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Business Proposal ECO/561 Economics September 16 !"1#


$%is assi&nment puts a 'ocus on t%e intro(uction o' a ne) pro(uct in t%e e*istent line o' business+ It e*plains t%e met%o( 'or (e,elopment o' &oo(s 'or &eneratin& more re,enue+ $%e concepts o' elasticit- o' (eman(s structures in a((ition to pro'it ma*i ma*imi/in& tec%ni0ues are also (iscusse( )%ic% are %elp'ul 'or t%e &oo( an( also to counter t%e barriers o' its entr-+ I )ill also co,er t%e pricin& strate&- an( (i''erentiation o' pro(ucts+ I %a,e c%osen to )rite a business proposal on is compan- 1arnier+ 1arnier is a mass cosmetics bran( o' L2Or3al t%at pro(uces %air care an( care pro(ucts+ $%e compan- starte( as Laboratories 1arnier in 14"5 an( )as ac0uire( b- L2Or3al in t%e 146"s+ Current pro(uct lines inclu(e 7ructis s%ampoos an( con(itioners an( Nutrisse %air color+ 1arnier is sol( in numerous countries )orl()i(e )it% speci'ic pro(uct lines tar&ete( 'or (i''erent t-pes an( cultures+ In !"11 1arnier partnere( )it% $erraC-cle to promote up c-clin& o' pro(uct containers an( t%e intro(uction o' bio(e&ra(able pro(ucts+ As -ou can see 1arnier is all about .eepin& up )it% t%e most recent tren(s in societ- so it )oul( onl- be ri&%t i' t%e- intro(uce( a ne) line o' pro(ucts tailore( to t%e most popular tren( )it%in t%e A'rican American culture or as some sa- 8Blac. 9air:+ $o(a- A'rican American )omen are t%ro)in& out t%ere rela*ers an( 8&oin& natural+: $%is tren( %as become so popular because o' it broa(casts t%e pri(e t%e- %a,e 'or t%eir bac.&roun( an( %erita&e+ It also promote( %ealt%ier %air+ 1arnier coul( start out )it% a s%ampoo tailore( to t%e 81oin& Natural: A'rican American )omen+ $%e (eman( 'or t%is s%ampoo is e*tremel- elastic mainl- because t%ese (a-s a number o' pro(ucts are present in t%e an( companies constantl- intro(uce ne) pro(ucts lines re&ularl-+ $%e s%ampoo structure resembles a ;onopolistic Competition+ $%is is seen


)%en a number o' companies are pro(ucin& pro(ucts or ser,ices t%at in t%e consumer<s perception %as (i''erences 'rom t%e competition but in realit- %a,e muc% similarit-+ $%e reason )%- t%e pro(ucts are percei,e( as (i''erent is t%e conse0uence o' pro(uct (i''erentiation )%ic% pla-s t%e main role in success in a monopolistic in(ustr-+ $%e (i''erence in pro(ucts is on t%e basis o' pricin& 0ualit- ima&es or an- a((itional 'eatures )%ic% ,ar- 'rom pro(uct to pro(uct+ $%us speciali/in& in somet%in& t%at<s a ne) tren( )ill &ain ne) customers an( %elp to promote t%e 1arnier bran( as a )%ole+ 1arnier %as annual sales o' aroun( 5 billion an( t%e a,era&e retail prices roun(in& to =6+44+ It is not possible nor )oul( it be &oo( to re(uce t%e price o' &oo(s because t%e price is alrea(competiti,e+ In e''orts to raise re,enue t%e manu'acturin& costs an( pro(uction areas )oul( %a,e to e,aluate( an( t%en cut accor(in&l-+ One )a- to (o so )oul( be to c%an&e t%e slo) manual an( ine''icient s-stems )it% ne) in,entor- tec%nolo&-+ $%e ne) pro(uct is custom (esi&ne( 'or t%e people )%o %a,e natural >unprocesse( 'ree o' perm an( rela*er? %air an( are searc%in& 'or natural %air solutions+ @it% t%e proper a(,ertisements t%ese pro(ucts coul( lea( to &eneration o' increase( re,enue 'or t%e compan-+ Researc% is con(ucte( on t%e %air an( scalp con(itionin& o' mainl- A'rican American )omen )%o %a,e natural+ $%e stu(- is con(ucte( to &i,e a better loo. at %o) t%is t-pe o' %air be%a,es an( reacts to (i''erent e*perimental treatments+ 9a,in& t%e researc% an( also a 'ocusin& in on t%e customers< nee(s )ill %elp to &ain t%e trust an( lo-alties o' consumers )%ic% %as positi,e e''ect on t%e &eneration o' re,enue+ $%e price an( t%e pro'it ma*imi/in& 0uantit- (etermination are (one )%en t%e mar&inal re,enue is set e0ual to /ero+ $%e mar&inal re,enue becomes /ero )%en t%e mar&inal re,enue cur,e reac%es its ma* ,alue+ $%e price strate&- 'or 1arnier s%ampoo is settle( at t%e retail price =6+44 )%ile t%e )%olesale price =5+"" an( t%e cost per unit is =!+5"+ @it% t%at bein& sai( it onl- cost 1arnier =!+5" to ma.e


eac% unit an( t%e- are sellin& it )%olesale to (i''erent stores 'or =5+"" so t%e- %a,e &ross mar&in o' =!+5" per unit sol(+ $%e ot%er 'actors )%ic% (etermine price li.e cost o' manu'acture placin& 0ualit- o' pro(uct etc+ are also ta.en into consi(eration+ $%e nonAprice( strate&ies inclu(e met%o(s li.e more e''icient a(,ertisin& Bran( en(orsements b- celebrities an( bsponsorin& e,ents or tele,ision s%o)s+ $%e au(iences respon( &reatl- to t%e attracti,e an( e''ecti,e sc%emes li.eB 'ree &i'ts mone- o'' coupons store (ispla-s an( publicit- ma&a/ines+ @e plan on cuttin& ot%er costs in or(er to pa- 'or t%e more e''icient a(,ertisin& an( bran( en(orsements+ $%e pie &rap% belo) s%o)s all o' our e*penses an( t%e bi&&est e*pense is )%at )e pa- out 'or emplo-ee salaries+

Total Direct Costs




Other Expenses


@it% t%e a((itional an( ne) tec%nolo&- use( )it%in our manu'acturin& )e can cut some o' our emplo-ees )%ic% )ill allo) us to spen( t%e mone- on impro,in& our bran( a)areness )it% t%e a(,ertisin& an( en(orsements+ $%ese are t%e %in(rances t%at ten( to ma.e it %ar( 'or t%e pro(uct 'or enterin& a speci'ic an( t%ese obstacles ma- be result 'rom 1o,ernment rules an( re&ulations license re0uirements scale econom- etc+ 1arnier %a( t%e abilit- o' creatin& suc% barriers to entr- be''ecti,e a(,ertisements t%at ma(e it ,er- %ar( 'or t%e ne)comer bran(s to compete or e,en e0ual t%em+ It uses t%e a(,anta&e o' cost in a((ition to t%e customer lo-alt- car(s )%ic% also act as barriers 'or entr- 'or ne)comers+ $%e compan- also %as t%e option o' usin& Intellectual Propertsc%eme as it o)ns a %u&e R an( C setup an( can lea( to pre,ention o' entr- o' an- ne) bran(s as t%e- mi&%t not be %a,in& a similar re&ulate( pro(uction an( t%e researc% tec%nolo&-+ $%e latest 1arnier pro(uct %as a number o' (i''erences 'rom ot%er bran(s o''erin& t%e customers custom natural %air solutions 'or all t%e t-pes o' natural %air )%et%er it be .in.- loose curle( ti&%t curle( coils or e,en an a'ro+

BUSINESS PROPOSAL References 1arnier 7ructis+ >!"1#?+ Retrie,e( 'rom %ttpB//)))+&arnierusa+com/Den/Dus/'ructis/E%ome 9ur F+ G Ri-anto H+ E+ >!"1!?+ Or&ani/ational Structure an( Pro(uct ; Competition+ Fournal O' Economics G ;ana&ement Strate&- !1>#? 6"6A65#+ (oiB1"+1111/I+15#"A 41#5+!"1!+""#5"+*

;cConnell C+ R+ Brue S+ L+ G 7l-nn S+ ;+ >!""4?+ Economics >1Jt% e(+?+ Retrie,e( 'rom $%e Uni,ersit- o' P%oeni* eBoo. Collection (atabase