Ajmal Perfumes in the Global Fragrance Market

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Table of Contents

Crucial Success Factors for a Perfumery
SWOT analysis for Ajmal Perfumes
Porter Five Forces Analysis
Calculations of Financial Ratios for the Global Competitors
Gross Profit Margin
Operating Expenses
Inventory
Company that Efficiently Handles Its Receivables
Recommendations
Works Cited

Crucial Success Factors for a Perfumery

The success of the international fragrance companies is highly dependent on the effective marketing, research of customers’ preferences, and high-quality promotion program (Matherly, Nandialath, and Richards 5). The companies should focus their attention on the constant development of the product and extension of lines.

SWOT analysis for Ajmal Perfumes

To get a better understanding regarding the effectiveness and success of Ajmal Perfumes, the organization should be analyzed by SWOT. SWOT examines the companies from four different perspectives, namely strengths, weaknesses, opportunities, and threats. It provides vital information for evaluation of the company’s effectiveness and success.

Ajmal Perfumes is the family business based company that originally was functioning in India. As a matter of fact, the company is one of the leading in the perfumery industry in the United Arab Emirates (Matherly, Nandialath, and Richards 8).

The major strength of the company is that it is focused not only on manufacturing perfumes but soaps, lotions, and oils as well. The brand is represented internationally. The company aims to find a balance between traditions and innovations. Ajmal Perfumes is versatile enough to satisfy every consumer. The ability to combine captivating scents of the Eastern World with modernity is the reason the majority of consumers prefers particularly this company over other famous brands.

The major weakness of Ajmal Perfumes is that the target customers group of the brand is older people. However, the company directs all the forces to influence the situation and develops fragrances that would suit younger people. As for the opportunities, it should be noted that Ajmal Perfumes realizes the importance and significance of the expansion strategies in positive business development. In terms of treats, it should be stressed that the competition in the perfumery market is rather tense; however, the reputation and high-quality products manufactured by the company contribute to the success.

Porter Five Forces Analysis

As a matter of fact, perfumery industry is attractive to customers as the majority of people believe that fragrance is an integral part of the daily round, however, to prove the attractiveness of the sector, it should be analyzed by Porter Five Forces model. The model is focused on five elements, namely competitive rivalry, buyer power, a threat of substitution, supplier power, and a threat of new entry.

As for the competitive rivalry, it should be noted that the competition in the market is tense, and it is difficult for a new company to compete with internationally famous brands. There is hardly a threat of new entry. According to the researchers, the amount of money spent of fragrances is increasing, and such tendency will only continue. Luxury and niche scents that cost an impressively big amount of money are popular as well. That is, the buyer power is strong. As for the threat of substitution, it is to point out that a number of scents are represented in different companies, and that is, every customer can find something he likes almost in every brand. It is worth highlighting that the threat of substitution is high. There are a lot of suppliers that provide companies with essential ingredients, and that is, they are not likely to influence the market in a significant way.

Calculations of Financial Ratios for the Global Competitors

Gross Profit Margin = ((Revenue – Cost of Revenue) / Net Sales) * 100

Christian Dior: ((32.903 – 11.181) / 32.903) * 100 = 66.02%;
Coty: ((4.611 – 1.824) / 4.611) * 100 = 60,44%;
Elizabeth Arden: ((1.238 – 0.629) / 1.238) * 100 = 49,19%;
Estee Lauder: ((9.714 – 1.996) / 9.714) * 100 = 79,45%;
L’Oreal: ((27.113 – 7.799) / 27.113) * 100 = 71,24%;
Revlon: ((1,381 – 0.493) /1.381) * 100 = 64,30%.

Operating Profit Margin = (Operating Income / Revenue) * 100%

Christian Dior: (7,065 / 32,903) * 100% = 21,47;
Coty: (210 / 4,611) * 100% = 4,55;
Elizabeth Arden: (95 / 1,238) * 100 = 7,67;
Estee Lauder: (1,312 / 9,714) * 100 = 13,5;
L’Oreal: (4,388 / 27,113) * 100 = 16,18;
Revlon: (203 / 1,381) * 100 = 14,69.

Net Profit Margin = (Net Income / Revenue) x 100%

Christian Dior: (1,709 / 32,903) * 100 = 5.19;
Coty: (293 / 4,611) * 100 = 6.35;
Elizabeth Arden: (57 / 1,238) * 100 = 4.6;
Estee Lauder: (857 / 9,714) * 100 = 8.82;
L’Oreal: (3,250 / 27,113) * 100 = 11.98;
Revlon: (53 / 1,381) * 100 = 3,83.

Return on assets = (Net Income / Average Total Assets) * 100

Christian Dior: (1,709 / 68,413) * 100=2.5 %;
Coty: (293 / 6,183) * 100 = 4.7 %;
Elizabeth Arden: (54 / 1,067) * 100 = 5.3 %;
Estee Lauder: (857 / 6,593) * 100 = 12,9%;
L’Oreal: (3,250 / 35,798) * 100 = 9,1%;
Revlon: (53 / 1,157) * 100 = 4,5%.

Return on equity = (Net Income / Equity) * 100

Christian Dior (1,709 / 33,323) * 100 = 5,12%;
Coty (293 / 857) * 100 = 34,18%;
Elizabeth Arden (57 / 482) * 100 = 11,82%;
Estee Lauder (857 / 2,733) * 100 = 31,35%;
L’Oreal (3,250 / 23,509) * 100 = 13,8%;
Revlon (53 / 693) * 100 = 7,6%.

Current ratio = Total Current Assets / Total Current Liabilities:

Christian Dior: 18,274 / 13,702 = 1,33;
Coty: 2,139 / 1,913 = 1,1;
Elizabeth Arden: 624 / 279 = 2,2;
Estee Lauder: 3,855 / 2,126 = 1,8;
L’Oreal: 10,293 / 9,503 = 1,08;
Revlon: 519 / 335 = 1,54.

Debt-to-assets = Total Liabilities / Total Assets

Christian Dior : 35,090 / 68,413 = 0,51;
Coty: 5,046 / 6,183 = 0,81;
Elizabeth Arden: 585 / 1,067 = 0,54;
Estee Lauder: 3,846 / 6,593 = 0,58;
L’Oreal: 12,289 / 35,798 = 0,34;
Revlon: 1,850 / 1,157 = 1,59.

Debt-to-equity = Total Liabilities / Equity:

Christian Dior: 35,090 / 33,323 = 1,05;
Coty: 5,046 / 857 = 5,88;
Elizabeth Arden: 585 / 482 = 1,21;
Estee Lauder: 3,846 / 2,733 = 1,4;
L’Oreal: 12,289 / 23,509 = 0,5;
Revlon: 1,850 / 693 = 2,6.

Inventory turnover = Cost of Revenue / Inventory:

Christian Dior: 11,181 / 10,262 = 1,08;
Coty: 1,824 / 648 = 2,8;
Elizabeth Arden: 629 / 292 = 2,1;
Estee Lauder: 1,996 / 984 = 2,02;
L’Oreal: 7,799 / 2,735 = 2,85;
Revlon: 493 / 111 = 4,4.

Days in inventory = 365 / Inventory turnover:

Christian Dior: 365 / 1,08 = 337,96;
Coty: 365 / 2,8 = 130,3;
Elizabeth Arden: 365 / 2,1 = 173,8;
Estee Lauder: 365 / 2,02 = 180,69;
L’Oreal: 365 / 2,85 = 128,07;
Revlon: 365 / 4,4 = 82,95.

Accounts receivable turnover = Revenue / Accounts Receivables:

Christian Dior: 32,903 / 2,608 = 12,6;
Coty: 4,611 / 581= 7,9;
Elizabeth Arden: 1,238 / 229 = 5,4;
Estee Lauder: 9,714 / 1,060 = 9,1;
L’Oreal: 27,113 / 3,994 = 6,7;
Revlon: 1,381 / 262 = 5,2.

Average accounts receivable collection period:

Christian Dior: 365 / 12,6 = 28,9;
Coty: 365 / 7,9 = 46,2;
Elizabeth Arden: 365 / 5,4 = 67,5;
Estee Lauder: 365 / 9,1 = 40,1;
L’Oreal: 365 / 6,7 = 54,4;
Revlon: 365 / 5,2 = 70,1.

Gross Profit Margin

The average gross profit margin ratio is different for various industries. However, the average gross profit margin for the global competitors is 65,10%. Among the companies under analyzes, Estee Lauder has the highest index. Gross profit margin can show whether the company is profitable or not. The companies have a high index that is positive for their development.

Operating Expenses

Every business requires additional expenses. Operating expenses are the essential part of every company, and they do not depend on the amount of sales the organization makes. These expenses help the business function, and they include salaries for the employees, rent, and insurances. The cost of the product includes materials and ingredients used, packaging, manufacturing, transporting, salary for workers, rent, and promotion. As the matter of fact, every company thinks of the risks, and these risks are included in the price. The more expensive the product is, the more operating cost it will cover.

Inventory

According to the analysis, the global company that most efficiently handles its inventory is Revlon. The data reflect the speed of implementation. The higher the score, the more efficiently the company uses inventory.

Company that Efficiently Handles Its Receivables

Receivable turnover characterizes the rate of payment of receivables of the company, namely how fast the company receives payment for the sold goods from its customers. The coefficient determines the effectiveness of the work of the company with buyers and customers in terms of the collection of receivables, as well as reflects the policy in respect of sales on credit. Christian Dior is the company that handles its receivables the most efficient.

Recommendations

To become successful in the GCC market, the company should research the preferences of the customers and follow world trends. The mixture of modernity and innovations combined with traditions is the best way to achieve success. High-quality products and a variety of lines will contribute to positive development (Matherly, Nandialath, and Richards 2). I am sure that mergers and alliances are beneficial as the tense competition in the market demands powerful marketing and strategies. The alliance will be more effective. Generic growth strategies that would be most applicable are:

Produce a scent that differs from every in the market;
Constant development for attracting new customers;
Research of the diversified needs of the buyers;
Production of perfumes for males and females of different age.

Works Cited

Matherly, Laura, Anup Nandialath, and Claire Richards. Arabic Perfumes and the Global Fragrance Market. Glendale: Thunderbird School of Global Management, 2013. Print.

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