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Strategic Review of G and M Cosmetics

HI5019 STRATEGIC INFORMATION SYSTEMS 

Each student will write a strategic analysis report of NOT more than 2500 words. The report should demonstrate that the student has thoroughly researched their topic. Students should use examples of business practice from the scholarly journals papers, conferences, books and professional magazines to support their arguments. The strategic analysis will be on a local company. The report consists of two parts and should cover the following requirements:

PART 1 (External analysis) 

1. Business background 

2. What industry is it? 

3. General environment analysis (economic, physical, sociocultural, global, technological, political/legal and demographic – and work out what the important facts are). 

4. The industry environment ((i.e., supplier power, buyer power, potential entrants, substitute products and rivalry among competitors) and explain briefly what is significant for each). 

5. Competitive environment (Is there a strategic group that you need to take account of? What is the rivalry like in this group? What capabilities do the relevant firms have? What strategies do they follow? What threats do they represent?) 6. Opportunities and threats

PART 2 (Internal analysis and proposal)

1. The firm’s resources, tangible and intangible 

2. Capabilities identification (explain the capabilities carefully to indicate what the firm really does.) 

3. Core competency analysis (For each capability, indicate which of the four tests for a core competency it meets). 

4. Propose a suitable information system solution that meets the chosen company needs. 

5. Evaluate the proposed system and provide your recommendations

Answer

STRATEGIC ANALYSIS

Introduction:

In this present era, maintaining sustainability and achieving competitive advantage has become tough for an SME. This is because; every sector is saturated and included a massive number of well known and innovative organisations. Therefore, to attract some customers in the organisation, it is necessary for making an active decision regarding product development, supply chain development, or resource allocation for which a better

 analysis is essential. Strategic analysis helps any company in becoming more innovative, sustainable, and resilient. This assignment is intended to describe the strategic review of an SME named G&M cosmetics.

Part 1:

Background of business:

G&M cosmetics Pty Ltd is one of the organic, ISO 9001 certified along with renowned skincare organisation that manufactures as well as sells skincare products in both the national and global level for more than 21 years (SmartCompany, 2018). The organisation is one of the family-owned businesses, and it is 100% Australia owned business. The turnover of the company is more than $8 million, and it is developed at the 201% rate over the past three years (SmartCompany, 2018). The organisation employed 20 people. The owner of the business is Zvonko Jordanov who founded the organisation in the year of 1996. The owner had developed an Australia based skincare company because the owner found that European cosmetics are very waxy, thick as well as heavy for the climate of Australia (SmartCompany, 2018). The company becomes famous for their high quality as well as a popular range of Australian cream along with the bio essence range of Australian oils.

Industry from which the company is belonging:

As G&M cosmetics are associated with selling the skin care products to the customers so it can be said that the organisation is belonging to the cosmetic industry. 

General environmental analysis:

For developing a brief overview regarding the external environment of G&M cosmetics, analysing the below-mentioned factors needs to be explained: 

Economic factorsThe government has dropped the tax rates to 27.5% for the business whose turnover is up to the $10 million (Pulse, 2018). Therefore, this initiative can help G&M cosmetics by saving some costs and invests it in the research and development so that they can achieve a competitive advantage. The funding options for Australian SMEs are increasing that can helps SMEs such as G&M cosmetics Pty Ltd in gaining an active growth. It has been observed that the member of AICM can quickly get up to $80 billion in any day to strengthen their cash flow that can help the business in achieving an active growth (Pulse, 2018). Non-banking options are rising for SMEs that can assist in facilitating an effective business expansion.
PhysicalThe organisation belonging to the skincare industry that is blooming in Australia and the revenue is developing. For attracting the attention of customers, G&M cosmetics has developed the massive range of products such as Australian creams, native Australians creams, bio essence Australian oils, DR V etcetera to attract the significant number of customers (SmartCompany, 2018).
Socio-culturalPresently, customers are accepting those skincare products that involve the natural ingredients but still innovative. Customers are expecting that a cosmetic brand would use the action as well as natural cosmetic parts such as botanical extracts, enzymes, along with various vegetables, herbs as well as fruits that include the anti-ageing properties (Naturally Good, 2018). On the other hand, G&M cosmetics utilises natural extracts that can help the business in achieving a competitive advantage with efficiencies by satisfying the needs of customers. Moreover, the organisation is the certified organic manufacturer that makes them widely accepted towards the customers (Kim and Urpelainen, 2015).
GlobalThe global economic recession creates a negative impact on the business of G&M cosmetics Pty Ltd. On the other hand, there are other organisations in the foreign market, therefore, to expand business in the market, the organisation can face issues regarding colossal competition.
TechnologicalAutomation in the manufacturing process can create efficiency in the process of production. Therefore, by maintaining automation, G&M cosmetics can improve their manufacturing process. On the other hand, an active focus of the company towards the social media marketing can help the business in attracting more number of customers towards them. 
Political/ legalIn the 2017/18 federal budget submission, the council of the small business of Australia request the government to support the SMEs that can help SMEs such G&M cosmetics in expanding their business in Australia with more efficiency. Despite the concern of Australian government towards the SMEs, the political uncertainty along with the downturn conditions in the property markets can create negative impacts for SMEs in securing an active growth  
DemographicIt is observed that more than 4725976 number of a female of Australia belong from the 25 to 54 age group that can help their business in selling their ageing related products (Indexmundi.com, 2018). There are 2012670 number of female and 2122139 number of a male who is belonging from the age group of 0 to 14 years so that G&M cosmetics can sell infant products to a massive amount of customers (Indexmundi.com, 2018).  Along with that, there is 1446663 number of a female who are belonging from 15 to 24 years. Therefore, G&M cosmetics can sell various skin care products.


Analysing the industry environment:

For explaining the industry environment, it is useful in applying Porter 5 forces model so that a better understanding regarding the cosmetic industry and market competition can be achieved. Porter five forces model of the cosmetic industry of Australia is showing below:

Supplier power:

There are higher numbers of a raw material supplier that are available in Australia such as Australian wholesale oils, cos mark, Trulux, Avenir ingredients etcetera. Therefore, for maintaining a position in the market, every supplier offer their products in the affordable costs (HuffPost Australia, 2018). Thus, the bargaining power of supplier is less because they charge a price based upon the amount demanded by their customers. 

Buyer power:

The buyer power in the cosmetic industry of Australia is very high because there are some cosmetic companies in Australia along with some well known foreign companies. Therefore, customers have so many options in front of them that provide them with a higher level of bargaining power. Along with that, switching costs are decidedly less that increases customer bargaining power.

Threats regarding new entrants:

Risks regarding the new entrants are less in the market because of starting a new manufacturing unit; it is required to invest significant money for initial setup. Along with that, it is also necessary to develop a useful set of suppliers for delivering excellent quality products to the customers that have decreased the chances of new entrants (Walker et al. 2014).

The rivalry between competitors:

There are higher numbers of a cosmetic brand in the market such as Weet-Bix, Qanats, Myer, Mirvac, Chemist warehouse etcetera along with some large beauty brands such as QV skincare, Aesop, Natio, Lucas Papaw, A'Kin etcetera (HuffPost Australia, 2018). Therefore, there are higher numbers of competitors that are present in the market that has created stiff competition for G&M cosmetic. 

Substitute products:

 There are higher numbers of substitute products of G&M cosmetic because G&M cosmetic mainly sell organic products and there are so many alternative brands that manufacture products with artificial ingredients and sell it to the customers.

Competitive environment:

The strategic group that is present in the cosmetic industry is the organic product. Different competitors that are present here are showing below:

Name of the competitorsCapabilitiesStrategiesThreats created by them
A’KinUsing vegan and free from paraben, sulphates ethoxylated chemical free products (HuffPost Australia, 2018).Developing organic products

Created enormous threats for G&M cosmetic because both the company sell similar types of raw materials to develop their products
The beauty chefThe organisation has the capabilities in hydrating and improving the texture of skin as well as boosting collagenPromoting products from organic ingredients (HuffPost Australia, 2018).The organisation develop those products that make skin healthy from the inside. Therefore, this fact can generate sufficient threats for G&M cosmetic because the outcomes of The beauty chef is better.
LanolipsThey have capabilities in developing products from the natural, essential along with the honest products (HuffPost Australia, 2018)Developing products by including her hero ingredientsas the organisation creates every product from the crucial skin care elements so that it can attract the customers that love to use natural ingredients that can create a threat for G&M cosmetic


Opportunities and threats:

In the present time, the revenue that is generated from the skincare amounts to the US$1650 million in the year 2018. There are vast possibilities that the market can be grown by 4.7% among the year of 2018 to 2021 that can create a compelling opportunity for the G&M cosmetic to achieve effective profitability. In the global cosmetic industry, it has been observed that most of the revenue is generated from the US which is amounted to the US$16993 (Statista, 2018). Therefore, by expanding their business in various areas of the US, G&M cosmetic can achieve more revenue. The ageing population is rising in the Australia that can create an additional opportunity for G&M cosmetic because it can increase their sales of anti-aging products (Statista, 2018). It is observed that high disposal income, availability of new market along with the increasing level to the bottom of the customers can drive the growth of G&M cosmetic.

However, the economic slowdown condition may decrease the revenue generation of the organisation. Along with that, the number of the cosmetic brand is rising in the Australia that can create issues for the organisation by increasing the level of competition for the organisation. On the east coast, the markets have been highly saturated that can generate massive competition in the market (Mordorintelligence.com, 2018).

Part 2:

Resources of the organisation:

Tangible resources:

G&M cosmetic has a sufficient amount of tangible and intangible resources. The organisation has the business turnover of more than $8 million. The organisation has established their business in two countries such as China and Australia that helps them in operating in the two markets (SmartCompany, 2018). The organisation has 20 active numbers of employees that support the organisation in achieving dynamic growth. Along with that, the tangible resources of the company also include variously advanced types of machinery as well as tools that are required for manufacturing their products (SmartCompany, 2018). The organisation has a proper research and development department that can help the organisation in achieving competitive advantage so that researchers in their organisation are one of the tangible resources.

Intangible resources:

The intangible resources of G&M cosmetic are the organisation is the organically certified manufacturer that helps them in attracting a massive number of customers who loves to use the natural products (SmartCompany, 2018). The company is ISO 9001 accredited. The organisation is operated as the 100% Australia owned company that attracts a vast number of Australians towards the brand.

Identifying capabilities:

The organisation has the skills in developing various Australia based skincare products that are perfect for the Australian weather. G&M cosmetics is successful in producing high quality, and premium products for everyday use with the help of various natural ingredients such as Lanolin oil, Emu oil, Avocado oil, goats milk etcetera (SmartCompany, 2018).

The other capabilities of the organisation are effective staff management. As per the owner of the organisation, they handle their staff with the help of staff motivation that they perform by offering so much autonomy to the employees so that they can think individually and develop more creativity (SmartCompany, 2018).

Along with that, the organisation also has the capacities in developing effective marketing. The organisation has a good focus towards the development of the social media marketing. For this purposes, G&M cosmetics has created their official page on Facebook and Instagram through which they provide updated product information to their customers to attract them towards their organisation (Breja et al. 2016).

Analysing core competencies:

Different core competencies of G&M cosmetics are shown below:

Branding:

The organisation has developed a 100%Australian owned brand that can easily attract a considerable number of Australians. Along with that, they have also earned the “Most trusted Australian brand” award that helps them in establishing an effective brand value (SmartCompany, 2018). They have developed their brand as a certified organic brand that helps them in attracting a massive number of customers. 

Innovation:

The organisation has invented a range of skincare products that are suitable for the Australian environment. The organisation has developed high quality as well as suitable skincare products from various natural ingredients that help them in securing the top position in the market.

Development of an extensive supply chain:

The organisation has developed their market in boththe China as well as Australia and for selling their product in these two markets, they have developed a unique supply chain so that they can make their product reachable to their customers with the help of various pharmacy, national retailers, and online stores along with the health stores (Tan and Carrillo, 2017). Their unique distribution point is helpful for them to make their product reachable to a massive number of customers. 

Proposing suitable information systems:

As G&M cosmetics have their existing businesses in both the Australia and China and they are also expanding their business in Malaysia, so for maintaining their business in these countries with efficiencies, it is necessary for applying a better decision support system so that G&M cosmetics can keep their business in this highly competitive market. A decision support system can help G&M cosmetics in making an active decision by facilitating a useful data analysed that are gathered from the various transaction-related information along with the other information such as buying raw materials, number of items that are manufactured and number of items sold. For making a practical decision, G&M cosmetics can apply a premium version of big data analytics. Big data analytics is essential in any business because it helps an organisation in finding new opportunities along with gaining some new insights for running the business more efficiently (Zakir et al. 2015). A useful big data analytics is also essential for G&M cosmetics because it helps in providing some vital information to the organisation that can help them in facilitating more effective business decisions. Along with that, G&M cosmetics need to apply big data analytics in their organisation in saving some cost of storing information (Zakir et al. 2015)

Evaluating the proposed system and providing recommendations:

Implementation of big data analytics is perfectly effective G&M cosmetics because it helps the organisation in identifying their current position in the market with the help of market data, competitor related data, and inventory related data along with the transaction related data. It is observed that the number of competitors is rising in the skincare industry so that for maintaining position in the market and achieving competitive advantage, it is essential for G&M cosmetics to apply some effective strategy with the help of which they can gain competitive advantage. Big data analytics can help G&M cosmetics by providing a useful insight regarding the current position of the company in the whole market to make a practical decision.

However, implementation of the big data analytics is not that much easy for G&M cosmetics because they are not a technology company so that their employees do not know about handling the big data analytics. Therefore, to facilitate successful implementation of the big data analytics, it is essential for the company in providing training to the employees so that they can handle big data analytics for storing and retrieving information. Along with that, it is highly recommended to G&M cosmetics in hiring a third-party vendor to implement big data analytics in their organisation because the organisation does not have any technical knowledge to establish the technology.

Conclusion:

From the above discussion, it can be concluded that for achieving competitive advantage in a market, it is always essential to invent some unique products that can perfectly satisfy the need of customers. This is because innovative products with unique features still attract some customers. G&M cosmetics is one of the well-known cosmetics SME that mainly offers organic products to draw them, but the organisation is facing massive competition from the other well knew cosmetic brand. Therefore, for achieving a competitive advantage in this highly competitive business environment, G&M cosmetics need to make some effective decision to improve their productivity and to align their resource with more efficiency. For this purposes, the organisation requires an effective decision support system.

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