Eternal Elixir Finance and accounting - Management accounting - Strategic management _______________________._.----__ Background Genevieve's Eternal Elixir [GE-3} Cosmetics 81 Skincare is a newly established private company which was founded by Genevieve T in 201 E\". The founder, who is also the chairman of the company, aims to create a better world with natural and safer skincare products, cosmetics and perfumes. GE?1 Cosmetics is a result of the founder's dream of creating a colourful line of natural skincare products and cosmeticsproducts with holistic skincare benefits that, while creating gorgeous looks, would also promote healthy skin. The business objectives of GE2 Cosmetics are to develop and market a holistic line of plant-based natural cosmetics and skincare products that is W341 to give consumers a\" \"We.\" -sonal Background Genevieve' 3 Eternal Elixir (GEE) Cosmetics 81 Skincare is a newly established private company which was founded by Genevieve T in 201?. The founder who is also the chairman of the company, aims to create a better world with natural and safer skincare products cosmetics and perfumes. GEz Cosmetics is a result of the founder's dream of creating a colourful line of natural skincare products and cosmeticsproducts with holistic skincare benefits that, while creating gorgeous looks, would also promote healthy skin. The business objectives of GE1 Cosmetics are to develop and market a holistic line of plant-based natural cosmetics and skincare products that is designed to give consumers an overall sense of personal well-being, health and beauty. The founder, Genevieve T, makes sure the nest natural ngICEd-ients are used to ensure the greatest skincare benets, while keeping true to the rich colour and glamour that Generally, cosmetics and skincare companies face many challenges when attempting to gain market share and trying to maintain a competitive advantage over rivals. It can be difficult to know which strategies are worth pursuing based on a business's position in the industry and the competitive nature of the industry itself. A clearly defined strategy and the effective implementation of the strategy will determine GE's success in its goals. The cosmetics industry is a very competitive industry. However, the products of GE are different from its competitors, both in its premium quality and packaging Product range Currently, the company is focused on three product categories: skincare, cosmetics and perfumes. The perfume range is customized and therefore produced for a focused market. The skincare and cosmetic products on the other hand are produced for the wider market. GE2's natural-based products are different from the chemical-based products that are widely available in supermarkets and malls. GE2 products come in attractive premium-looking packaging and stand out compared to other natural-based products. Product costs The high quality ingredients used in GE2 products have led to high cost of production. There has been a lot of flux in ingredients' pricing and it is often the organic ingredients that are affected (especially therapeutic grade essential oils). Weather has also affected crops, resulting in lower yields, and has thus raised the prices of the ingredients. Moreover, the products are mostly handcrafted, resulting in high labour costs. Although the final product cost is relatively high, the product quality adds value for customers. Nevertheless, the target market and product pricing strategyProduct costs The high quality ingredients used in GE2 products have led to high cost of production. There has been a lot of flux in ingredients' pricing and it is often the organic ingredients that are affected (especially therapeutic grade essential oils). Weather has also affected crops, resulting in lower yields, and has thus raised the prices of the ingredients. Moreover, the products are mostly handcrafted, resulting in high labour costs. Although the final product cost is relatively high, the product quality adds value for customers. Nevertheless, the target market and product pricing strategy are of concern of the management. Product market As a newly established company, GE2 is faced with strong competition from highly established foreign cosmetics and skincare brands. However, recent trends show that customers are increasingly seeking natural skincare and cosmetic products for their well-being. GE2 views this as a potential growth area. Currently, GE2 products are distributed by beauty centres, health exhibition booth vendors and through online marketing. The CEO is concerned about the limited market scope. She feels that the firm has to explore a wider market for the company's products.3. understanding nd the ntarkel d to consider. If . loo low. consumers Will not value the product and tnav ?t?;t?$;?:'ew\\:hm the label claims. II _ 0113. '1 no high and tilt'5 Will not move enough products. As 3'0\" 59' YUUI' printing. it is imporlanl to thoroughly understand how you r competitors are pricing Similarw or apparently similarproducts. It is also important to know how the distribution channels are positioned. High-end boutique or family-friendly salons? Both of those outlets have a price~p0int prole and GE1 products' pricing should be consistent with the pricing prole of the chosen distribution channels. Given the high quality of GEz's products, the CEO is unsure whether to sell its products either at average industry prices to earn profits higher than that of its rivals, or below the average industry prices to gain market share. The CEO has read of various pricing strategies that are applicable. However, she is unsure of the most suitable pricing strategy that suits her products. Application Questions You are the Financial Manager in GE2, and you are required to: 1 Evaluate the financial position of GE2 using the information from the appendix. 2 Advise on an appropriate pricing strategy for each product category, and explain how a marketing mix strategy can help GE2 to develop a successful business. 3 Analyse the competitive position of GE and recommend appropriate competitive strategies for the company.Appendix Extracts from financial statements Income statement for the year ended 31 March 2019 2018 RM RM Revenue 150,000 100,000 Cost of sales 80,000 55,000 Gross profit 70,000 45,000 Less: Marketing expenses 20,000) (12,000) Other operating expenses (18,400) (8,700) Operating profit 31,600 24,300 Less: Finance costs (1,000) (2,000) Profit before tax 30,600 22,300 Less: Tax expense (7,650) (5,575) Profit for year 22,950 16,725Statement of financial position as at 31 March 2019 2018 RM RM Non-current assets Tools and equipment 40,270 35,950 Current assets Inventory 2,400 2,100 Trade receivables 1,970 1,860 Cash 11,800 8,300 Current liabilities Trade payables 1,870 1,780