GROUP

2
BEAUTY INDUSTRY
 Porter's Five Forces
New entrants
Substitute Product

Customer

Competitors

Supplier
 1. New
entrants
The threat of new entrants for L'Oréal, as
analyzed through Porter's Five Forces, IS
LOW.

L'Oréal's extensive experience, patents,

and access to cheaper funding due to its
established presence reduce the risk for
the company.

Although switching costs for customers

are not very high, brand perception plays
a crucial role.

Moreover, navigating government

regulations and distribution channels
can be challenging.
2. Competitors
1. Intense Competition: The cosmetics industry is
experiencing rapid global growth, resulting in
fierce competition among numerous
companies. Major players in this industry include
L'Oréal, Maybelline, Lakme, Chanel, Urban
Decay, and Estee Lauder.
2. L'Oréal's Dominance: L'Oréal stands out with
the highest market share primarily because of
its extensive product range and a strong
reputation that fosters customer loyalty.
3. Perceived Brand Loyalty: While product
differentiation among brands may not be
significant, there is a perceived sense of brand
loyalty among customers.
4. Positive Industry Impact: Despite the high
level of competition, it is not negatively
impacting the cosmetics industry; instead, the
industry is growing at an accelerated rate.
3. Substitute product

1. High Threat with Lower Costs: The threat of substitute

products is high when a comparable product or service is
available in another industry at a lower cost. This is because
the psychological barriers to switching between industries
are relatively low, which heightens the threat of substitutes.
2. Quality and Performance Matter: A substitute product
that matches or surpasses the quality and performance of
L'Oréal's offerings would increase the threat of substitutes.
3. Competitive Price-Performance Ratio: L'Oréal
maintains a strong price-performance ratio in the market,
making it challenging for other brands to provide similar
value at that price point, especially for the upper-middle-
class demographic. This factor reduces the threat of
substitutes.
4. Customer
Customers have numerous options from local and
international brands available through both local and online
channels, offering similar products to L'Oréal.

Switching costs for customers are low due to the availability

of products in a similar price range.

Over time, customers tend to develop loyalty to brands that

suit them, impacting their choices.

The potential for backward integration into manufacturing is

limited as it requires expertise and capital.

The presence of similar products from different brands at

similar price points complicates customer decisions.

Competitive pricing strategies by companies contribute to

the overall low bargaining power of customers in the
cosmetics industry.
5. Suppliers
Supplier Industry Competition: The supplier
industry lacks concentration, with numerous
companies. This provides cosmetics firms like L'Oréal
with multiple options for raw material procurement,
reducing supplier influence.
Raw Material Importance: While the supplier's
product is crucial for the cosmetics industry, the
abundance of suppliers diminishes their individual
significance.
Low Switching Costs: Cosmetics companies,
including L'Oréal, face minimal switching costs when
changing suppliers since supplier products lack
differentiation.
Low Threat of Forward Integration: Suppliers lack
the expertise to produce end products in the
cosmetics industry, reducing the risk of forward
integration. Such integration would harm company
profitability significantly.
 Distribution of Skin Types Among Females in
Vietnam in 2019

Question 2
Consumers want to distinguish different skin types
based on their current skin condition.
More
statistic
evidence of
consumers’
demand
Beauty Care
Frequency

Consumer’s behavior have

a tendency to makeup/
skincare independently
Facial Recognition
1. Personalized Beauty Recommendations:
Face recognition technology analyzes skin tone, texture,
and facial structure.
Enables tailored beauty recommendations, such as
foundation shades and skincare regimens.
2. Virtual Try-On Experiences:
Allows customers to try on makeup products and
experiment with hairstyles.
Eliminates the need for physical application, saving time
and effort.
3. Targeted Marketing and Product Development:
Provides insights into customer demographics,
preferences, and buying habits.
Enables tailored marketing campaigns and product
development.
4. Enhanced Customer Service:
Identifies regular customers and retrieves their
preferences and history.
Thank You