Cosmetic industry Porters Five pushes analysis

The aesthetic industry is continuing to grow over the past few decades and it is presently a billion money industry. Many consumers of cosmetic products have became aware the importance of do it yourself image and demonstration which has boosted the purchase of aesthetic products around the world. There is excellent invention in this industry which includes also resulted in the gradual growth in the cosmetic industry. Products such as creams, ointments, lipsticks, perfumes, makeup, toe and nail polish, locks spray and gels, bathtub salts and bubble baths as well as baby products are in popular especially in developed countries. The global aesthetic industry creates over $160 billion, which shows the importance of the industry (Begoun, 2003: 23-24).

However, there are specific factors which have an impact on the access to the plastic industry by firms. These factors can be briefly examined using the Porter Five causes analysis. They include the threat of substitutes, threat of new accessibility, bargaining electricity of customers and suppliers as well as intensity of rivalry on the market (Porter, 1980: 5-11). These factors should be assessed whenever a company is getting into any industry since they help the management develop effective marketing and competitive strategies. Knowledge of the Porter Five causes also helps business evaluate the feasibility of earning profits over time.

This newspaper will measure the cosmetic industry with regards to the Porter Five forces. The five factors that have been produced by Porter will be employed to the industry to be able to develop a competitive accessibility strategy. In addition, the obstacles to entry and leave on the market will be discussed in detail. Recommendations will then come in about how businesses may correctly apply the Porter Five Pushes model to be able to get into the cosmetic industry and achieve long term success. The discussed issues will be summarized at the end.

Cosmetic industry

The cosmetic industry is continuing to grow over the years to become a billion money industry, surpassing many other products which are sold on the market. Consumers are alert to the value of plastic products and especially their positive influences on improving personal image, self confidence and self esteem. Also, they are aware of the value of first impression both at the work environment and in world generally speaking (Bruno et. al. , 2010: 56-59). The realization of the value of cosmetic products has spurred demand for these products which are used by both males and females similarly. As was stated in the intro, the global plastic industry creates over $160 billion. Furthermore to consumer knowledge, there's been increase in advancement of different aesthetic products across the world. These products target at increasing the physical and state of mind of humans generally. Because of increased innovation and offer, demand for plastic products in addition has little by little increased (Winter, 2005: 5-7).

However, it must be noted that the global aesthetic industry is a large industry which includes high entrance costs, if businesses are to be successful. This industry is very energetic and requires huge investments in research and development to meet client needs. In addition, the intense competition presently observed in the marketplace especially by large manufacturers such as Avon, Revlon, Clinique, Estee Lauder, LR, Mac, Unilever while others, demand high bills in marketing and advertising (Kotler & Pfoertsch, 2006: 63). They are already set up global beauty brands that have market goodwill and devotion, and capturing a good market share requirements hostile advertising and innovating unique products. Further research of the aesthetic industry with regards to the Porter Five causes will be undertaken below;

Porter's five causes analysis

The Porter Five forces were produced by Porter plus they analyze interior and external factors which influence the competitiveness of a product or industry. They are the threat of substitutes, threat of new admittance, bargaining electricity of customers and suppliers as well as intensity of rivalry in the industry (Porter, 2008: 3-7). These factors will be determined and put on the plastic industry.

Threat of new entry

This factor analyzes the convenience with which organizations may enter an industry. Competitive industries will probably attract many firms which will strive to capture a market talk about (Aaker, 2001: 23). That is likely to reduce the overall profitability of businesses which are present in the industry. In order for firms to take pleasure from long term profitability, they should develop customer loyalty within their industry. This will likely ensure that although new firms enter an industry, their market share is unaffected since customers have beliefs on their products. Development of customer commitment is achieved through innovating new products which meet up with the unique market needs.

The cosmetic industry has a low risk of new entrants. This is due to many factors. The first is the huge costs of access. Developing unique cosmetic products takes a lot of resources both in conditions of research and development and the actual making process. Few middle and small scale firms get access to the money and expertise necessary to perform this effectively. Another factor which discourages entrance into this industry is the huge competition present in the industry. In addition to the huge competitors such as Avon, Revlon, Clinique, Estee Lauder, LR, Mac and Unilever, who have a huge market talk about, there are a great many other small scale competition who also have a tiny market talk about and who reduce the overall success of firms on the market.

Bargaining ability of customers

The bargaining power of customers analyzes the power which consumers have associated with price changes in the industry. This factor analyzes the energy which consumers have in manipulating price changes scheduled to shifts popular (Aaker, 2000: 102-120). When consumers have a higher bargaining electricity, the manufacturers and retailers may not properly predict future demand by the marketplace. This may make them struggling to achieve permanent profitability credited to unpredictable demand habits.

The beauty has a higher bargaining power of customers. This is due to the increase competition and option of cosmetic products from a number of manufacturers. Since these products have high substitutes, then it is possible for consumers to pressure manufacturers to lessen their product prices through purchasing those of their rivals. This is an issue which manufacturers of aesthetic products face across the world.

Bargaining electricity of suppliers

This factor analyzes the energy which suppliers have regarding making price changes because of their products. Suppliers who have a higher bargaining power are able to affect price changes through using techniques such as market manipulation through hoarding and restraining supply. Although some of these strategies are against the law in many countries, suppliers usually apply them when they want to result price changes (Diller et. al. , 2006: 33-36). The plastic industry has a low bargaining vitality of suppliers.

This is because of the lot of market players and large way to obtain diverse products to the marketplace. There are numerous cosmetic products that are developed by both large and small level manufacturers. Due to the huge supply, consumers have the power to influence the marketplace prices as opposed to the suppliers.

Threat of substitutes

The threat of substitutes arises when there are similar products produced by competitors which gratify the marketplace needs. When consumers have access to substitute products which can satisfy their market needs, then manufacturers and suppliers lose their bargaining electric power. Consumers are able to buy competitor's products if they're unhappy with product price or quality. In order for suppliers to tackle the task of threat of substitutes, they have to innovate products which meet the needs with their target market segments (Keller, 2003: 595-600).

In the cosmetic industry, there a wide range of competition as has been discussed. There is therefore a higher threat of substitute products. If manufacturers sell their products at higher prices, or if the merchandise are of poor, then individuals are able to acquire substitutes from the many competitors who are present on the market environment (Gregory, 2003: 77). Hence, it is essential for the marketplace players in the cosmetic to be ground breaking if they're to tackle the challenge of the risk of substitute.

Barriers to entry and exit

Barriers to entry and leave make reference to the challenges businesses face when joining or giving the industry respectively. It has been discussed that we now have huge costs which can be associated with entry to the aesthetic industry. These costs include charges for developing the merchandise as well as research costs. These are some of the barriers to entry in the aesthetic industry. In addition, there are many competitors who decrease the overall profitability of the industry, rendering it a hurdle to entry. Finally, the countless large scale aesthetic organizations which enjoy economies of level make it a hurdle to entry specifically for middle and small range firms.

Barriers to leave are the high development and research costs. Due to the high costs associated with developing aesthetic products, it is problematic for businesses to leave the industry without attaining the expenses for production. There's also many machines and equipment used in developing cosmetic products and disposing these at a fair market value is difficult hence rendering it an exit barrier.

Seller and buyer concentration

The cosmetic industry is appealing fir people of all age ranges and sociable backgrounds. There are several cosmetic products that happen to be tailored to meeting the needs of different market segments. The buyer attentiveness can therefore be regarded as low since there are extensive buyers who cut across different market segments both in the developed countries and the expanding countries. However, the seller amount may be considered as saturated in developed countries. Many large scale cosmetic producers are focused in develop countries such as the USA, France and Germany. For instance, the cosmetic industry is appreciated at $6 billion in France and $12 billion in Germany. In the US, it is valued at over $20 billion.

However, owner concentration in expanding countries and appearing markets is relatively low. Few firms have ventured into growing products which meet up with the specific needs of the market segment. To be able to achieve long-term success, new market entrants should concentrate on this neglected populace segment. The high seller awareness in the developed countries causes high competition and a standard reduction in profitability for cosmetic companies in this industry.

Recommendations on proper entrance strategies

In order for companies to successfully go into and attract a market show in the cosmetic industry, various tips should be put in place and these will be talked about below;

Focus on appearing markets and developing countries

It has been discussed that there is a low vendor concentration in appearing markets and expanding countries. This target market segment has been generally disregarded despite its potential in the cosmetic industry. Companies which enter into this industry should develop affordable cosmetic products which cater for different needs of rising markets and developing countries (Lassar et. al. 2003: 11-19). Although these products should be affordable, product quality should not be compromised. The presentation should be done in several sizes and quantities that happen to be affordable for customers.

Cost command strategy

Due to the high competition present in the cosmetic industry, it is important to implement a cost leadership strategy. This calls for pricing cosmetic products less than competitors to catch the attention of consumers. The price leadership strategy will ensure cosmetic products are cheaper than those of competitors and customers will be enticed from the large cosmetic companies which sell products at higher prices (Bateman, 2010: 44-46). Expanding customer devotion will ensure long term profitability.

Research and development

Research and development is essential in the plastic industry. Due to the high competition and diverse dynamics of the industry, research will enable firms to build up products which meet market needs. This will appeal to customers from the already founded firms in the market since customers are drawn to high quality products (Peter & Olson, 2004: 39). This strategy works well in both the developed and expanding countries.

Aggressive marketing campaigns

Finally, competitive marketing will ensure that companies entering the cosmetic industry have products which are known to the marketplace (Chaudhury & Jean, 2002: 22-24). Creating market understanding will ensure that highs ales levels are achieved. A combo of Internet, electronic digital and media advertising should be used in order to attain all the required target market segments.

Summary and conclusion

Various aspects of the plastic industry have been mentioned in detail. Because of the realization of the importance of self image, this industry is continuing to grow over time. The impact of Porter Five forces on the industry in addition has been discussed. The industry has high competition, high admittance barriers, low provider electricity, high customer power and a huge range of substitutes. In order for a company to enter and be successful in the cosmetic industry, it has to apply various strategies. Included in these are focus on growing markets and expanding countries, implementing a cost leadership strategy, utilizing research and development and making use of aggressive marketing campaigns. These strategies will ensure that they take a market show, develop customer loyalty and achieve permanent profitability over the years.

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