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Business Level Strategy: Sephora

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Question:

Describe and discuss the major management functions of planning, organizing, leading, and controlling in Sephora organisations?
 
 

Answer:

Overview of the company

The company was founded in the year 1970 in France. The company has more than 100 brands in the company with 1800 stores spread over 30 countries. The company has a customer base of over 6 million and has 27000 employees working in the various branches spread across the world (Wearesephora.com, 2015).

The innovation objectives

The competition and demand and markets- the company by offering large number modern brands and also excellent customer services so that the company can attract a wide young customer base. The sales associates of the company mainly focus on the color, skin care and fragrances of the products. They often try to cross sell the products (prezi.com, 2015).

Production along with delivery- the company changed the sales policy so as to attract many customers. The company also took the initiative to reduce the cost of operation and also the cost of labour.

The company tries to employ a more number of managers who are brand centric and their stores are based in the centre of the big cities. The company has an organizational structure which is traditional in nature. The exception is that two of the marketing SVPs reports to the CEO directly.

Organization workplace- the company tries to connect the various business activities among the network partners for sharing of the knowledge. The company believes that one company does not need to follow the herd if it is under the umbrella of a big brand (Schweiger, 2008). The company becomes stronger if it adopts the culture of the place in which the company is operating. It gives the company individuality and thinking in a fresh way and also to generate unexpected ideas.

Marketing strategy of the company

Sephora is one of the widely recognized cosmetic retailers in the world. Recently it has integrated a digital marketing scheme in their overall marketing strategy. The company has a single executive who looks after the both the marketing and digital sectors. It was one of the first companies in the world to sell prestigious cosmetics. The company allowed the customers to touch and use the product in the same location (beauty, 2014). In the year 2007 the company opened its website making the company an early entrant in the e-commerce market. The company continuously tries to make commitment to the customers and educates the clients. The company took the digital far beyond the product specifications and shopping carts; but they also built  a system which could give the customers a better access to the image of the products, more information and clarity (Mullins and Walker, 2013). The website also gives an opportunity to the customers to communicate with the company and also with each other. The company plans to introduce new products every month in the first year of its operation.

Financial strategy of the company

The growth strategy of the company is that it plans to capture the 10% of the Australian cosmetics market which is $4 billion industry. The company plans to do that by offering lower prices and new brands as well as the self service to attract the younger generation in their stores. The sale if their product is expected to reach from $225 million to $250 million and the market share of the products will reach double digits in the next four- five years. The store Is planning to open 20 new stand alone stores in the country (Loeb, 2013).

 

The industry environment of the company

The industry environment of the company can be discussed with the help of the Porter’s Five Forces Framework.

The threat of entry- the threat of new entrants in the market of cosmetics is low since the entry requires a huge investment in capital, inventory as well as an efficient distribution channel. It also requires good relationships with a large number of brands. Thus the threat of new entry in the market for the company is low (Harvard Business Review, 2014).

The threat from suppliers- the supplies of the company has low bargaining powers as the company features products from a large number of brands and the company also has its own private label. Moreover the suppliers have to comply with the supplier’s code of conduct in order to carry out the supply. This is done so as the supply chain of the company is transparent (The Business of Fashion, 2013).

Threats from the buyers- the customers buy beauty products from three different types of shops they are department stores, retail stores like Sephora and drug stores. Since the switching over cost is low in the beauty industry, the customers do not stick to the same store. They go to places which offer lower cost products rather than the higher cost that are offered in Sephora.

Threats from the substitutes- there are no close substitutes of Sephora as the customers will not be able to make a wide range of products in their home and the sources are limited.

Competitive rivalry- the competition of the beauty products is huge in the market. Some of the competitors of Sephora are Societe De Distribution Aeroportuaire, MH Muller Handels etc in France. These are certain country specific competitors and the company operates globally.

Business Level Strategy of the company

The current business level strategy of the company is based on the differentiation. This strategy provides the customers convenience and also pressure free shopping (Harvard Business Review, 2014). The company allows the customers to walk through the store and choose the products they want, rather than the traditional system where the customers had to interact with the salesperson. Since the company endorses a wide range of products, the customers will be able to find whatever they need. The company has different structures which are functionally different and meets the specification of each of the countries (Fortenberry, 2013).

Price discrimination in different markets

The most obvious price differences are in the company’s own brand, Sephora Natural Volume Mascara, the price of which in US is $US12.84  or $US12 which includes an average sales tax of 7%, when this price was changed into Australian dollars it was $15.66. The same product was selling in its Sydney flagship store at $25 including GST, making it a massive 60% more expensive than the US (Dixon, 1960).

Another example is the Formula X Nails, a brand owned by Sephora, which was selling in the US for $US11.24 including tax, which was $13.70 Australian dollars. But the product was selling in Sydney at $20, which made the product more expensive in the US by 46%

Conclusion and Recommendations

It can be said that the innovative process takes time to become successful. Moreover it also takes money and resources, innovative ideas. The company needs to establish new ideas and see whether the ideas are feasible. The ideas must be implemented in a test run so that the people can experience them and give their expert opinions and then only the ideas are to be put in the market. The old concept of the sales representatives is gone and the concept of beauty advisors has emerged in the market who offers ideas and advices. It is a place where the personal beauty can be accessed (Furrer, 2011).

 

References

beauty, S. (2014). Sephora's big plans to bring Australian blokes to beauty. [online] The Sydney Morning Herald. Available at: https://www.smh.com.au/business/retail/sephoras-big-plans-to-bring-australian-blokes-to-beauty-20140609-39srv.html [Accessed 28 Feb. 2015].

Dixon, B. (1960). Price discrimination and marketing management. Ann Arbor [Mich.]: Bureau of Business Research, School of Business Administration, the University of Michigan.

Fortenberry, J. (2013). Nonprofit marketing. Burlington, MA: Jones & Bartlett Learning.

Furrer, O. (2011). Corporate level strategy. London: Routledge.

Harvard Business Review, (2014). How Sephora Reorganized to Become a More Digital Brand. [online] Available at: https://hbr.org/2014/06/how-sephora-reorganized-to-become-a-more-digital-brand/ [Accessed 28 Feb. 2015].

Lipczynski, J. and Wilson, J. (2004). The economics of business strategy. Harlow: FT Prentice Hall.

Loeb, W. (2013). Sephora: Department Stores Cannot Stop Its Global Growth. [online] Forbes. Available at: https://www.forbes.com/sites/walterloeb/2013/04/18/sephora-department-stores-cannot-stop-its-global-growth/ [Accessed 28 Feb. 2015].

Mullins, J. and Walker, O. (2013). Marketing management. New York: McGraw-Hill.

prezi.com, (2015). SEPHORA STRATEGY. [online] Available at: https://prezi.com/sqynjmk01ahv/sephora-strategy/ [Accessed 28 Feb. 2015].

Schweiger, M. (2008). Sephora, the beauty authority. New York: Collins.

The Business of Fashion, (2013). Inside Sephora’s Branded Beauty Strategy - The Business of Fashion. [online] Available at: https://www.businessoffashion.com/2013/09/marc-jacobs-sephora-lvmh-branded-beauty-strategy.html [Accessed 28 Feb. 2015].

Wearesephora.com, (2015). The Sephora Saga | We Are Sephora. [online] Available at: https://www.wearesephora.com/Home/Page/Id/2-the-sephora-saga.sls [Accessed 28 Feb. 2015].

Yin, E., Duan, L. and Fong, N. (2010). SEPHORA. 1st ed. [ebook] Available at: https://www.sfu.ca/~sheppard/478/syn/1147/Group_C.pdf [Accessed 28 Feb. 2015].

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