Alfin: Marketing and Cosmetic Industry Essay

3286 Words Jul 15th, 2010 14 Pages
Case summary

Alfin Fragrance Inc. was a US based importer and marketer of high end French perfumes and cosmetics. The company was going to introduce an industry breakthrough product – Glycel, which was acted like an anti aging crème. The product would be demonstrated and sold at the best departmental and Glycel was expected to provide Alfin Fragrance a fortune as an annual sales of $ 30 million was expected in 1987.
The industry observers speculated that Alfin Fragrance needs some external financing to support its growth. But Alfin had to make its financing choice – whether the company will go for external debt or it will issue equity.

Problems Statement:

In this case, we are going to analyze the following problems which are
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tors were heavily relied on advertising to compete against the rivals • Bandwagon production by most of the companies • Because of the existence of identical product customer’s switching cost was low • Because of large fixed cost in trademark and licensing rights, entry barrier was also high • Companies tried to improve their market position by branding and new product launch
Threat of new entrants: The threat of new entrants in the industry was not so high because of the following reasons: • The industry was already captured by hundreds of firms and some large pharmaceutical firms also had their subsidiary share in the cosmetic industry • Not so lucrative industry growth rate • Another most tough barrier for the new entrants were the existing brand preference and product line by the competing firms • Companies had to have large resource capabilities for compensating large initial fixed cost was needed to have trademark and licensing rights • Access to distribution channel was not easy by the newcomers

Threat of substitute products:
The threat of substitute product was low because of the following reasons: • Substitute of cosmetic and toiletries were possibly some skin and health care drugs which were costly and not a subject to frequent buy • Substitute product manufacturers had not campaign much advertising for their products • Largely available cosmetic product in terms of substitutes
Bargaining

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