Cosmetic industry Porters Five forces analysis
The cosmetic industry has grown over the past few decades and it is currently a billion dollar industry. Many consumers of cosmetic products have realized the importance of self image and presentation and this has boosted the purchase of cosmetic products across the world. There is great innovation in this industry which has also led to the gradual growth in the cosmetic industry. Products such as lotions, creams, lipsticks, perfumes, makeup, toe and nail polish, hair spray and gels, bath salts and bubble baths as well as baby products are in high demand especially in developed countries. The global cosmetic industry generates over $160 billion, which shows the importance of the industry (Begoun, 2003: 23-24). However, there are certain factors which affect the entry to the cosmetic industry by firms. These factors can be briefly analyzed using the Porter Five forces analysis. They include the threat of substitutes, threat of new entry, bargaining power of customers and suppliers as well as intensity of rivalry in the industry (Porter, 1980: 5-11). These factors should be assessed whenever a firm is entering any industry since they help the management develop effective marketing and competitive strategies. Knowledge of the Porter Five forces also helps business evaluate the feasibility of making profits in the long run. This paper will evaluate the cosmetic industry in relation to the Porter Five forces. The five factors which were developed by Porter will be applied to the industry in order to develop a competitive entry strategy. In addition, the barriers to entry and exit in the industry will be discussed in detail. Recommendations will then be made on how businesses may appropriately apply the Porter Five Forces model in order to enter the cosmetic industry and achieve long term profitability. The discussed issues will be summarized at the end.
The cosmetic industry has grown over the decades to become a billion dollar industry, surpassing many other products which are sold in the market. Consumers are aware of the importance of cosmetic products and especially their positive impacts on improving self image, confidence and self esteem. They are also aware of the importance of first impression both at the workplace and in society in general (Bruno et. al., 2010: 56-59). The realization of the importance of cosmetic products has spurred demand for these products which are consumed by both males and females equally. As was stated in the introduction, the global cosmetic industry generates over $160 billion. In addition to consumer knowledge, there has been increase in innovation of different cosmetic products across the world. These products aim at improving the physical and mental state of humans in general. Due to increased innovation and supply, demand for cosmetic products has also gradually increased (Winter, 2005: 5-7). However, it must be noted that the global cosmetic industry is a large industry which has high entry costs, if firms are to be successful. This industry is very dynamic and requires huge investments in research and development to meet client needs. In addition, the intense competition presently seen in the market especially by large manufacturers such as Avon, Revlon, Clinique, Estee Lauder, LR, Mac, Unilever and others, demand high expenses in marketing and advertising (Kotler & Pfoertsch, 2006: 63). These are already established global cosmetic brands which have market goodwill and loyalty, and capturing a fair market share demands aggressive advertising and innovating unique products. Further analysis of the cosmetic industry with respect to the Porter Five forces will be undertaken below;
Porter’s five forces analysis
The Porter Five forces were developed by Porter and they analyze internal and external factors which affect the competitiveness of a product or industry. They include the threat of substitutes, threat of...
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