Research in Practice

Abstract

            The Perfume Shop in the United Kingdom was acquired by A.S. Watson Group (the largest retailer of health and beauty products globally) in 2005. In most instances, most mergers and acquisitions do not end well. This is evident in the fact that the profits and sales of the minor company tend to reduce as well as its performance after an acquisition. However, some companies are able to beat the odds and still do well after an acquisition. The acquisition of the Perfume Shop by A.S. Watson Group is one such case. This report aims at bringing to light the results of the merger between the two companies and the related factors.

Aim, Objectives and Rationale

Aim

To critically evaluate the factors behind the success of the Perfume Shop

Objectives

  1. To find out about the Perfume Shop.
  2. To find out about theA.S. Watson Group (This is the company that bought the Perfume Shop).
  3. To find out the reasons for the continued success of the company even after the acquisition.

Rationale and Introduction

According to the Raconteur, the United Kingdom’s beauty industry has an estimated total worth of 17 million pounds. This is a considerably high mount which implies that this is a major industry in the United Kingdom. Focusing on the Perfume Shop in the United Kingdom, this company was started in 1992. Originally, in 1991, the Perfume Shop was called Eauzone. The Merchant Retail Group Inc. purchased the company then. As at that time, the Perfume Shop had a total of six stores. However, three were closed down with only those in Portsmouth, Basingstoke and Guildford left. Afterwards, the company expanded and developed branches in Sheffield, Bromley and Meadowhall. The company has maintained these branches over time and opened others within the United Kingdom. Currently, the Perfume Shop has over 265 retail shops nationwide. These shops pride themselves in selling all major brands of fragrance at prices which offer value for the customers’ money. The Perfume Shop takes pride in the fact that it provides a matchless customer service whose staff are well equipped with the necessary skills and knowledge to pass on to each of their customers.

It is also important to focus on the A.S. Watson Group. This is the largest beauty and health retail group in Hong Kong. The A.S. Watson Group has more than 12,000 stores worldwide and these stores serve approximately 28 million customers every week. This group operates the largest portfolio of retail brands and formats around the globe. Majority of the company’s shareholdings are owned by the multinational conglomerate C. K. Hutchison Holdings Limited. A small percent (approximately 25%) of the company’s shares are owned by Temasek Holdings, a company owned by the government in Singapore. The headquarters for the A.S. Watson Group are in the Watson House. Initially, the A.S. Watson Group was started as the Canton Dispensary and Soda Water Establishment. This was in 1828 when it was a dispensary where the poor people of Guangdong went for free medical services. It was not until 1871 that the company adopted the name “A.S. Watson Group.”This group had a major acquisition in Europe with the Perfume Shop in 2005(Beauty, 2014).

Brief Literature Review

When the Perfume Shop in the United Kingdom ventured into the market, it worked to improve customer satisfaction in the world of fragrance(Edwards, 2015). The company had strong core values, mission and a vision all of which were aimed at ensuring the customer’s needs are considered. The company provided quite a large number of people with a source of livelihood by employing them. This is a corporate social responsibility that every company must address. Over time, the company has gone through a merger where it was absorbed by the A.S. Watson Group. This acquisition has not affected the success of the business. Evidence to this is the fact that the company (The Perfume Shop) has managed to remain in the market and stand the competition in the world of perfumes. The success of the company even after an acquisition is not an easy task and the reasons behind this need to be addressed in detail. This is in light of the fact most acquisitions do not succeed especially for the minor company; the probability of its survival is slim after an acquisition.

Methodology

For this report, secondary research is going to be used since there is enough research on the subject. The report aims at discussing the factors that have contributed to the success of the Perfume Shop even after its acquisition by the A.S. Watson Group. In order to achieve this objective, a range of both qualitative and quantitative data will be utilized. The major source of the data that will be collected will come from the internet blogs, articles and journals. Some mental aspects will also be included.

To ensure that there is no probability of having a bias in the findings and conclusions of this research, the report will use a number of resources. Undeniably, the more recent the source, the more reliable the data is. For this reason, this report will utilize materials that have been created within the last 10 years since using data collected too long ago introduces the risk of having invalid and outdated results.

Findings, Analysis and Discussion

The Perfume Shop has recorded a 46 % increase in profits in the last year and a 29% increase in sales. This has seen the company make an approximate profit of 514, 000 pounds with a sales amount of 21.72 million(Henderson, 2001). This clearly shows that indeed the company is doing well in the market. For this reason, it is important to find out why this company is still doing well after an acquisition unlike many other companies that go through the same process(Nicholls, 2007).

The first factor to consider is the staff of the company. The staff of the Perfume Shop are a perfect epitome of elegance. Considering that human resource is the greatest asset a business can have, then it means that the employees of an organization have a great effect on the performance of the organization. When the employees are demotivated or unprofessional, the company is bound to fail. For this reason, it is undeniable that the elegance and zeal to work among employees of the Perfume Shop proves the fact that the human resource asset has contributed positively to the success of the company. The Perfume Shop retained some of its former employees even after the merger/acquisition. This means that the company employees have quite a number of years of experience on the job. Consequently, the company is bound to succeed all other factors held constant. Moreover, the employees in the organization are motivated evident from the fact that the Perfume Shop was ranked among the best 100 companies to work for (Nicholls, 2007).

`           Another relevant factor is the number of brands that the company deals in. Evidently, the lesser the number of products/varieties that a company deals in, the higher the probability that the company will not do well in the market and may be faced-out due to stiff competition. The Perfume Shop knew this trick and have diversified their brands numerously. By diversifying, the company has reduced the probability of leaving the market or facing losses after one of their brands or some become obsolete or their demand reduces significantly. This is another reason why the Perfume Shop has been able to remain competitive even after its acquisition by the A.S. Watson Group(Cooper & Finkelstein, 2014).

The third relevant factor that has contributed to the success of the Perfume Shop in the United Kingdom is matching the current marketing standards in the economy. The Perfume Shop has gone online. Having a company website is very beneficial since it increases the market for the products of the company. This is because the customers of the products are not limited to the geographical locations of the stores set up by the company but everyone who can access the internet despite their location around the globe has access to their products. The wider the market for the goods produced by a company, the higher the probability that the company will have more sales and hence remain in the market. The Perfume Shop has achieved this benefit hence its success even after an acquisition(Bebenroth, 2015).

The fourth factor that has contributed to the success of the Perfume Shop in the United Kingdom even after its acquisition by the A.S. Watson Group is the alignment of the cultures of both companies. The success of a company after a merge/acquisition greatly depends on whether there is a fit between them. This fit is based on the compatibility of the values of the two companies. Considering that the A.S. Watson Group is also a company in the beauty industry, then there is a high correlation between the two companies. This correlation and compatibility is responsible for the success of the Perfume Shop even after the merger/acquisition(DePamphilis, 2011).

The fifth factor is the organizational culture. The Perfume Shop has a culture that allows it to fit in the beauty industry comfortably and compete healthily. One of the cultures that the company has acquired over time is the after sales services. For example, the company offers free delivery of its goods when need be. This may seem like a negligible act but it goes a long way in increasing customer loyalty. Another aspect is the rewards that have been introduced by the company. These rewards motivate customers to purchase at the stores of the Perfume Shop hence ensuring that the company remains in the market even after the merger(Cron, 2015).

The sixth factor that can be attributed to the success of the Perfume Shop even after its acquisition/merger is the fact that there was a complete integration plan between the two companies before the acquisition took place. In most instances, when two companies merge, they tend to fail if the integration plan was not completely set out. This was not the case with A.S. Watson Group and the Perfume Shop. Consequently, because of a well laid out plan, the Perfume Shop has still succeeded even after the acquisition(East, 2012).

Conclusion and Recommendations

From the above analysis, it is evident that the success of the Perfume Shop has not been on a bed of roses. The company has had to set strategies to bring forth this success. This cannot go unappreciated since statistics show that more that 70% of companies which merge or go through an acquisition do not survive for long. Possible reasons for the fall-out may be due to miscommunication when the merger or acquisition wasbeing done which made one of the parties make an uninformed decision. In addition to this, there may be no well laid-out integration plan for the two companies after the merger or acquisition. Also, the non-compatibility of the companies is another factor that can contribute to their failure after the merger/acquisition. Evidently, the Perfume Shop has been able to put all these factors in place and consequently guaranteeing its success.

Focusing on the recommendations, there are several aspects that the Perfume Shop should consider to increase its success. One of these is to increase the number of stores worldwide. This will increase the market share hence the volume of sales will increase. All other factors held constant, when the sales increase, the profits are bound to increase too. This means that the company will have a better competing edge and hence be more successful in the beauty industry.

Another recommendation for the company would be to utilize technology in its operations. This will reduce the operation costs of the company and hence increase their profitability. The Perfume Shop may also increase the brands of perfumes it deals in. This will ensure that the risk of being faced out reduces significantly. Moreover, increasing the number of brands also increases the level of customer satisfaction since different customer specifications will be met.

In a nutshell, it is important for every company to weigh its options before choosing to go for a merging or acquisition offer. As shown by the case of the Perfume Shop, there are indeed some companies that still do well even after a merger or an acquisition. However, there are very few companies who enjoy this benefit. For this reason, it is essential that the right parties are consulted so that a company makes the best decision when it comes to the issue of mergers, amalgamations and acquisitions. Since the Perfume Shop has succeeded in it, then it is evident that mergers, amalgamations and acquisitions can be of benefit to a company if the right factors are put in place.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bibliography

Aidin, B. (2014) UK beauty industry review. Available at:

http://raconteur.net/lifestyle/business-face-of-uk-beauty

Briefing, C. (2015) China’s cosmetics industry: Opportunities and challenges for foreign investment – china briefing news. Available at:

http://www.china-briefing.com/news/2015/09/01/chinas-cosmetics-industry-opportunities-and-challenges-for-foreign-investment.html

Beauty, B. f. o. U., 2014. Raconteur. Business face of UK Beauty.

Bebenroth, R., 2015. International business mergers and acquisitions… by Ralf Bebenroth. 10 ed. Tokyo : Springer.

Cooper, C. L. & Finkelstein, S., 2014. Advances in mergers and acquisitions. Vol. 13 by Sydney Finkelstein. 13 ed. Bingley, U.K: Emerald.

Cron, K., 2015. Mergers and acquisitions: key success factors. Financier Worldwide Magazine.

DePamphilis, D. M., 2011. Mergers and acquisitions basics. 11 ed. Amsterdam : Academic Press.

East, T., 2012. 5 Drivers of Successful Mergers, Acquisitions. The HVACR Management Magazine, 07 01.

Edwards, M., 2015. The Perfume Shop. Expertise.

Henderson, A., 2001. Interim surge at Merchant Retail. Growth Company Investor.

Nicholls, C. C., 2007. Mergers, acquisitions, and other changes of corporate… by Christopher C Nicholls. 2nd ed. Toronto : Irwin Law.

 

 

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