For the meso-part of our
analysis we have chosen Porter’s
five forces framework: threat of new entry, bargaining power of buyers,
bargaining power of suppliers, threat of substitutes, and competitive rivalry
in the industry.
Threat of new entry
The cosmetic industry
has a low threat of new entrants due to the following factors. First of all,
the costs of entry are huge. Developing unique cosmetic products requires a lot
of resources, thorough research and complicated manufacturing process. Only a
few middle and small scale firms can afford such expenses and perform
effectively. In addition, there are such huge competitors such as Estee Lauder,
L’oreal, Clinique, Unilever, etc, who all have a large market share.
Bargaining power of
customers
The cosmetics industry
has a high bargaining power of customers due to the increased competition and
wide availability of cosmetic products from many different manufacturers. Since
these products have high substitutes, then it is possible for consumers to
force manufacturers to reduce their product prices by buying those of their
competitors. This is a challenge which manufacturers of cosmetic products face
across the world.
Bargaining power of
suppliers
The cosmetic industry
has a low bargaining power of suppliers due to the high number of market
players and large supply of diverse products to the market. There are many
cosmetic products which are developed by both large and small manufacturers.
The supply is so huge that consumers have the power to influence the market
prices as opposed to the suppliers.
Threat of substitutes
The threat of substitute
products could be characterized as moderate. In this case, substitute is not a
facial wash produced by a competitor, it could be a trip to a beauty salon
where a professional dermatologist takes care of your skin or a trip to your own
bathroom where you perform the same cleansing routine every day. Neutrogena
Wave might be a cheaper alternative for the former, but a more expensive one to
the latter, therefore the threat of substitutes is moderate.
Competitive rivalry in
the industry
Cosmetics industry is
very competitive. Various surveys show that every year more women in Russia
Hello guys! I read your Porter's 5 analysis, and I just wanted to point out that threat of substitutes is not aout the threat of competing products, instead it is a threat of totally other goods that satisfy the same needs. In car of your WAVE product, it could be some beauty procedures at cosmological center, for example, etc
ОтветитьУдалитьDear Elena, many thanks for your comment. We will correct this mistake.
УдалитьAnd I also wanted to comment on your conclusion about the power of new entrants. Maybe the threat of new comers is bigger than you believe. Consider, for instance, Natura Siberica company. It managed to enter the market not only of Russia but also of several other countries, win the hearts of thousands of consumers during short period of time. It has at least 2 competitive advantages - very sustainable and natural products and low price of them.
ОтветитьУдалитьDear Elena, thank you for your comment. Yes, we examined the case of Natura Siberica and found out that in the period 2010-2011 the company showed a significant growth (about 115%). That is why it managed to reach the 10th place amoung cosmetics companies, which are sold in pharmacies. The year before they were on the 25th place. However, Natura Siberica is the exception rather than a rule, because quite a few companies manage to obtain such success in the short period of time.
УдалитьNevertheless, we agree with you that thorough monitoring of existing and potential competitors is needed in order to stay successful.
Hello guys!
ОтветитьУдалитьfrom your analysis of cosmetics industry it seems to me that it is rather difficult to enter the Russian market... Bargaining power of customers is high, the competition is severe, and also there is the moderate threat of substitues. Maybe you should stress on some unique advantage of your product or strategy, which none of your competitiors has, in order to be sussessfull on the market.
Also, I was surprised by the fact that on average Russian woman uses more cosmetics than a European one. Is it really so? Because it seemed to me that due to the higher quality of life in Europe, women there may afford bying more different cosmetics than Russian women, especially if they live in rural areas.
Tania