Foreign Market Analysis

Executive Summary

The report is prepared to briefly fabricate the analysis that describes the foreign market style and trends of UAE. A small scale local company has been chosen here to prepare the assessment where the focus is on how that company will plan to enter in a new foreign market apart from its home country. Few models and theories are utilised in this report to have a clear picture of the specific market and its background along with how the local company can incorporate itself in a new foreign market is explained through the models. The aim of this assessment is to product a detailed analysis of all the notable aspects when a small or medium local company is considering entering in a new market being an existing one in their home country.

Introduction

The assessment here presented is a report that will target a local UAE perfume manufacturing company named AJMAL PERFUMES MANUFACTURING AND OUDH PROCESSING, who is considering entering in the UK market for expansion after holding a stable position in UAE. The report will give a short background of both the company and the market sector with the statistical market trend reports & segments. The aim of this assessment is to present an analysis which will help in attaining the answer that the decision of Ajmal company to enter in a foreign market will be good or bad. In order to support this decision PESTLA analysis of the foreign market and Porter’s Five Forces Framework to understand the industry environment is used below. Following these some suggestions on a suitable entry mode and few recommendations on the overall consideration is also presented. The conclusion below summarises all the highlighting facts of this report.

Company Background

AJMAL PERFUMES MANUFACTURING AND OUDH PROCESSING is a local perfume manufacturing company holding the position of one of the largest perfume manufacturing companies of the Middle East and also known around the globe. Ajmal Perfume deals especially in the consumer staple products and other household products under the consumer staples industry. In early 1950s, Late Haji Ajmal Ali founded Ajmal Perfume initially by starting as a farmer to a perfumer in Assam, India. Later on he shifted to Dubai, UAE and in the year 2004 steered his passion towards creating fragrances into Ajmal Perfume and his generations are still continued to follow this passion (Our Story, 2020). The current COO is Nazir Ajmal and Abdulla Ajmal is at the position of General Manager in UAE (History, 2019).

AJMAL PERFUMES MANUFACTURING AND OUDH PROCESSING basically deals in cosmetic products and manufactures various fragrance perfumes, skin care products and along with these gift sets and other toiletries too. One of the strength of Ajmal Perfumes is their R&D Wing of their company with a 150,000 sq. ft. factory having highly trained personnel and latest equipment which helps in their trial and test process of all their ingredients that goes in the making process of the perfumes and later on sold to their customers world-wide (CRAFTING QUALITY, 2020). Ajmal Perfumes also contributes towards the environment also which has a proof that till now they have planted more than 10 million Agarwood trees with the motive to have a constant supply of Oudh to their manufacturing process in both the terms of quality & quantity.

Market Background

Ajmal Perfumes Manufacturing and Oudh Processing, after having s successful market hold in UAE are considering entering in the UK market. Ajmal Perfumes is exporting their products for over 45 countries internationally except the UK market where they are possessing to enter after analysing the UK market trends and demands of their products. As days are passing, Ajmal Perfumes are increasing their retail exportation and soon they wanted to start business in UK also with their exclusive and innovative products, showrooms and retail touch points because as records say that nearly around 3.9 million men and women use perfumes and like to try new fragrances (CRAFTING A GLOBAL ESSENCE, 2020). Not only perfumes the other toiletry products of Ajmal Perfumes can also find its place in UK as the frequency of using the after shave products usage among men have also increased in the past few years.

The UK perfume market was estimated to be valued around USD 31.4 billion in the year 2018 and later on it is expected to get an expansion of around a CAGR of 3.9% between the years 2019 to 2025 (GRAND VIEW RESEARCH, 2019). The UK market is well known for their growing trends and demands of increasing demand for luxury and exotic variant fragrances along with coupled personal grooming product sets. Ajmal Perfumes have a great variety and range of personal care products too with gift sets of new fragrances and other toiletries. So if analysed it will be quite a good decision for Ajmal Perfumes Manufacturing and Oudh Processing to consider entering in the UK market for expansion and diversify their customer base, further augmenting the sales.

PESTLE Analysis of the market

The PESTLE Analysis of the UK perfume industry market will reveal the factors that affect the business companies of the industry and the new entrants of the market must also care about these factors since depending on these, the success or failure of the new entrant company can be gained.

PESTLE Analysis

Evaluating the market and industry environment & using Porter’s five forces framework analysing the competitive analysis

Market & Industry Environment Analysis UK 300

The cosmetic and fragrance industry is basically consisted of all those companies who manufacture the cosmetic products, toiletries and perfumes with variant fragrances including the hair care, body care and the makeup and hygiene products also. The overall market size of the perfume and cosmetics industry is around £5bn with existing and new emerging businesses of nearly about 739 in numbers employing on an average of 15,623 people under them (INDUSTRY RESEARCH REPORTS, 2020). The cosmetic and perfume industry have grown and changed from time to time according to the changes in the consumer spending habits, tastes which sometimes also created operating challenges to the business firms of the Perfume and Cosmetics Manufacturing industry over the past five years from 2015 to 2020. This industry operated the manufacturing of a huge range of products starting from make-up to perfumes, hygiene acre, hair care and many more which are considered to be a necessity, insulating the consumer demands from the wider side of the economic conditions. In the year 2020, the decline started to fuel up due to the world wide Covid-19 or the corona virus pandemic situation where the most essential necessity turned into just survival instead of any other product.

There has been found a downstream demand in the hair care, skincare and fragrances or perfumes and is dropping due to less engagement in the social interactions. This resulted into a slower rate in the consumption of the cosmetic and perfumes and increased demand of the personal cleanliness and hygienic products (RESEARCH AND MARKETS, 2020). Though in the upcoming years the industry is targeting to reshape the trends and increase the consumer demands by introducing the value-added products. These products will raise the awareness of being healthy and fit among people prompting more health oriented and natural products in the market. This initiative may get its expected shape between the years 2020 to 2025 as planned & desired.

Competitive Analysis using Porter’s five forces framework 450

The UK cosmetic and perfume industry has grown over years and currently it is considered to be a billion dollar industry generating over $160 billion on a global scale showing the necessity and importance of eth cosmetic and perfume industry in the market. In the recent days the products such as fragrant perfumes, creams, lipsticks, toiletries, hygienic products and etc. are have seen a rapid growth and increased usage by the customers especially in the developed countries like UK. The consumers are very well aware of the value of cosmetic products and their positive impacts on improving their confidence & self-image boosting their self-esteem. The realization of the importance of first impression both at the workplace and in society in general is well aware by people. In order to analyse the competitive advantage analysis of the cosmetic and perfume industry, the Porter’s five forces framework will fit best. The Porter’s five forces framework is originally developed by Michael Porter to analyse that to what extent the internal and external factors cam influence the competitiveness of a product or industry. This framework includes fives measure of analysis which identifies that product or industry.

Threats of New Entrants (High)

The cosmetic and perfumes industry is always at the teat of new comers to attract and capture the market share. These threats drive the profitability to a dropdown for the existing companies. As stated by Bruijl (2018), in order to remove this barrier of new entrants the existing companies needs to create a strong brand image and identity.

Threats of Substitutes (Low)

Substitute threats are the most common in every industry as there is no such fixed brand which can grab and hold the customer base forever. There is always risk of getting substituted by other brands or products. And in case of cosmetic and perfume industry, this risk is very effective due to the growing usage of home remedies and rural home-made products. To remove this threat constant innovation and introduction of natural, ayurvedic and herbal products are essential to maintain the consumers.

Competitive Rivalry (High)

Being in the high competition with tough rivals depends on the degree of the rivalry among the companies. This degree can be differentiated from high – low- medium depending on the potential of the companies and the power to capture the customer base through various new and inventive techniques.

Supplier Power (Low)

The range of suppliers in this industry is higher as compared to other industries because of the huge quantity of products and varieties of the items. There is a definite switching cost exists in this industry and also a treat that a new integration will also initiate soon. The presence of substitutes also affects the supplier power in this industry.

Competitive Rivalry (High)

The last factor is the buyer power because consumers whether existing or new are the deciders that whether a company will survive or not. Buyers if gets attracted towards any brand or product the demand of that company ultimately increases raising their profitability and decrease the sales of other companies (Grebenshchikova et al. 2017). So to maintain a long term profitability, all companies keeps introducing new products with variants and innovation so that there can be a constant holding of the customer base and hence the market share.

Based on the analysis above, suggesting a suitable mode of entry into the foreign market and include justifications for choosing the mode & discussing the advantages and disadvantages of the entry mode

The Porter’s five forces framework highlighted some of the risks, barriers, threats and entry strategies for the existing companies. Along with this for the new entrants, a successful entering mode to attract the customer base and hold the market share of eth cosmetic and perfume industry, the best recommended entry mode into any foreign market is the Research & Development strategy to be implemented.

Research & Development Strategy

The research and development strategy can be briefly explained as a defined set of inter-related choices which are coherent across the decision making concerns including the product architecture, planning, processing, manufacturing, and other functions altogether are considered favourable for making the decisions to be taken while considering entering into any foreign market being a new entrant constitutes the R&D strategy (Ko et al. 2020). The entry mode of research and development is very much critical and crucial at the same time in regards to the foreign cosmetic and perfume industry market. Due to the rapid increasing competition and the diversification of the industry nature, the research and development strategy enable the transformation of products according to the needs of the market trends and customer demands. This strategy attracts customers through high quality products which are effective in both the developed and developing countries.

The R&D strategy helps in creating customer loyalty which ensures a long term profitability of the new entrants in the existing competitors of the foreign market. The R&D strategy can be fulfilled by the help of various campaigns of the entrant brand and its product items into the foreign market. In this regards, internet is the best way to create a new market awareness of the new brand and its products. This advertising technique includes a combination of the electronic media, mass media and the internet itself which ensures that a high level of customer range can be grabbed with the introduction campaign (García-Quevedo et al. 2017). Together all these, if arranged and utilised, then the desired target can be expected to be achieved for the new entrants in the foreign market.

Advantages & Disadvantages

Recommending an overall corporate market strategy including choice of target segment, pricing, distribution and promotion of the products and services in the chosen foreign market

There are different types of marketing strategies consisting of different forms of target segmenting, product promotion techniques, product pricing strategies and product distribution methods. Here there will be a recommendation of a separate created marketing strategy with different forms of functions of it.

Marketing Strategy

The most useful marketing strategy that can be recommended for utilising in the entering process in any new foreign market is the Cost Leadership strategy. Under this strategy, the function processes towards tackling the high competition of the foreign market which is also present in the cosmetic and perfume industry (Morgan et al. 2019). The importance of this strategy is to fight with the high competitive market with the element of effective costing function in the foreign market i.e. the UK market. This strategy involves the pricing of the products in such a way that it is set lower as compared with the other competitors of the same industry who are already existing with a strong hold. The cost leadership strategy ensures that the prices of the new entrants must be cheaper so that the customers will get attracted with the new brand and the sale can be higher with high profitability. This also enables the customer loyalty for a long term of period.

Target Segmentation Strategy

The target segmenting strategy involves in itself those research parameters in regards with the foreign market that evaluates the potential of that market and the potential of the target customer base which are segmented for focusing on. One of the best target segmenting strategy is to apply the STP method. This method includes certain facts:

It categorises the market depending on the basis of the business characteristics where the segmenting parameters are like demographics or geographic nature of the market.

As per Camilleri (2018) the segmenting of the customers are done depending on the elements like income level, loyalty with the existing brand businesses, preferences, taste trends and popularity. The potential customers are targeted for achieving the desired objectives.

The product position is placed and offered to the new market in such a way that it sends a message from the seller to the consumers on behalf of the new entrant brand. It explains the vision, motive and values of the brand.

Product Pricing Strategy

When choosing the product pricing strategy for entering into a new foreign market, the best strategy will be the penetration pricing strategy. This strategy is highly beneficial for those markets where the competition is very high in between the existing companies. This pricing strategy ensures that the new entrants can be able to hold their foot in any foreign market. In this strategy, the new entrant attempts to offer such prices that must be lower than the competitors. This method is called penetrating pricing strategy. Kienzler and Kowalkowski (2017) explained that this strategy is very helpful in attracting the customers also because for new entrants who are entering any new foreign market, it is the most essential things that the company must grab the taste preferences and loyalty. And these things must be attained for a long duration so that when the prices will be raised in future, the entrant must not lose any customer.

Product Distribution Strategy

There are main three different types of product distribution strategies exist regarding new entrants in any foreign market – Intensive, Selective and Exclusive. From all these three, the best strategy recommended in this case can be the Intensive distribution strategy. As per this strategy the main focus points of the entrant company should be targeting to penetrate in the foreign land, introducing as many outlets and retails stores as possible and no cap on the physical stores and locations. According to Xu and Chen (2017) for any new entrant, to hold a strong market place it is necessary to make the products visible everywhere in the foreign market so that more and more exposure can be gathered grabbing the attention of more new customers. This channelises the penetration of the new entrant into the foreign land and motivates the brand to grow in the foreign market.

Product Promotion Strategy

The best strategy for a new entrant to grab customer attention is the Social Media Promotion strategy. Wang (2019) stated that when a brand desires to enter in any new foreign market, social media in recent days can be recommended as the best way to promote their products and services. Social media nowadays is that platform where each and every person engages most of their times so when a product can be seen most often in these platforms in the form of advertisements, attractive offers, quiz questions, contests, product giveaways, personal mail marketing promotion, sample products for use and their feedbacks, point-of-sale, end-cap marketing, referral codes and coupons and many other methods. These things increase the customers’ interest to know more about the new brand and product whose advertisements they are finding everywhere. So it is very vital that the best possible utilisation of the social media platforms can be done to promote the brand and products of the new entrants.

Conclusion

The assessment above is based on Ajmal Perfumes are increasing their retail exportation and soon they wanted to start business in UK also with their exclusive and innovative products, showrooms and retail touch points because as records say that nearly around 3.9 million men and women use perfumes and like to try new fragrances. Apart from this, the assessment has explained that Ajmal Perfumes is considering entering in the new and foreign market of UK. All the necessary facts are discussed in this assignment which Ajmal Perfumes have to focus on for entering into the new market of UK. Lastly, it can be declared that with full carefulness and best strategies, Ajmal Perfumes can get a strong foothold in the UK market despite being a new entrant.

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Appendices