Asia Division Business Unit Strategy-Biotech Health and Life Products Inc. Management Plan-Part 1
Introduction
The purpose of this project is to analyze the internal and external environment of Biotech Health and Life Products, which is one of largest manufacturers of personal care products, protein and fitness, vitamin, food supplements, and nutraceuticals. Currently, the company is operating its business in the United States, Europe, South and Central America, Caribbean and Canada. Now, the company has decided to expand its business in Asia. Biotech Health and Life Products will be penetrating the Asian markets through cosmetic products, which will be its new product line. In order to analyze the scope for the cosmetics in the Asian markets, this report includes internal and external analysis of the cosmetics industry as well as includes the business strategy for Biotech Health and Life Products to move forward.
Specifically, this report will show a SWOT analysis of Biotech and the cosmetic industry and a PESTLE analysis using the location as well as Porter Five Forces analysis for the industry. In addition to external and internal analysis, this report also includes five major business goals that Biotech Health and Life Products will initially be focused on while starting its business in the cosmetics industry. Moreover, each of these goals includes clearly defined objectives, which will help the company in measuring progress.
SWOT Analysis of Biotech Health and Life Products Inc.
In order to perform the internal analysis of the Biotech and the cosmetic industry, we have selected SWOT analysis. SWOT analysis for the same is detailed below:
Strength of Biotech Health and Life Products Inc.
- The first strength of Biotech is that the company does not rely on natural resources in order to conduct research. It means that the company performs technology-based research for testing and developing its product.
- The company is highly driven by skilled talent which is highly beneficial for the company.
- With the use of supplements and natural ingredients, the research group of the company is in the position of coming up with better ideas and additional innovations.
- The company has highly experienced workers, which is one of the significant strengths of the company.
- With a variety of products, the company has a presence in different developed and developing markets worldwide.
Weaknesses of Biotech Health and Life Products Inc.
- High investment costs in new materials and technology.
- The weak ability of the company in terms of tracing profits from investments.
- The company has not been in the cosmetics industry, which can become challenging for the company to penetrate a new market with new products in its product line.
- In the past, the company has experienced failures in Research and Development.
- For companies to expand their business by penetrating new markets with new products becomes very difficult. Similarly, Biotech will also be facing several challenges in terms of production and marketing of cosmetic products in the new market.
Opportunities for Biotech Health and Life Products Inc.
- The use of technological advancement in the use of natural supplements can be one of the major opportunities for the company.
- The shift in the behavior of the consumer. Most of the people in the Asian market have become more open towards using cosmetics and makeup in all type of setting. Moreover, women of Asia have become more informed regarding makeup trend, which is allowing them to prefer the use of cosmetic products.
- Increase in the rate of women employment rate. In the last decade, the increase in the number of women in the professional circle can be observed. The working environment in almost all companies requires a formal look and professional attire for which makeup is a necessary pre-requisite.
- The Asian markets have been experiencing an increase in the per capita income as well as disposable income, which have resulted in the increase in shopping by customers.
- Customers are now showing interest in personalized makeup options and are ready to pay more for this service. This trend shows that there is a huge opportunity for Biotech like companies in order to charge a premium for personalized makeups.
- Biotech has better technology that helps in producing healthier cosmetics for the people who are highly health conscious.
- Compared to competitors, Biotech makes use of new ideas and innovations in order to produce better products.
Threats for Biotech Health and Life Products Inc.
There are several negative factors that can impact the business expansion of Biotech in the Asian markets. Some of these factors are:
- In the Asian market, Biotech will face a lot of competition from different companies like Lakme, Revlon, and other luxury brands, such as Estee Lauder and much more that are emerging as brand leaders in the cosmetics industry.
- Most of the time cosmetic products are criticized due to chemical contents and testing in animals (BERGER, 1997). Due to criticisms, a negative image has been created regarding cosmetic products due to which customers prefer organic or mineral makeup.
PESTLE Analysis for Biotech Health and Life Products Inc.
A few political factors like rules and regulations designed by the government as well as different formal and informal rules under different acts affect the cosmetics industry of Asia. Some of the political factors are as follows:
- Trade restrictions and tariffs: In order to cross the state borders for the purchase of raw material as well as delivery of finished products, companies have to bear the charges.
- Tax policy: Almost all the countries’ governments have developed a law where companies have to bear 30 percent tax rate. This tax is very high among all the taxes, resulting in the reduction of the company’s profit (Fukuhara, 1979).
- Environmental regulations: As per the norms of the government of different countries like India, the company has to convert 30 percent of the land area into green land in order to make the eco-friendly environment, which incurs additional costs for the companies.
Economic
Several economic factors affect the purchasing power of the potential consumers as well as the cost of capital of the cosmetics firms. Some of the economic factors are as follows:
- Interest rates: On average, the rate of interest on the corporate loan in Asian countries varies between 8-12 percent as well as companies also have to pay additional tax each year (“Indian Cosmetic Market Outlook 2018”, 2018).
- Inflation rate: The increasing inflation rate in the Asian countries adversely impacts the companies because cosmetics companies have to purchase various raw material, technology, and various other machinery at higher prices.
Social
Majorly, cultural and demographic aspects form a part of the social factor. Most of these factors impact the size of the potential market as well as the needs of customers. Some of the social factors that affect the cosmetic industry of Asia are as follows:
- Health consciousness: Most people have become conscious towards their health due to which they do not prefer to use chemical-based cosmetics but rather prefers that are not harmful to the skin. However, these cosmetics are a bit costlier than the chemical ones because organic ones require natural resources, and these are not easily available.
- Emphasis towards safety: Most of the companies engaged in cosmetics industries have emphasized the safety of the employees and provided insurance policies, resulting in overhead expenses for the company. This can increase the overhead expense for the new companies trying to engage in the Asian cosmetics industry.
Technological
There are several technological factors that affect the cosmetic industry of Asia. Some of these factors are as follows:
- Research and Development: In order to offer the best and suitable cosmetics as per the needs of the Asian market, companies engaged in the cosmetics industry have to spend a huge amount of funds in research and development. Hence, the company will have to consistently invest in R&D activities in order to remain competitive in the market.
- Technological advancement for production increases the selling price of products: It has been observed that most of the cosmetics companies in the Asian markets are using highly advanced technologies for research and development and production of cosmetics products due to which they have to increase the prices of the products.
Legal
There are several legal factors like the competitive ordinance, employment ordinance, merchandize ordinance, safety and wellness ordinance, and various others legal factors that are impacting the cosmetics industry of Asia. These factors highly impact cosmetics companies in several ways like how an organization operates, the cost of products, and demand for the merchandise. There are several acts passed by the government of Asian countries that effects the operations of the cosmetics companies (Japan Cosmetic Industry Association, 1992). For example, in India, Drugs and Cosmetics rules were laid down in 1945 and companies engaged in the cosmetics industry are required to run their business by abiding those rules.
Environmental
Most of the countries of Asia have taken a better initiative for an environment where companies engaged in cosmetics industry are required to convert 30 percent of their land into the green area as well as using eco-friendly paper for packaging purposes (Sahota, 2014).
Porter’s Five Forces Analysis for Biotech Health and Life Products Inc.
The threat of new entry
The Asian cosmetic industry has a low threat of new entrants because of several factors. The first factor is investment, which means that entry to the cosmetic industry requires a huge amount of investment. It is because the development of new unique cosmetic products requires huge resources for both research and development and manufacturing process. Moreover, expertise is also required to perform these activities. The second factor that discourages companies from entering into the cosmetic industry is the huge competition present in the market.
Bargaining power of suppliers
The bargaining power of suppliers’ factor of porter five forces analyzes the power of suppliers due to which prices of the products changes (Straker, 2016). The Asian cosmetics industry has the low bargaining power of suppliers due to the higher number of suppliers as well as the large supply of diverse products into the market. Both small and large-scale manufacturers develop most cosmetics products. Therefore, due to higher supply, consumers have the higher power to influence the product prices, which opposes the power of suppliers.
Threats of substitutes
As it has been already aforementioned that there is a higher number of companies engaged in the cosmetics industry of Asia due to which competition is very high. this shows that threat to a new entrant in the Asian cosmetics market is very high. It has been observed that most of the manufacturers sell their cosmetics products at higher prices and in case a new entrant or the existing company sells its product at lower prices, then consumers can easily switch towards these companies.
Bargaining power of customers
The Asian cosmetic industry has a higher bargaining power of customers because of the higher competition in the cosmetics industry as well as the availability of cosmetic products from multiple manufacturers. Due to multiple manufacturers in the cosmetics industry, customers have an easy opportunity to switch from one brand to another, which results in a reduction of product prices. This becomes highly challenging for manufacturers of cosmetic products.
Barriers to entry and exit
Barriers to exit in the cosmetic industry include huge investment in research and development costs. As the cosmetics companies have to invest a huge amount of funds in research and development due to which it becomes very tough for these companies to exit the industry without achieving the production costs.
Results of each of the Three Analyses
The results from the above analysis show the following results:
- Due to the higher number of cosmetic products manufacturers, competition is very high in the Asian cosmetics industry.
- The amount of required investment in the cosmetics industry is very high because huge expenses incurred in research and development and manufacturing processes.
- Due to the increase in the women employment rate in the Asian countries, there is a huge scope for cosmetics companies because the demand for cosmetics or makeup products is increasing heavily.
- Before entering the Asian market, Biotech needs to invest more time and money in research and development so that it can develop demanding cosmetic products as per the needs of the target markets.
- Due to the negative image of several chemical based cosmetics products, consumers are looking towards organic products. Hence, Biotech needs to focus more on organic cosmetics rather than products with chemical ingredients.
Goals the Business Unit Strategy should look to attain
The goals of Biotech are:
Goal 1: To know the desires of customers on cosmetic products
Before entering a new market, it becomes very important for the company to research the market regarding the requirements, needs, and desires of the target market regarding the particular product (Gordon, n.d.). Similarly, Biotech will also conduct comprehensive market research in order to determine the demands, requirements, needs, and desires of its target market.
Goal 2: Higher investment in research and development in order to develop innovative and demanding cosmetics.
Once the company gets to know the desires of the target market regarding the cosmetic products, then the company will have to focus on the research and development. The goal of the company will be to make a better investment of time and money in research and development in order to develop cosmetic products that meet the needs of target customers. This goal of the company will play a significant role in the success of the company in the Asian markets.
Goal 3: Offering innovative cosmetics that are safe to use.
Nowadays, most of the customers are aware of several chemical ingredients that affect their skills due to the use of a cosmetic product (Szutowski & Szułczyńska, 2017). Due to this, customers are looking for organic cosmetics or cosmetics that are safe to use. Hence, it becomes one of the significant goals of Biotech to ensure that its products do not include chemicals that are unsafe for the skin of customers.
Goal 4: Maintaining a loyal customer base
The other goal of Biotech will be to maintain a loyal customer base by offering healthy cosmetic products as per the requirements of the customers.
Goal 5: Reach target markets
In order to maintain competitiveness, Biotech will saturate the market and will become part of people’s live. In order to do so, the company will offer a wide range of cosmetic products, quality packaging, and reasonable price points by developing effective strategies with suppliers.
Objectives (per goal)
Objective 1.1: To know the reason behind using the particular cosmetic product.
Objective 1.2: To understand what customers are looking for different cosmetic products?
Objective 1.3: To ensure that customers’ needs are met.
Objective 2.1: To ensure the best quality of cosmetic products.
Objective 2.2: To make sure that all cosmetic products are free from effective chemicals.
Objective 2.3: To continue to study, apply and advance scientific knowledge in the field of cosmetic products.
Objective 3.1: To make sure that cosmetic products offered to customers are safe and do not have any side effects.
Objective 3.2: To ensure stringent quality procedures in the production process.
Objective 3.3: To make sure that all the products are properly labeled along with the instructions for using the product.
Objective 4.1: To make sure that customers come back for the same products and become the company’s recurring customers.
Objective 4.2: To fulfill the requirements of customers through consistent work on research and development.
Objective 4.3: To ensure that products are readily available in the market at a minimum price so that customers get a better quality of cosmetics at a minimum cost.
Objective 5.1: To identify who are the target customers and how to reach them either through e-commerce or retailing.
Objective 5.2: To offer a product range in each niche in order to fit the needs of various customers.
Objective 5.3: In order to increase the sales of cosmetic products by 15 percent every year.
References
BERGER, H. (1997). Environmentally compatible surfactants for the cosmetic industry. International Journal Of Cosmetic Science, 19(5), 227-237. doi: 10.1046/j.1467-2494.1997. 171718.x
Fukuhara, N. (1979). Japanese Cosmetic Industry, Present & Future. Journal Of Society Of Cosmetic Chemists Of Japan, 13(2), 5-13. doi: 10.5107/sccj.13.2_5
Gordon, J. Goals & Objectives for the Cosmetics Industry. Retrieved from https://yourbusiness.azcentral.com/goals-objectives-cosmetics-industry-28439.html
Indian Cosmetic Market Outlook 2018. (2018). Retrieved from https://www.prnewswire.com/news-releases/indian-cosmetic-market-outlook-2018-278287911.html
Japan Cosmetic Industry Association. (1992). Japan Cosmetic Industry Association Standard SPF Test Method. Journal Of Society Of Cosmetic Chemists Of Japan, 26(3), 207-214. doi: 10.5107/sccj.26.207
Sahota, A. (2014). The Greening of the Cosmetics Industry. Chemviews. doi: 10.1002/chemv.201400118
Straker, R. (2016). Capitalising on Beauty: A Preliminary Analysis of the Cosmetics Industry in Barbados. SSRN Electronic Journal. doi: 10.2139/ssrn.2794215
Szutowski, D., & Szułczyńska, J. (2017). Product innovation in cosmetic industry – case study of major cosmetic companies. Gisap:Economics, Jurisprudence And Management, (12). doi: 10.18007/gisap:ejm.v0i12.1620
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