Executive summary
Fragrance Villa is a start up firm planned to be located in Dubai Airport Freezone, Al Quds St., UAE. The company is to be owned by a sole owner, Mukesh Adan, who will be in charge of the managerial functions of the company. The firm intends to position itself competitively in the perfume retail industry by opening a shop in the specified location and later diversify into other places within and outside the city. The shop will stock various perfume products from high-end to low-end to take care of the overwhelmingly big perfume and cosmetics industry in UAE.
Introduction
Dubai has in the past decade become a hotspot for business, especially due to its centralized nature and booming economy. The Middle East as a whole is a steadily growing perfume market that currently is valued at more than $ 2 billion and is expected to grow steadily in the near future thus making it a very attractive business destination for both foreign and local business companies. According to the Beauty World Middle East (2011), “Cosmetics and fragrance firms are attracted to Dubai because of the tax-free zone and 100% ownership subsidies given by the Dubai Airport Free Zone”. This has attracted the large number of investors who have set up their headquarters and business centers in Dubai airport tax free zones.
Mission
The main mission of Fragrance Villa is to make it one of the most respected and reliable retailers of perfume products within the U.A.E, especially Dubai city. Since many visitors visit Dubai annually and the local demand for perfumes is also high, Fragrance Villa intends to dissect and study the needs of the market and sell products that will become household brands.
Objectives
- The founder of Fragrance Villa intends to start making profits by the end of the second year.
- The founder of Fragrance Villa expects to launch the company by the third quarter of 2011.
- Fragrance Villa intends to be among the top ten perfume retailers and wholesalers by the end of its third year of operations.
Keys to success
- The entrepreneur is known to be a quite skilled and stubborn individual who doesn’t give up on his/her ambitions.
- Manpower.
The Company
Fragrance Villa intends to open up the shop before the end of the year 2011, as a sole proprietorship with the entire business belonging to one individual, Mukesh Adam. Mukesh will run the firm with the assistance of the employees, family and friends. Mukesh considers himself as a highly talented and a passionate individual with the ability to steer the business into a greater future by competing in the current market within Dubai. He is also a professional business consultant so it is expected that his expertise will come in handy into the business operations.
The company’s main business format is to target the entire market that consist of a wide range of demographics and market perfumes to them and later grow its business gradually by increasing the number of outlet stores in Dubai and eventually in the entire Middle East region. The company intends to grow into a respected retailer and wholesaler of well established brands of perfumes that will use innovative marketing techniques to compete in the market with other competitors. It is the intention of the owner to venture in the future and start developing hid own brands of perfume as soon as he fully understands how the giants of this industry operate.
Start up Summary
Legal terms
Opening a free zone company that is owned 100% by one individual is easy in Dubai since there are no legal restrictions in terms of number of members of a company and an individual only needs a commercial license. To get along well with the legalities of business here, the firm will hire a legal consultancy company which will in the first year of operation be consulted constantly on legal and tax issues (Report Linker np). The consultancy will also assist the owner obtain personal legal requirements necessary.
Start up Requirements
Products
Statistics by the Generation Data bank suggest that residents in Dubai start using perfumes as early as they turn into teenage hood (Business Standard np). It is apparent that every individual (both genders) within the population usually desire to look and smell good thus the demand for perfumes is high. Perfumes can be grouped into many categories and one such category can be either male or female type of perfumes. Although many perfumes are becoming more and more unisex many consumers still feel comfortable wearing perfumes that are considered to be sexually appropriate and unique.
Most of the time, men are turned away by perfumes which are strong in smell unlike women and thus this is why Fragrance Villa intends to stock male, female and unisex perfumes within its outlets. The intentions of Fragrance Villa is to cater to the needs of various subgroups of customers who exist within the Dubai market and this is hence the reason that the company will also stock both high end and low end segments of the perfume market by selling premium brands and also stocking low-end brands (Casson 58). The main reason for doing this is to ensure that the company has a mass market that will allow the company enjoys large numbers of customer traffic at all times. Despite selling perfumes which target various people, the shop also intends to deal with the sale of perfumes meant for use in homes (for example, toilets, sitting rooms), cars and perfumes used in aroma therapy.
Fragrance Villa plans to be unique by operating as a leading house that provides all types of perfumes under one room, this way shoppers can shop for all ranges of perfumes from one single shop (Carsrud & Malin 122-124).
Market Analysis
Dubai is one of U.A.E’s busiest cities with a lot of aircraft traffic, thus increasing the market for luxury products, such as perfume-related products, to the locals and also to international consumers who include world businessmen and tourists on vacation. Data from the Euro monitor suggest that the Middle East market for perfumes is rapidly growing, currently growing at over 10.3% annually as compared to the global growth of 4.6% making the region a quite attractive market. Dubai alone in the last five years has experienced a growth of over 12% up from 2008 and the industry reports suggest that the industry is likely to continue growing even beyond by the year 2014 (Report Linker np).
Euro monitor reports indicate that perfumes meant for women enjoy a larger market share of over 65 percent as compared to that of the male counterparts. The Dubai perfume market makes most of its sales to the many saloons, which are located in Dubai, spa’s and even higher sales transactions occur especially when pilgrims visit the Middle East city of Mecca. If Euro monitors estimates is anything to go by then by the year 2014 the cosmetic industry within Russia would have grown to 519.5 million (AED), meaning that business men who invest in perfumes should expect more profits (Premium Beauty News,2011).
Although there are a number of competitors within this industry such as “Chanel, Clarins Group, Estee Lauder West Asia, P&G Cosmopolitan Cosmetics, Perfumes Loewe West Asia, Guerlain West Asia, Revlon West Asia, Parfums Givenchy West Asia, Parfums Christian Dior SA, and Elizabeth Arden West Asia” which are well established companies that have been in both the manufacturing and retailing market internationally (Premium Beauty News np). Despite having many well reputable companies in the Dubai market there are many independent manufacturers and retailers who manufacture and sell perfume in Dubai.
Strategy
Fragrance Villa will use multiple marketing strategies that will allow the shop increase the customer traffic in its store. The shop will put in place a mass marketing strategy for its lower end customers so that it can appeal to a larger segment of the demographic chart of Dubai (Case 34). Marketing is all about selling goods and services to consumers with an aim of satisfying them. Successful commercial organizations more often than not aim to satisfy their consumers and maximize the revenue streams got from selling their products., and thus with this knowledge in mind Fragrance Villa intends to target and reach out to its customers in Dubai. Under the mass marketing strategy the company intends to use a perfect marketing mix that will both at the same time reach out to consumers and save any incremental costs that the company is more likely to face while marketing the products. According to Kotler (65), companies are more likely to enjoy economies of scale when they use a mass marketing approach because differentiating products usually comes at an extra cost. Companies which do not adopt a differentiation approach may at the end of the day adopt a mass market strategy end up pursuing a market penetration strategy which is basically a pricing strategy that aims to sell affordable low priced products to the market this will thus appeal to a given share of prospective consumers in Dubai (Beauty world Middle East. np).
Since Fragrance Villa plans to offer a wide range of products which are not limited to either low-end or high-end products, the shop’s higher end premium product range will use a segmentation and targeting marketing approach where the marketing mix will be manipulated to appeal to consumers who want something extra (Kourdi 116). When companies follow a differentiation strategy they are most likely to adopt a skimming/milking price strategy which involves charging high rates for a product in order to recover extensive funds that may have been involved in the process of sourcing the products from the producers. Marketing Research techniques can be used by Fragrance Villa continuously and the subsequently obtained Information can be used in decision making and policy selection as the market evolves in order to ensure that value is sold to consumers. This means that the company will be forced to use more vigorous promotional strategies that will place and position all higher end products under their wing as superbly unique and high class. With a good marketing mix then the company can thus appeal to high end clientele. Currently, the owners are considering partitioning their stores into two different areas that will be packaged and decorated uniquely clearly bringing out a subliminal message of the difference between the high-end and low-end markets of their products throughout their stores this way the current market can know what to expect while entering their stores (Porter 56).
Implementation and Control
The marketing department will constantly evaluate its performance levels, analysis being made in comparison with forecasted revenues and achievement of set forth objectives. Use of milestones will be of most importance to ensure that the company’s mission and vision is on the right track. Short term goals and targets will be used against a planned timetable and used to control the strategic implementation process.
The most conclusive control measures that will be used by Fragrance Villa will include performance indicators. Such as sales volumes and revenue measure performance. If the data obtained surpassed set targets that the company will not need to adjust their strategies but if their targets are not met then strategy will be changed (Kotler 89).
Management of the Company
Since Mukesh will solely be in-charge of managerial functions, he is expected to dedicated more attention to the venture, particularly during the beginning years of the venture as at that time the business will be a bit shaky and fragile. Most of the decisions will be made by the owner, however on certain occasions he will need a sounding board, for instance market experts or employees, in making some decisions. Once the business gains ground and stabilize, because of the increased workload Mukesh can change his role into a more supervisory role whereby if he or she decides to expand he can supervise the work of his employees on a regular interval.
Since it’s a start-up business, the owner will use flat organizational structure as it will allow him use a hands-on approach meaning him will have more control over his organization. If the entrepreneur has more control then he can thereby influence the overall strategic direction the company is expected to follow (Porter 57). The owner when not available due to unavoidable circumstances, he will appoint the most trusted and hard working employee and give him or her authority to take his role until his return.
Financial forecast
Financial statement
Assumptions
- The business will experience a steady learning curve for the first 3 years.
- Only 40% of all costs are fixed costs while the rest are variable costs.
- The business will realize significant growth in revenues is subsequent years.
- Amount estimates are in American Dollars ($).
Table 1: List of total expenses (2010-2013)
The expenses are expected to be rise gradually in the first three years due to inflation and also expansion of the business. Assuming that the business will make sales of 20,000 perfume items which retail at an average of $ 4 in the first year $5 and$6 the sales of 2011-13(80,000, 100,000,120,000) and thus the projected profit or losses will be:
The above shop trend suggests a business growth of 125% in the first year and a growth of 84% in 2013.
Works Cited
Beauty world Middle East. ‘UAE Market for color cosmetics to be Worth AED 519.5 million in 2014.’ Beauty world Middle East. 2011. Web.
Business Standard. ‘Booming Cosmetics Sector of U.A.E.’ businessstandard.com. 2008. Web.
Carsrud, Allan & Malin, Brannback. Entrepreneurship, (Illustrated edition), Melbourne: Greenwood Publishing Group 2007.
Case, James. Competition: The Birth of a New Science. New York, NY: Farrar, Straus and Giroux, 2008. Print.
Casson, Michael. The entrepreneur: an economic theory, (Illustrated edition), Manhattan: Rowman & Littlefield, 1982. Print.
Kotler, Philip & Keller, Kinen. Marketing Management (13th edition). New York: Prentice Hall, 2006. Print.
Kotler, Philip. Marketing Insights from A to Z: 80 concepts every manager needs to know, New Jersey: John Wiley & Sons Inc, 2003. Print.
Kotler, Philip. Principles of marketing, 2nd edn. New York: Prentice Hall, 1990. Print.
Kourdi, Joseph. Business Strategy: A Guide to Effective Decision Making, 2 edn. New York: Economist books, 2009. Print.
Porter, Michael. The Competitive advantage of nations, illustrated edn, Northampton, MA: Free Press, 1990. Print.
Premium Beauty News. ‘Color cosmetics to drive growth of the UAE beauty market.’ Premium Beauty News. 2011. Web.
Report Linker. ‘Make up Marketing in U.A.E.’ Report Linker. 2011. Web.