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Business Case

Essay by   •  April 21, 2012  •  Essay  •  1,157 Words (5 Pages)  •  1,495 Views

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Smith has a very important decision that will make or break his business plan. Smith has come up with a business plan that is based on fragrances and other beauty products that are sold to Asian women. Smith's idea is to set up a website where these Asian women can visit to purchase beauty products at a discount price. How is Smith going to supple these beauty products to his consumers for a discount price?-Through parallel importing. Parallel importing goods from unauthorized distributors through the gray market. This would allow Smith to take advantage of the ecommerce boom, and would make himself a lot of money by offering up to 70% off high quality merchandise.

Smiths business plan is to offer a secure site that sold the "most popular" brands of cosmetics, fragrances, skin care and fashion related products at competitive prices. Smith's idea is a classic example of aggressive pricing strategy. This would enable him to give away free items to his customers, have fast delivery and offer specific items to different age groups.

So what is the main issue? The main issue is that if Smith continues with his business plan as a parallel distributor there are many consequences, regardless of the face that being a parallel distributor is legal. Smith wants to eventually get these products from the distributor, but the problem with that is that they tend to want to deal with smaller players in the market, and working with the large distributors is very time consuming. Another issue is by supporting, there is a risk of antagonizing their distributors fearing the sales would cannibalize their existing distribution arrangements, even if the site was duty free. The biggest issues that Smith has to deal with are that if the manufactures decide not to sell to the site, which could be the demise of the site.

A solution to Smiths problem would be to actually find someone to buy the products from in the grey market that will profitable enough for him and the business he will be buying from. At this point, Smith is in the market to make money. He is trying to take advantage of the Asian beauty market that hasn't' been touched. By finding a distributor, he will then be able to decide pricing and other logistics. With a proper distributor there is business.

The second solution would be for Smith to make sure that these products that he will get from his distributors will sell. Do these Asian women want the products that will be featured on his site? Will they be discounted enough that they wouldn't seek out other distributors that are more convenient? The fact that Smith is wants to sell name brand cosmetics to women who otherwise couldn't afford it is a brilliant idea. But can you actually get the products? Legality is not an issue, the gray market is not illegal, but if the cost of the item is too high, then that means the target market isn't going to buy. The entire reason why they would buy from Smith would be for the discounted price. The purpose of buying online for a discounted price and online convenience will no longer be relevant.

Another solution to Smiths dilemma would be to make sure the quality of the product he is receiving from his distributors is of good quality. From experience and facts from the article, a lot of the time



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