Executive Summary
The case study is about a well renowned cosmetic brand INGLOT, a family owned business that was started in way back in 1980 and today is spread across 44 countries with its wide range of cosmetics. The report is going to focus on the company micro level and macro level road map. It will highlight the priorities, achievements and challenges faced to establish and expand both domestically as well as internationally. It will thereby conduct a strategic evaluation of the company by using VRIO strategic tool to find out the sustainability and competitive advantage of the company.
Since the company is vast and widely spread, to understand its competition is equally important so that diversification can be suggested, and innovation could be highlighted. Therefore, a competitive analysis is being performed to study the strength and weakness of other competing companies in the cosmetic industry.
After looking at all the possible areas by using information available in the case study, I have tried to suggest a short strategic plan for the organization that may help the company to have a status in the international market and expand in countries which are difficult to explore. My report will discuss more on the qualitative factors than the quantitative factors to prove my point.
1. Introduction
The said case study is about INGLOT, a well-established cosmetic brand, started in Poland by Wojciech Inglot, a young chemist in 1980 with a simple vision; offering an affordable range of cosmetics with the best quality ingredients. In 2000, INGLOT opened its own store and had a presence in major shopping centers. To have an international exposure the company implemented franchise model and by 2005, it had a market share of 10% in the cosmetic industry. In 2012, the company had a presence in 44 countries across the globe with its cosmetics available in around 22 outlets.
The report is going to discuss the path followed by INGLOT to create its step up in the domestic market followed by international expansion. The report will also suggest INGLOT’s strategic plan for the next five years with a concrete outline of recommended geographical expansion, business model evolution and product diversification.
2. INGLOT Performance Factors at a Micro Level
The company at micro level had expanded manifolds over the years. It had its entire R&D carried out in Przemysl to keep the innovation going in order to meet customer demand for a variety of products. It was the first company to introduce the idea of Freedom System Concept in the cosmetic industry, where it liberates the customers by providing a line of display of all their products in each store and enable customers to customize their own shade. This concept was unique and new in the market, and it gave the company a lot of public attention and visibility. To maintain the product innovation it introduced rainbow color containers and breathable nail polish.
The infrastructure and machinery used by the company were of best of standard and, in fact, few machines were custom designed to enable the customer as well as the company to meet their requirements. In order to replenish its stock faster and on time, it did not compromise on shifting its location and the raw material which were imported from Japan and Switzerland. This decision gave the company competitive advantage over its competitors . The sustainability was achieved with its R&D facility being certified to the highest of quality in line with the industry standards, and the location helped it to fetch a great quality labor at low costs .
The range of product offered by INGLOT for women for face, body, lips, nails, etc. Here, there is a huge scope for new line and products as its competitors were offering product line for baby, anti-ageing for middle age group, hairstyling products and perfumes.
The pricing strategy was least complicated and was placed in the medium price range. Its main focus was to provide the best quality product at an affordable pricing for all income level. The affordability factor helped company gain popularity as well as access to new customers in comparison to its competitors.
INGLOT had a different school of thought when it came to promotion as it believes the traditional methods such as print and media inefficient. The store decoration, merchandise, promotional material was designed internally by an inbound team. In order to give a firsthand experience and advice, industry known make up experts and color consultant were hired. The stores had fully-equipped studio with mixing stations where professionals helped customers create their own colors. This concept was different and encouraged customers to try new colors especially originating and suiting to their taste .
Reaching at the core of a country is not easy; this was realized by the company quite soon which initially opened 5 stores in UK, Ukraine, USA, Australia and Lithuania. It realized that opening stores without local market knowledge was not a good idea. This led the company to adopt Franchisee Model to expand by keeping the selection method quite stringent. Over the time with a strong franchise model and experience with a number of companies; INGLOT realized that the most reliable ones are the small or medium family owned business – greater control and long term commitment due to personal interest and money at stake. Location knowledge, language and cultural understanding were other factors that helped in sustaining the model for a very long period.
Another important feature that the company had to work on was its Store Layout to maximize customer shopping experience with minimum rented space. Therefore, it provided in house furniture to the franchisee store along with décor matching with the rented facility to maintain uniformity and great customer experience.
3. INGLOT Performance Factors at a Macro Level
Where in at the domestic front in Poland where the company has acquired 10 % market share in the cosmetic industry with this it realized that market saturation will lead no benefit to the company and, therefore, it decided to expand its business internationally .
At the international level, the company by the end of 2012 was operating in 44 countries; this number is quite phenomenal with respect of growth and positioning. IT first internal expansion took place in 2006 with opening a store in Canada, though it wasn’t a priority market for the company, but the initiatives led to the idea of further expanding the company internationally looking at the response it got in Canada. Therefore, a local initiative by a random application lead INGLOT has its presence in Middle East with a great customer response.
Followed by Middle East, Europe was another market captures huge scope for the company; though it had a hyper competitive market as France in the cosmetic stream but other markets of Luxemburg, Switzerland, Sweden and Slovakia which initially seemed low on demand turned out to be quite attractive. Greece with the help of local partners who collaborated with professionals and makeup institutes, followed by Russia - another well-organized local partner with an accurate inventory management - were a few achievements.
Latin America, where it barely started with its store in Argentina, Mexico and Curacao since 2011, it received number of application from South and Central America. South African market where the company has a strong presence with 12 stores opened since 2010, reason being the strong knowledge of local culture and market along with a great relationship with its local partners. The company has even had alliance with Woolworth, a huge retail chain in South Africa, to enhance its presence and local knowledge. Asia was another huge market awaited for INGLOT, after Middle East the company created presence in Malaysia, India, Nepal, Kazakhstan and Azerbaijan. China is an explored section followed by Indonesia.
4. Competitor Analysis
INGLOT is a big name today in the cosmetic industry but what cannot be neglected is the presence of some of the close competitors which are continuously analyzing and updating new products in the market .
Innovation is a key to success in this industry and therefore various skin care, lip care, hair styling, nail art etc. had been introduced time and again to meet the customer demand/ some of the close competitors of INGLOT were :
MAC – Makeup Art Cosmetics being a huge cosmetic brand majorly owned by Estée Lauder Companies since 1994, this company had a wide presence in respect with INGLOT in terms of geographical coverage whereas the ownership structure was different. MAC had introduced the concept of makeup colors in pots, having professional makeup artists to address the issues and suggestions of customers, even at a retail store, thereby creating a competitive edge. The major difference between the expansions of two companies was that of ownership, as MAC had its international presence after being acquired by a giant company whereas INGOT had done it on their own with strong human resource.
ShuUemura - This Company was more prevalent in the Asian Market offering product based on the concept of Science, nature and art. This is a unique concept, and its products are being well recognized internationally.
BobbiBrown - Another big name in the cosmetic industry and also owned by Estée Lauder Companies like MAC. It was founded around the same time as INGLOT. The founder of the company is a lady who worked as a freelance makeup artist for years after which she had an innovative idea to create a lipstick that did not smell; this unique thought changed the entire competitive advantage for Bobbi Brown, It is now operating in 20 countries, giving stiff competition to INGLOT in Canada, USA and UK.
Shiseido – This is an oldest cosmetic company in the world starting from 1872. The company had a strong scientific knowledge of cosmetics which had been its major USP apart from its great presence in 88 countries around the globe with manufacturing set up in 15 countries and R&D establishment in 10 countries. It is a direct competitor of INGLOT in the Asian markets and the non-captured zone as well.
Make Up Store – The store was founded in Sweden in 1996 with the idea similar to the concept of INGLOT in order to offer the greatest variety of colors at a single location, with innovative and beautiful package and overall extending a unique shopping experience. It also concentrated on affordability of its products.
Make Up Forever – The Company was established by a French painter in 1984. It relies on a similar concept of mixing colors in order to give complete freedom to customers. It has a huge presence in Asian market, Europe, USA and Middle East. Similarly Max Factor is the first company to offer the general public high-quality cosmetics products, which were only affordable and available mainly to elite actors. The company believes that all women had the right to look glamorous. Another family owned professional company Maybelline known for using the latest technology for product innovation is available globally in 37 markets across the globe.
5. INGLOT’s Strategic Analysis
After carefully understanding the internal and external environment of INGLOT – a cosmetic brand along with its competition, I would like to propose a strategic plan for INGLOT for the next 5 years by using VRIO Analysis .
VRIO – Value, Rare, Imperfect imitable and Non-Substitutability is a technique used to analyze a company’s internal resources and capabilities to realize if they can be a source of sustained competitive advantage .
Value- It first begins with the question of Value, that whether the company’s strategy helps in increasing the firm’s revenue and the company has been able to utilize the opportunities. INGLOT vision had been to provide high quality cosmetic products using best of technology and material from all over the world. This ideology has helped gain popularity and visibility in both domestic and international market. The company has targeted customers depending on the market, and its franchise model has helped reaching each corner of the major cities; utilizing their knowledge and local skills. Also, as the franchisee network is augmented to increase reach, the ability to manage them is more difficult not to mention the probability that some of those franchisees under perform. Starting from 1980 to 2013 with a wide presence in 44 countries is an exemplary achievement for a family owned business. Adapting to different countries regulation with same values, maintaining uniformity by keeping the store layout similar all across and simple methodology of financing helped it achieving the Value parameter .
Rare – Rarity in the company product and services can lead to its achieving competitive advantage. It has been a pioneer in Freedom system in the cosmetic industry where enough freedom was extended to the customer to create their own color. Product Innovation such as breathable nail enable for Muslim customers, and rainbow color containers were launched to gain market attention. The concept of having profession makeup artist at the store to provide expert advice and makeup tips to the customer gained popularity. With time, many of the competitors have even adopted a similar technique but the methodology and technology is closely guarded by the company. The strategy is rare when complete competitive advantage is created which is possible in this case.
Imitate – Here the question is how long other competitors takes to imitate your product and services. Cosmetic Industry is closely observed by each cosmetic brand; therefore imitation is easy and early . The Freedom System pioneered by INGLOT was imitated by several other brands in order to capture customer base. The rainbow color containers were also used by my companies to display their products. Since most competitors used the concept to approach customers but the way INGLOT differentiated itself by the way they presented their products through unique packaging and display, the variety and range of colors offered in dozens of possible combinations, and real-time product availability. There is an increasing pressure as competitor's attempts to imitate are under way and this is a threat to business. Though the chemical formula to produce the colors of lipsticks, nail enamel, eye makeup etc was closely guarded and is difficult to imitate .
Organization– Is the firm efficiently organized to implement the strategy? INGLOT is a family -owned business managed by three brothers in an organized manner wherein they share equal responsibility as well as flexibility with each other . The founder Wojciech Inglot expired in 2013 and handled the R&D until his death. Chairman of the Board, Zbigniew Inglot is in-charge of business development and therefore negotiates opening of new stores and is responsible for taking financing decisions for the company. Elzbieta Inglot Kobylanska is in-charge of operations and is based predominantly in Przemysl. Magdalena Kluz-Pekalska, Vice President of Sales and Marketing takes care of public relations, company image and brand promotion. Thus the organizational structure is very much family-oriented and better management can be seen in Inglot. As per the analysis the company is the company score on the value, rare and low on imitates parameters and, therefore, proves to be a sustainable organization in the long term.
6. INGLOT Strategic Plan for the next 5 years
Inglot does not need any type of expansion in its current product line, rather it should focus on its Key Success Factor (KSF) that is provide professional grade make up at an affordable pricing. Rather it should trade-off varied other product lines for example baby products, male line of cosmetics etc. If it plans to offer such products it should go for strategic alliance with various well-known brands which can ensure speciality, quality as well as better scope to Inglot. Strategic alliances which it is planning should adopt the franchising model so that Inglot still enjoys control over marketing, production as well as R&D.
It should charge franchising fees or royalties from its franchisees, considering it such a popular brand name. Revamped franchising model will motivate the underperforming franchises and create a new revenue stream from new franchisees too. Franchisee screening should be done so that just quality franchisees join the network as 10 applications are received per day that is 3650 application in one year if we assume that 10% of total applications per year are quality applications then in 5 years the company will have 1,825 quality and well performing franchisee appointed.
It can plan for geographical expansion in North African markets by providing franchises in countries like Morocco, Algeria and Tunisia, as these can prove o be profitable and promising markets for Inglot, through right pricing strategy to target the customers. Furthermore Inglot needs to upgrade its production capacity as well as R&D to gain competitive edge in future. This will ensure providing high quality for current product line and will also help in development of 100 percent natural makeup line which is professional and affordable.
Lastly it is recommended that Inglot should engage in high level corporate social responsibility (CSR) activities to enhance its sustainability and to contribute towards environmental protection through its products. This can be done by providing full support to the community in which it operates through various efforts like providing education to the children of workers in the production factory. Eco-labelling of products can also be done by Inglot; this will turn Inglot into an eco friendly and socially responsible brand name and will positively contribute towards its long term sustainability in the market.
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