Using the diagram above to analyse the points as posed by the porters five forces, Rivalry What industrial characteristic influence the intensity of the rivalry.
The strive for profit The intensity of rivalry among firms varies across industry, and the different is measured with respect to industry while for france fragrance industry the type of competitive move each firms adopt in other to make profit are sometimes aggressively and sometimes rivals compete in non-price dimensions such as innovation and marketing; and this is what is greatly applicable in the fragrance industry with each firm coming out with new product at every interval when it seems the market is getting tired of a particular product, while at the same time each firm tried to give a big push to their product in the market by giving it a worthwhile marketing in other to distinguish it from other product. Others include: * number of competitors * rate of industry growth * intermittent industry overcapacity * informational complexity and asymmetry * fixed cost allocation per value added * level of advertising expense * Sustainable competitive advantage through improvisation The type of competitive move In pursuit an advantage over its rivals, a firm can choose from several competitive moves which include; * Changing prices as well as improving product differentiation * Creatively using channels of distribution * Exploiting relationship with suppliers (i. e. my product, my standard)
The threat of substitute products The existence of close substitute products increases the propensity of customers to switch to alternatives in response to price increases (high elasticity of demand), and the determinant may include; buyer propensity to substitute relative price performance of substitutes buyer switching costs perceived level of product differentiation however, this is part what the French government has always protected and tends to give threat of close substitute a lesser advantage by giving each firm its own market share within which your product is protected. The threat of the entry of new competitors Profitable markets that yield high returns will draw firms.
This is what has made france fragrance industry to be saturated as a results of many new entrants, which has effectively decrease profitability, also based on the government protection it is now difficult for a new entrant into the market. However based on porters view the other points that can cause barriers include; * the existence of barriers to entry (patents, rights, etc. ) * economies of product differences * capital requirements * access to distribution * absolute cost advantages * learning curve advantages * expected retaliation by incumbents * government policies The bargaining power of customers This can be define as the ability of customers to put the firm under pressure also described as the market of outputs. This situation happens when buyers are sensitive to price changes.
What pose the situations are; * the ratio of buyer concentration to firm concentration * degree of dependency upon existing channels of distribution * bargaining leverage, particularly in industries with high fixed costs * buyer volume * buyer switching costs relative to firm switching costs * buyer information availability * availability of existing substitute products * buyer price sensitivity * differential advantage (uniqueness) of industry products however, to live above these, it can be observe that almost all the fragrance company have launch out to other European countries as well as other part of the world with france still being the head-quarter using good channels of distributions.
And even at this end there are still element of French government backing across the European union. This can be described as market of inputs. This is a situation where suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. While in these case study the major supplier are the farmers that plant the flower and the perfumers, also includes the labour and the kinds of threat include; * Supplier charging excessively high prices for unique resources. * supplier switching costs relative to firm switching costs * degree of differentiation of inputs * presence of substitute inputs supplier concentration to firm concentration ratio * employee solidarity (e. g. labor unions) * threat of forward integration by suppliers relative to the threat of backward integration by firms * cost of inputs relative to selling price of the product 1b To analyze the competition within the fine fragrance distribution industry by using the porters five forces with the use of the same diagram above The following are the posed problems from the five element i. e. Rivalry The major rivalry in the retailing store is in the standard with which each store is portraying the fine fragrance with respect to the compliance of the standard and the level of their customer relations.
The threat of substitute products To be the most patronize store, each make sure they stock the latest perfume and a popular one such that what value for money, else there are several alternatives to choose from, not to talk of price quoting from the down market stores e. g. Superdrug, where customer knows they can get the same product for less. The threat of the entry of new competitors Fine fragrance retailing is a young market where the intrusion of new store is still allowed even though it seem a bit of a protected market, as long as you can keep up with the standard which protect the fragrance house. Hence it calls for the existing to store to always put up a strategy to keep their position in the market as it can be observed in the case of Superdrug i. e. hat enters the market with same products but with far less price. The bargaining power of customers Having understand that there is well enough choice to choose from, ranging from the up-market i. e. boots, house of fraser with standard product from the manufacturer as well as standard price, and the down-market e. g. Superdrug that got its supply from: over produce product, gray market, also from the direct distributors and are selling it a very low price. Customers tends to use this knowledge to lure even the up-market to bring down their price to suite themselves, and that is when stores tends to embark on sales in other to attract more customers and be able to make profit in return.
The bargaining power of suppliers Being the intermediary, the retail store sometimes tend to be at the receiving end of profit loss, because with the supplier trying to meet up with the target sales and profit they tend to push the over price of materials, services and other sundry expenses incurred in the curse of production to the retailers and it sometimes become a big problem for retailers to break even Question 2 The impact of celebrity endorsement on fine fragrance competitive environment It helps attract many first-time fragrance users to newer trends and celebrity-driven scents. It has taken competition in the market to whole new level as classic designers, like Ralph Lauren and Giorgio Armani, launch new products and more celebrities launch their own fragrances.
When it comes to teenagers, it has been reported that celebrities are more popular, with lot of American girls who wear fragrances saying that they use a “celebrity” fragrance, as opposed to fewer adult women. Question 3 Selective distribution agreements, on one hand, is a distribution system that restrict the number of authorised distributors and prohibit sales to non-authorised distributors, which leaves authorised dealers only, appointed dealers and final customers as possible buyers. Selective distribution is almost always used to distribute branded final products. Basically selective distribution is expected to satisfy the following conditions as it si given by Article 81(1) of the EC Treaty. First, the nature of the product in question must necessitate a selective distribution system.
Secondly, resellers must be chosen on the basis of objective criteria of a qualitative nature. Thirdly, the criteria laid down must not go beyond what is necessary. Fine fragrances are marketed as luxury products and one that is accepted to use selective distribution in order to protect the brand images which consumers evidently value. The fragrance houses only supply their products to retail outlets which, in principle, provide an ambience which accords with the luxury image of the products and the criteria in which they select these stores include; Staff training Lightning Ambience Location Size of windows Self arrangement and The quality of floor covering eanwhile, the use of selective distribution by the fragrance house has in time past generated some questions especially when stores like Superdrug and Pound stretcher regarded as the discount stores are also willing to get direct distribution from the fragrance house and it include; A complex monopoly exists in the market whereby fragrance houses might refuse to supply non-recognised outlets The fragrance houses operated a form of selective distribution selling their products to selected retail outlets who offer the ambience and luxury associated with the product which in turn makes the product so expensive, other point include; There appear to be lack of competition in the market Maximize control over service level/output Enhance product’s image & allow higher markups
Promotes dealers loyalty, better forecasting, better inventory and merchandising control Restricts resellers from carrying competing brands Only suitable for high price, high margin, and low volume products Selected firms capable of carrying full product line and provide the required service However, if the selective distribution agreement is abolished, companies like Givenchy, chanel, and the other notable one will be greatly affected because the reverse will be the case for stated points above and it will be.
