Corporate Strategy Case Study

Kaya's Expansion Spree: Taking Toll on Profits?

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Abstract:
Although runs a popular cliché – ‘the absence of flaw in beauty is itself a flaw’ – everyone craves for flawless beauty. While many try out home remedies, few seek professional help to look beautiful. In India, the beauty services market is projecting a good growth rate, with a steady shift from unorganised players to being organised. The Indian beauty market is witnessing the growth of brands like Lakme Beauty Salons, Shahnaz Herbals Inc., Vandana Luthra Curls and Curves (VLCC), CavinKare’s LimeLite, Green Trends, to name a few known players. Kaya Limited (Kaya) is also one such cosmetic dermatology chain which, by offering advanced skin care services is expanding its presence in India as well as in international beauty services market.

By the end of 2009, Kaya had opened 100 skin care clinics, with 87 operating in India and the rest in West Asia. Unlike other players who emphasise franchise model, Kaya is operating through company-owned outlet model, which were taking time to break-even. Kaya believes that company-owned outlet model delivers consistent quality, although the return on investment is not immediate. Encouraged by high customer retention rate and expanding customer base, the company is further planning to launch new clinics in the coming years. However, since its inception, the company was reporting huge losses, which were primarily attributed to the company’s expansion spree, operating model and advertising spends. Moreover, the company is not holding back its decision to open up new skin care clinics, despite the losses. Hence, the question arises whether there is a need for Kaya to relook at its operating model and review its rapid expansion strategy.

Pedagogical Objectives:

• To analyse the opportunities present in the Indian beauty market and discuss how Kaya Skin Clinics are growing in this segment
• To examine Kaya’s strategy of rapid expansion and evaluate the effects of the same on the brand’s performance.

Keywords : Franchisee, Franchisee Model, Company-owned Outlet Model, Beautycare Market, Beautycare Market in India, Beatycare Products in India, Beautycare Services in India, Beautycare Products Vs Beautycare Services, Beautycare Products Vs Beautycare Services in India, Kaya, Kaya Skin Clinics, LAKME, Economies of Scale