CX770020 : Strategic Management

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Table of Contents
INTRODUCTION.........................................................................................................................2
PROBLEMS IN THE COSMETIC INDUSTRY....................................................................2
BACKGROUND............................................................................................................................4
ALTERNATIVES..........................................................................................................................5
Reasons for Alternative Not Being Implemented/Constraints..............................................8
PROPOSED SOLUTIONS...........................................................................................................8
RECOMMENDATIONS............................................................................................................10
REFERENCES............................................................................................................................10

TRILOGY SKIN CARE COMPANY, NEW ZEALAND
INTRODUCTION
The case study in this assignment is based on the cosmetic industry and the cosmetic products.
Cosmetic industry is a commercial sector that specializes in producing and distributing cosmetic
products, eg hair care products, beauty products, skin care products as well as other health care
products and raw materials. To be specific, the case study involves the Trilogy Company, which
is located in New Zealand and specializes in production and distribution of cosmetic products.
The case study has given a general view of how the cosmetic industry was started and how it
evolved to be one of the fastest growing industries in the whole world. Basically, the company in
question (Trilogy Company) is taken as an example of one of the fastest growing and developing
businesses in New Zealand’s cosmetic industry. Despite the intense and fast growth of the
industry, there are a number of problems that the cosmetic industry in this case study is facing.
PROBLEMS IN THE COSMETIC INDUSTRY
Close and Stiff Competition
This is a problem to most of the cosmetic businesses in the whole world. The industry is
nowadays streaming with many businesses and product brands whose aim is to be the best in the
market (Kirkley et al, 2016). Currently, there are some main companies that have already
overtaken the market and have proved to be top in the industry for over 5 decades, i.e. Procter
and Gamble, Unilever, Beiersdorf and L’Oreal which are some of the largest multinational
players in the cosmetic industry. These companies have basically taken almost the entire product
market in the whole world but still facing competition challenges on a daily basis (Chung, 2014).
The main issue is that industry is now overflowing with various businesses and product brands
that target the same consumers. Research has shown that most of these products are either
substitutes or complements but still have different features that help the consumers differentiate
one from the other. However, with the large numbers of businesses, product brands, increase in
demand of the cosmetic products and growth of the entire industry, there is increase in
competition in the cosmetic industry that may affect some of the businesses negatively hence
may end up making them leave the market (Kanazawa, 2007). According to Platzek et al, all of
these reasons or aspects can all be listed threats to the new and upcoming businesses.

Natural and Organic Product Preferences
Cosmetic products were originally being used just by a few groups of people, especially the
ladies. Nowadays, these products are being used by almost every gender and age group for many
different reasons and purposes. This has led to increase in the preference for natural and organic
skin and hair care products in general. This is simply because the customer think that these
specific products are more reliable, effective and efficient in their purpose (Lockhart et al, 2011).
Research has shown that the preference and increase in demand for natural and organic hair care,
skin care and beauty products has risen by about 15% per annum. Most of the cosmetic product
users prefer organic and natural products because they perceive the synthetic products as less
safe, less gentle and with high rates of negative effects. Therefore, this means that the organic
products are safer and gentle, have higher chances of bringing positive results and generally,
more reliable. Additionally, the fact that these products are made directly from plan extract, then
their effectiveness and efficiency is higher than that of synthetic products which are made from
chemicals that can cause damage or rather destroy rather than build. Also, the fact that there are
large numbers of consumers now consuming the cosmetic products (i.e. the aging, babies,
youths, men, women etc. who have different types of skins and hair) is also one of the
contributors to the increased demand and preference for organic and natural products.
This is a problem because most businesses in the current world are basically investing in
involving better technology into their production processes to reduce costs and produce better
products. The use of advanced technology means the use of chemicals and other synthetic
materials hence interfering with the product’s properties, in terms of organic and natural features
(Tuunainen, 2011 and Kanchana et al, 2013). Therefore, the demand and preference of organic
and natural products proves that the businesses will use better techniques to extract and produce
the products with the required quality standards and property levels.
Cosmetic and Pharmaceutical Challenges
The cosmetic products can be used for various purpose, to take care of the skin, hair, beauty and
other health conditions. Some of the pharmaceutical products can also be used to take of the
skins, hair, beauty and other health conditions. These reasons cause challenges to both industries.
This has led many businesses into combining some of the responsibilities and conducting both
the cosmetic and pharmaceutical roles, Cosmeceutical industry (Lockhart et al, 2013). This has

also led to more competition than ever between the individual businesses in each industry,
whether in terms of product prices, characteristics, marketing, target market to name a few. Also,
it is becoming a challenge for business in these industries because of the desire to offer both
cosmetic and pharmaceutical products at once or rather hand in hand (Ventola, 2011).
In conclusion, the problems in the cosmetic industry may be few but can still cause a lot of
impact to the business themselves and the industry. However, every business should be in a
position to identify the problems affecting its operations and find its own ways to solve them,
simply there are solutions for all of the problems named above.
Supply chain challenges
BACKGROUND
Trilogy is a cosmetic company situated in New Zealand. It was established by two sisters (Sarah
Gibbs and Catherine De Groot) and launched in the 2002. The company specializes on producing
and distributing natural skin care products and hair products in a number of countries i.e. Europe,
Japan, Australia and USA. Since its commencement, the company focused only on producing
products that would cater for the New Zealand customers but with the increasing and growing
demand for skin care products in the cosmetics industry, the company started to shift their focus
to target other markets and customers, e.g. the countries mentioned earlier. From the beginning,
the company produced its skin and hair care products from one main raw material which is the
rosehip oil. From this raw material, the company came up with various products like skin
cleansers, moisturizers, serums and oils, eye and lip care products to name just but a few. to be
specific, the company started by focusing on the production of just four products but with the
increased market growth and cosmetic product demand, the company is currently producing
around 27 product types with different consumers being targeted. From the beginning, the two
founders aimed at achieving their main philosophy which was based on three basic and
fundamental principles; producing best pure natural products, inclusion of minimum synthetic
percentage during production and involvement of deep and most effective skills and knowledge
into the production process. This objective or rather purpose is what contributed mainly into the
development and growth of the whole business at a faster rate, to the extent of being listed as one

of the 50 fastest growing cosmetic companies in New Zealand for three consecutive years.
However, the company was still aiming at focusing on reaching the global market and becoming
an international company. Based on the history of the cosmetic industry, it was started at around
4000 BC, but did not concentrate or give much recognition to sustainable growth and
development until the beginning of the 20th century. However, after gaining its sustainable
growth and development, the industry grew intensely and became more attractive to investors
and business people to date. For instance, in North America and Eastern Europe, the industry
grew at a faster rate hence being valued to more than US$150 billion. Research has proved that
many developed countries are certainly receiving large amounts of revenues from the industry,
e.g. USA, Australia, Europe, Brazil etc.In addition to that, the cosmetic industry spread even
more lading to the production of various kinds of products by many large companies, like Procter
and Gamble, Unilever and L’Oreal among others. The businesses in the industry were able to
focus on production of different kinds of products like hair care products, beauty care products,
skin care products to name a few. Currently, the industry has growth further with the changes in
product preferences and demand, i.e. more preference and increase in demand of organic and
natural cosmetic products. This has forced the businesses that specialize in the production and
distribution of these products to change their processes and raw material usage to suit the
consumers’ desires. As a result of the industry’s’ growth, the individual businesses have also
grown into multinational companies whole operations are carried out in global levels. With that
in mind, Trilogy basically hopes to increase the sustainability growth and development of its
entire business operations by globalizing its operation in the international market. According to
the case study, the company is almost achieving this objective due to the numerous and frequent
product advertisements made in many various cosmetic and beauty magazines form different
countries. In addition to that, the company is focused in involving large numbers of retailers,
wholesalers (e.g. supermarkets and department stores) and other types of genuine and legal
distributors in the cosmetic industry to reach its customers.
ALTERNATIVES
Cosmetic Product Production rather than Rosehip Seed Oil Exportation
Before the company was made or even started, Sarah Gibbs, one of the Trilogy founders was just
exporting rosehip seed oil to other countries and selling it to other international cosmetic

producers and markets all over the world. However, later on, together with her sister De Groot,
Sarah decided to do more with the seed oil and rather than exporting it, they decided to sell it in
their own market, in New Zealand. The two founders started to produce cosmetic products on
their own by using the rosehip seed oil as the main and only raw material. Through that they
made around four products which they sold in the New Zealand market. With the four main
products, the business was able to focus mainly on retailers and specific customers which led to
the company’s drastic and fast growth and development onwards. The two founders were
certainly more thrilled with their new business more than their original business. This led to the
creation and development of Trilogy Company.
Use of Natural and Organic Raw Materials to Produce Cosmetic Products
Trilogy Company specializes on production of natural cosmetic products which are produced
through the use of organic raw materials, i.e. rosehip seed oil. By the time Trilogy was started,
most businesses produced cosmetic products by mixing or including synthetic materials like
chemicals in the production process. However, Trilogy used the rosehip seed oil as its main raw
material. The other raw materials used in the production process of Trilogy products have always
been organic material extracts, eg organic marula oil, organic jojoba oil, evening primrose oil,
honey and coconut oil. The use of raw material to produce cosmetic products is an alternative
choice for the company because the founders will now be able to do exactly what they love and
are thrilled of doing. In addition to that, by committing to natural product production, the
company has higher chances to grow and develop more because of the increasing preferences
and demand for natural cosmetic products (Yeoman et al, 2011). According to Fisk, 2010, this
can be said to be a way of increasing sustainable growth for an organization in general.
Marketing and Advertising Techniques
According to the case study information, Trilogy Company lacks effective international
marketing techniques. For instance, the company’s products have never been advertised in the
very well-known cosmetic and beauty magazines known in the world, like Vogue, Marie Claire
UK and Elle USA (Preece, 2015). However, Trilogy has been advertised and marketed in other
international magazines largest departmental store magazines. Even with the few advertising
choices and methods, the company’s products are certainly well-known and popular to its
consumers in many countries (Thomas et al, 2015). This means that the company’s objective to

market and advertise its products has been achieved through other ways. To be specific, Trilogy
chose to concentrate and put more effort on ensuring that the retail market is well taken care of
and that the products are always available and enough. Trilogy has also focused on ensuring that
almost every commercial media platform has covered its product advertisement and marketing
effectively. Through this, current customers are able to be updated on the product development
and advancement while the potential customers get the opportunity to know of the products’
existence (Seo et al, 2015 and Kumar et al, 2013)).
Growth and Sustainability
The cosmetic industry was originally not focused on ensuring its growth and sustainability.
However, in the beginning of the 20th century, the industry was able to attain its sustainability in
growth and development which means that its main objective and purpose was to not only
benefit itself, but also the customers and the community at large (Mendez-Otero et al, 2012).
Generally, the sustainable growth is one of the greatest challenges that a business can face
especially during its start-up years (Fonseca-Santos et al, 2015). Basically, there are a number of
fundamental factors that are capable of fostering sustainable growth (Dobbs et al, 2007). They
include, ensuring that there is authentic purpose for the business, ensuring that the product brand
is powerful, effective and efficient customer retention, effective partnership and collaboration,
community involvement to name a few. In this case study, Trilogy Company were able to ensure
that most of these aspects were achieved. For instance, the company ensured that its product
brand is powerful, ensuring that there was an authentic purpose of the business itself and the
products themselves among other things. Originally, the cosmetic industry hoped to grow and
develop when it was started but this alternative to focus specifically on ensuring effective
sustainable growth was able to not only develop and grow the industry but also to ensure that
market growth was long-term and continuous.
Cosmeceutical Industry Creation
This industry was an alternative for reducing the competition between the new, modern and
upcoming natural cosmetic businesses with the pharmaceutical businesses. In the current
business world, large number of consumers have more preference for the organic and natural
products, whether for medical purposes, beauty, skin care or hair care purposes. The demand of
these products has also increased hence leading to an increase in the number of businesses

producing and distributing natural or organic cosmetic and medicinal products (Tanentzap et al).
The result of all of these scenarios is high, close and stiff competition in both the cosmetic and
health industries. Therefore, some businesses decided to join some of the business which made
the Cosmeceutical industry. This industry aims at providing both the organic or natural cosmetic
and pharmaceutical products together. From the creation of this industry, many businesses have
tried to enter the market without success. This is simply because of the lack of faith and believe
from the consumers. Many customers have always claimed that the products produced by the
industry are sometimes misleading, unclear, ineffective or highly effective hence causing adverse
negative effects.
Reasons for Alternative Not Being Implemented/Constraints
The alternative on Cosmeceutical industry creation was certainly not implemented by many
businesses because: there were a number of claims and complains received from the customers
about the products’ being ineffective, highly effective, unclear and misleading. This means that
even with the diverging Cosmeceutical industry, the companies that were willing to offer both
cosmetic and pharmaceutical products as one single products cannot actually manage.
The alternative on using natural and organic raw materials to produce cosmetic products was also
not greatly implemented because: first there are no specific and clear official regulation rules that
are meant to govern organic certification in most countries. This include the amounts of natural
nutrients or ingredients used, quality standard, type among others. Second, it is a great challenge
to manage fractioned supply chain, especially for individual suppliers, producers as well as
sourcing raw materials for the formulators (Alsos et al, 2014). This means that with the increase
in demand and preference for natural and organic cosmetic products, it is impossible to
determine exactly which product is pure organic and natural from many other brands claiming to
be (Neubauer et al, 2016).
PROPOSED SOLUTIONS
The best proposed solution for the alternative on Cosmeceutical industry creation is basically to
leave the industries to be independent. This means that the industry will be dissolved leading to
non-existence. When the industries become independent, they will be able to make their own
rules and regulations which are meant to guide and govern every producer and business in
general. Additionally, industry independence encourages business independence which means

that the businesses will focus their efforts towards ensuring that their products and services,
production processes and other operations completely adhere to the set standards and laws
(Platzek et al, 2010). When the industry is non-existence, there will be no businesses that will be
willing to join a collapsing industry or rather non-existence industry. Therefore, there will be
more businesses joining either the cosmetic or the pharmaceutical industry. When the businesses
increase in these sectors, there will be increased, close and stiff competitionin the industry. This
will basically force the businesses to improve their product quality and change other things like
product pricing to suit that of the consumers (Pfeiffer, 2014). The end result of the process is to
implement better, effective and manageable rules and regulations to be used by all the business
in the industry.
The solution for the alternative on using natural and organic raw material to produce cosmetic
products is to first involve the governmental organizations or authorities on the matter and then
creation and development of the laws and regulations to govern the production of the products
themselves (Fonseca-Santos et al, 2015). In all countries, there are different but certain and
specific laws and rules that govern the cosmetic and medicine industries. In New Zealand, the
medicine producing businesses have to comply with the laws and guidelines that are set to
govern medicine products, i.e. in terms of active ingredients used, quality standards of the
ingredients, amount of the ingredient used among other things. All of these regulations are
contained in the New Zealand’s Medicine Regulations 1984. A cosmetic is basically any product
that is used to cleanse, protect or beautify the hair or skin. In New Zealand, all cosmetic products
must comply with the Cosmetic Products Group Standards that was created in the year 2006 and
published by the Environmental Protection Authority.From the information provided by
Environmental Protection Agency, other additional regulations like regulation 24 and 26-36 of
the Medicines Regulations of 1984 must also be adhered to by any cosmetic business and
product. Therefore, the industry should focus on ensuring that the regulations and laws
governing the cosmetic industry are monitored and adhered to, including the bills pending
approval in the parliament to ensure that are all clear and comply with the industry’s objectives
and purposes. According to Cosmetic Products Group Standard 2006, currently there are no set
laws that govern and give a guidance on the quantity and amounts to be used by producers when
producing certain products, the business owners ought to ensure that all the requirements are
well measured, estimated and mixed with each other during the production processes. In other

words, the business owners must ensure that the products are safe to use, effective and clear
instructions on use for the customer. These regulations should most importantly be implemented
for business that produce organic or natural cosmetic products as well as medicines. Therefore
the Environmental Protection Authority should be able to set these regulations and the Cosmetic
Products Group Standard should be in a position to implement each one of them.
RECOMMENDATIONS
Creation and development of regulations
The country should be able to ensure that all the required requirements are created and enacted
into the specific industry’s systems and laws. The associations or bodies (e.g. in New Zealand,
the Environmental Protection Authority with the help of the Cosmetic Products Group Standard)
responsible for this role should therefore put more effort into coming up with specific laws and
regulations that will govern the production of organic and natural cosmetic products as well as
the medicines. This is simply because, these are the types of products that are currently being
preferred and highly demanded but lack laws and regulations to govern their production.
Encourage in-existence of Cosmeceutical industry
The country should also burn the existence of Cosmeceutical industries which will lead to non-
existence of the business that offer the industry’s services and products as well. When the
industry is non-existence, the cosmetic and pharmaceutical industries will certainly be left as
independent which will increase the rates of development and fostering growth in each one of
them. In addition to that, the independent industries will end up having more members or
businesses which will lead to more competition in general. The result of such a scenario is
improved product quality standards, better pricing levels for the products, increased supply of
products to name a few benefits to both the economy, businesses and the consumers.
Encouragement of usage of natural or organic raw materials
The country can also encourage the production of organic or natural cosmetic and medicine
products by coming with less but more effective requirements for both industries. The laws or
regulations must generally favor the production of organic or natural cosmetic products, e.g.
offering government support though incentives, infrastructure improvement to ease the
transportation processes of raw materials, encourage the growing of the raw materials in the

country, enacting reasonable taxation regulations especially for these products to name a few
things. Besides getting revenues from both industries, the country will also be able to provide for
its people their medicinal and cosmetic needs through the businesses.

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