Carlina Cosmetics is a Spain based manufacturer cosmetics. The founder is Mr. Wenthworth Miller who started the business in 1948. The principles of the business are design, manufacture and distribute cosmetic products. The products are classified into 6 major categories; deodorant, gel, shampoo, eau de cologne, perfume and floral scent. In 1960s, foreign company started to enter the market but at that time Carlina Cosmetics was not yet affected. In 1963, Carlina Cosmetics launched its best selling product, a deodorant called Aurora.
By this, the company’s sales and profit increase dramatically. This brings to an opening of factory at Paris in late 1960s. There are developments in design, transport and telecommunications in 1970s. While for cosmetic industry, there was a widespread implementation of new technology for fragrance analysis. There was also a large supermarket chain which changed the consumer behavior. After 10 years operating, the factory at Paris was closed down due to unprofitable return. In 1980s, the company moved to a new factory and the problem rose because of idle capacity.
Referring to Table 2, in 1980 the sales increased by 1598. 81 (Euro Thousands) after closed the factory in Paris. This is due to eliminating unprofitable products. However, in 1990 the sales decreased by 209. 58 (Euro Thousands) after moved to a new factory. This is because the company is producing far below capacity. From our analysis, we see that there are a few problems in this case. Firstly, is change in customer preferences, it is between the young and old group of customers.
For old people, they tend to be loyal with Carlina Cosmetics because they had used the products for a long time and it suits best for them. So, they doesn’t want to change or switch to other products. However, for young people they are influenced by advertisement. Thus, they are easily switched to other company. Secondly, there were many competitors at that time either from domestic or foreign companies. Customers had more choice on the product and they might find substitutes for any of Carlina Cosmetic’s product.
Thirdly, there were different views of different generations. This is between Mr. Miller and his son. His son tries to introduce new cost system which might reduce the company’s cost. However Mr. Miller reluctant to change and ignore all the ideas proposed by his son. He cannot accepts others’ opinions and always think that his decision was the best. When foreign companies enter the market, some of the customers switched to them as they offered high quality products but at lower prices.
Thus, people might think they can save their money by purchasing the same quality products like what Carlina Cosmetics offered but at a price which was much lower. From all the above problems, we come out with a main major issue which is whether there is a need to change the existing cost system as there are changes in the environment or market? For this company, it is difficult to change because of Mr. Miller’s attitude. He imposed a complete control on the company by made all the decisions and ignores others.