The beauty industry, cosmetics in particular, has a bright future as women, no matter whether they live in big cities or small villages will always need a fully loaded make-up pouch in their bag. The growth in urban cosmetics consumer spending is driven by the increase in spending in terms of brands. Urban residents tended to be more adventurous and sophisticated, so they tried different brands. On the other hand, many people in rural areas who had bought three brands last year had now reduced purchases to two brands or fewer because of higher prices compared to those in urban areas.
Competitive rivalry in the industry
Rivalry among competing firms is high. Color cosmetics sales in Indonesia are concentrated among the leading companies: Orindo Alam Ayu, L’Oréal, Martha Tilaar Group, Revlon and Vitapharm. These five players all have a long-standing presence in Indonesia, target different income group.
Threat of new entrants
Potential entry of new competitor is low. Due to that there are a lot of leading cosmetic brands in Indonesia it would be difficult for new cosmetic brand to enter in the market since the leading brands already capture most of the customers group.it would also be hard for a new cosmetic brand to reach its economy of scale in this condition.
Threats of substitutes
Potential development of substitute products is high. A threat of substitutes will exists when a product’s demand is affected by the price change of a substitute product. Customers can switch from using foundation to use power that has foundation as ingredients or BB cream instead.
Bargaining power of suppliers
Bargaining power of suppliers is low. There are many cosmetic suppliers in Indonesia so the cosmetic brands can choose among those suppliers which make the suppliers unable to retrieving high price.
Bargaining power of buyers
Bargaining power of consumers is high. Consumers can switch to new cosmetic brands easily without any switching cost....
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