Analysis of Cosmetic Industry using Porter's Five Forces

The report analyzes the cosmetic industry using Porter's Five Forces model to understand its attractiveness. The market size is growing due to customer demand for skin care products. A SWOT analysis reveals opportunities for innovation and threats from competitors. The industry has low supplier power but high buyer power due to multiple product options. To compete, companies must adopt penetration strategies and innovate their products.

Industrial
Attractiveness

Table of Contents
INTRODUCTION ..........................................................................................................................3
TASK...............................................................................................................................................3
Industry attractiveness.................................................................................................................3
Market size of Cosmetic Industry...............................................................................................4
Porter Five Forces on Cosmetic industry....................................................................................5
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Industry attractiveness is based on future growth of market. It is generally depends on the
size of industry and perception of customers. There are number of organisations which are
engaged in manufacturing and selling wide range of cosmetic products which brings huge
challenges for new cosmetic product to achieve sustainability in market. The present assignment
is based on the cosmetic industries who deals in Bulgarian gel products. This report covers the
market size, profit margins etc. along with Porter's five forces model.
TASK
Industry attractiveness
It is defined as an activity of organisation which generates profitability with determining
the risks. It depends on the competitors who are existing in the marketplace along with their
strength, margins and supply of products in compare of the organisation (Craig and Campbell,
2012).

Market size of Cosmetic Industry
Illustration 1: Market value of cosmetics
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Source :Market value of cosmetics. 2017
Above chart is defined the value of cosmetics from the year 2009 to 2017. cosmetic
industries are basically manufactures the products which are related with the skin care, health
care and beauty products. This chart is basically defines the market size of the cosmetic products
in United kingdom. According to the last financial report it was estimated that the business was
taking a huge growth of 9.77 billion pounds at the end of 2017.
There are many beauty products are imported from various nations such as hair creams,
body fitness vitamins in the world. France who is the largest importer or manufacturer of
cosmetic products (Market value of cosmetics, 2017). UK also exports various products which
includes rose creams body lotions and many more. Apart from that, Organic cosmetic products
are also an essential part of this industry in which the country have a huge market presence in the
world because 54% of total market size is captured by the organic products. Because there are

various individuals who have a requirement of nature products so, there are various industries
who are manufacturing the organic fairness products. Therefore, it can be said that the market
size of cosmetic industries has been grown in recent years (UK Beauty Market Statistics, 2014).
Source : UK Beauty Market Statistics. 2014
Interpretation- From the above graph it can be said that the business of fragrances has
getting lower increment than the other beauty products. Revenue from cosmetic colour product is
decreased because of chemical ingredients in it. Sale of skin care goods are increased because of
market trends and perception of customers. Hair care products have also increased its market
size. Apart from that, it is seems that the natural products such as toiletries has an huge
increment rather than other products.
Therefore, It can be said that market trends and perception of customers decide the
growth of any industry. As per market trend it is seems that demand of natural products are
increased because customer requires the non chemical products therefore, up coming time will be
profitable for the cosmetic industry (Kamukama, 2013).
Illustration 2: UK Beauty Market Statistics

Porter Five Forces on Cosmetic industry
There are various organisations in UK which is engaged in manufacturing and selling
cosmetic and skin care products. Therefore, to introduce new product into cosmetic market, the
organisation should first analyse the competitiveness of market so that further decisions can be
made accordingly. For this, Porter Five Forces is considered as a best method to analyse the
market so as to achieve competitive advantage.
Threats of new entrants: There are number of organisations engaged in selling various
skin care cream products which has already attained strong position in cosmetic market such as
Avon, Revlon, Clinique etc. which affect the new cream product to achieve sustainability due to
having lack of trust and reliability. This will bring difficulties for new company to achieve
sustainability within shorter period of time. The threat of new entrants are low due to having
huge cost of entry. Developing unique cosmetic products such as Bulgarian rose cream requires
funds to be invested in conducting research and development and manufacturing process (Luong,
Vo and Le, 2017).
Threats of substitutes: In the cosmetic industry, the threat of substitute products are high
due to having numerous rivals in the market. Therefore, if the cosmetic companies tried to
increase the prices of their cream products then it may shift the buying behaviour of customers to
substitute products which are hugely available in the market environment. To prevent such
threat, the cosmetic organisation must introduce something new and innovative in their cosmetic
product so that the chances of shifting buying behaviour of targeted people will be restricted.
Competitive rivalry: There are huge competitions amongst rivals in the cosmetic industry
such as Elemis, Espa, Clarins and local companies. There are limited spas which have their own
products therefore supply is more than the demand. Therefore the degree of differentiation is
moderate. Therefore, huge number of rivals have their own brand products due to which it will
be more difficult in cosmetic industry to achieve sustainability of new cosmetic product.
Supplier power: The suppliers in the cosmetic industry is low due to having high number
of existing market players and largely supply of diverse products to the market. There are
number of cosmetic products which are offered by both large and small scale manufactures. Due
to high number of suppliers, the customer hold power to influence the market prices as opposed
to the suppliers (Santoro, 2017).

Buyer power: Customers in cosmetic industry has high bargaining power due to having
number of options to buy wide range of cosmetic products offered by number of companies. As
the cosmetic products have high number of substitutes which forces manufactures of skin care
products to lower their prices so as to attract their buying behaviour towards their new product.
Therefore, to compete in market the cosmetic company should adopt penetration strategy in
which the company first lower the price of their new product and after that increasing when
achieve sustainability in market.
CONCLUSION
It has been concluded from the above report that industry attractiveness is based on the
market trends and analysis of needs and demands of customers. Market size of this industry
taking growth because of the requirement of customers. Porter's five model has analysed the
strength and weaknesses of the competitors.

REFERENCES
Books and Journals
Craig, T. and Campbell, D., 2012. Organisations and the business environment. Routledge.
Kamukama, N., 2013. Intellectual capital: company's invisible source of competitive advantage.
Competitiveness Review: An International Business Journal. 23(3). pp.260-283.
Luong, D.B., Vo, T.H.G. and Le, K.N., 2017. The impacts of country of origin, price, and brand
on consumer behavior toward cosmetics products. International Journal. 6(2). pp.53-71.
Santoro, R., 2017. Skin over the centuries. A short history of dermatology: physiology,
pathology and cosmetics. Medicina Historica. 1(2). pp.94-102.
Online
Market value of cosmetics. 2017. [Online]. Available
through:<https://www.statista.com/statistics/289762/market-value-of-cosmetics-in-
great-britain/>
UK Beauty Market Statistics. 2014. [Online]. Available
through:<https://www.raconteur.net/retail/business-face-of-uk-beauty>