This assignment provides an opportunity for you to describe a business idea, assess the competition it faces, outline the strategy for it and explain the competitive advantage you think it possesses to make it stand out in the marketplace:
1. Explain either your business idea or one you are familiar with
2. Describe which customer segment it is targeting
3. Analyse the competitive external business environment that you will face using two models that relate to the external business environment
4. Summarise your analysis of the external and internal business environment with a SWOT analysis
5. Using further models and concepts explain the strategy and positioning of the business idea
6. Explain where the competitive advantage for the business idea exists
7. Critique at least one of the models you have used in your report
Your response should be in the form of a written report of between 1,500 - 2,000 words.
Solution:
1.1 Introduction
Every business and organization starts with an idea of how a product or service to be offered. In addition, the idea takes into consideration the target market for the product and services, the competitors, business environment and so on. The aims of this report is to discuss Muna Global Concept Makeup/Beauty business idea, evaluate the competition it faces, list various methods for it, assess the competitive edge the business idea have that will enable it stand out in the marketplace. In addition, this report will adopt Porter Five Forces and SWOT analysis to scan both the external and internal business environment.
1.2 The Muna Global Concept (MGC) Makeup/Beauty Business
The Muna Global Concept (MGC) Makeup/Beauty Business is involved in the sales and distribution of broad range of beauty products to cater for individual beauty needs. Some of the products include brushes, lipsticks, eyeliners, mascaras, foundation, eyeshadows among others. The makeup/beauty industry is development rapidly globally with estimated value of $532 billion and it is slated to exceed a market value of $805 billion by 2023 (Danziger, 2019). Additionally, the profit margins for makeup businesses are at an average of 40% and can be up to 80%.
1.3 Target Market
The Muna Global Concept (MGC) Makeup/Beauty Business target market is focused on Nigeria. However, owing to the advancement and development of emerging technologies, the business will broaden its market horizon to the rest of Africa. Marketing efforts of MGC will target specific demographics such as age bracket 16 to 55. Furthermore, the targeted audience would comprise of actors and actresses, local broadcasters, cheerleaders and gymnasts, makeup artists and consultants.
MGC target audience or market are individuals who have keen interest in makeup and cosmetics products and are majorly customers who care about quality cosmetic products.
1.4 MGC Segmentation, Targeting and Positioning (STP)
For a business to ensure good product penetration in a market, segmentation, Targeting and Positioning (STP) is importance in dividing the market into segments and to offer various products to various persons in the market according to category (Tanford & Malek, 2015).
According to Akram (2017), a market segment is referred to as individuals with similar interests for products of the common characteristics. To ensure that suitable products are offered to particular persons, MGC segments the market into certain units. According to Tanford & Malek (2015), segmentation comprises of geochemical, demographical, psychographics and behavioural segmentations. MGC have adopted all four market segmentation to meet the market objective set for the business. For instance, the geographic segmentation helps MGC segment the market by cities, regions, nations (Thoeni, 2014). Ages, genders, academic levels, religions, income and professions are segmented using demographic (Truong, 2016).
The age bracket for MGC in this category of segmentation is between 20 to 50 for women and 20 to 45 for men (Tung 2013). For the psychographics segmentation, MGC segments the market by values, culture, and lifestyles. Finally, customers buying history, behaviour and preferences are segmented using the behavioral (Venter, Wright, & Dibb, 2015).
Targeting: Targeting connotes choosing a market unit in which the business aim to reach with its products. MGC takes into cognizance the attractiveness of the market segment in targeting it and the values to be sustained continuously. Therefore, the target audience of the MGC as seen from above, comprises of both male and female, though the female customers are more than the male.
Positioning: Positioning is known a business placing its products in a unique stand in the market and the customers’ minds using the marketing mix (Armstrong & Kotler, 2013). Building a exceptional position in the market and use of differentiation methods are significant to a brand. MGC is intensely positioning its products in the mind of consumers in the Makeup/Beauty business in Nigeria and Africa. The company adopted various techniques such as product innovation, brand image and packaging to position its products in the market.
1.5 Market Analysis and Assessment of Competitive External Business Environment
For a business to thrive, there is need to assess the business environment. The Business environment comprises of both internal and external factors that influence businesses. The internal business environment is within the organization control. However, the external business environment is beyond the control of the organization owing to its dynamic nature and its various factors.
Regarding the makeup/beauty industry, the largest market in Africa is found in Nigeria with over 200 million people (Varrella , 2020). According to Varrella (2020), Nigeria will be the world’s third most populous nation in 2030 after China and India. The Nigerian makeup/beauty sector has witnessed increasing growth estimated at US$3 billion (Nosike, 2019). However, the external business environment which includes economical, political, legal, demographic, socio-cultural, technological have significant impact on the makeup/beauty industry.
In this section, Porter Five Forces Model and SWOT analysis will be used to analyze the external business environment as related to MGC Makeup/Beauty business in Nigeria and Africa at large.
2.1 Porter’s five forces analysis
According to Panda (2019), Porter propounded the Porter Five Forces to assess both internal and external business environment that have significant effect on organizations. The diagram in figure 2 depicts the porter five forces which will be analyzed further.
Figure 2: Porter’s Five Forces Diagram: Source (Chi, 2020).
Threat of new entry:
This force in the porter five forces assess the ease with which businesses enter into a market. According to Chi (2020), sectors that are highly competitive are expected to attract many companies that will compete for market share. Consequently, this will result to declining profitability of organizations in that industry. However, in the context of the Makeup/Beauty industry, it has a less threat of new entrants in Nigeria and Africa owing to various factors such as cost, research and development and the production processes.
Bargaining power of customers:
This porter five forces assess the power of customers to bargain as it relate to changes in prices in the Makeup/Beauty business. With a high bargaining power of the customers, future demand would be difficult to forecast by organizations such as MGC (Parrish, 2016). Consequently, this could lead to companies’ inability to attain long term profitability owing to the irregular demand patterns. In Nigeria and Africa, there is a high bargaining power of customers in the Makeup/Beauty Industry owing to keen competition and availability of various brands.
Bargaining power of suppliers:
This porter five forces assess the power of suppliers in regard to changes in prices for makeup/beauty products. Prices in the market are influenced significantly by suppliers with high bargaining power. These suppliers adopt methods such as market manipulation through hoarding and restraining supply. However, owing to the fact that there are various actors and huge supplies of various brands in the Nigerian Makeup/Beauty industry, there is low bargaining power of suppliers.
Threat of substitutes:
When there are similar brands and products in the market, there would be threat of substitutes. In addition, when customers have options of other brands and products that meet their needs, this lead to threat and companies will lose their bargaining power (Kotler, 2011). Customers will be able to buy from other rivalry brands and products when they are not satisfied with the price and quality. However, MGC adopt pricing strategy and innovate products to meet the needs of its customers.
Barriers to entry and exit:
This is known as the challenges MGC faces when entering or exiting the makeup/beauty industry. The startup capital in this industry in Nigeria and Africa at large is huge and it comprises of research and development, marketing and promotion, product design and packaging among others. Exiting challenges include costs of research and development as well.
Seller and buyer concentration:
It is pertinent to say that the Makeup/Beauty business is attractive and there are several brands and products which are tailored to meet the various individual’s needs. Therefore, the buyer concentration can be viewed as low owing to the fact that there are various buyers cutting across various market segments both in the Nigeria and other African countries.
2.2 SWOT Analysis
SWOT is an acronym which means Strengths, Weaknesses, Opportunities, and Threats (Proctor, 2014). SWOT is importance to analyzing both internal and external business environment not just in the makeup/beauty industry but all sectors and industries.
Figure3: SWOT Analysis (adapted from Armstrong & Kotler 2013)
Strengths:
MGC strengths could be seen in Nigeria, the African largest market where it uniquely positioned itself. In addition, MGC has unique brands and products well designed and packaged as testified by customers. Another strength of MGC is its marketing and promotional strategies using internet, celebrities and referral network. Finally, MGC found its strength in its capital base and suppliers.
Weaknesses:
Owing to the high quality of brands and products MGC offer in the market, the prices are higher than other competitors’ products in the Nigerian and Africa market. Therefore, customers who are low income earners and could not afford the high price would opt for other products which will reduce MGC market share.
Opportunities:
There is a huge opportunities in Nigeria and the entire Africa when it comes to the Makeup/beauty business. According to Callaghan Jacob & Swilling (2020), the Africa Continental Free Trade Area is targeted to promote various businesses in Africa and MGC has been keying into this opportunity.
This opportunity creates new markets, simulates industrialization pathways for African economic integration (Callaghan, Jacob & Swilling, 2020). Other opportunities includes the increasing various movies industries in Africa with Nigeria have the higher production of home made movies and are all in need of makeup/beauty products.
Threats:
Increasing competition from various companies who are into the makeup/beauty business is a huge threat to MGC. In addition, there are culture and religious beliefs in Nigeria and the rest of Africa that are against makeup/beauty brands and products. This is indeed threats to MGC business. Finally, increasing import duties and taxes in Nigeria and the rest of Africa pose a significant threat to MGC makeup/beauty business.
3.1Conclusion
This report has discussed the Makeup/Beauty business idea of Muna Global Concept. Furthermore, it assessed the target market and competition that it faces in the market. Finally, it adopted Porter Five Forces Model and SWOT analysis to evaluate the external business environment.
In conclusion, every organization begins with an idea which will later result to the birth of the entire business, the products or services and strategies on how to achieve the overall objective of the business. As seen from this report, MGC target market is focused on Nigeria. However, owing to advancement and development of emerging technologies, the business will broaden its market horizon to the rest of Africa. Marketing efforts of MGC will target specific demographics such as age bracket 16 to 55. Furthermore, the targeted audience would comprise of actors and actresses, local broadcasters, cheerleaders and gymnasts, makeup artists and consultants who have keen interest in makeup and cosmetics products and are majorly customers who care about quality cosmetic products.
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