Micro environment is defined as “the actors close to the company that affect its ability to serve its customers- the company, suppliers, marketing intermediaries, customer markets, competitors and publics.” (Armstrong et al, 2011)
The next model that we will use will be porter’s five forces 1985 ‘the degree of rivalry’ (Burgers, 2008) which will help take a microanalysis on the market. This is used to help considerably when finding the ways competitions environments work.
(UBC, 2010).
Supplier power- Determines the price of supply and therefore will increase price if there are fewer suppliers’ than buyers as less competition means people will be willing to spend more money.
Buyer Power- buyers with a strong bargaining power in comparison to sellers with less power will try to force prices down, demand more services and set up competitors against one another-all at the expense of the seller’s profitability. Market segments may be less attractive if the seller is powerful, who can control prices or reduce quality or quantity of ordered goods and services.
Potential entrants- When there are low barriers to entry in a profitable market, especially when abnormally large sums of money is made, potential entrants will come into the market. However, when more entrants come into the industry, with high competition, it causes less profit within the companies.
Substitute Products- Products that fit the criteria of another product. This would mean different goods would satisfy consumers, so therefore can replace the product with less accessories. This causes the substitute goods sales to rise and cross the elasticity of demand.
Perfume and aftershave is different to other goods and services where there is no such thing as a substitute good, causing the demand to continuously to be high. The industry is endlessly growing, with numerous products that fit the ‘high class’ designer fitting. These are the brands that are in the most power and most say in the market, with huge capital, allowing them to do so. New entrants have the potential to make huge amounts of profit, however, due to the barrier being so high, they will never have the same amount of capital to the high class brands such as Chanel, Versace and Marc Jacobs.
If entered in the market at the right time, high returns on profit could be made. Mintel found in the ‘Purchasing Habits’ of their 2010 Women’s Fragrances report that ‘men are keen to buy fragrances as a gift’ and in their 2010 Christmas Shopping Habits report in Christmas Gifting Patterns that 58% of gifts bought are fragrances. This links with the statistics of purchasing perfumes to sky rocket 67% more at Christmas than any other time of the year.
“For the year ending April 2013, sales of men’s “prestige” fragrances rose by 6 percent to $953 million.” (Robert Shaftoe, 2011) supports the statistics above.
perfume step by step market audit 