arabian Perfumes

Arabian Perfumes

Introduction and Strategic Issue

The Arabian perfume or fragrance industry is meant to manufacture both men’s and women’s perfumes. The sector consists of companies that specialize in mixing fragrant essential oils as well as aroma compounds, some solvents, and fixatives to give the body a decent smell. Perfumes and fragrances are being used in religious ceremonies as pre-love making rituals, among other diverse uses. In the UAE, they are essential at masking or enhancing individual body odor that emulates nature’s pleasant smell (Matherly et al., 2012). The perfumes are distinct because of body chemistry, odors, and temperature. The global fragrances market has been rapidly growing because of people’s interest in the products as well as new companies that share market advantages. Fragrances come in various forms, both natural and artificial. There have been increasing concerns regarding the issue of synthetic fragrances, a query regarding allergies as well as toxins, which have prompted critical players in the industry to focus on natural fragrances only.

Fragrances have caused increased consumer expenditure on personal care products. Besides, the industry has spread in Arab counties, increasing awareness concerning the associated benefits of using the products. The industry has seen the market proliferate, especially with many people utilizing their favorite perfumes. Even so, there are companies that have been poisoning themselves even though natural. The women’s Luxe brand has lost reputation because of the associated challenges and grievances reported by the public (Matherly et al., 2012). Even so, such companies are still collaborating with multiple celebrities for product endorsement. The increased popularity of fragrances, as well as the demand for better products, is making the sales of perfumes increasingly get recognized..

Perfumes and fragrances have encouraged the grooming of people around the globe. As a result, they have been essential integrals of day to day living. They have been used by Arabians primarily to relieve unpleasant body smell because of sweating (Matherly et al., 2012). The consumers of the products are categorized as men, women, or unisex. Some perfumes are encouraged to be used for both genders, and these perfumes have no devastating effects like their counterpart competitors. Concerning distribution channels, the perfume market is categorized as existing as either online retail stores or offline retail stores. There has been a growing interest for researchers, especially in the research and development departments, as well as advertisements that have enhanced the importance and growth of the fragrance industry. The key players in the market invest more on critical factors for them to influence consumer purchase decisions.

The strategy utilized in the perfume industry mostly revolves on defensive techniques characterized by the high value of the products and the slow growth rates. Additionally, it is the defensive strategy that is utilized to support other growing markets, including Brazil, China, and African countries, among others. Celebrity-endorsed products such as Coty have been used as a strategy to win a more significant market advantage (Matherly et al., 2012). Even so, it still remains as a volatile strategy since the perception of a celebrity is variable with time. Additionally, it is evident that some stars could detract from a brand, making it contradicting in the fragrance industry. Various resources and core competencies encouraged by the Arabian perfume market dictate the underlying competitive advantages. Some companies tend to rely more on the environment as well as the skills to become strategically fit. Even so, both strategies work, especially in market penetration.

External Analysis

An external environment refers to a situation by which external or outside factors, as well as influences, impact the operation of a business. For the Arabian perfume industry, there are many factors that affect the business operation, which prompt the companies involved to act and react accordingly to keep the flow of services smooth (Matherly et al., 2012). The industry also has the micro and macro environment. On the one hand, there are various factors that directly influence the services of the companies involved. On the other hand, there are other factors that the companies involved have no control over. The most persistent and competitive companies have to adapt to overcome the environment. The external environment is vital in assessing an industry’s attractiveness as well as profitability. Many organizations look at the competition, yet multiple other factors can determine the success of a product.

Porter’s Five Forces Model

According to Porter, organizations should look at multiple other factors other than the competition that affects business operations. Even though the substitutes remain critical to business operations, porter still noted competitive rivalry as the main factor that determines the success of a business.

1. Competitive Rivalry

Competitive rivalry looks at the situation and position of other companies within the same industry. For the Arabian perfume industry, there are many products and new ones still emerging (Matherly et al., 2012). While checking on competitive rivalry, the number of competing companies ought to be considered. The consideration ought to also include the nature of competitors, as well as the comparison between their products and services to the company in question. With intense competition in the Arabian fragrance market, companies tend to use aggressive price cuts as well as advertisements and campaigns. In case a product meets minimum competition, the company would likely achieve great strength and healthy profits.

2. Supplier Power

The concept of supplier power revolves around the ability to have a supplier meeting their maximum prices. The Arabian perfume market has many suppliers with unique, as well as advanced products and services (Matherly et al., 2012). Even so, a company should look into how expensive it would be to switch between suppliers. The more suppliers a company gets, the easier it can get to switch to other alternatives in case of elevated prices. Even so, in the case of a few suppliers, companies need to consider external assistance to escape high prices and gain more revenue.

3. Buyer Power

For the case of buyer power, companies within the industry ask themselves the ease of having prices driven down (Matherly et al., 2012). Companies can consider the number of clients in the market and the capacity or orders they have. Additionally, because of the nature of competition, it would also be required of companies to evaluate how fast clients can switch between rivals. With more customers, a company in the industry could thrive better than that with only savvy customers.

4. Threat of Substitution

The threat of substitution is also a critical consideration that outlines how customers can find different ways of doing that, which is being done. If fragrances are being supplied as alternatives to traditional perfume, people would instead go for the newest trend. The concept would be further enhanced when the substitution comes with the advantage of low prices. Fragrances that substitute others cheaply can outweigh the position of the dominant perfumes as well as the profits of the companies involved.

5. Threat of New Entry

The ability of products to enter a new market comes with various risks to a fragrance company’s position. Some companies are developed successfully and threaten the existing ones in terms of products and services offered. Threat particularly happens when there is an improved quality of the products at a low price. Additionally, the fragrance industry presents ease in getting a foothold into the market and weakening the positions of others within the market. It also becomes easy to beat the rivals as soon as a good strategy is used after entry.

Key Success Factors

Various key business success factors align with the fragrance industry. These include the strategic focus of the company, the people involved, operations, marketing, as well as finances.

1. Strategic focus

The strategic focus of the Arabian perfume industry focuses more on the existing leadership, management, and planning within organizations. Some of the important considerations include a customer-driven company, seriousness in maintaining the core values, maintaining a sustainable competitive advantage, having a clear mission, and having goals backed with strategies. Companies that have an excellent strategic focus do not lose value in the market quickly.

2. People

The people involved in the success of an organization include the existing personnel, staff, as well as learning and development. Many companies that succeed in the industry maintain proper people-management criteria. For instance, companies may consider hiring based on talent, and personal strengths, and some may have the people motivated by the autonomy to make decisions that align with strategic goals.

3. Operations

The operations of a company determine the success in the market. The components of services may comprise the processes and work involved. Companies that succeed in the fragrance market have the activities aligned and fine-tuned to encourage customer value (Matherly et al., 2012). Additionally, those that promote innovation as well as collaboration throughout the organization have a greater market advantage over their rivals.

4. Marketing

The marketing criteria established and maintained within an organization is important for the success of a business. The fragrance industry may consider customer relations, sales, and responsiveness. The companies with more significant market advantage continuously check on the customer needs, satisfaction, and values.

5. Finances

Companies that have good financial management succeed more and better in the industry. Fragrance organizations with better asset management, facilities, as well as equipment, tend to dominate the industry even more. Some of the areas in finances that are worth consideration, including competitive pricing, sophisticated financial control, as well as having financial rewards aligned with results.

Industry Profile and Attractiveness

The fragrance industry has multiple characteristics and is dominated by competition. Even so, the companies involved still have differing market share. It is easy for new entrants to dominate the market (Matherly et al., 2012). The fragrance industry is attractive to various incumbents. The Arabian perfume industry is likely to get to the position of the fashion and trends industry. For as long as companies maintain the right strategies, they are likely to dominate the sector easily.

Company Situation

Many companies dealing with fragrances face multiple strengths, weaknesses, opportunities, and threats to their operations. For instance, maintaining consistent quality is essential for the success of various companies in the business (Matherly et al., 2012). Additionally, it is becoming challenging to get a continuous supply of fragrance products and maintain a good market share. Financial burdens are also pertinent to some of the companies in the industry. However, most of the companies are coping with such situations and overcoming the existing challenges to succeed and supersede their competitors.

Financial Analysis

The financial situation of a company is primarily dependent on the nature of competition. Companies that get into the perfume industry unprepared end up losing market advantage. Financial data can be used to predict a company’s performance before it enters the market. Financial analysis is mainly performed by financial analysts with a specialty in predicting various finance essentials for an organization. Many companies in the fragrance sector provide financial statements that can be used to gauge potential performance. Some other companies give their statistics reports that can be effectively used to check on the performance of an organization. Sample financial statements also work for other companies, including the operating rations that can be used to evaluate market performance. Some financial data can be found in BizStats, an online resource for business statistics. Some other areas that can be used for economic analysis include business census, google finance, and yahoo finance. The economic situation of a company can predict the success of a new entrant into the market.

SWOT Analysis

The SWOT analysis is vital to let a company evaluate how it can stack up against the real competition. Using the analysis tool can also allow a company in the perfume industry to understand where the brand stands in the larger marketplace. The greater business and its position in various regional markets should contribute to the effective use of the tool.

Strengths

Various strengths exist with companies within the perfume industry, including a loyal customer base and reputation. Many customers have their most preferred fragrances, and they would tend to stick to their choices for the long term. Additionally, their proprietary knowledge is essential for the success of the business. Many suppliers and competitive sources of raw materials also present as a strength of the industry. Besides, many companies have trade connections that contribute to greater competitiveness and market advantage. The industry is also coupled with the advantage of multiple avenues of distribution. There is also a sharp line for customers with average income. The various strengths encourage the companies to have their brand names reaching large audiences as well as many potential customers.

Weakness

The primary weakness in the Arabian perfume industry is having a new entrant into the business. Introducing a new brand without any reputation would be stressful and would call for advanced strategies to win customers. Some other times, there are costly labor sources in the industry that contribute to company weakness. Financial constraints also exist for companies that need to maintain a more significant competitive advantage. The least established brands also miss diversification, especially in the avenues of distribution, making them drag with an insufficient market advantage.

Opportunities

The fragrance industry is not an emerging industry yet remains to be a key participant in the world. Presently, there are no international trade barriers that prevent the operations of foreign companies in local regions. Free operations have led to the thriving of the companies entering new regions. Additionally, there is little to no inter-governmental tension and the attitude towards commerce. Many regions are accessible as sources of labor, supply, and export. There are loosened commercial restrictions even within nations for fragrance products, opening channels for new markets. Besides, the fragrance industry has a lot of cheap and ready labor that can be used as a channel for company success.

Threats

The primary sources of threats in the Arabian perfume industry include politics and economies. Some regions experience political unrest, making it difficult for trade to successfully be evidenced in the region. Some fragrance companies are also dominant within specific regions, and political unrest would affect business operations in totality. Developing countries are also experiencing changing political climate that affecting the areas of cheap labor. Trade embargoes and economic downturns are also a challenge to the industry. Customer spending can be restricted by economic factors, and potential clients could be affected. When combined, political and economic issues may contribute to poor brand exposure and name recognition, as well as the distribution of perfume products.

Recommendations

Strategy Recommendations

There is an importance in leveraging a marketing strategy as used and applied by perfume retailers. Besides, having a strategy across various markets is nothing but beneficial. The key strategy recommendation for the perfume companies is having clarity on that which is driven globally and that which is managed locally (Matherly et al., 2012). With the industry well established globally, there is a need to have local, market-specific plans as well as initiatives for ultimate success. Companies that embrace strategic marketing planning, as well as budgeting, tend to be dominant in the industry. Some other important considerations may include marketing campaigns, encouraging outreach activities, and involving one primarily in tactical campaigns.

There is also a need to understand the local market needs and also develop a collaborative approach. With the fragrance market being widespread to global areas, some companies feel that it is an opportunity to avoid spending time to understand local cultures and customer needs and behaviors. Even so, customers from different countries have different perceptions of a product. To have a consistent and working global model, companies should first understand the local markets and have close relationships with the local marketing teams.

Tracking and adjusting in real-time is also critical for the success of an organization. It is wise to run campaigns in multiple markets for one to have good tracking results. Companies ought to get the key metrics and goals pertinent to their operations. Additionally, they can review the various metrics to allow for local participation. It could also be critical to leverage the best practices across different markets.

Objectives

Performance objectives of operations in the perfume industry include a focus on quality, speed, dependability, flexibility, and cost. There are various influences on the performance objectives, both internal and external. The primary internal influence is cost (Matherly et al., 2012). Companies should maintain consistent conformance to customers’ expectations as it proves to influence their satisfaction or dissatisfaction. Maintaining quality should be the key considerations of various companies within the fragrance industry. With good quality, companies save on the need for re-work. Customers also prefer companies that work with speed. Speedy delivery of goods is important as companies can create a good reputation for responses. The underlying influences of speed include speedy decision-making and the speedy movement of materials. Dependability is also critical as customers gauge the products as soon as they have been bought. Companies that have high internal dependability have the best operations. Flexibility in the industry also manifests in the areas of product, volumes, and delivery. Fragrances with lower costs also have their products sold faster than those that have been over-priced. Therefore, the key sales and profitability goals include quality, speed, dependability, flexibility, and cost.

Strategic Justification

Leveraging a marketing strategy is critical to have a sustainable business. Additionally, almost any company can adapt to a leveraged market strategy. The perfume industry is also globally established, and that calls for companies to have both local and global plans. Without a leveraged strategy for brand recognition, there would be a failed marketing strategy (Matherly et al., 2012). Fragrance companies also need to understand local customers’ needs to ensure that they understand the culture better. People from around the world make different purchase decisions compared to local residents. Therefore, having a collaborative approach with local clients assists in the success of a business. Without tracking and adjusting in real-time, companies may also fail strategically and lose their brand identities.

References

Matherly, L. L., Nandialath, A., & Richards, C. (2012). Arabic Perfumes and the Global Fragrance Market: Thunderbird School of Global Management. In How Perfumes are Chosen, (pp. 1-11).