Radiant Cosmetics free essay sample

Radiant Cosmetics, founded in the 1930s, had been one of the top five cosmetic companies in the U. S. for more than 60 Radiant’s product lines cover hair care, skin care, makeup, and perfume. Cosmetic is a highly competitive industry because of its huge market and lucrative profit. The number of cosmetics consumers have been increasing and is estimated to hit 161 billion in the U. S. by The same phenomenon happens global wildly. With the increasing income, more women get extra money to purchase cosmetics, which make themselves look younger and more charming. Major competitors for Radiant Inc. are L’oreal, Estee Lauder, Procter Gamble, and Avon Products. Radiant used to occupy around 10% of the U. S. market, but Radiant’s domestic market share shrank more than 1% in Furthermore, the global market share of Radiant Inc. also has been shrinking since Huge economies such as the European Union, Japan, China, and South Korea consume $170 billion of cosmetics and perfume. The potential profits are so attractive that Radiant Inc. lans to enter global market and join the competition with those large cosmetic companies. Radiant decided to crack France’s market first, because France is recognized as the center of worldwide fashion and beauty, and the victory of campaign in France’s market could also anchor Radiant’s global luxury brand. Once Radiant succeeds in entering France’s cosmetics market, it will probably be involved in the fight against counterfeits, which happened before when Radiant entered Japanese market. A study conducted in 2003 by the Centre for Economics and Business Research suggested that the cosmetic industry loses about $3. 7 billion to counterfeits per Main Issue Margaret Clark, Radiant Cosmetics president and CEO, and Randall Bevington, Radiant’s chief marketing officer, were contemplating  launch a new lip-plumping product called Four Carat Pout in 2008. It was an innovative product which could increase the visual and sensory perception of lip plumpness. Here are several major questions that needed to be figured out before the launch of Four Carat Pout: marketing and anchoring Four Carat Pout as a luxury brand or a mass product; finding a solution to position the product as a possible starting point for an expanded anti-aging line; and the way to market and distribute the product in the global market, especially in France. In addition, intellectual property (IP) issues are also important to the launch: Radiant has been involved in fights with cosmetic counterfeits in the past in Japan. With the launch of the new product, â€Å"Four Carat Pout,† Clark needs to decide whether to pursue patents, copyrights and/or trademarks for various aspects of the new product. The case focuses on the interplay between marketing strategies and intellectual property issues in international fashion products. Challenges: Although Radiant Inc. had been one of America’s top five cosmetic houses for over 60 years, its domestic and global market share kept shrinking from 2002 to 2007. In addition, the company’s net income had been negative during the same period, because Radiant loss ground to Procter Gamble and Estee With the increasing income of females and changing of consumer behavior, the global cosmetic market developed at amazing speed. The huge â€Å"pie† drived Radiant to expand its international business, particularly in France, which is the worldwide fashion and beauty center. The cosmetic industry is really competitive in France, which is full of powerful competitors such as L’Oreal, Estee Lauder, Procter Gamble, Shiseido, and Avon Products. These participants have been occupying the market for a long time, so the business circumference is pretty threatening for new entrants. Four Carat Pout, as an innovative product, could or could not receive consumers’ response. Radiant has to spend an amount of advertisement expenses to market the innovation, as well as tries to cultivate a new consumers’ behavior. The struggle with counterfeits and infringement would probably exhaust Radiant’s capital and effort. Radiant could have to spend several hundred thousand dollars or even more to safeguard its rights and interests. Moreover, it could be a long term, continuous campaign with counterfeits and patent infringements. Especially in the international business, Radiant has to adapt to local patent protection policy, which could bring the company a lot of inconvenience, and need to spend more on the intellectual property. The unprecedented products would give a new definition for lip gloss, which not only make people look good, but also anti-aging by supplying nutrition to lips. In addition, inexpensive formula controls raw material cost in a relative low level so that Radiant’s can keep its gross margin higher than its competitors. Radiant can also apply for patent to protect its advantages from the imitating by competitors. In addition, Radiant Inc. is a top five American cosmetic company, which got capital support from its U. S. market and Japanese market. With the support from its strong â€Å"backyard†, Radiant invests about 25 million every year in researching and developing, as well as has the ability to build brand awareness and distribution channel. Furthermore, with the changing of consumer behavior, an increment percentage of female has been preferring luxury cosmetics. The consumption of premium cosmetics increased from 36. 2% in 2002 to 44. 5% in 2012. On the other hand, luxury products usually come with high profits and good prestige. Those benefits would help Radiant Inc. be a successful market entrant. Weaknesses As a new entrant of France cosmetic market, Radiant is not well known by French consumers. Thus, it has to spend large amount of capital on advertising expense and built its brand awareness. Another problem which is bothering Radiant is that it had to face higher slotting allowance to entry some large distribution channels such as Sax fifth Avenue, Nordstrom, and Dillard’s. Facing the squeeze from lots of powerful incumbents such as L’Oreal, Estee Lauder, Procter Gamble, Shiseido, and Avon Products, Radiant has only limited resources and market in the beginning of its entrance. Moreover, Radiant has to pay extra expense and effort for the switching cost of the consumers. As mentioned before, Radiant Inc. had been one of the top five cosmetic companies in the U. S. for more than 60 years, but its market share had been shrinking and net income had been negative since 2002. Based on the financial situation in the recent years, Radiant did have challenge to raise enough capital and spend it on its international campaign. At last, the difference in culture, law system, and trading policy in France would be a strong challenge for Radiant to conquer. The company could be involved into law suits or huge loss if it neglects even one piece of those factors. Opportunities According to the analysis in 2012, consumer behavior for cosmetics had been changing dramatically, more consumers preferred to purchase high quality, advanced function, and luxury One of the reasons behind this phenomenon is the increasing individual income, which means consumers have a strong financial situation to afford those premium products. Additionally, luxury products usually provide higher gross margin per unit for the company, so that Radiant can reinforce its financial power. Furthermore, the increasing consumers’ preference to high-end products also provided Radiant a clear routine in its future strategy. Radiant could formalize its global luxury prestige if it could succeed to develop French market, because France was considered as the center of world fashion and beauty. Thus, Radiant’s international expansion to other countries would be much easier. German, China, and South Korea had huge cosmetics market, so those countries could be targets for Radiant’s next expansion. Another opportunity for Radiant was that Malaysia, India, Vietnam, and China provided low cost to manufacture products. Radiant could open its own manufactory or sign contract to manufactories in those countries to lower its manufacture costs. Threats Fierce competition: Notwithstanding the apparent growth of the cosmetic industry during the past four decades, there are currently more than 700 growing cosmetic companies competing in the market. Additionally, there are also market leaders that dominate the cosmetic industry. Consequently, it creates stiff and intensifying competition especially to those smaller companies as market leaders are putting pressure on these smaller cosmetic Counterfeits: Radiant could have to face counterfeits after it builds its global luxury brand. A study conducted in 2003 by the Centre for Economics and Business Research suggested that the cosmetic industry lose about 3. 7 billion USD to counterfeits per Moreover, it could be a long term, capital burn campaign with counterfeits and infringe on patent. Especially in the international business, Radiant has to adapted local patent protection policy, which exhausts capital and efforts to win the intellectual property campaign. Economic recession and currency fluctuation:   Ã‚  Ã‚  Potential Economic recession and currency fluctuation could happen if Greek debt crisis cannot be well solved. Accounting to the past developments, the cosmetics industry has never been always in such a case. The industry is no longer recession-proof and is now bound for depressions and declinations. Actually, the sales in the past year are slow moving because of downed consumer spending. Consumers that time then tend to settle for the less expensive SWOT Analysis Summery Even though there are a lot of internal challenges at Radiant and the weaknesses of the company overwhelm the strengths, the opportunities and future prospect are pretty bright. Threats from the industry and business environment could also be a big problem to figure out. However, Radiant can expand to other nations much more easily once the company can anchor its luxury brand position. Hence, the launch of an anti-aging line and global expansion will benefit Radiant as long as proper management and strategies are applied. Porter’s Five Forces Analysis Moderate/intense threat from new competition Cosmetics industry is a huge market, and the size of the pie has kept increasing since the industry was existence. Many new entrants hope to share a part of the pie and make benefit from it. Radiant Inc. faces challenges from the whole industry every day. Radiant can take most of competitor in its home (the U. S. ,) but it is still a weak in the global market. The industry does not have a high requirement for new entrants no matter by capitally or technically, so it’s not too hard for new competitors to enter in low-end market. Strategy for those new entrants is usually focusing on low-end market, and then moving to high-end products. New entrants also like to sell their products online, which can save expense for expanding distribution channel at the beginning of their business. Production costs for new entrants are usually higher than incumbents because they have large products order, long-term relationship with manufactories, and better JIT scheduling. Moderate/Intense Bargaining Power of Customers (buyers) Radiant doesn’t have too much bargaining power with ending consumers, especially in international market. First reason is that there are hundreds of options for consumers to choose. A tiny change of price could affect sales revenue and market share for low-end products, but for high-end consumers, they are not sensitive to small price fluctuation. Additionally, as a innovative product, Four Carat Pout is a brand new and differential product, which increases bargaining power to the consumer. Thus, Radiant has moderate bargaining power in domestic market. In the global market, however, Radiant is a not well-known, lack of distribution, less competitive, and foreign company. Radiant almost does not have any power to bargain with its customers, particularly in France. Intense/Moderate Bargaining Power of Suppliers Most suppliers for Radiant don’t have a high brand reputation, nor have an irreplaceable technical advantage. Most advantages for those suppliers to provide are good quality, adequate capacity, and low price. As a company in a really competitive industry, Radiant focused more on cost than on other factors. Furthermore, there are many oversea suppliers from India, China, or Vietnam can provide similar products and services with low costs. Thus, the suppliers don’t have too much bargaining power with Radiant; otherwise Radiant can just switch another inexpensive one. Intense Threat of substitute products or services Regular lipstick and lip gloss are substitute for the Four Carat Pout, and they are usually less expensive than Four Carat Pout. Moreover, regular lipstick and lip gloss are much more well-known because they have been launched for several decades. On the contrast, Four Carat Pout is a new innovative product which hasn’t been fully accepted by the market. At last, it is hard to estimate the effect of Four Carat Pout because there is not enough consumers’ response for the innovation. High Intensity of competitive rivalry The cosmetics industry has been growing at a rapid speed for the last four decades. One hundred seventy-billion-USD market drives estimated more than 700 growing cosmetic companies competing in the market. The increasing number of participants makes the competitive industry even more competitive. Brutal competition requires participants to keep innovating products, building more distribution channels, and creating better prices and promotion strategies.