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Background
With increased competition and stagnant growth, the skincare company needs a rebrand. This event consists of changing the packaging to a more convenient, fresh, relevant, and profitable production. It is estimated that in four years, the company will not only catch up with the percentage of growth lost over the past years on the average in the industry but will move to the level of current growth. The strategic rationale is based on research conducted among consumers and retailers, who determined the need for a change in packaging and chose the new option as a better one. The expected impact is to maintain share and growth within the industry.
Financial Analysis
Table 1. Project Conditions
Table 2. Financial Indicators
According to the analysis in tables 1 and 2 above, these changes are necessary for the company for several reasons. Firstly, the cost of packaging production is reduced, and a significant increase in sales is expected, covering all possible costs for launching and maintaining the project. It is signaled by the calculated indicators of NPV and IRR. Feedback from major retailers, which are the main customers, is positive, indicating the need to introduce this project as soon as possible. All possible costs with the return of the old goods have been calculated and taken into account in the calculations above.
Risks
Financial risks are associated with a mismatch in the forecast for sales growth, affecting the growing revenue required to support the project and cover costs. Non-financial risks are associated with competitors shortly, and a competitor will release a new skincare product that may be of better quality as a product. It will take a long time to fight such a competitor since the development of hygiene, and medicinal products requires a lot of checks and time.
Ethical Considerations
Improving packaging without improving the product despite rising prices is justified for several reasons. Firstly, the hygiene and pharmaceutical industry must explain any change in composition with numerous experiments, passing inspections, and more (Luchese, 2021). The duration of the process will be extremely high. Secondly, judging by marketing research, the companys consumers are only dissatisfied with the packaging; they are satisfied with the price and quality of the product, and therefore a change in the composition may lead to an outflow of old customers if they are not satisfied with the new result.
Reference
Luchese, C. L., Engel, J. B., & Tessaro, I. C. (2021). Disposable, reusable and biodegradable hygiene products. In Antimicrobial Textiles from Natural Resources (pp. 421-454). Woodhead Publishing. Web.
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