The lipstick effect: turning around XT Beauty

Abstract

Learning outcomes Upon completion of this case study, students will have learned to identify and analyze pending organizational failure, based upon company data. They will have formulated a business strategy (either cost leadership, differentiation or focus), as well as propose process improvements to cope with changing macroeconomic factors, costs, supplier conditions, and especially talent management and retention. Students will practice the logical organization of information, articulating the key facts and assumptions underlying their solutions. They will practice communicating with a possibly hostile executive team, to whom they defend their proposal based on its merits. Case overview/synopsis This case recounts the recent history of the XT Beauty, a fictionalized but real company headquartered in Moscow, selling professional cosmetics, electrical instruments and equipment for beauty salons in St. Petersburg, and other cities in Russia. XT Beauty enjoyed successful growth until the onset of the 2014 economic crisis when consumer purchasing power plummeted. Students consider both the obstacles and opportunities presented by an emerging Russian market, customer behavior in a recession, managing sales talent, the leadership style of women, as well as key operational, and financial issues as the company react to a deepening economic crisis in an uncoordinated manner. The case is an introduction to the Russian business culture and operational environment. It focuses not only on challenges but also the opportunities in the anti-cyclical market for beauty products. Complexity academic level Master’s students in international business, human resources, operations and MBA candidates. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes. Subject code CSS 1: Accounting and Finance

Cosmetics companies: income developments in time of crisis

“…The authors find that surprisingly household income does not affect high-equity cosmetic brand choice. Khvatova and Thakur-Weigold (2019) describe the recent history of a Russian cosmetics company that experienced a phase of great development until 2014, when consumer purchasing power plummeted. Their research focuses not only on challenges but also the opportunities in the anti-cyclical market of beauty products.…”

“…In other countries, research has shown that spending on cosmetics has not changed in times of recession (Kaswengi et al. , 2020; Khvatova and Thakur-Weigold, 2019; Hyun and Choi, 2018; Hassan et al. , 2015) or it has moved towards cheaper products (Le Roux, 2010).…”

“…It is, therefore, necessary to understand, in times of economic crisis, if the sector has suffered the effects of the reduced availability of resources for families and individuals: this is the main motivation of the study, which tries to verify whether, in Italy, the economic crisis has reduced the consumption of a secondary good, as it would be logical to believe. In other countries, research has shown that spending on cosmetics has not changed in times of recession (Kaswengi et al, 2020;Khvatova and Thakur-Weigold, 2019;Hyun and Choi, 2018;Hassan et al, 2015) or it has moved towards cheaper products (Le Roux, 2010). This would mainly depend on psychological dynamics, such as the "lipstick effect" (Murgea, 2012;Allison and Martinez, 2010;Hill et al, 2012;Arnold and Reynolds, 2003).…”