Rinnovar International Inc. currently has around 14 billion of annual revenues and 6 shares in the market of cosmetics, fragrance and skincare. Recently, the company aimed to purchase an established company for increase its products range. RI refused to expand itself through organic growth. For expanding its business and market area, it chose to buy existing companies. The company purposed to have ability for competing with the major companies which strong in cosmetics & skincare sector in prestige and mass-market within five years.
2.1 Product Range
Rinnovar International produces less newfangled cosmetic products than competitors. The product range of Rinnovar International is limited. For example, Rinnovar International is facing the lacks of health and haircare products for the consumers in the market.
2.2 Market Area
The market area of Rinnovar International is finite and less productive in certain areas, such as South Asia and South America. Collectively, these areas recently are having the low sales.
2.3 Distribution Networks
The distribution networks are too restricted. There are only privileged agents to be used in its overseas markets. Therefore, it definitely affected the sales of the company.
2.4 Production Centres
Rinnovar International located their factories in high cost countries such as United States. This caused its products becoming costly.
3 Reasons for the Problems
3.1 Product Range
Rinnovar International faced the shortage of budget hence it lost the ability for producing new products. Besides, due to the change of target customers’ taste, the product range of this company is not satisfied the customers anymore. The lack of creativity of company also limited the range of products.
3.2 Market Area
Different area means the different kinds and cultures of people. Foreigners who are having different skin tones and skin conditions might unsuitable for using the products of Rinnovar International. It made the foreigners have no the courage and confidence to buy the products. In addition, lack of advertising techniques brought about the low interests from the foreigners to products of Rinnovar International.
3.3 Distribution Networks
The biggest reason in the distribution networks issue is the lack of trust between Rinnovar International and the other agents. This situation made the scarcity of potential agents who have the ability to spread Rinnovar International’s business throughout the world. The different of business culture in different countries also made Rinnovar International facing difficulties to spread out its business area.
3.4 Production Centre
The currency exchange rate is the main reason which causing the high production expenditure. Due to the high production expenditure, the products will produce in a smaller quantity for reducing the factor cost such as labor cost. Moreover, high competition in the labor market also caused Rinnovar International needs to pay more for hiring enough quantity of workers for their production of goods.
4 Suggestions for Overcoming Problems
4.1 Mumbai Herbal Products
4.1.1 Type of business
The company established in 2004 and it is created by two Indian women; one of them is famous model and the other is film star. Its products have strong position in shower and bath sides and it consists of hair and skincare products. R&D department is excited in creating high-quality and trustworthy products for competitive global market coupled with it has high profile clients such as hotel groups, embassies, top department stores and airlines.
The company’s international sales have decreased but it gained high profits in the past three years.
The company’s teams need to improve because most of the members in board of directors have plenty of business experience except the two founder members. The company desires to expand on more transporting, marketing and financial skill from outside.
The owners may not allow full ownership by Rinnovar International and they probably want half share of equity and profits.
4.1.5 Additional Information
The company faces many challenges in global markets as the market of hair and skincare products are growing fast in India.
4.2 Hondo Beauty Products
4.2.1 Type of Business
The business is established in 1982 and it is very flexible. It has many partnerships with foreign companies too. There is variety of products supplied such as cosmetics, bath and shower dominating with the cosmetics companies in Korea and to those buyers in Asia, US and Europe. The latest and modern factory is situated in Korea, especially for good quality control only. It is one of the business partners of many foreign companies.
The business’s profits have increased in the past three years but it has reduced its profits since there have competitions from China and India.
Since the members of the board of directors are all Korean, the management style is concurrent but the decision making process is slow in the business.
There are 60% of the ownership are owned by the Kim family and the remainder is owned by the private shareholders. Although the family would consider full ownership by Rinnovar International, but there are unlikely to get the right price between both of them.
4.2.5 Additional Information
Hondo is secured to experience strong competition from the competitive producers from advanced countries in the future.
4.3 Good Earth
4.3.1 Type of Business
Good Earth was established in 1992 and located at Belo Horizonte, Brazil. It produced various kinds of mass-market products including hair-care, skin-care and body-care parts in the market. Moreover, it has a strong position in cosmetics and fragrances market by using direct sales strategic. Through direct selling, Good Earth Company has more than 480 sales reps in Latin America, including 265 in Brazil. Since this company does not test products on animals, it is considered as a highly ethical company that using natural ingredients.
The expansion of Good Earth is having a downtrend. The profits grew gradually in previous three years. Besides, the future profits in the short term will also be affected by the heavy investment in overseas plants.
The company is managed by Gustavo Lopez and his family. Lopez is a powerful and dictatorial CEO while the younger members are more ambitious. Thus, the great tension is building up in their team but the younger members would prefer to a more dispersed structure for the company.
The majority ownership of the company is retained by the Lopez family unless they get an offer from Rinnovar International that they couldn’t reject.
4.3.5 Additional Information
In Brazil, the market for cosmetics is growing speedy.
4.4 Sheen Hair Products
4.4.1 Type of Business
The company is established at Palm Beach, Florida in 1978. It dominantly produces shampoos, hair colours and other haircare products. The products of company included many famous brand names and they are exclusively sold to beauty salons. It located its factories in low-cost developing countries.
Its financial situation is quite steady and the profits growth of the company in past 3 years did not surprising. Due to the strong competitive market, its profit margins have dropped.
It has a team which is assembled with Americans who are full of experience. However, for selling goods in global markets, they have not much experience on it.
The company is categorized as publicly owned company. It might give out 100% ownership in case the satisfying price was offered.
4.4.5 Additional Information
Although the market is competitive, the company is succeeded to maintain its share of the US market. The company was given bad press because the company had been indicated that giving low wages to its employees in overseas.
5 Evaluation of Suggestions
5.1 Mumbai Herbal Products
This business established by two Indian women in 2004 and R&D department is creating high quality products for competitive global market. It has strong position in producing bath and shower products. It gained high profits in the past three years but international sales were decreased. The company needs to improve its team and expand their marketing. The owners probably want half of the share of equity and profits. This company faces competitive global markets as their products are growing fast in India.
5.2 Hondo Beauty Products
Its business is very flexible and it has many foreign companies’ partner. There is variety of products supplied to major cosmetics companies in Korea and to the buyers from Asia, US and Europe. The profits reduced since there have competition. The management style is concurrent but the decision making process is slow. Although the Kim family would consider full ownership for Rinnovar International but it is hard to get the right price between them. Hondo is secured to experience strong competition.
5.3 Good Earth
Good Earth has a very strong position in Brazil especially cosmetics market. The sales strategy which they are using is very successful. However, the financial position of this company was bad as this company has heavy investment in overseas plants. The younger members of the company do not like the centralized structure of the company. The share ownership is hard to get as the family persist to retain a majority shareholding.
5.4 Sheen Hair Products
A Florida company which produces shampoo, hair colours and haircare products dominantly. Its production expenditure is low. Its profit margins have dropped due to the competitive market. In the board of directors, there are all Americans and they are full of experience except of selling in global markets. It is possible for making Sheen Hair Products to be owned by Rinnovar International if the right price was offered. Although it received bad press, it is successful for maintaining its share of the US market.
Cite This Work
To export a reference to this article please select a referencing style below: