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Table of Contents

1. Mission Statement 2

2. Market Research 2

3. Customers’ Needs 4

4. Market Analysis 7

5. SWOT Analysis 9

6. Porter’s 5 Forces Model 10

7. Product – Design and Features 11

8. Benefits 13

9. Technology 15

10. Management 18

11. Marketing Strategy 23

12. Budget 24

13. Limitations 25

14. Long Term Objectives 26

15. Timeline 27

16. Appendix A 29

17. Appendix B 30

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Company Mission

We want to bring out the unique beauty in every woman through customized cosmetic

products.

Market Research

To better understand and identify our target market, we conducted market tests by

approaching 120 female working adults. These women are aged between the ages of 25-

35, and were either executives or in managerial positions, have a monthly income of

more than $2000 a month. Make-up is important to them as they need to be presentable at

work. Therefore, they spend average of $150 on cosmetics product monthly. We asked

them to evaluate and improve Goddess.

Most of the women liked that Goddess was personalized and how it made putting on

make-up an enjoyable experience. Most of them were also willing to pay an average of

$900 for Goddess, if it were endorsed by cosmetic professionals. However, some issues

they raised against this product were the accuracy of the skin tone test, and how user-

friendly it would be.

Our targeted market size during our initial launch is 240,800, which includes employed

women from the ages of 24-40. The market share we will be targeting is estimated at 1%,

which is 2,400. We will target the mass market size of 500,000 after 5 years1. We are

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http://www.mom.gov.sg/NR/rdonlyres/64406C8E-289B-444C-98FF-
A343275407C4/2265/2004LF_t45.pdf

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estimating that we will be targeting 1% of the market share in Year 3, the product launch

year, and 3%, 6% and 10% in the subsequent years.

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Customers’ needs

Having a clear outlook of the customers’ needs plays an important part in our success. In

order to find out what maximises the fit of our product with the customers’ requirement2,

we conducted a survey targeting mostly at women at the age of 18 – 40. Questions were

mainly constructed on the basis of the problems and needs revolving around face

cosmetics, categorised under eye shadows, foundations and blushers, and application of

cosmetics. The summary of our results is as follows.

Eye-shadow

Most women find that there are many incidents where they have an impulse to put a

certain colour of eye-shadow to match their mood and clothes, yet they do not possess

that particular colour. Hence, they have to make do with the colours they have and this

results in a similar look most of the time. This colour may be a colour which they used to

have, but it is no longer in the market, therefore even if they intend to buy that particular

shade of the eye-shadow, it will be tedious to source for it from another brand.

Furthermore, women needs special colour for certain functions, shades that they will not

purchase for daily usage. Even though they find it wasteful to buy it simply for the

occasion, there is no other alternative than to purchase them.

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Strategic Management of Technological Innovation, Melissa A. Shilling, International Addition, p. 215-
216

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Above all, women love to have a wide variety of colours, yet the price, which is at an

average of S$20 for an upper-end, mass-market brand, and the short product lifespan,

deters them from purchasing these colours regularly.

Foundations and Blushers

Most Asian women have the problem of locating a foundation tone best suitable for their

yellow-based skin tone, thus they are unable to achieve an optimal look. Furthermore,

some women nowadays like the idea of having a healthy bronze glow; hence many spend

hours under the sun. However, the problem arrives when they have to purchase yet

another foundation tone that suits their tanned skin tone. As they get fairer, the

foundations that they had purchased when they are fair and tanned will not match their

current skin tone. This applies for cheek colours too, as different colours match different

shades of skin tone.

Application of Cosmetics

Some women, who are not proficient in putting on make-up find it a hindrance to do so

by themselves. Furthermore, the application of cosmetics involves a lot of knowledge,

experience and exposure. Many women do not know how to blend 2 or more colours for

their foundation colours, and are even more confused about which part of the eyelid to

apply the eye shadow. Therefore, it is common to see women looking inappropriate due

to the misapplication of make-up for the wrong occasions. For instance, some women

wear outrageous-looking party-type make-up for work functions. Also, there are

particular functions which require special style of make-up, for instance, a Halloween

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party. These are the times where women will find it a problem to design a style for

themselves that bring out their best.

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Market Analysis

Overall Cosmetics Market

The cosmetic and toiletry retail market in Singapore was worth approximately US$379

million (S$659 million) in 2003. This shows an increase of 3.2% from 2002 figures. In

2003, imports from the U.S. amounted to US$97 million, which represents 15% of the

total imports.

Colour Cosmetics

Among the cosmetics, the most dynamic growth was demonstrated by colour cosmetics

over the years. In 2003, sale of colour cosmetics were worth US$49.4 million (S$86.4

million). Even though it is a modest increase of 1.4% from 2002, the growth rate over

2000 and the review period was 8.7% and 41.5% respectively. This growth is likely to

increase steadily over the coming years, as Singaporean women are more image-

conscious. Therefore, the use of cosmetics has become more of a necessity than a luxury.

Furthermore, Singaporean women are starting to use cosmetics at a younger age, as more

teenagers have the disposable income to purchase these products. Above all, with equal

work opportunities, the average working Singaporean women has the financial capability

to support their purchase of cosmetics.

Premium Product Market

With the increase of financial power, Singaporean women have the ability to purchase the

premium products. According to the figures from the Association of Perfumes and

Cosmetics Distributors of 2002, the domestic retail value for premium cosmetics and

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fragrance brands was in excess of US$78.2 million (S$140 million), which is considered

a strong growth. Furthermore, more women are likely to fork out large sums of money to

purchase a premium product if the luxury brand is particularly fashionable or attractive.

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SWOT Analysis

Strength:

Our product is the first of its kind hence we have the first-mover advantage. In addition,

our company is made up of talented people from different fields of expertise.

Weakness:

Our company currently lacks the financial resources to further develop our idea and

introduce our product into the market. We also need to further increase in-depth

knowledge on our mechanical and technical needs.

Opportunities:

The niche market of customized cosmetic products is being overlooked by major players

in the industry, who focus on producing mass-market products.

Threats:

Major players are able to enter the market using a shorter period of time. This is because

they have the resources to speed up their product development.

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Porter’s 5 Forces Model

1. The degree of existing rivalry

As our product would be the first of its kind in the market, there is currently no rival.

2. Threat of potential entrants

The threat from potential entrants is rather high as we believe that our target market is

lucrative. Furthermore, it is easy to imitate our product mechanism and the barrier to

entry is low.

3. Bargaining power of suppliers

The bargaining power of suppliers is high as we will be dependent on them for our

supply of cosmetics and equipment manufacturing.

4. Bargaining power of buyer

As we will be selling our product directly to the end users, the bargaining power of

the buyers (end users) is low.

5. Threats from substitutes

The best substitute to our product would be the over-the-counter cosmetics. The

threat is valid and should be taken seriously as there are many established mass

manufactured cosmetics brands in the market.

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Product

Design and features

Goddess is a portable device that customises make-up for the user. The features of

Goddess is categorised into cosmetics blending and consultation on the application of

cosmetics and is as follows.

Cosmetics Blending

Goddess involves the blending of the different individual eye shadow, blusher and liquid

foundation colours. The cosmetics will be from a renowned cosmetics company, for

instance, Shiseido or Shu Uemura. For the eye shadow, these colours will come in

refillable chalk form consisting of 4 primary colours- Cyan, Magenta, Yellow and Black.

An additional shimmer chalk is also available for purchase. These refill pencils come in

different lengths to cater to the needs of different customers.

The choice of colour is either chosen from the personalised template of C-M-Y-K, where

the software will differentiate it with different percentage of each colour, or it will be

selected from the professional recommendation made by Goddess. There will be an

option for the addition of shimmer.

Consultation on the application of cosmetics

This section of Goddess is separated into 2 categories, “styles” and “tutorial”. The

“styles” category consists of recommendations from the software to advise the user on

the shades of shadow to use and the methods of application. The software will design a

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variety of styles for the customers to match their clothes, skin-tone, contours, and

function. This software can be frequently updated on the Internet. Combinations

generated by Goddess can be saved and be referred to anytime. A step-by-step tutorial is

also provided, complementing the styles generated previously.

Goddess is tentatively supported with either a spectrophotometer or a colorimeter to

determine the user’s skin tone, and face structure.

Other Functions

The screen is designed to be touch-screen to make it more user-friendly. Goddess can be

personalised, with different colours and designs sticky available for sale. It is supported

by USB-port to download updates from the Internet.

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Benefits

Convenience

The social benefit that Goddess offers is that it saves time for the busy working woman.

Many often face a problem of rushing to get to work on time while having to look

presentable. With Goddess, the colours are pre-chosen and customized to what you are

wearing. With a click of a button, it dispenses personalized eye-shadow and blusher

colours, saving you the hassle of deciding what to choose.

Professional advice

Goddess is designed by a diverse team of industry experts, including software engineers,

cosmetic and material researchers. Our software system has been reviewed by a panel of

cosmetics professionals. Therefore, we can ensure that the skin-tone analysis and

blending technology is endorsed in the industry. We intend to constantly update our

technology to ensure that our software provides updated and trendy make-up templates to

suit different occasions.

Reduces wastage and Economic Benefits

An environmental benefit of Goddess is that it reduces wastage of make-up products and

packaging since there is no longer a need to purchase bulk items that last for many

months. Most women often are unable to finish using cosmetic products before the expiry

date. Thus, they have to throw away these expensive products. It makes economic sense

to purchase Goddess, since there is no longer a need to purchase pricy make-up products.

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The cosmetic pencils sold are compact and comes in an environmentally-friendly

packaging.

Improves self-esteem

More importantly, our mission is to improve a woman’s self-esteem through the use of

these products. Looking good is very important in an increasingly image-conscious

society. Being presentable will not only improve one’s social status, and create a good

impression at work and social events.

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Technology

When we are measuring skin tones or color, what we are doing is really measuring the

various wavelengths. The different wavelengths are electromagnetic energy with known

length and known amount of energy. When an object appears in a given color, it is so due

to the emission and/or reflection of light. The object may be absorbing some other

wavelengths but the remaining wavelengths of reflected light rays that enter our eyes will

then ‘allow’ our perception of color. The perception of color comes from photoreceptors

in our eyes, the L M and S cones sensitive to the light of long, medium and short

wavelengths accurately.

A device which is able to detect color is a colorimeter. This device uses sensors that

assign consistent measurement parameter to every color, no matter what the ambient

conditions happen to be. A colorimeter measures the way an object reflects or transmits

lights across the visible spectrum and records the values which correlate with the way the

human eye sees color. The light reflected off the object will be passed through a red,

green and blue filter. After that, a photodetector beyond each filter will detect the amount

of light passing through the filters, which ultimately will be translated into X, Y and Z

values.

Another more accurate method of color measurement is to use a spectrophotometer,

which records the amount of energy present at each wavelength of visible light. And we

can take measurements using a spectrophotometer, an instrument that divides the visible

spectrum into discrete bands and records the amount of energy present in each one. When

we do a color measurement with the spectrophotometer, we obtain its spectral response

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curve which shows how much radiant energy the sample transmits or reflects at each

wavelength. The operation of the spectrophotometer is basically to illuminate the sample

with a light source, of a known wavelength and spectral range, and this will be reflected

by the sample at different wavelength intervals. This is done by passing the reflected light

through a monochromating device that splits the light up into separate wavelength

intervals. The spectral data is then sent to the processor where it is multiplied together

with data table values for the selected illuminant to obtain the X, Y and Z values.

The advantage of a spectrophotometer over colorimeter is that metamerism is

automatically detected. The negative aspect is that high quality spectrophotometers are

very expensive. However, this disadvantage is set to change as instrumental development

is improving very rapidly.

Presently, the technology that is available is to recognize and analyze colors, but they are

unable to give us advice on how our customers should match their make-up. Therefore,

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our company has already contacted several esteemed programmers as well as engineers to

further develop from the available technology to come up with program languages that

can advice our customers in the most flattering way to apply their cosmetics.

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Management

Timing of Entry

A key strategic decision for firms contemplating entry into new emerging markets is the

timing of their entry. Companies can either choose to enter early (first mover) or may

prefer to enter later and wait for technical and market uncertainties to subside. Both

situations have pros and cons attached to it but which strategy to adopt will dependent on

some key advantages that each company possesses.

Metamorphosis product is a new creation for consumers to have a customized blend of

colours that suits their unique individual skin tones. After much analysis, Metamorphosis

wants to leverage on the advantages as a first mover in this market.

Unique product

From our market research, we have clearly identified a need for our product. Being a new

product with no substitutes is the greatest competitive advantage that our Metamorphosis

has. The advantage of being the first in the market is that we don’t have any competition

but it will take a huge amount of resource to educate the market. It is expensive to

educate the market, taking both time and sustaining power to do so.

Excellent research team

Our company possesses and is further developing state of the art technology to conduct

further research on this product. Together with the best talent in this industry, we are

confident of the quality that we deliver. Metamorphosis emphasis on product innovation

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is the key that we hold our success to regarding the timing of entry. With our world-class

researchers, we are confident that the company can command the relevant resources to

succeed as a first mover. In addition, the unique capital and cost structures that the

company adopts have reflect our ability to manage and allocate resources effectively.

Resource management

Talent Development

We have chosen to solely develop the necessary technologies for our product in order to

have exclusive control of and protect our designs and tacit knowledge. Although it will

require a concentrated pool of talent and strong financial backing from venture

capitalists, we feel that this will challenge us to develop new skills and market

knowledge, which will benefit us when we have built a strong foundation for expansion.

We have sourced for experts from relevant fields in cosmetics, material, engineering and

software. This will enable an all-rounded perspective for development of our product.

Our R&D department will be focusing on the development in these areas:

- portable skin tone detector

- customized make-up blending technology

- individualized make-up software system

Protection - Patents

We have decided to patent Goddess. Although patenting is an expensive and long

process, our company feels that it is necessary for our survival. This is because without

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patenting, we will have no protection against our potential competitors copying our ideas.

So even if we enter the market earlier, we may still be at a disadvantage as we do not

have the necessary resources to compete with the potential competitors as they will

mostly probably be some big companies

External party management

As our company is very new to the make-up industry, it is essential that we collaborate

with various established players in the industry, and form symbiotic relationships with

one another.

Strategic Alliance with Loreal

It makes economic and technological sense to form strategic alliances with established

make-up brands such as Loreal and Shiseido. These firms have greater capital resources

(e.g. make-up products), distribution and marketing capacities that will allow us to speed

up market penetration. With financial backing and research partnership, our in-house

R&D department is able to develop cosmetic technology (e.g. portable skin tone detector)

within a shorter amount of time. The make-up companies will stand to benefit through

this alliance because they can decide their commitment level at a later stage. There is a

resource and strategic fit between us and our alliance partners.

Outsourcing Manufacturing of Product

Due to the lack of scale and facilities, our company has decided to outsource the

production of the customized make-up machine to contract manufacturers. This move

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will reduce costs and save resources, and enable our company to focus on core activities

that provide us with a competitive advantage in the market, which is establishing

ourselves as a leader in customized make-up products and services.

Deployment strategy

Timing

When we launch Goddess we must ensure that the production capacity and customer

service are in place as customer may be unhappy if they can not get hold of Goddess after

the launch or receive sub-standard service when they need it. We will also have the

launch near Christmas so as to take advantage of the increase in consumer spending

during the festive season which can last from December to March.

Licensing and compatibility

We decided not to share information of Goddess with any other parties except for one

designated strategic partner with an established cosmetic company. This is so as the only

competitive advantage we have over potential competitors is our knowledge of Goddess.

By sharing that knowledge will be unfavorable for us as we are a small company with

little resources to compete with our potential competitors if Goddess is successful.

Pricing

We decided to use maximum market skimming during the earlier phase of Goddess

which is to set the price high to signal that Goddess is a significant innovation that offer

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a substantial performance improvement to any products available in the present market.

By doing so, we will also be able to recoup initial R&D expenses assuming high demand.

Distribution

We decided to use intermediaries as our primary distribution method although it is more

expensive. This is so as Goddess will need onsite production education and by using

intermediaries will help to achieve this aim. Another point to note is that most of the

substitutes for Goddess are using intermediaries in the form of service counters so it will

be better if we can also use the same to compete with the substitutes.

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Marketing strategy

The target market group that we are serving is the early adopters among PMEBs and

socialites aged from 20-45 years old. (Includes brief description/characteristics of early

adopters from text)

To illustrate the attractive of our product, we have come up with a marketing plan. We

will be providing free make-up services for exclusive beauty and fashion events. This is

because such exclusive events are only open to socialites and professionals hence it will

be an effective way of reaching out to our targeted market group. Besides making our

presence felt in exclusive events, we will be committing $50,000 on sponsorship of

beauty and fashion shows such as “The Singapore Fashion Week”. To construct an

appealing image, we would sign on an artiste to endorse our product. This will give the

product more credibility. We will be spending $50,000 on advertisement in magazine.

The magazines chosen should be the ones that our target group read such as Her World

and Female since our market is a niche market. Lastly, road shows ($75,000) will be set

up to introduce and promote our product. It will be the place to gain first hand experience

the product as well.

As shown in the marketing tactics/plan above, our strategy is to use selective channels to

reach out to our target market group. This is because it is a niche market. By selecting the

appropriate and effective communication channels, we will be creating exclusiveness for

our product. Furthermore, our resources can be spent wisely.

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Budget

We expect the company to be profitable in the fourth year and to break even in the fifth

year.

Funding Required

The funding for our company is estimated to be $2,000,000 which will enable us to get

through our infancy years. The six co-founders will come up with $100,000 each and the

rest which is $1,400,000 will have to come from external parties such as venture

capitalists.

We do not think net present value will be a good indicator of the company's financial

position as we only did a five year budget. Using the budget to calculate net present value

will be inaccurate as it does not include all cash flow till the end of the company.

Please refer to Appendix for the detailed budget.

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Limitations

Patent

To protect Goddess, we hope to patent it. However there are also many problems which

come along with it. Firstly, there are too many parts to patent and some might already be

patented in the previous years. Secondly, it is a laborious and very time consuming

process. Lastly, one major problem with patenting is that if Goddess enters the global

market, whichever patent that were successful applied for might also not be protected

overseas.

Joint Venture

Metamorphosis is a small and young research company. Hence, it will be difficult for

established make-up companies to believe in our cause and collaborate with us. There is

the threat of being taken over by these companies after the product is launched since they

will have more bargaining power in resources and distribution. Therefore, it is important

to find the right partner and draw out clear partnership objectives.

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Long Term Objectives

Our company aims to be at the forefront of innovation, to be the market leader in

developing beauty products. We want to bring out the best in every woman. At the same

time, we will not rest on laurels but will seek to innovate and add additional features to

our machine. From our market research, many respondents actually hope to see more

features like manicure service offered in our machine.

Being the founder and developer of this machine, we want to build a strong brand image.

We want to be known as a company that develops premium products in the areas of

beauty.

After the successful launch of Goddess, our company hopes to be acquired by a major

cosmetic player, such as Loreal, in the next few years. This is because it is not realistic to

stand alone among the big players in the industry. We want to establish ourselves into a

premiere customized-cosmetics product design company, by focusing on research and

development in this field. Upon acquisition, besides being able to concentrate on this

aspect, we will be able to provide employment for more talents in this industry. Our

venture capitalist might be able to gain financial rewards from this acquisition, in the

form of shares from our parent company.

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Timeline

Year Activity
0 Set up company
1 Development of Goddess
2 Development of Goddess
3 Joint venture with major cosmetic company

Launch Goddess during Christmas


4 Marketing campaign

Development of new products and improve

Goddess

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Appendices

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Appendix A

Underlying assumptions for the budget

Sales assumed as below:

Units Year 1 Year 2 Year 3 Year 4 Year 5 Year 6


Market share gain for the
year 1% 3% 6% 10%
Total market share 1% 4% 10% 20%
Sales(cosmetics blender) 2408 7224 14448 24080
Total market share 2408 9632 24080 48160
Refills for each customer 2 3 3 3
Refills 4816 28896 72240 144480

For the first year of our launch


Since we will only launch it in the last quadrant of Year 3, we approximate that the
average customer will only purchase two refills. Subsequently, after the first year of our
launch, the average number of refills sold to our existing customer is estimated to
increase to 3.

For the first two years


Within the first two years, the increase in expenses is estimated to be about 5% because
we focus on R&D. For the third year with the exception of lab and rental expenses, our
expenses will increase by a greater percentage due to launch of Goddess and continue to
increase by 5% in the fourth and fifth year.

All expenses are assumed to be made in cash and ending inventory is assumed to be 10%
of cost of good sold. Debtors are assumed to be 10% of total sales.

Cost of good sold is assumed to be 110% of material costs. Sales price of the cosmetics
blenders is $500 and a cut of profits is imposed for the sales of refill at $15 each.

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