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Flare Fragrances Company, Inc Analyzing Growth Opportunities Case Solution
Flare fragrances, a company known for its perfumes and scented products, has recently recovered from the economic crisis, but with low sales as compared to previous years. Management needs to plan the future of the company strategically and increase the sales of Flare in the coming years. Three strategic alternatives are presented, all of them resulting in the increase of sales. Firstly, the introduction of a new brand named Savvy is discussed as a viable option. Secondly, the launch of new scented products has been studied and lastly, the alternative of drug store expansion has been recommended to solve the current problem of the company.
Following questions are answered in this case study solution:
Introduction and Problem Identification
Strategic Alternative One
Strategic Alternative Two
Strategic Alternative Three
Recommended Action Plan
Flare Fragrances Company Inc Analyzing Growth Opportunities Case Analysis
1. Introduction and Problem Identification
Flare Fragrances was formed in 1955 having a small share of the perfume industry. After 1996, it started to introduce new perfume brands on a regular basis. Flare is standing on the fourth position in the largest perfume companies in the industry. The company has 93 percent of its operations in fragrances and 7 percent of the share in scented products. In 2007, flare fragrance stood 4th in the perfume market with sales of 261.3 million and a 9.5 percent share of the total perfume industry. However, the economic crisis after 2007 led to a steep decrease in the growth rate of the company. Growth rate of 12 percent decreased to 2 percent from 2007 to 2008. Loveliest is the most popular brand of the company, on which brands of the company are relying due to halo effect. Management has to increase sales in the post crisis period in order to stand in the industry and maintain its position. Customers will have various options in the industry and the vital products will be high tier perfumes in the future. Management has to redefine its product line strategically in order to deal with the current situation.
2. Strategic Alternative One
Flare fragrances can launch the new brand known as Savvy which is still in the pipeline. Management of the company had this brand in their upcoming projects and its launch can assist in the increase in the sales of the company. There are two ways the company can launch Savvy in the perfume industry. Firstly, it can launch it as an independent brand in the market. Secondly, the company can launch it under the name of Loveliest; for example, Savvy by Loveliest. Both of the options have their own strengths and weaknesses.
If the company launches the product on its own and there is no connection of Loveliest and Savvy then it will have the benefit of introducing a new brand image. A new brand image will encourage buyers to experience the new product and affiliate with it in a new way. It will also tap the young segment of the market as its placement will be done accordingly. The issue with a new brand is that it requires a lot of initial investment for advertising and promotion. There will also be high competition due to SKU and brand proliferation.
If the company launches Savvy under the banner of Loveliest, the project will cost much less as compared to the previous strategy as less marketing will be required for the new product. Halo effect of Loveliest will enable Savvy to be known in the market. It will also tap the young market segment. However, it will be harder to make the new brand connected to the younger generation as Loveliest is an old brand and the younger generation might find it orthodox.
3. Strategic Alternative Two
Flare fragrances has the option through the expansion of its retail stores in the market. Expansion and introduction of new retail stores will provide a larger market base for the company to grow the sales of its products. Currently the company has limited number of retailers which sometimes result in the product to be rare in the market. If the company increases its retail stores, it will move towards an important strategic decision assisting in the growth of the company in the long term.
Retail expansion helps in reaching more customers within a particular period of time, making the product cycle fast and profitable for the company. The drugstore chains will promote the high end products of flare fragrances. However, the company has to take the relationship with present retailers into account. The present retailers might not like the expansion of drugstores as they would lose their bargaining power. Existing stores would also lose their customers who will be directed towards the other stores as they will be offering the high end products of the company. The expansion of drugstores can also have an impact on the image of the brand. As the brand of Fragrance Company is based upon its image of perfection and rarity, the image will be degraded if it is made available on a wider scale. The sense of uniqueness and rarity is important for any brand, especially high end products like fragrances by Flare Fragrances.
4. Strategic Alternative Three
Flare fragrances has most of its production line maintained for perfumes and fragrances, but the company also produces a small proportion of scented products other than perfumes. Product development is an important phenomenon in strategic management of any organization. It helps in the growth of the company’s sales and increases the market share of a particular company. In the case of Flare, product development will include additional products other than just perfumes and fragrances. Scented products will be the low end products, targeting the low budget group of the market.
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