Thursday, April 23, 2020

Strategic Management in the House of Ajmal

Introduction The House of Ajmal is a family heritage and a sensational force in the United Arab Emirates (UAE). The business entails a perfumery, which is based in Dubai and it has been inexistence for close to six decades.Advertising We will write a custom case study sample on Strategic Management in the House of Ajmal specifically for you for only $16.05 $11/page Learn More It has its origin in India and it is rumored to have come into existence when the very first Arabians visited India and developed a liking to the oriental scents that typify the Asian continent. However, contemporarily, the accuracy of this rumor is insignificant in the face of all the business that the House of Ajmal is closing at the end of the day. The business features amongst the leading perfumeries in the United Arab Emirates, alongside household names such as the Arabian Oud, Zahras Perfumes, Swiss Arabian perfumes, and the Royal Diwan Group. Its formidability as a competitor is evident to its rivals especially when there are international rewards such as the FIFA Perfume Awards that were sponsored by the Fragrance Foundation (founded in 2008), where Ajmal won a number of awards based on its fragrances and exemplary retailing techniques. On the global level, the competitors are numerous ranging from Coty to Elizabeth Arden to Dolce and Gabbana and Chanel. What is of concern is that even other non-perfume sectors such as the clothing lines and celebrity names are entering the race and they have the luxury of sailing past entrance resistors under the glamour of their names.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More These factors and many more are justification enough for the house of Ajmal to reconsider its development strategy in light of ensuring continued relevance, sales, and profitability in the future. Superficially, it may not seem to be in jeop ardy of becoming irrelevant especially considering that presently the House of Ajmal runs a $200 million 150000 square foot factory in Dubai, which produces over 50000 bottles of perfumes consisting of an array of Arab and French fragrances daily. However, the new entrants pose a threat to its very existence especially considering that traditionally, most of its products have been targeting the affluent Middle Eastern clientele. External Environment It is interesting to note that the perfume industry is becoming as dynamic as the fashion industry, which is to say that it changes all the time. This versatility has to do with the fact that increasing percentages of consumers are in fact younger than twenty-five years, a fact that can be explained by the ever-evolving market trends that have now seen youthful entrepreneurs taking over the role of production in the society and not necessarily relying on being employed to earn an income. The industry players on the other hand seem to hav e some sort of retarded growth, and whereas some have seen the wisdom of adapting to suit this new clientele, others are still set in their ways, much to their loss and doom. For comparative purposes, it is evident that in the fashion industry, designs keep changing and the only way to stay relevant is by producing chic and trend outfits that are affordable and desirable to the targeted consumers. The same principle applies in perfumery industry.Advertising We will write a custom case study sample on Strategic Management in the House of Ajmal specifically for you for only $16.05 $11/page Learn More The House of Ajmal has its backbone in the affluent Middle Eastern clientele, but even this phenomenon is rapidly shifting on a negative tangent. Today, only 10 per cent of the United Arab Emirates residents are actually nationals with the rest of the 90 per cent being expatriates. Therefore, it is safe to conclude that even if the House of Ajmal is making ma ny dollars selling to the Middle East, most of its clientele is comprised of expatriates of various nationalities, with conflicting interests in scents. A bonus to the House of Ajmal is that Arabian scents have always been a favorite amongst most consumers, specifically the ouds, ambers, and musks. Another advantage for Ajmal is the fact that their production is not only limited to perfumes, but they have their tentacles spread into air fresheners, body sprays, lotions, essential oils, and even soaps. However, with incumbent brands and designs based on other factors such as celebrity status and seasoned distribution lines such as Burberry’s Clothing line, the house of Ajmal needs a strategy that shall keep it afloat and abreast despite the raging competition. Key Success Factors Introduction With the perfume industry and particularly in the Middle East, there is the advantage of automatic popularity of perfumes among Arabs. This group of people likes to wear layers of perfume that leaves their scent behind even an hour after they leave a room. Additionally, they prefer ouds, masks, and amber perfumes, which are produced locally in the UAE. With this knowledge in mind, to stay relevant, all that a perfumery has to do is to produce a line in these tastes.Advertising Looking for case study on business economics? Let's see if we can help you! Get your first paper with 15% OFF Learn More However, with globalization, there has been emigration and now 90 per cent of the UAE population comprises expatriates. However, this element does not seem to remove from the consumption of perfumes in the Middle East and if anything, it simply adds to the appeal of the United Arab Emirates as a forum for launching new perfume products. The House of Ajmal vs. competition In view of its regional and immediate competition, the House of Ajmal is not faring so badly. As noted above, it boasts revenue of 200 million dollars. Additionally, it has over 100 different varieties of perfumes and an exquisite 70 brands to its name. These brands are distributed locally and internationally through its various retail outlets. In the United Arab Emirates, there are 35 outlets and in Malaysia, which is the newest reach out point for Ajmal (launched in 2010) there are already four new outlets. The other areas of interest under the House of Ajmal’s influence include India, Kuwait, Saudi Arabia, Oman, Bahrain, and Qatar. In total, this House boasts a sum of 141 outlets. An immediately interesting competitor is the Arabian Oud, which is a perfumer that came into existence in 1982. Simple arithmetic indicates that the Arabian Oud is only three decades old and thus young enough to be a progeny of the House of Ajmal, but this perfumery already has 620 stores in fifty cities, across 30 countries. Whereas initially the Arabian Oud operated only in the Middle East as the House of Ajmal does now, in 2000, it created a flagship store in the United Kingdom, which was followed closely by launching another store in Paris in 2004. Rivaling the House of Ajmal’s 100 fragrances, the Arabian Oud has 400 individual fragrances. Slowly but surely, the Arabian Oud seems to be bent on taking over the perfume market in the Middle East and beyond. In 2012, it launched the largest perfume store in the Kingdom of Saudi Arabia and it has made it clear that it intends to carry on in the same t rend. Nevertheless, this development is not such a major cause of worry for the House of Ajmal for brand loyalty is still on its side. Despite the Arabian Oud’s mogul like expansion, the House of Ajmal maintains its clientele among the affluent Middle Eastern population. Therefore, it is important to note that brand loyalty is the only factor that is keeping the House of Ajmal standing. Change is inevitable and it is encouraging that Ajmal has already realized this and is working towards appeasing the newer generation of clientele that demands trendy and contemporary scents. An illustration of this positive attitude towards change is in the design and layout of Ajmal stores. They have an open air feeling that is enhanced by the spacious, stylish, and contemporary surroundings to give a â€Å"unique and interactive sensory experience,† which is proof that Ajmal is aware of the new demands of the new generation clientele. It is even more encouraging that the new stores w ere not designed from scratch, but instead were made over, which implies that the idea is to reform and repackage the new product to suit the targeted consumers. This move is advantageous as it shall mean a reduction in the overall costs as more revenue would have been required if the House of Ajmal were launching an entirely new product. Additionally, it cuts out the risk of hiking the prices of the new products in case the consumer reaction was not as anticipated, in order to cover the advertisement, promotional, and marketing costs related to the new product. As it is, consumers are getting a refurbished version of what they are accustomed to and probably at lower costs and better packaging, which probably explains why they are giving out millions of dollars to secure the same. The final factor is the opportunity of growth that the House of Ajmal can seize. Presently, most of its clientele is the affluent Middle Eastern population as aforementioned. However, it reserves the optio n of going intercontinental and launching its products into the European, Asian, American, and even African markets. It has the raw materials necessary for such a move as it runs a factory in the UAE, which is the hub of raw materials for perfume ingredients and nosers. All that is lacking at present is establishing its presence in these new segments. In the quest to facilitate such an expansion, there are the revolutionized technological advances that have seen to the increased efficiency of distribution throughout the world within a maximum 48 hours, not to mention the Internet as a means of advertising in social media networks such as Facebook and Twitter. Conclusion This section has looked into the key success factors behind the perfumery that is the House of Ajmal. It has noted the fact that the Middle Eastern population prefers scents rounded about ouds, ambers, and musks and that being in the hub of the UAE, the House of Ajmal can easily access these raw materials for product ion. Secondly, the fact that the House has been in existence for over 60 years grants it credibility and preference in the eyes of most consumers, thus ensuring brand loyalty and securing specific consumers. Third, the fact that the House of Ajmal is a diversified enterprise as it deals with several products including lotions and air fresheners gives it a competitive hedge in the market. This aspect guarantees the perfumery a secure place in the market as it has a variety of products and places it almost evenly with other perfumes that are branded either on celebrity status such as Justin Bieber’s Someday or on famous distribution lines such as Yves Laurent or Burberry Clothing Line. The fourth key success factor is the fact that the House of Ajmal is currently reforming or refurbishing its products to stay relevant as opposed to coming up with an entirely new product as this aspect cuts out many risks related to product development. Finally, Ajmal’s restricted presenc e to the Middle East presents it with the option of expansion as a means of increasing profitability and sales and the various markets that it could easily launch into would be the European, Asian, American, and African markets especially with the revolution in technology and the Internet capabilities. Porter’s Five Forces Introduction In any market, there are constant paradigm shifts as new players enter or old players leave the market. The factors that determine how the paradigm shifts are constant and they can be easily surveyed in light of the House of Ajmal, which is the case study in this strategic management paper. An analysis of these five factors concerning the house of Ajmal shall indicate its credibility as a competitor in the versatile perfumery market in the UAE. Threat of New Entrants In any market, monopoly is never a preference to competitive trading and so there is always an advantage if the market presents opportunities for new companies to join other player s. However, apparently, too many companies in the market reduce the profit margin and makes the company less viable and so it is in the case of Ajmal. The perfume industry, especially in the Middle East, is a luxurious business to engage in; however, there is the issue of qualifications, which requires training and at least six years of apprenticeship. This element is already a barrier to new entrants as the House of Ajmal is 60 years old and before new entrants can make their presence felt, close to another decade shall have passed by in the process. However, this qualification does not bar wealthy business people from acquiring failing businesses, integrating them, and forming a formidable rival for Ajmal, and so this factor has moderate significance regarding Ajmal’s standing in the market. Moreover, the competition that jeopardizes Ajmal’s standing, viz. Arabian Oud, has been in existence for close to thirty years already and if brand loyalty is the only variable t hat is being looked upon to even the odds, Ajmal has no cause for worry. Threat of Substitutes In the perfume industry, substitutes may or may not be rampant. The reason for this on-the-fence conclusion is that several reasons trigger consumer preference in scent. Good advertising may induce brand loyalty especially if emphasis is laid on the quality of the brand in terms of consumer and environment protection. However, brand loyalty may also be induced by the specificity of consumers’ tastes. Nevertheless, the latter reason is a less persuasive argument as many times, consumers prefer the perfume based on the name rather than the scent and they would never choose it in a blind testing procedure where the perfumes are not branded. Consequently, it is safe to posit that there are multiple substitutes in the perfume industry and especially in the Middle East. Consequently, this element is a strong factor in determining Ajmal’s competitiveness and it should be regarded wi th special concentration when coming up with a strategic plan. Bargaining power of Buyers In most markets, the power of the buyer can never be underestimated, and especially in the perfume industry where as noted above there are a myriad of substitutes, it is important to keep buyers happy. Zeroing in on Ajmal reveals a tendency to charge exorbitantly for its goods mostly due to the quality as well as the targeted consumers. It may not seem necessary to cut these costs presently as that class of consumers actually grades goods based on price at times. However, it is also apparent that a new generation of consumers, which is trendy, is coming up and it would prefer affordable prices. As it is, Ajmal only has two viable options and the first is to introduce products that are amenable to this group, which means the products should entail trendy, chic, and affordable perfume splashes and body lotions or soaps among others or to shun this new generation at its own peril. It is encouragin g that Ajmal seems to be working towards satisfying the demands of this new generation of consumers by simply refurbishing its products. In a way, this move achieves two goals as it keeps the older generation ensnared and captures the attention of the new clientele. Consequently, the bargaining power of buyers is definitely a strong factor in determining competitiveness. Bargaining Power of Suppliers This element is another indefinite factor because for instance, the natural oud that is used in the manufacturing of perfumes is said to have run out completely and so most of what is used today is synthetic. Consequently, the scale shifts based on the preference of the manufacturer, viz. between synthetic and natural. Most vintage bestsellers, as Ajmal, prefer to use natural raw materials to produce their perfumes. Consequently, the suppliers of such raw materials have a great bargaining power. In the case of Ajmal, the bargaining power of suppliers is definitely a strong factor in det ermining her competitiveness. However, in view of the refurbishment of its products to meet the demands of a new generation, it is safe to say that in pursuance of a cheaper or rather more affordable product, Ajmal may decide to use synthetic raw materials. Such a move would reduce the suppliers’ bargaining power. However, it may not be necessary for Ajmal to stoop that low as the perfume itself only takes 3 per cent of production and the rest of the cost is due to packaging, marketing, and distribution. Consequently, if Ajmal were to cut on these three costs, it may not need to resort to synthetic raw material and the bargaining power of suppliers of raw materials remains a strong factor whereas that of the suppliers of the packaging and the other factors shall be reduced considerably. Competitive Rivalry In the arena that is the United Arab Emirates, there are few, but very potent competitors in the perfume industry. Presently, Ajmal is doing a good job by holding up its ed ge in light of all the new entrants and if it manages to overcome local competition completely, it shall be well on its way towards succeeding internationally. This aspect is a real possibility especially given that all the competitors seem to be focused on the affluent population in the society, which leaves room for groundbreaking development among the poor to middle class population. Conclusion This segment has dealt with Porter’s five forces in analyzing the viability of the House of Ajmal as a competitor in the United Arab Emirates. The issue of new entrants is of moderate importance to Ajmal’s position in the market for whereas new entrants cannot displace her overnight, acquisitions and mergers are unpredictable, hence they may dominate the market. The threat of substitutes is not a significant factor for Ajmal mostly because it has brand loyalty. The bargaining power of buyers is definitely a strong factor as the new generation consumers have triggered the refu rbishment of Ajmal’s stores and products in a bid to remain relevant. The bargaining power of suppliers is two fold, viz. it divides the suppliers of the ingredients of the perfumes and those of the packaging. The new generation demands can cause either suppliers bargaining power to have greater relevance, but this element is a significant factor. Finally, competitive rivalry is a significant factor and Ajmal’s standing seems to be sure. SWOT Analysis Strengths Ajmal is a market leader as it has been in existence for sixty years and so has brand loyalty Has not ventured into other continents and so it is more manageable Has other products besides perfumes so relevance wider outreach Has its own factory and so production costs are reduced Has its own outlets and so the middleman that is department stores is cut out Is flexible to accommodate demands of new generation Comfortably stayed afloat for sixty years with its clientele purely affluent Opportunities Could easily increase its fragrances by hiring better and more nosers Could integrate technology and internet into its business plan to increase its outreach Could easily expand into the international market Could easily target the new generation of consumers and increase its market hold Weaknesses Has only 100 fragrances while competitors have 400 Its product is customized for the purely affluent consumer Its scope of business is presently only limited to the middle east Threats Rigid stance on the use of natural raw materials as ingredients when e.g. oud no longer exists naturally Arabian Oud as a competitor that is targeting her strongholds in the UAE New legislation by the European Union and other standard boards on quality control Recommendations Generic strategy Market Expansion Ajmal has a solid impression on the consumers in the Middle East. However, it is apparent that the only reason why the competition seems to be catching up is that competition has spread its outr each to other continents and regions and so it is harnessing a greater aggregate market. Consequently, if Ajmal were to follow suit and create new branches in countries such as the United Kingdom, China, Spain, and France, its sales and profitability rations would rocket. This assertion holds because the House has the advantage of a long period in business – 60 years and natural quality products to back it up. Additionally, it should be cheaper to produce for these new markets, as European consumers prefer lighter perfumes that require less natural raw materials. Grand strategy This scheme is also called a master strategy and it provides the general direction for a business action. Specifically, I recommend market development as the grand strategy to be applied. This strategy is both affordable and less risky and it entails marketing the same product, which in Ajmal’s case entails the perfumes, the air fresheners, the lotions, soaps, and body oils and other fragrances, but under a different cosmetic package. In other words, it is simply refurbishing the packaging or by changing the channels of distribution or the contents of advertisements or promotions. Ajmal could adopt this strategy by opening new branches in other cities and countries outside the Middle East. On the advertisement perspective, an example of a solution would be to issue free pamphlets to lure young customers with the impressive depictions of the products therein, in a way akin to what mobile phone suppliers catch the young generation’s attention. Additional advertisement could also be done by creating a fan page on Facebook or a username on Twitter and have millions of followers to comment on the products. Product Development The element of product development could also be implemented as a strategy. In this case, the House of Ajmal could either modify a current product or perfume or create an entirely new product and use established channels to distribute it. As establi shed in the earlier analysis, it would be wiser to simply refurbish existent products as this aspect would reduce the risk of poor turnover ratios incase consumers are not impressed by the new product. Strategy justification The market expansion, market development, and product development strategies proposed for Ajmal are the most viable options in terms of affordability and risk management. Conclusion Ajmal is a market leader in the Middle East perfume industry. However, currently, it faces serious regional and global competition from companies such as Arabian Oud and Coty, respectively. In a bid to avoid being overtaken, the House of Ajmal should utilize several generic and grand strategies namely the market expansion, market development, and product development strategies. These strategies are advantageous due to their affordability and low-risk quality and it would be wise to avoid starting a new product entirely when the brand loyalty has kept consumers attached for close to 6 0 years. Whereas it is true that the company should evolve to be in a position to cater for the younger generation that now makes up to 65 per cent of its consumers. Therefore, it is important to strategize and evaluate how to go about meeting the needs of the young generation. The performance indicators of success shall be visible in the feedback from the surveys that the company shall carry out to measure consumer satisfaction as well as in an increase in the growth and sales rates. Moreover, by creating new branches in new cities and countries, especially outside the Middle East, shall add value to the brand prestige. Soon enough, the company shall enter the league of other global producers of perfume and be in a position to compete at that level. This case study on Strategic Management in the House of Ajmal was written and submitted by user Alissa P. to help you with your own studies. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly. You can donate your paper here.