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Key Topics
Requirement
Business proposal for ‘Crimson’.
Solution
Introduction:
The cosmetic industry had prevailed from the time of Greek athletes (400 BC) when they used to apply sand and oil on their skin which protected them from harmful rays of sun. Apart from this various thing in place of modern cosmetics were used in earlier times by people to enhance the glow of their skin and beautify themselves. In the 20th century, the cosmetic industry started growing, and few MNC's got involved in it and became the market leaders. Since then it has expanded at a faster pace and almost all of our day to day products that are used to keep ourselves clean belong to the cosmetic industry. It may be handled by few large players, but the reach of this industry has spread to a large range of businesses.
One of the leading products in this industry is ‘Lipstick'. It is a popular lifestyle product among the women, and almost every section of society can afford this product. The major consumer of this product is working women who are responsible for an increase in the demand for this product. Also, people are spending a lot of time on social media these days and are getting influenced by the changing lifestyle of others specially the on-screen celebrities. Companies are also keeping the price of lipstick very low so that their product is easily welcomed by the consumers in the market.
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About the product:
Crimson 13-hour lip splash brings you a range of 10 shades that will enhance the beauty of your lips for 13 long hours. The presence of vitamin E in it conditions and softens the lips. It also has a matte finish which will give lips a glossy look.
Key features of product-
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Suitable for office wear
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Portable and travel-friendly
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Matte finish
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Unique texture
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Also available with 3 flavors
Product price: $25
Market structure:
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1. The number of sellers and buyers are huge.
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2. In a long run, companies have flexibility in entering the market or exiting from it.
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3. The use may be same, but products are differentiated in some way or the other on the market.
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4. Each product in the market sold by different firms are close substitutes.
Price elasticity of demand:
Demand schedule
Price per lipstick (in $) Lipsticks demanded per month(in 1000’s) Elasticity(PED)
40 0 Infinity(perfectly elastic)
35 1 3(elastic)
30 3 2(elastic)
25 9 1(unit elastic)
20 12 1/4(inelastic)
15 15 1/3(inelastic)
0 20 ½(perfectly inelastic)
Price Elasticity (PED or Ed) = Change in Quantity / Change in Price
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Place Your OrderWhere, Change in Quantity = ((New Quantity - Original Quantity) / Original Quantity) Change in Price = ((New Price - Original Price) / Original Price)
Analysis of product pricing:
The above table shows that the product is adequately priced because the elasticity at $25 is unit elastic, if a product is priced below $25 then the revenues of company will fall and if the price is more than $25 then the demand of product falls.
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