The following are the key drivers of profitability in the cosmetics industry in
ID: 379049 • Letter: T
Question
The following are the key drivers of profitability in the cosmetics industry in Vietnam: The beauty and cosmetics retail market in Vietnam has been estimated to be worth $1.7 billion annually, a figure that will likely reach $2.35 billion by 2018, according to market research company Mintel. Increase in Sales Volume - Though the market size is relatively small, growth in most beauty and personal care categories is expected to continue to expand over the next decade as per capita spending increases. Increase in Average Sale Price - Being a sought after makeup brand, MAC has the ability to hike up prices higher than what its products will sell for in the home country. Consumers are willing to pay more for premium goods. Reduction in Unit Costs - considering that packaging and labor will be done in Vietnam, cost of goods (components for packaging) and labor cost is significantly cheaper in Vietnam. When you lower the operation costs and increase average price of product in the market, you will have a high profit margin. Developing Country- As a developing country, Vietnam’s population consists of younger generations. With beauty trends, makeup has been on the rise especially in Asian countries including Vietnam.Assume that the company M.A.C Cosmetics is trying to expand its makeup business in Vietnam. Discuss the benefits M.A.C Cosmetics will get from each one of these key drivers of profitability and provide specific examples for each one of them.
Discuss the disadvantages M.A.C Cosmetics will be facing from some of these key drivers of profitability and provide specific examples? How do you think M.A.C Cosmetics should mitigate these disadvantages? The following are the key drivers of profitability in the cosmetics industry in Vietnam: The beauty and cosmetics retail market in Vietnam has been estimated to be worth $1.7 billion annually, a figure that will likely reach $2.35 billion by 2018, according to market research company Mintel. Increase in Sales Volume - Though the market size is relatively small, growth in most beauty and personal care categories is expected to continue to expand over the next decade as per capita spending increases. Increase in Average Sale Price - Being a sought after makeup brand, MAC has the ability to hike up prices higher than what its products will sell for in the home country. Consumers are willing to pay more for premium goods. Reduction in Unit Costs - considering that packaging and labor will be done in Vietnam, cost of goods (components for packaging) and labor cost is significantly cheaper in Vietnam. When you lower the operation costs and increase average price of product in the market, you will have a high profit margin. Developing Country- As a developing country, Vietnam’s population consists of younger generations. With beauty trends, makeup has been on the rise especially in Asian countries including Vietnam.
Assume that the company M.A.C Cosmetics is trying to expand its makeup business in Vietnam. Discuss the benefits M.A.C Cosmetics will get from each one of these key drivers of profitability and provide specific examples for each one of them.
Discuss the disadvantages M.A.C Cosmetics will be facing from some of these key drivers of profitability and provide specific examples? How do you think M.A.C Cosmetics should mitigate these disadvantages? The following are the key drivers of profitability in the cosmetics industry in Vietnam: The beauty and cosmetics retail market in Vietnam has been estimated to be worth $1.7 billion annually, a figure that will likely reach $2.35 billion by 2018, according to market research company Mintel. Increase in Sales Volume - Though the market size is relatively small, growth in most beauty and personal care categories is expected to continue to expand over the next decade as per capita spending increases. Increase in Average Sale Price - Being a sought after makeup brand, MAC has the ability to hike up prices higher than what its products will sell for in the home country. Consumers are willing to pay more for premium goods. Reduction in Unit Costs - considering that packaging and labor will be done in Vietnam, cost of goods (components for packaging) and labor cost is significantly cheaper in Vietnam. When you lower the operation costs and increase average price of product in the market, you will have a high profit margin. Developing Country- As a developing country, Vietnam’s population consists of younger generations. With beauty trends, makeup has been on the rise especially in Asian countries including Vietnam.
Assume that the company M.A.C Cosmetics is trying to expand its makeup business in Vietnam. Discuss the benefits M.A.C Cosmetics will get from each one of these key drivers of profitability and provide specific examples for each one of them.
Discuss the disadvantages M.A.C Cosmetics will be facing from some of these key drivers of profitability and provide specific examples? How do you think M.A.C Cosmetics should mitigate these disadvantages?
Explanation / Answer
as it is notices and observed that the demand for cosmetics is going to be increase, at least for next decade. it is the best motivating factor for MAC, to exapnd its cosmetics business. the growth level is study and continue in nature, at the same time most of the people interested towards to purchase cosmetics in the nation. it shown that the demand is going to boost in near future.
the other important factor to be considered here is, the sales price is going to be increase due to huge demand. the supply is stable in nature and the demand is high for the product. it is going to be increase in future, hence the price of the product can be increase. it will be help to firms in the industry to increase their profit levels. it is applicable to MAC too, and they can expand their business.
the other important factor to be considered here is, the manufacturing cost is going to become low. as the production level increases, the total fixed cost for firms is going to become lowest. it helps the firms to produce products at lower cost. it also helps MAC to get economic benefits, hence they can focus on expanding business.
the drawbacks are-
when the profits are increasing, at the same time, many new players may enter into the market to enjoy the profits. increasing competition will leads to increase in other areas like advertising and promotions. it is noticed that the cost of production is going to be decline, it implies that the selling price must be decline. when the competitors in the market declines their prices, MAC has to implement the same.
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