Beauty Asia: Cosmetics Case

Cosmetics Case


BeautyAsia (BA) is a health and beauty consumer products company headquartered in Malaysia. It manufactures and sells a line of cosmetic products ideally suited for the Malaysian marketplace. Although it has been a successful company for over twenty years, it has been losing money for the past two years and its market share has declined. The CEO has asked you to assist in diagnosing the problem and generating a few possible solutions.


What should BeautyAsia do to restore its profitability?

Suggested Frameworks:

Given the client’s decline in market share, the 3Cs model (i.e., Competition, Competencies, Customers) is an effective framework.

Key Facts (to be shared as the case progresses):

· Market share declined from 90% to 60% in the past two years.
· Manufacturing is excellent
· Inventory management systems are unsophisticated and ineffective, resulting in excess inventory and order fulfillment problems
· Brands are widely recognized throughout Malaysia
· No new products have been launched in the past eight years
· BA sells its health and beauty products primarily through local mom and pop shops (i.e., convenience stores)
· Management considered selling its current products outside Malaysia, but has been distracted by problems in its home country

· Several large multinational manufacturers have entered the market
· Competitors have flooded the market with new products
· Multinational competitors sell their products through supermarkets

· As a result of multinational competitors entering the market, consumers have been exposed to new types of products and their health and beauty product tastes have become broadened and become more sophisticated

· BA has multiple product lines ranging from lipstick to skin creams
· BA’s products appeal to price-conscious consumers
· The health and beauty products industry is growing approximately 15% per year

· BA products are currently sold through small proprietary shops
· Supermarkets are becoming increasingly popular in Malaysia
· Supermarkets have high order fulfillment and stocking requirements

Good Conclusions:

· Multinational competitors are creating a new distribution channel for health and beauty products. The channel shift is causing BA to lose market share. BA needs to update its inventory systems to compete in the new channel and reduce its costs.
· Competitors are driving changes in consumer tastes toward greater product variety and quality. BA has not kept pace with new product introductions. BA needs to improve its marketing/market research.

Excellent Conclusions:

· BA’s manufacturing expertise gives it an opportunity to sell high quality private label products at a discount to current prices in the supermarkets.
· There is danger in challenging multinational competitors by offering a wider assortment of products in the supermarket channel. Alternatives for BA include: strengthening its position in the local shop channel; focusing on profitable customer niches (premium, low price, etc.); targeting only certain product categories like lipstick and blush for distribution through supermarkets.
The cost to BA of regaining its lost market share is extremely high. BA may be better off preventing further loss in market share and focusing on improving its current profitability instead

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