Term Paper: Regime Change and Democratization of Iraq

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¶ … regime change and democratization of Iraq has led to an emerging market that can become extremely susceptible to new market products. In the six months after liberation in Iraq, 20 million cell phones were distributed among the population. The explosion of consumerism is due to the denied access to luxury goods in the last regime that resulted in a consumer outburst with the emergence of new market liberalization. One product that could have significant success within the Iraqi consumer market is a cosmetic product. This is an extremely underdeveloped market and it has significant potential. In the below sections we will analyze the viability of market penetration for cosmetic products. The first step however, is to understand the nuances of Iraqi society and its current demographics.

Iraq is located squarely in the midst of the Middle East surrounded by Saudi Arabia, Syria, Turkey and Iran. Its climate is very dry with the majority of its terrain made up of desert land. In total their population is estimated at over 26 million people, a near even male to female ratio. Important to our discussion is that the median age for females in Iraq is 19.6, which means that the target population for our product is very well represented within this country. In total there are about 12.5 million women that fall between the target age group that we are looking for (below 65 years old). Of the country in general, 97% of the population are Muslim, and this may significantly impact sales figures, which we will discuss below. The Iraqi economy is primarily-based within oil, with 95% of its exports being oil related shipments. Furthermore, most of the wealth was concentrated within a top-heavy aristocracy system until recently. The GDP per capita was 3,400 dollars according to estimates in 2005 and should have risen significantly since that time. Despite their oil wealth, Iraq lacks a strong economic infrastructure and the recent collapse of its government has led to an upward increase of unemployment. The unemployment rate in 2005 was estimated at 25 to 30% of the workforce, one of the highest in the region. Overall the economic situation in Iraq is not dire, but flexible income for consumer products is much less flexible than in the United States.

Cosmetic beauty products are an extremely profitable sector within the United States. Companies such as L'Oreal, one of America's oldest cosmetic producers made profits of almost 20 billion in 2003, and has consistently shown double-digit growth in the past two decades. Cosmetics can take many different shapes and forms from lipsticks to concealers. The industry primarily relies on fashion magazines, cultural icons, and celebrities to advertise its products and takes advantage of the massive consumerism in America to push its products. The industry has invests billion every year to create new products that launch on the market. Pricing for these products can range anywhere from 2 dollars to over 5000 dollars for brand name perfumes. Overall the cosmetic industry thrives in the United States because of its consumer economy, whether this success can be translated to Iraq requires a detail analysis of its economic and social factors.

The first factor to consider when cosmetic products are involved is the size of the consumer market in question. The target demographics of this product are young women, and in this case Iraq is in full abundance with fully one third of its citizens being women within the range of 14 to 65. Although a significant portion of the population resides in relatively rural regions in Iraq, the majority of young women in Iraq reside in urban regions where the population of major cities is well over one million. Overall women within urban regions have greater access to disposable income than women in rural areas and they are also part of a much more developed consumer infrastructure. Therefore the market size indicates that there is potential for this product within the Iraqi consumer market.

The main barrier to market penetration for cosmetic products are socio-economic and socio-cultural factors that may significantly hinder cosmetic assimilation within Iraqi consumer markets. From an economic perspective, the per capita income for citizens is remarkably low; this is because the economic wealth within this country has been traditionally top heavy with most of the money allocated to government and aristocratic spending rather than sharing among citizens. Therefore consumer spending is traditionally very limited, although since the liberation effort such consumer spending has increased at an amazing pace as more access to wealth and the improvement to economic infrastructure have all helped their causes. This however is not the primary barrier to the assimilation of American cosmetic products. The socio-cultural barriers may have a much more significant and negative impact on American cosmetic sales. First, the conservative nature of Muslim culture (97% of total population) as well as Shiite culture dictates that women behave in a very reserved manner, in many cases they have to be fully concealed at all times when they are out in public, therefore the need for cosmetic products within their cultural structure may be severely limited. The conservatism of the older generation may not however, automatically transfer to the younger generation within Iraq, the integration of cell phone technology and other electronic consumer products is an indication that the consumer culture in Iraq is change and therefore young women may be much more susceptible to good marketing campaigns for cosmetic products. Another important factor may be the aversion to American products within the Iraqi marketplace. The current backlash of cultural conflict created by the U.S. occupation has turned a significant portion of the population to retaliate against American cultural infiltration within Iraq, therefore American cosmetics may be viewed by many as another attempt to impose cultural hegemony among the Iraqi population. A careful marketing campaign has to be restructured so that cosmetic products are subtly and nonaggressively introduced into the market. Cosmetic manufacturers who want to enter the Iraqi consumer market must change their cosmetic offerings to more subtle products and to provide tantalizing options that fit within the reserved cultural atmosphere of Iraqi women.

At the present there are little to none legal barriers to entry as the newly instated interim government has yet to create taxation for imports. However, any entrance within the Iraqi consumer market may have to be approved by the United States export authority because of the sensitive nature of the Iraqi economy and U.S.-Iraqi relations. However there appears to be no barriers once the product is the approved domestically within the local or national political arena. The status quo could change significantly by later this year however, because the interim government will institute more policies as the increase in economic infrastructure will make the consumer market in Iraq more sophisticated given time.

The competition that American cosmetics face within the Iraqi consumer sector is traditional feminine beauty products that particularly emphasize skin tone and scent. However, this market is not a well developed one because the products are not used on a national level and many times operate in local areas rather than nationally marketed products. Cosmetic products that can mold itself in the fashion of region fashionable fragrances and skin conditioners could very well subsume the existing competition. Competition with local market players will be stiff because they are entrenched within the local culture, however a national level campaign and strong sales infrastructure could easily overcome any competition on the local level especially if demand continues to escalate for beauty products. The key is for these organizations to create effective products that will be popular for consumers, such as scented oils and ointments that play upon Iraqi concepts of beauty and mystique.

The current economic and political climate of Iraq is especially conducive to foreign investment because of several strong incentives. First, the United States wants greater cultural and economic penetration into Iraqi consumers because this will entrench their position and reduce anti-American sentiments among the populace. Second, the increased flexible income and desire for consumer products have left a void within the market that demands to be filled, therefore policies have been implemented to increase the accessibility of consumer products. Cosmetics would be a welcome addition to the current market and would be favorably supported by the political infrastructure that is attempting to create greater access to formerly inaccessible consumer products. Finally, foreign business investment not only increases job opportunities but provides more revenue for the government, which are two influential factors that motivates greater political cooperation. The interim government wants Iraq to be as attractive as possible for outside business investors because foreign investment is the quickest method of injecting money and job growth into the economy to improve Iraq's overall economic infrastructure. These reasons make the climate for business investment ideal.

Other than creating an excellent product that will receive market assimilation, the primary challenge for American cosmetic companies is to create an effective marketing campaign that will lure women away from traditional beauty products… [END OF PREVIEW]

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