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The case study written response

[Name of Student]

[Name of Institute]

[Date]
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Table of Contents
Introduction:...............................................................................................................................................3
PESTEL Analysis:..........................................................................................................................................3
Porter's Five Forces Analysis:.......................................................................................................................5
Strategic Recommendations:.......................................................................................................................6
Conclusion:..................................................................................................................................................8
Executive Summary:....................................................................................................................................9
References:..................................................................................................................................................9
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Introduction:
The beauty industry is a diverse and dynamic sector, which includes skincare, haircare,
cosmetics, and fragrance products. The industry is considered by strong rivalry, varying
customer partialities, and fast technical developments. In this report, we will analyze the beauty
industry using PESTEL and Porter's Five Forces analysis and present strategic recommendations
for a firm in the beauty industry. “The beauty industry generates over $100 billion in revenue
worldwide. The men's personal care market is projected to hit $276.9 billion by 2030. Skincare is
projected to generate up to $177 billion by 2025. Beauty companies spent an estimated $7.7
billion on advertising in 2022. Cosmetic retailers report $17.09 billion in online sales.” (Petruzzi)

PESTEL Analysis:
Political Factors: Government regulations, such as product safety and labeling requirements,
can significantly impact the beauty industry. Moreover, political instability and trade barriers can
also affect the industry's supply chain. The customs department of a country can determine the
duty on a specific product meaning a particular government of a country has a specific
percentage of duty on a product before another government of the same takes over and relaxes its
regulations on that product.

Economic Factors: Economic factors, such as price rises, exchange rates, and throwaway
income levels, can influence customer expenditure conduct and request for cosmetic products.
As inflation rises the buying power of the consumer becomes effected and overall business is
affected. (Pam, 2023) Businesses are directly impacted by inflation in two key ways:

When values surge, trades experience augmented raw resources, industrial, and overhead
prices. While a commercial could continue moderately unpretentious by transporting all prices to
consumers, in reality, businesses will absorb part if not the majority of the increased cost to
avoid losing customers.
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Social Factors: The beauty industry is heavily influenced by changing social trends and
consumer attitudes towards beauty, diversity, and inclusivity. The industry is also impacted by
demographic factors, such as age, gender, and ethnicity. Younger age groups are the biggest
consumers of the beauty products. “TABS Analytics' second annual U.S. Cosmetics Study found
that millennial women (ages 18 to 34) are the heaviest buyers of beauty products in the $13
billion cosmetics market (market size excludes skin care and hair care products).”

Technological Factors: Technological advancements, such as e-commerce and digital

marketing, have disrupted the traditional retail landscape and changed the way consumers shop
for beauty products. (Ross, 2022) Online businesses have recorded success in post COVID era
and people are considering the mode of setting the business as an online store to cater the
requirements of the consumers. There is an ease of work in setting up a business which results in
lesser financial burden.

Environmental Factors: The beauty industry has faced criticism for its impact on the
environment, such as plastic waste and animal testing. Consumers are increasingly demanding
eco-friendly and sustainable products. Perfume sprays have to should not contain ingredients that
are harmful and injurious to health. Earth’s atmosphere and environment also has to be kept in
consideration as the consumers attract more towards greener products. Due to climate protection
awareness, it has become somewhat necessary to consider these factors while evaluating and
predicting a product’s success.

Legal Factors: The beauty industry is subject to various legal regulations, such as product safety
and advertising standards, which can impact a company's operations and marketing strategies.
Elements in the cosmetic industry are delicate. They can be FDA-controlled lacking FDA-
permission. “The Federal Food, Drug and Cosmetic Act (FD&C Act) and the Fair Packaging and
Labeling Act (FPLA)” are important frameworks which all in the industry must follow.
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The “FD&C” sees through the components that have to be in the product and also the ones which
need not to be in the product which has been mentioned in their monitors. The components based
on their use while the “FD&C” confirms there’s misrepresentation patented on the goods. If
there are problems, the merchandise may be abandoned. It can be recalled also.

Moreover, if constituents aren’t up to level (as believed by the FDA) they can be excluded,
which is public in many nations separate of the United States.

Porter's Five Forces Analysis:

Threat of New Entrants: The beauty industry has high barriers to entry, such as strong brand
loyalty, high R&D costs, and significant marketing expenses. However, the rise of e-commerce
and social media has lowered the barriers to entry for smaller, niche players.

Bargaining Power of Suppliers: The beauty industry relies heavily on suppliers for raw
materials and packaging, giving suppliers significant bargaining power. However, the industry's
size and scale give it some leverage in negotiations.

Bargaining Power of Buyers: The beauty industry's buyers have moderate bargaining power,
given the availability of substitutes and the ability to switch brands easily. However, brand
loyalty and product differentiation can reduce buyer power. If the bargaining power of the buyers
is high then they can force, the manufacturers and sellers have to lower their prices in order to
not let go of the customer. Otherwise, the customer can switch his concentration on a rival
company’s product.

Threat of Substitutes: The beauty industry faces a high threat of substitutes, with many similar
products and brands available to consumers. However, strong brand loyalty and product
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differentiation can reduce the threat of substitutes. There is multitude of companies that are
selling the product that is designed for the same purpose. The companies have no vie for the
same customers in the market.

Competitive Rivalry: The beauty industry is highly competitive, with many established players
vying for market share. Companies compete on factors such as branding, product innovation, and
customer experience (Ketabchi, 2019). They also vie for the same customers and want to shave
the loyalty of the same consumers. This creates the environment that can be said to be as very
hostile in a business. In order to achieve a established customer it becomes imperative to treat
each customer very honestly and consistently to keep him loyal to the idea of the company.

Strategic Recommendations:

Based on the PESTEL and Porter's Five Forces analysis, we recommend the following strategic
actions for a firm in the beauty industry:

Embrace digital transformation: Companies should embrace technological advancements and

invest in digital marketing and e-commerce to stay relevant and competitive. They should invest
in technological tools to enhance increased output: Companies should invest in technology to
enhance their e-commerce and digital marketing capabilities, improve supply chain efficiency,
and develop innovative products.

Develop eco-friendly and sustainable products: Given the increasing demand for eco-friendly
and sustainable products, companies should prioritize the development of such products to meet
consumer needs and differentiate themselves from competitors. The environment friendly
products are the way of the future. It already looks inevitable to adjust the products in
accordance with the demand of eco-friendly and sustainability. By producing goods that are
more durable and can be re-used is a driving factor in customer’s choice to buy a product.
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Focus on sustainability: Companies must rank workable and moral performs to plea to
customers who are progressively aware of the influence of their acquiring choices on the
situation and the social order. (Sustainability & Consumer Behaviour, 2022) Customers are
likely to make a decision based on sustainability and environmentally awareness. It is also vitally
important to mention that customers are becoming more aware thanks to the increase of use of
social media and television exposure. It is crucial for the business to take into account that the
more innovative ways they discover to offer a more sustainable lifestyle the likelier it is to grow
the number of their customers.

Innovate and differentiate: Companies should invest in R&D to develop innovative products
and differentiate themselves from competitors (Ross, 2022). This can include developing new
formulations, packaging, and delivery methods. Companies should invest in R&D to develop
innovative products that stand out from competitors. Differentiation can be achieved through
unique formulations, packaging, and delivery methods. Also wider demographic can be attracted
based on formulations for colder and warmer areas. Achieving same objectives in different
demographic is a good sign that innovation and differentiation is taking a positive impact.

Embrace inclusivity: Companies should embrace diversity and inclusivity in their marketing
and product offerings to cater to a broader customer base and enhance brand image. (Petrovic,
2022). The more inclusive the campaign is to attract the customers from a wider profile the
likelier it is that customers are attracted from a diverse profile. It creates s relationship of
sincerity; loyalty and the bond of real trust is built between a company and its customers. Being
more diverse attracts a larger demographic of potential customers, which has positive effect on
the sales of the organization. Getting engaged with customers online and accepting their
feedback is a very good way of bringing inclusivity in the beauty industry and it creates a halo
effect of bringing more and more customers.
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Expand into new markets: Companies should consider expanding into emerging markets to tap
into new sources of growth and revenue. The more markets are explored the more the probability
of engaging new customers. The culture and tradition of a new market has to be kept in mind
before running an advertisement campaign in order to be more attractive and consequently
attracting newer customers. The first step is to have an understanding of the customer. In order to
do that a thorough analysis has to be done to have better grip of the needs and common interests
of the consumer. What are the key areas that need to be targeted in order to attract the customers
from a new market. A plan has to be devised in order to reach customers and having a
competitive advantage and edge over rival competitors in the market.

Develop strong brand equity: Companies should focus on building strong brand equity through
effective branding and marketing strategies. (Hartford, 2022) This can help to create a loyal
customer base and reduce the threat of substitutes. The highest level to attain and reach is to
create resonance with customers. This happens when a strong level of trust develops between a
company and a customer. They brand recurrence acquisitions and they sense a connection to your
product. They might feel a sense of attachment with other clients and business members. And they can
be vigorously involved as product representatives by captivating part in working conversations, joining
proceedings or ensuing your product on public mass media. That product impartiality assembly can be
extremely valued.

Conclusion:
In conclusion, beauty industry presents both challenges and opportunities for firms. By
understanding the industry's external factors and competitive landscape, companies can develop
effective strategies to navigate the dynamic market and achieve long-term success. The beauty
industry presents significant challenges and opportunities for companies. By understanding the
industry's external factors and competitive landscape, companies can develop effective strategies
to navigate the market and achieve long-term success. By prioritizing sustainability, innovation,
inclusivity, and global expansion, companies can differentiate themselves from competitors and
meet the evolving needs of consumers. All these factors are crucial in increasing the selling
profile of the company.
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Executive Summary:
This report analyzes the beauty industry using PESTEL and Porter's Five Forces analysis. The
beauty industry is highly competitive, with many established players competing for market share.

PESTEL analysis reveals that the beauty industry is affected by changing consumer preferences
and attitudes towards ethical and sustainable practices, increased government regulations,
technological advancements, and changing demographics. Porter's Five Forces analysis reveals
that the industry is characterized by intense competition, high barriers to entry, strong bargaining
power of suppliers, moderate bargaining power of buyers, and the threat of substitutes.

Despite these challenges, the beauty industry offers significant opportunities for growth and
expansion. Companies can leverage their strengths in branding, innovation, and customer
experience to gain a competitive advantage. Overall, the beauty industry is poised for continued
growth, driven by changing consumer preferences and technological advancements.

References:
Petruzzi, D. (n.d.). Topic: Cosmetics industry. Statista. Retrieved April 11, 2023, from
https://www.statista.com/topics/3137/cosmetics-industry/#topicOverview

Adding value to your brand through Brand Equity | the Hartford. (n.d.). Retrieved April 10,
2023, from https://www.thehartford.com/business-insurance/strategy/business-branding/brand-
equity

Sustainability & Consumer Behaviour 2022. Deloitte United Kingdom. (n.d.). Retrieved
April 11, 2023, from
https://www2.deloitte.com/uk/en/pages/consumer-business/articles/sustainable-consumer.html
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5 benefits of expanding into New Markets. Benefits of expanding into new markets | Safeguard
Global. (2022, October 13). Retrieved April 11, 2023, from
https://www.safeguardglobal.com/resources/blog/benefits-of-expanding-into-new-markets

Petrovic, D. (2022, September 22). Diversity and inclusion in marketing: What brands should
know: Stackla. Nosto. Retrieved April 11, 2023, from https://www.nosto.com/blog/diversity-
and-inclusion-in-marketing/

Ross, S. (2022, December 13). Why should you invest in Research and Development
(R&D)? Investopedia. Retrieved April 11, 2023, from
https://www.investopedia.com/ask/answers/043015/what-are-benefits-research-and-
development-company.asp

Am, J. B., Doshi, V., Noble, S., & Malik, A. (2023, February 6). Consumers care about
sustainability-and back it up with their wallets. McKinsey & Company. Retrieved April 11,
2023, from https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/
consumers-care-about-sustainability-and-back-it-up-with-their-wallets

Chaffey, D. (2023, March 7). 10 reasons you need a digital marketing strategy 2023 [planning
tool]. Smart Insights. Retrieved April 11, 2023, from https://www.smartinsights.com/digital-
marketing-strategy/digital-strategy-development/10-reasons-for-digital-marketing-strategy/
Licata, R. J. (2022, November 8). Beauty Industry: Cosmetic Market Share, trends, and statistics.
Terakeet. Retrieved April 11, 2023, from https://terakeet.com/blog/beauty-industry/

Pam Wallace. (2023, March 8). How rising inflation impacts a business. Universal Funding.
Retrieved April 11, 2023, from https://www.universalfunding.com/inflation-business-impacts/

Home | united states trade representative. (n.d.). Retrieved April 11, 2023, from
https://ustr.gov/sites/default/files/files/reports/2021/2021NTE.pdf

Ketabchi, N. (2019, August 22). Looks that thrill: Inside the Booming Beauty Industry: Toptal®.
Toptal Finance Blog. Retrieved April 11, 2023, from https://www.toptal.com/finance/growth-
strategy/beauty-industry
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Stahl, A. (2022, November 9). 3 benefits of diversity in the workplace. Forbes. Retrieved April
11, 2023, from https://www.forbes.com/sites/ashleystahl/2021/12/17/3-benefits-of-diversity-in-
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