Ajmal: The Analysis of the External Environment Essay Sample
Ajmal is a well-known Arabic company that produces perfumes. It was founded in 1951 and ever since, it has gained considerable popularity in the Oriental world. This company successfully entered the markets of such Arabic states as Bahrain, Kuwait, Qatar, Saudi Arabia, United Arab Emirates, and Oman (Ajmal Perfume, n.d). This year, the company’s general manager, Abdulla Ajmal, makes a public claim announcing that Ajmal enters the European market, targeting several locations at the same time (Hind, 2015).
As it is known, the modern phenomena of economic globalization facilitated the conquest of new distant markets. Simultaneously, it reinforced the rivalry that encouraged a growing number of businesses to operate in the red ocean zones. Considering these realities, it is critically important to conduct a meticulous analysis of the external environment. To elaborate proper recommendations that can increase Ajmal’s competitiveness and financial prosperity, this paper will survey the company’s PESTEL, as well as perform Porter five forces analysis, Key success Factors, and SWOT analysis.
Brief Review of the Discussed Variables
Undoubtedly, the survey of the firm’s external environment is rather complicated. In particular, it includes many interdependent factors, such as “political factors, economic conditions, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions” (Evaluating a company’s external environment, n. d., p. 38). These aspects comprise the macro-environment of businesses, the analysis of which is known as PESTEL. Besides, while exploring the macro-environment of a certain company, it is necessary to conduct so-called Five Forces Analysis, which was elaborated by Michael Porter. Therefore, it is often known as the Porter’s 5 Forces Analysis (Evaluating a company’s external environment, n. d.). According to Porter, every business is affected by five domains (forces), which are rivals, potential new entrants, customers, suppliers, as well as substitutes and complementors (Evaluating a company’s external environment, n. d.). Logically, if a company manages to bear the pressure of these forces, it gains certain success factors that should be identified and studied with the purpose to be supported and developed further. The key success factors (KSF) may include such variables as technology-, manufacturing-, distributing-, marketing-, skills- and capacity-related factors. Apart from that, the exploration of the external environment presumes conducting a SWOT analysis, which consists of such components as company’s strengths, weaknesses, opportunities, and threats.
PESTEL Analysis of Ajmal
As it is known, political factors are closely connected with economic conditions. Therefore, these aspects will be discussed as the interdependent notions. To begin with, it is appropriate to mention that Ajmal faces moderate or minimal political risks while entering the European states because the EU developmental policy welcomes the entrance of the new businesses (Economic and Financial Affairs, 2015). The EU strives to attract the business owners and investors from other countries. Nevertheless, the lack of unity that is noticed between the current members of the EU belongs to the critical political factor that may postpone or complicate the market growth (Panico, & Purificato, 2012). In a few words, the political instability of the EU affects the business world and creates greater political risks for the multinational companies (including Ajmal) that strive to conduct businesses in Europe (Table 1).
The European debt crisis that started with the collapse of the Greek economy in 2010 significantly affected the other states. Today, the EU is characterized with the decreasing interest rates (Panico, & Purificato, 2012). Moreover, the lack of political unity led to the lack of unity among the citizens of the same state. It enhanced the level of uncertainty and, naturally, made the EU less attractive for foreign businessmen and investors (Panico, & Purificato, 2012). Therefore, to improve the contemporary economic situation, the European Commission creates reports that highlight the financial issues and seek the ways of their solution (Economic and Financial Affairs, 2015). Consequently, even though the EU market may become more attractive for foreign businesses once the politico-economic issues are tamed, in the meantime, entering Europe with the strange products is rather risky (Table 1).
Fortunately, the leader of Ajmal admits complexity of the task to attract Europeans to the Eastern perfumes (Hind, 2015). What makes things even worse is that the world-famous European perfume brands implement Oriental motives in the process of their products’ differentiation. For instance, Kenzo’s Flower and Yves Saint Laurent’s Opium are positioned as the Oriental fragrances (Lin, Ma, 2008, p. 50). It means that the already existing European brands apply exotic and unknown Eastern motives, taking away such option from the new entrants. Thus, the existing sociocultural situation is challenging for this Arabic perfume company (Table 1).
Internet penetration can be considered as the main technological factor that facilitates conducting the global trades. Moreover, it opens the new perspectives of e-commerce that is actively used by Ajmal. The well-performed cyber presence is clearly visible while surveying the official site of this perfume company. Specifically, the site is connected to the main social media, which is supposed to spread the word of mouth worldwide, increasing the number of customers. Besides, the company provides online shopping options from various spots (not limited to the Middle East area) (Ajmal Perfume, n.d). Therefore, one can rightfully presume that the modern technological factors are greatly beneficial for the further development of this business (Table 1).
The environmental factors of UAE are beneficial for both prospects: entering the EU market and maintaining domestic business. In particular, both areas have sufficient deposits of natural resources and water supplies that are vital for manufacturing. Besides, in terms of geography, the connection between the EU and the Middle East is well-elaborated, which facilitates the logistics. Consequently, it is possible to state that the environmental forces do not intervene with the business process (Table 1).
Legal Regulatory Factors
Considering that Ajmal endeavours to become the multinational corporation, the alignment of the legal regulations is its crucial task. It goes without saying that there are differences in the legislative policies of the Eastern and Western worlds. In order to succeed in conquering the new markets, Ajmal should be ready for additional expenses (money spent on lawyers and other experts, who work on assuring the compliance between the local regulations and company’s policies). Besides, this aspect is connected with the notion of business ethics that is a significant variable of success. For instance, in case of the company’s failure to maintain legal or ethical responsibility for its stakeholders, its competitiveness and, accordingly, profitability, will be compromised and lessened. Therefore, under the circumstances of the global expansion, the legal regulatory factors enhance the risks Ajmal company may face (Table 1).
The Porter’s 5 Forces Analysis of Ajmal
The rivals’ pressure is always the most tangible; the competitors make this task quite challenging for Ajmal that strives to conquer the offshore markets For example, the European market is overloaded with the brand perfumes that have already won the loyalty of millions of consumers worldwide. Apart from the above-mentioned brands, it also includes Chanel, Dior, Serge Lutens, Lancome, Gucci, Lacoste, Giorgio Armani, Calvin Klein, and many others (Perfume Shopping, 2012).
In addition to the European brands that are being sold and bought all over the world, Ajmal endures domestic rivalry while competing with another Arabic perfume brand, –Rasasi. Rasasi also displays good cyber presence and conducts e-trades, but it has more successful differentiation strategy. Specifically, the official site of this company offers an individual test for every visitor in order to determine the preferable fragrance (Rasasi, n. d.). Besides, it is necessary to consider that a great variety of Ajmal perfumes potentially lessens the customer’s demand because the scarcity is known to induce the sales. Moreover, according to Porter, the successful competition is possible either through product differentiation or application of the low-cost policy. In the case of Ajmal, it struggles to properly differentiate the great number of the released perfumes, whereas it does not implement the low-cost strategy either. Therefore, considering all these factors, one can rightfully conclude that Ajmal suffers from considerable rivalry (Table 1).
Potential New Entrants
As was stated above, the perfume industry is overloaded. It is filled with the European world-famous brands, which the Arabic perfume brands strive to replace, not to mention a number of cheap copycats and other unknown, but financially affordable perfumes of a good quality. This situation means that the potential new entrants are questionable. Therefore, Ajmal experiences minimal to moderate pressure from the new entrants (Table 1).
The perfume industry is definitely the buyers’ market, which means that the customers’ pressure is high (Table 1). Ajmal experiences serious customer pressure because of the lack of differentiation that is combined with the abundance of the company’s and its rivals’ products. Besides, the above-discussed deterioration of the politico-economic situation in the EU, where Ajmal is targeting this year, means that the customer pressure will become even more tangible. It is assumed to happen due to the fact that people’s purchasing capacity may be affected by the deteriorated life quality or the corresponding threats. Finally, the lack of sociocultural interest in the Arabic world suggests that the offshore customers would prefer Ajmal’s rivals.
The pressure of suppliers is insignificant (Table 1) because UAE’s geographic position presumes that there is an abundance of the business affairs, resources and affordable workforce in the vicinity. In the modern world, Ajmal works with the suppliers from China, India, and other countries (Ajmal Perfume, n.d).
Substitutes and Complementors
Considering that Ajmal positions itself as a company that produces high-quality luxury perfumes, the pressure of substitutes is minimal (Table 1). The rationale shows that this strategy targets a particular group of people who associate themselves with a good life quality and use brand perfumes to emphasize their social position. Thus, potential substitutes are provided by competitors. Furthermore, all firms that specialize in cosmetics (other than perfumes) and thematic souvenirs can be Ajmal’s complementors. For instance, the UAE tourism businesses may be referred to as powerful complementors.
The Key Success Factors of Ajmal
Ajmal successfully implements the global nets in order to expand its market. The active cyber presence is an important key success factor of this company. It has the official site, as well as advertising pages on the four main social media (Facebook, Twitter, Instagram and YouTube). In addition, it conducts e-trades using a number of e-commerce platforms that specialize in cosmetics with the aim to target the Chinese, Indian, Russian and other customers (Perfume Shopping, 2012). In this way, maintaining technology-friendly approach, Ajmal makes it possible to purchase its perfumes anytime anywhere.
The technology-related key success factor of Ajmal is closely connected with its distribution-related successful approach. Apart from the already described ways of distribution, a company site states that
AJMAL enjoys a prominent presence in the Travel Retail arena, with some of our most notable clients being Dubai Duty Free, Abu Dhabi Duty Free, Muscat Duty Free, Bahrain Duty free, and Cairo duty free. (Ajmal Perfume, n.d, n.p.)
In addition, Ajmal representatives assert, “We have our range of products present in Airlines with British Airways, Oman Air, Air Arabia being some of the airlines amongst many others.” (Ajmal Perfume, n.d). Without doubt, many-sided distribution is one of the major success factors of Ajmal.
Despite the issue with differentiation, it is necessary to admit that this company has significant intangible assets that refer to the Oriental culture. It serves to attract both domestic and foreign customers. The images of perfume contain much golden colour that is associated with the East. For example, the advertisement of Aurum evokes the notion of some mysterious, dark, hidden beauty that resonates with wealth and pleasure (Ajmal Perfume, n.d). This association is reinforced by the seducing female voice, which, together with the image, attracts buyers by emphasizing the beauty of the Middle East culture.
SWOT Analysis of Ajmal
The business is situated in UAE, which is the area with a sufficient amount of natural resources. Besides, it does not experience scarcity in the workforce or suppliers because there are African countries from one side, as well as India, and further China from the other. In addition, the favourable location of a resort place allows Ajmal to benefit from perfume distribution through a number of duty free spots and use the travel companies as complementors. Moreover, being a well-elaborated Oriental brand, Ajmal has important intangible assets, such as the positive promotion, and the images and titles of perfumes that embody the Middle East mystery and exotica (Table 2).
Positioning itself as the Arabic brand, Ajmal limits the number of clients who are not interested in, or maybe even averse to the Middle East. Besides, considerable releases of the new perfumes that are poorly differentiated lessen the value of the Ajmal’s products. In such conditions, the high prices of perfumes limit the customer demand even more. Furthermore, the perfumery is located far from the well-developed states, which complicates the market expansion in those areas. In particular, the costs for logistics and management of the foreign staff, as well as other expenses would either limit profits or make the company maintain its unbeneficial policy of high prices. Moreover, since the rivalry of the perfume industry is very intense, competing with the local famous brands is a risky idea (Table 2).
Ajmal has great opportunities to collaborate with the tourism sector in order to create blue ocean zone. Moreover, this business can spread a positive word of mouth advertising, maintaining the corporate social responsibility towards all stakeholders while paying much attention to the domestic areas. In addition, Ajmal has good chances to increase its presence in the immense and valuable markets of China, India, Russia, Kazakstan, and other fast developing countries that are not averse to the Muslim world (Table 2).
Ajmal may lose its sustainability because of the considerable rivalry with a number of the well-developed and world-famous brands. There are no visible signs that the Arabic culture is being popularized in the EU. On the contrary, many average citizens have the negative attitude towards Muslims. While this social issue is combined with the enhanced expenses of entering the offshore market that is already characterized with the great rivalry, it becomes clear that this approach is risky and full of uncertainty (Table 2).
Recommendations and Conclusion
Collaboration with Complementors
Being located in a famous resort place, Ajmal has great opportunities for the expansion of the client base, supporting the local community and gaining significant profits at the same time. To succeed with these tasks, it is necessary collaborate with the tourism field.
Recommendation 1: Purchasing some resort property would allow expanding the business in other directions apart from perfumes. Simultaneously, encouraging the visitors to spread positive opinions all over the world is a good approach to advertise own products. In this case, the logotypes of both hotels and perfumes should coincide. Moreover, it is a wonderful platform for promotion of the care products for home released by Ajmal. People memorize better when they feel the scent, and when their perception is emotional. The positive emotions from the trip will be memorized for many years along with the scent and images of Ajmal’s perfumes. Therefore, combination of these business directions is a great approach to expand the client base.
Recommendation 2: To track the effectiveness of this idea, one may consider investing in some local hotel. This approach can be combined with various actions, lotteries, and discounts that are aimed at promoting Ajmal perfumes. Apart from the above-mentioned advantages, it will be an effective way to support the local communities by promoting the domestic resort place in all possible ways. At the same time, this approach leaves money in the country instead of spending them on expensive advertisement abroad; meanwhile, the offshore clients will be enticed by the positive word of mouth spread by tourists.
Blue Ocean Strategy for Ajmal
Given that the competition in the perfume industry is immense, it is necessary to consider the creation of the blue zone.
Recommendation 1: It is suggested to elaborate and promote the sunscreen with the scent of Ajmal perfumes. It is a practical approach that will provide visitors with a chance to enjoy the smell of the luxury perfumes and get used to it. Undoubtedly, it should result in the increased purchase of other company’s products. At the first stage, it is possible to create the sets of personal hygiene, selling these items to the local hotels. It will help to attract potential customers, who are expected to become willing to buy the sun screen oil and, later, go home with the perfumes and other Ajmal’s goods.
Recommendation 2: It is suggested to combine the scent with the souvenirs. For example, it would be favourable to create a set of luxury and stylish air-fresheners that by shape and scent can remind people about the Middle East. Once those clients are used to the presence of such small stylish determinants of their preferences, way of life, and social status, they will become loyal to Ajmal’s products.
Despite the fact that a high cost of products is an effective advertising strategy that is aimed to stress the social position of buyers, most clients prefer to save money. It is especially relevant for young people who are price-sensitive. Therefore, it is necessary to elaborate different systems of prices, depending on customers’ age, loyalty, and location. In terms of the age/prices correlation, one should consider creating the sets of cosmetics for young people with the affordable prices and corresponding branding (images, slogans, advertisement). Moreover, to build a loyal client’s base, it is necessary to make sales and discounts for loyal customers on a permanent basis. Finally, smart pricing presumes that the cost of products depends on the person’s location. In this case, identifying the location of a potential buyer allows offering perfumes at a reasonable and affordable price, which increases the chances of its purchase.
Targeting Developing States
In different states, people have various buying capacities; yet, it does not mean that companies should target only well-developed states. On the contrary, as a rule, such areas are already overloaded with the products (at the very least, it is a relevant premise for the discussed perfume industry). In this case, the threshold for the new entrants is high, which makes the successful competition improbable.
Alternatively, it is necessary to concentrate on the developing states where the rivalry is moderate and the demand/proposition ranks are more equal. Moreover, there are possibilities to conquer new loyal customers who are supposed to become richer with time. Therefore, instead of concentrating on the EU’s market where there are economic and political instability combined with Muslim-averse moods, as well as the demand that is satisfied by the local brands, it is recommended to target the Asian areas. For example, the immense markets of China, India, and Russia posses more potential buyers than the EU. Moreover, the manufacturing process in these areas will be cheaper. These countries have good environmental conditions. Most importantly, they are not overloaded with the Western perfumes. In addition, they are potentially more ready to accept and like the Arabic perfume.
This paper discussed the external environment of Ajmal, the famous Arabic perfume company. In particular, this macro-environment investigation of Ajmal consists of PESTEL, the Porter’s 5 forces analysis, the KSFs, and SWOT analysis. Furthermore, according to the revealed findings, various recommendations were made. In general, the suggestions presume transferring business from the red zone of the perfume industry to the blue ocean zone that will be free from competitors. The middle steps (aimed at taming the rivalry force) can be achieved through cooperation with complementors, while targeting the areas with good demand. Besides, given the immense role of technology, it is recommended to implement smart pricing strategy.
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