BUSINESS STRATEGY

A case study on “Arabic Perfumes and the global fragrance market”.

SUBMITTED TO

Prof Satish Kumar

Business Strategy

School of Business, MAHE Dubai

On 2nd April 2019

BY

Deviprasad, Pavan, Deepak, Stelvin, Nakul, Basangouda, Tejas, Sherlin, Veenashree,

Vasihnavi, Varuni

GLOBAL MBA 2018-2020

School of Business, MAHE Dubai.

 1. Perfume industry is facing strategic issues both globally and regionally? Use Porters five
force model to analyze them.

Strategic Issues faced by perfume industry is competitors replicating their business strategy.
Arabian Perfumes following the first mover strategy captured whole of the market as the demand
was huge.

Porters Five Force Model seems to provide us with clear understanding on the competition the
Arabian perfumes is facing. The Competition not only seems to be limited to local grounds rather
even expanding globally.
Regional and Global Analysis on the perfume industry would provide the following insights

THREAT OF NEW ENTRANTS:

International brands such as Saint’s Laurent classic, Loreal, Coty, Elizabeth Arden these tend to
take advantage of their supply chain reach to the local market in UAE. These International
brands tend to provide different variety of products and market their products as elite brands
targeting top notch people of society. Few other international brands Swiss Arabia concentrated
on packaging like Swiss Arabia and Skimming the Prices to higher end.

Regional Companies compete among themselves with segmenting their consumers based on
demographic factors and constant innovation.

SUBSTITUTE PRODUCTS:

It is evident that perfume industry always face threat from substitute. However, it is hard to
replace a product that is branded with a high reputation yet the technology seems to be advanced
that perfumes are sold in black market by the local retailers across UAE. These perfumes are of
similar aura but targeting middle income groups thus grabbing the market opportunity of the real
brand.

International brands tend the duplicate their products with same essentials and similar ingredients
to capture the Arabian perfumes market in UAE.As from the case it is shown that International
brands such as Estee lauder have been replicating the aura and scent woody fragrance provided
by Ajmal and Swiss Arabia.

BARGAINING POWER OF BUYERS:

Arabian perfumes are priced high and cater the premium UAE market, Since Majority of the
economy of UAE is from oil and tourism the most perfume buyers tend to be tourist. So these
buyers tend to buy the perfumes from their selective choice as it is Price sensitive Market.

Arabian perfumes seems to be highly priced when compared to its International counterpart
Even regional competition exists due to price sensitive market.

BARGAINING POWER OF SUPPLIERS

The Perfumes seems to be made from common traditional OUD for its fragrances as these trees
are 100 years old and are on verge of extinction , So there are only few suppliers for the OUD .
The suppliers can be responsible for change in price of the raw materials . Hence these could
impact the overall pricing of the perfumes in UAE.

International brands use their synthetic oud to manufacture.

RIVALRY
International as well as local brands seems to be following the same strategy which is
differentiation and niche market targeting

2. One regional perfumery plans to appeal to the younger, contemporary market by updating
the look and feel of the retail establishments and creating a novel, engaging sensory
experience where customers can customize their own fragrance. Is this likely to be a
winning strategy? What marketing and product merchandising initiatives will be needed
to improve the shopping experience? Use Generic competitive strategies for analysis.

The Arab consumer is unique and needs to be treated differently than consumers in other parts of
the world. Buying is very social among Arabs. Arabs will often times put less stock into the
specific features of a product and focus on the recommendations made by their friends, family
and social media.

Making perfumery plans that appeal to younger generation and contemporary market by
updating the look and feel of the establishments and also giving sensory experience where
customers can customize their own fragrance is more likely to be a winning strategy.

Because tastes and preference of people do change for person to person. And customizing their
products as per customer needs will provide a lot of options to the customers where they can
select the type of fragrance they want. The company should also keep in mind that, for inclusion
of customization the feature must be compelling and unique in the market.

And moreover, as large number of population is of youngsters attracting them will also be a
winning strategy.

 Digital marketing campaigns: It helps to provide product information and education as

well professional advice about usage. It helps to improve functionality and geographic to
reach fastest growing business in perfume sectors.
 Social media: As most of the youngsters spend their time in social media, it helps to
target the market and provides the information about brand, price, value, culture,
uniqueness and potential to buy.
 Arabs like to window shop and debate over buying something. Shopping is a national
pastime in some countries. Don’t expect a direct response marketing model to work in
many situations in the region. Marketing to these consumers should include all steps in
the conversion funnel from introduction, to follow up, to closing the sale, to making them
into a repeat customer.
 Status symbols are important: Typically, a brand or a particular status symbol product
must be around and established within the Arab market before it becomes a status
symbol. Many high end products and brands that convey status in other countries may not
be established enough in some Arabian markets to convey status.
 Arabs may need to touch before they buy: For many Arabs they are used to buying things
in person through someone they may know. As a large percentage of Arabs still haven’t
bought anything online they aren’t used to paying for products they haven’t seen. There
are a few ways that brands can help ease the transition for these types of consumers.
Customer support is key.
 An important aspect of Arab culture is fame and honor. Stemming from elements left
over from the Arab tribal culture, how a family is perceived in the society is important to
be able to do business within the society. Bringing honor to a family gives the family
more power, influence and opportunities in society. 
 Create the idea of exclusivity: People value the things differently depending on rare and
exclusivity they pursue them to be. The rarer product the more valuable it appears. So
that it will be available in particular area.
 Give free samples: It tends to be more attractive when customers get the free samples.
That makes the buying decision easier.
 Product safety and elimination of risk: Educate the customer about safety requirements of
the product.
 Making an effective advertising for the perfumes using celebrities.
 Improving the product design and packaging so that it is more appealing to the market

3. Assume you are hired to consult with one of the regional perfume companies. What
strategy would you recommend they implement to deal with trend towards regional
companies expanding in the UAE, as well as global companies intensifying local
offerings? What market opportunities are available? Create a strategic group map and
use SWOT or Value Chain for analysis.
SWOT analysis is a strategic methodology to analyze the – Strength and weaknesses that the
perfume industry possess, and the opportunities and threats that the industry faces because of the
competitive factors.

STRENGTH

 The industry’s characteristics and capabilities that it uses to design, develop and hold
competitive advantage in the market.
 High Margins compare to competitors – Although the perfume industry in UAE is going
through a downward pressure on its profits, but when compared to its competitors Arabic
perfume industry is still afflicted in higher profit margins.
 The Arabic perfume company provides extensive offerings that have helped to attract
different segment of customers. This has helped them to diversify its revenue streams.
 The Arabic perfume has maintained a high brand image in the industry. This has enabled
the company to charge premium compared to its competitors.
 The success of product mix offered by the Arabic perfumes company also attracts a wide
range of customers.
 The perfumeries UAE holds a strong market leadership position in the industry. As a
result, the company has scaled new products success.

WEAKNESS

 Either be the absence of strengths or the presence of lack of resources that are required
for the company’s success.
 The ability of local company’s like Arabic perfume and other such companies to exploit
the market is fast disappearing. The customer network promoted by perfumeries UAE is
less effective.
 There are low investments into customer-oriented services which is helping the
competitors to gain advantage in the present and future market.
 The cost of replacing the existing experts has become high. There are only few
employees with knowledge base in the Arabic perfume company and replacing them at
any given point of time will be an extremely difficult task.
 The gross margin and the operating margin can be improved and moving forward the
perfumeries UAE may face pressure on its financial statements.
 The product life cycle of the perfume in the market was becoming short and was
requiring more capital to maintain market share.

OPPORTUNITIES

 The areas where the firm identifies its potential for growth, profits and market share.
 There are opportunities to tie up with global brands to promote their perfumes.
 Innovate new fragrances with same base notes and variating high notes.
  There are opportunities to take their product globally with the help of Internet and digital
marketing to target the younger generation.
 As there is a rise in people spending the idea of expanding the product mix is a must.

THREATS

 As the global brands are bringing in celebrities to promote their brands, this causes a
huge threat to the regional perfume industry.
 The celebrities don’t just promote other global brands but also are coming up with their
own brand. Like Justin Beiber’s “Someday” and so on.
 Fragrance manufacturers were subjected to regulations of different countries to protect
the consumer rights and the environment.
 Regulator changes would require the company to reformulate few scents which could
result in high costs, delay in manufacturing which will lead to lower sales.
 There might be laws introduced by the regulatory bodies on certain ingredients in the
perfumes in order to protect the consumer against allergic reactions and health hazards.

4. Can the UAE grow Arabic perfumes globally? Analyze through following strategies?
a. Blue Ocean Strategy
b. First mover advantage

The market in UAE is set to benefit from its growing trend towards consumer urbanization,
higher spending propensity and the heightened importance on personal appearance and
grooming. In addition, increased demand for youth-oriented, floral and exotic fragrances and
celebrity perfumes will set the pace for rapid market expansion in UAE. As UAE is home to over
200 different nationalities having different taste and culture, owing to the increasing trend of
appearance and personal care becoming part of pride, self-reliance, and confidence. The major
in-house brands of UAE like Ajmal, Zahras and The Royal Diwan which are present over
several decades have been successful in capturing the perfume market in UAE by their exotic
rare scented oils extracted through the trees from India and South East Asia have taken a
prominent spot in the minds of people and its users. Rapid technological advancements have
developed effective problem-solving techniques so as the rare scented perfumes last longer than
the ones in the market.

BLUE OCEAN STRATEGY

Perfumes from UAE especially oudh-based perfumes are expensive and are in high demand in
the western countries and to conquer the market presence worldwide the BLUE Ocean Strategy
comes in effective play suggesting various factors that can be more effective for UAE grown
Perfumes launching worldwide.

The four factor that are considered are Raise, Eliminate, Reduce and Create
RAISE:

 Price: As UAE based perfumes are expensive than other perfumes and due its high price
and limited availability its most sought after. Hence reducing the price can be an proven
way for global market entry.
 Product: As UAE has different versions of OUD based perfumes hence some of the
perfumeries are exclusively available only in UAE like the Royal Diwan, Arabic Nights
which was specially developed to attract higher end Middle East Market. Hence making
these perfumes available globally can be good market entry and conquering strategy.
 Supply Chain: Ramping up of supply chain helps in availability of perfumes even in
outlets like Walmart, Airports, Shopping Malls etc.

ELIMINATE:

 Product differentiation: Refillable perfume bottles with premium color combinations.

Exclusive Seasonal wise scented product launch. Creating new market for younger
generation with variety scented products
 Reengineering supply chain to have an advantage in both local and international markets.

REDUCE:

 Unnecessary cost: The brands come along with premium packaging like gold plated
personalized name plates on the perfume or usage of expensive materials that adds to the
costs can be extensively reduced.
 Cost of Manufacturing: can be reduced by technical advancements and reducing material
costs.

CREATE:

 New market penetration through Social networking like Facebook, twitter and creation of
online selling services.
 Providing exclusive offers for comeback customers and maintain loyalty points on
purchase of products.
 Business strategy of taking advantage of demographic conditions to reposition,
Reforming and repackaging on the product lines.
 Launching products that suites the customer demand of the particular region.

First Mover Advantage

From case The UAE market seems to be attracting more fragrance industry as it is economically
stable country.

From the Case it is evident that certain perfumes such as Ajmal Perfumes which has long roots in
India were not only conquering market share in UAE but also in India. Since their constant
evolution made them have competitive advantage over their competitors.

As it is clear from the global expansion of the Ajmal perfumes that it tends to attract the older
generation which signifies the brand loyalty. Also, not only limiting themselves to previous
generation they also have intended to capture younger audience attention by introducing new
product lines and variation to suit their budding taste and preference.

Ajmal perfumes seem to be following trial and error methodology to test their perfumes with
their constant Research and innovation.

They seem to follow tactical approach in opening their stores globally; they introduced 400+
individual fragrances in each of their countries to know the consumer taste.

Similar is the scenario with other Arabian perfume brands (Zahra’s, Swiss Arabian) they tend to
capture only the niche market of elite people in the UAE. Since Customization and
differentiation of perfume to meet the taste of individual preferences is the USP of the company.
These elite perfume brands can expand globally by introducing the same to other parts of world
by only targeting the niche market (i.e. elite group).

By following the above “first mover strategy” the above Arabian perfumes can gain the
following advantages

 Diversification of their product line to suit the customer preferences.

 New Technology innovation and constant evolution in the product line.
 Setting the standards for the companies falling in red ocean.
 Gaining the Trust and loyalty of their clientele, winning new customers from constantly
concentrating the marketing mix aspects of promotion by tapping to new channels of
communication.
 Diversifying the risk factor of failure by not only concentrating on single geographical
location.
 5. Should the regional perfumeries sign licensing agreements with each other? With other
global players? Discuss the same with strategic options available for entering and
competing in International markets. And also the preferred global approach

Middle east is known for its spicy aromatic fragrances prepared out of oud extracted from the
rare agar wood found in Indian and south Asian dense forests. This fragrance high recognition in
the fragrance industries being one of the prime competitors for global fragrance industry. Top
fragrance manufacturing companies are producing fragrance from oud aiming at Middle-east
consumers. UAE has its regional fragrances brands such as Ajmal Perfumes, a 60-year-old brand
catering to the affluent Middle Eastern clientele always striking a balance between ethnic ethos,
modernity and innovation. Other prominent brands such as Arabian Oud , Zahras Perfumes ,
Swiss Arabian Perfumes known for their wide range of premium and authentic Oud and The
Royal Diwan Group is a dominant player in the market.

These brands are performing well even with the tough competition by the foreign brands having
more brand recognition and better networking capabilities. These regional brands lack in their
presence in the global market of perfumes when compared to top perfume brands, brands such as
Henessy, which are already producing the oud based ethnic fragrances.

To increase the capacity of global reaching capabilities and to expand customer base of the oud
fragrances new opportunities like licencing of the products to major global players in the
perfume industry. The major advantages of opting licencing are

 quick, easy entry into foreign markets, allowing a company to “jump” border.
 lower capital requirements.
 potential for large return on investment (ROI), which can be realised fairly quickly.
 low risk, since you enter with an established product and you take fewer financial and
legal risks.

By observing the advantages, we can suggest regional perfumeries should go for licencing as
their market entry strategy with the global player for their expansion plans. The top players know
their market much better than the regional. That knowledge allows the oud-based fragrances to
be marketed in a way that is more attractive to the consumer. It is a chance to expand the reach
of a message, product, or concept without actually needing to invest into them fully. Even when
certain elements of the arrangement are pre-planned, there is still a certain level of freedom and
control given to the licensee in the management of their business.

So we conclude that, in order to maintain the authenticity and the cultural heritage of the Arabic
oud based perfumes making it available to the world, we have opted licensing as the market
entry strategy to sustain in the global market.