Sephora is a French-based retailer in cosmetics and perfumes that do operate in the United Arab Emirates. With over 100 stores in the Middle East market, the beauty store has been doing well in terms of performance over the past years. The beauty store is in a monopolistic competition given the immense competition between many of beauty cosmetics already in operation the country. There are many cosmetic retail store operating in the UAE with each trying to achieve some price advantages over the other. This they do through differentiating their goods from other similar goods and making them desirable to their customers. As a result, the consumers in the UAE are treated to the best possible market outcome given that they have a variety to choose from. The cosmetic consumers in the UAE are have a perfect knowledge of the range of beauty products they may need (Nocco, Ottaviano, & Salto, 2014). The retail store has over the past decade spend a considerable amount of cash on advertisements given that there is imperfect knowledge of its products in most parts of the region.
They have to convince their customers to choose their products over those of the competing retail store. The decisions made on consumption can be described as rational with the maximization of self-interest emphasized. The consumers are out to maximize their satisfaction from the wide range of products that are in display at the beauty store. Similarly, the retailer is aims at maximizing their profits through increased sales and diversification of product lines (Nikaido, 2015). More beauty stores are continuing to enter the market, for instance Lorac and the cosmetics currently offers homogenous products a further assertion of the type of competition the retailer is operating in. The costs of a commodity are determined by the market forces of demand and supply and can be referred to as a price taker. The regulation of the government in the UAE cosmetic market is under minimal regulation by the state explaining why the company has been operating without much externality. Due to the type of market structure Sephora is obliged to operate under, the stores have been making normal profits in the long run with super-normal profits occasionally achieved in the short run (Nikaido, 2015).
Price elasticity of demand can be described as the percentage of change that is observed in the amount of quantity demanded compared to the percentage changes in prices. Under monopolistic competition, the price elasticity of demand can be described as perfectly elasticity. As such, infinitely small changes in process will result into an infinitely massive changes in the quantity of products that are demanded or are in supply in the market. This implies that the consumers have a range of options to choose from when the products from one particular store become relatively expensive. The income elasticity can be described as unit elastic given that when the income of a consumer changes, there will be a proportional increase in the quantity of beauty products that will demand from Sephora.
The beauty retail shop is facing competition the Unilever Gulf Beauty and Personal Care retail outlets in the region. The products retailed by Sephora have close substitutes and complements to allow the consumers to make rational decisions concerning the types of products they are willing to consume. For instance, there are a number of hair and facial products on offer at the retail shop allowing the clients to make the best choice of preferred product. For instance, the beauty blend has a close substitute in the Cargo Bronzer and can also be used to complement other facial beauty products. The product faces competitions from rival retail outlets such as Unilever that have been in the market for a long time. The competing firm produces equally quality and reliable beauty products as those being retailed by Sephora explaining why the competition for market control is increasingly becoming sophisticated.
The company relies on a labor force that is mostly recruited from the local population to enhance cohesiveness and to reach a wider market base. However, the employees should be equipped with the requisite training to enable them cope with the dynamics of a monopolistic competition (Pierret, & Beze Boduka, 2011). A well-trained workforce implies increased productivity and efficiency and therefore a reduction in production costs in the long run (Pierret, & Beze Boduka, 2011). The company is planning to open more retail outlets in Dubai in the near future to increase their market dominance. This will be a profitable endeavor given the expanded market in Dubai and the company is more likely to experience an upsurge in sales. The company, in its bid to grow and develop more should diversify its production process further to attract a wider range of customers. As it stands, the company is valued highly in the region in terms of quality and efficiency in a market so much maligned with competition. The company should start exploring the less explored markets of Asia and Africa to further diversify their production process.
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