We use cookies to give you the best experience possible. By continuing we’ll assume you’re on board with our cookie policy

See Pricing

What's Your Topic?

Hire a Professional Writer Now

The input space is limited by 250 symbols

What's Your Deadline?

Choose 3 Hours or More.
2/4 steps

How Many Pages?

3/4 steps

Sign Up and See Pricing

"You must agree to out terms of services and privacy policy"
Get Offer

Analysis: Cosmetics Industry

Hire a Professional Writer Now

The input space is limited by 250 symbols

Deadline:2 days left
"You must agree to out terms of services and privacy policy"
Write my paper

The Shiseido Group was established in 1872 and is headquartered in Tokyo, Japan. The company is engaged in the cosmetics and toiletries industry. The group also has massive interests in the boutique, restaurant, salon, fine chemicals, pharmaceutical and beauty foods sectors. Shiseido is the largest manufacturer of cosmetics in Japan with more than 20 brands. The firms product offering consists of 3 product lines and these are the Skincare range, the Pureness range and the Beneficence range (Shiseido, 2005 Jones, Kanno Egawa, 2005).

The Shiseido Group is a conglomerate consisting of about 100 subsidiaries.

Don't use plagiarized sources. Get Your Custom Essay on
Analysis: Cosmetics Industry
Just from $13,9/Page
Get custom paper

Thirty seven of these subsidiaries are local operations, 3 are affiliated firms and the rest (60) are overseas companies. The overseas operations include about 70 business sites in 70 countries, 10 manufacturing sites and 6 research and development (R D) sites. The overseas manufacturing bases are located in the US, China, France, Taiwan, and New Zealand while the RD bases are in China, the US and France. Currently, the company is headed by Shinno Maseda who is the President, CEO, and Director.

Other senior leaders are Yasuhiko Harada who is the Corporate Senior Executive Officer and Director and Kozo Hanada who is the Chief Officer Professional Business Operations Division (Yahoo Finance, 2009). The mission of Shiseido is to identify new, richer sources of value and use them to create beauty in the lives and culture of those we serve (Shiseido, 2005 p. 5). During the first half Fiscal Year which Ended in October, the company recorded an 11 decline in its profits. The revenue for the first quarter announced in March, 2009 stood at US 7095.

10 million and this represented a 2. 6 decline in revenue compared to the previous year. Over the same period, the firm witnessed a marginal rise in the number of its employees as they increased by 0. 1 and currently stand at 28,810 (Yahoo Finance, 2009). Overview of the Global Cosmetics Industry Estimates based on 2006 data indicate that the U. S had the largest cosmetics market in the world and this market makes up close to 30 of the entire global cosmetics market. It is followed by Japan with 17 market share, and China (6).

It is also estimated that collectively, the EU countries hold a 43 market share with Germany, France, Britain, Italy and Spain having the largest markets in that order. Norway and Sitzerland each have 1 market share. The size of the European market is nearly larger than that of Japan and U. S combined (Euromonitor, 2007). Figure SEQ Figure ARABIC 1 Leading Cosmetics Markets Regarding per capita spending, Europe has the highest per capita spending on cosmetics in the world. According to a 2007 survey by Euromonitor, the mean per capita spending on cosmetics is 128 annually.

The highest per capita spending by country in Europe is by Denmark and Sweden where the mean annual spending is 171. Spain and France follow closely at 169 and 166 respectively. Countries such as Greece ( 121) and Portugal ( 104) have much lower per capita spending. Worldwide, Japan still leads the pack with a mean per capita expenditure of 174 every year. Per capita spending on cosmetics in the US is just 127 while China lags far behind with a mean annual per capita spending of 24 (Euromonitor, 2007). Figure SEQ Figure ARABIC 2 Per Capita spending in the major cosmetics markets

Even so, the US and Japanese markets have registered negative compounded annual growth rates (CAGR) since 2000. China has had the highest CAGR since 2000 and it is estimated that the cosmetics the sector will expand by an average of 15-20 percent in the next three years. This will make the sector the largest cosmetics sector in the entire world (TNS, 2007). Europe has also had a relatively strong CAGR since 2000 Political legal factors Political factors have shaped the outlook of the cosmetics sector in the world for a long time.

This observation is particularly relevant for Shiseido, which was able to obtain a competitive advantage in the Chinese market upon its entry in 1981 by forging good relationships with the countrys political class. This amity enabled the company gain entry into the closed market, long before other foreign players could set foot in. thirty years down the line, this rapprochement is still useful for the company (Kurser, n. d Jones, Kanno Egawa, 2005). Accession to the WTO by China has not only helped to improve the countrys business environment but has also led to more foreign participation in the countrys cosmetics sector.

By joining the WTO, China made a commitment to open up its markets and help to fight counterfeit products (Utsunomiya, 2003). China also introduced consumption tax which largely affected premium cosmetics. This is bound to make these products costlier with little or no effect on the products made for the mass market. Recently also, the country reduced the tariffs it imposes on imports by 10. This has considerably lowered the tariff barriers which hitherto stood in the way of international cosmetic firms such as Estee Lauder.

Since the reduction of the tariffs, the ten leading cosmetic brands in China are all foreign brands. Liberalization of direct sales in the country has also helped boost the sector, especially as regards participation by foreign brands (Utsunimoya, 2003 Jones, Kanno Egawa, 2005). The Chinese examples are significant because the country currently has the highest compounded annual growth rate (CAGR) and its population offers a sizeable market that can be leveraged by any firm to obtain a competitive edge. It is also important as the country is forecast to become the largest market for cosmetic in the world.

The cosmetics sector in European countries has also been boosted by the entry of more countries into the EU bloc, as a consequence of harmonized tariffs, free cross border movement, larger common market and elimination of other non-tariff barriers among others (Euromonitor, 2007). . Economic Factors The cosmetics sector has also been influenced to a large degree by economic factors. A case in point is China, where rapid economic development has enhanced the growth of the cosmetics industry. According to the CIA world Fact book (2008), China has a GDP in excess of 7. 099 trillion with a double digit growth rate of 11.

9 percent in 2007. The country has the second largest economy in the world, with an estimated per capita income of 5,400 and a more open economy. The sound economic performance by China has contributed greatly to the expansion of the cosmetics industry. As a result, the disposable incomes and purchasing power parity of the Chinese has increased and the ripple effects have been felt in the cosmetics sector. To illustrate this point, there has been a consistent rise in the sales of high value beauty products. According to reports, nearly 50 of all skin care products sold in China in 2006 exceeded US 12.

9 in price compared to US12. 5 the previous year. Statistics also show that the volumes of skin care products charged above US 12. 9 increased by 4 in 2006 (Jones, Kanno Egawa, 2005 Wang, 2002). Additionally, the cosmetics market in the second tier cities is expanding. For a long time, cosmetic firms in China obtained the bulk of their sales from the 1st tier cities such as Beijing and Shanghai. Of late however, there is an emerging trend whereby the expenditure of customers on cosmetics in second tier cities is comparable to that of customers in the first tier cities.

For instance, clients in second tier cities spent an average of 49. 8 RMB while their counterparts in the first tier cities spent an average of 51. 3 RMB on cosmetics in 2006. European countries with expanding economies have also witnessed an increase in the purchasing power parity and disposable incomes, factors which have enabled individuals to be able to afford the premium cosmetic products. However, the global economic meltdown is seen to inhibit the growth of the cosmetics industry further (Yahoo Finnace, 2009 Euromonitor, 2007). Socio-economic Environment

Socioeconomic factors continue to shape the cosmetics industry in a major way. Strong traditions and culture among the different member countries of the EU have been cited as the key factor affecting the sales of cosmetics in the region (Euromonitor, 2007). First, the demographics of many countries in Europe and Asia has significantly shaped the industry and are foreseen to drive the demand for products. In most of Europe, the population of old people in has been on an upward rise over the past decade. This has seen a spike in the demand for skin care products, specifically the anti-ageing and anti-cellulite cosmetic

products. The same situation obtains in China where the aged people make up 12 of the countrys 1. 33 billion population. In Shanghai alone, a fifth of the residents there are aged. This has provided huge opportunities for cosmetic firms to cash in on the demand for anti-ageing products. There was a 21 rise in the sales of anti-ageing products in 2006 in China. This was a big improvement when compared to the sales of these products in 2005 where there was an increase of just 13. 6. Estimates indicate that the market for anti-ageing products in China alone is worth 3 billion Yuan (CIA Factbook, 2009 Euromonitor, 2007).

Another socioeconomic factor that has had a profound effect on the cosmetics industry is the trend where men are becoming increasingly fashion conscious. This is driving the growth of the mens cosmetics sub-sector and has particularly triggered a huge rise in the demand for male fragrances in Europe. According to Euromonitor (2007), the rise in demand for toiletries in the region can be attributed to the growth of the mens cosmetics segment China also has seen an expansion in the mens cosmetics segment (CIA Fact book, 2009 Douez, S Guilbault, L. 2008 Euromonitor, 2007).

Changing perceptions, increased awareness and health consciousness are also reshaping the industry in a major way. These factors are driving the rising demand for natural and organic cosmetics. The falling birth rate in most of Europe and Chinas one child policy have also affected the industry as they are cited as the main reason behind the reduced demand for baby care cosmetics in the respective regions. Finally, cultural practices such as the concepts of jiangxi and face in China, celebrity influence and social pressure also determine the demand for these products (Utsunomiya, 2003 Euromonitor, 2007). Environmental Factors

Environmental factors have had a great impact on the cosmetics industry. For one, the manufacturing process has been associated with environmental degradation. As a result of this, many countries have introduced legislation which outlaws the use of chlorofluorocarbons (CFCs) and PVC containers. This has increased the costs of doing business for cosmetic companies as well as introduced entry barriers for new entrants. Additionally, there has been an increased emphasis on environmentally friendly activities such as recycling of used bottles, use of biodegradable materials and renewable fuels and attainment of zero emission.

This has also added onto the costs of doing businesses for many cosmetic companies. To meet the requirements, Shiseido has invested in zero emission plants, phased out CFCs and PVC containers, embarked on massive recycling of used glass bottles and is exploring ways of using renewable fuels. Additionally, the company is increasingly sourcing its raw materials from environmentally conscious suppliers (Shiseido, 2005 Wang, 2000). The rising concern about environmental conservation has also contributed to the development of natural and organic cosmetics.

According to Global Insight (2007), the natural cosmetics industry is expanding at a rate of 20 percent annually in Europe and commands a tenth of the U. S. market. In most of the countries in EU, there has been an upsurge in the sales of skin care products due to mounting concerns about exposure to ultraviolet (UV) and other rays and their role in cancer (Euromonitor, 2007 Wang, 2000).. In China, the environment also drives the industry in unique ways. China experiences very hot summers where temperatures can rise up to 40C.

This season gives cosmetics companies a major boost as it is associated with soaring sales of LTV protection products. Companies in China have introduced specialty products specifically targeted at locking in the UV Protection market. Products include San Lu Factorys Sun Block Milk, Li Hua Si Baos Sakula range, Raystars MiniNurse, Procter and Gambles Olay brand and Aupres range of luxury skin care products (Euromonitor, 2007 Wang, 2000).. Technological Factors In an industry such as the cosmetics industry where innovation and quality are key success drivers, technology plays a very important role in the success of a particular company.

For instance, the average unit labour cost in the EU is comparable to that of the US but is up to 25 higher than Japans. Industry productivity in the US is 5 times higher than that of the EU primarily because of the different rates of technology uptake in the different counties. Specifically, the industry in the US is highly mechanized while that in the EU is largely manual. Additionally, the US has a higher uptake of ICT utilized in total manufacturing and its utilization of ICT in non-ICT producing sectors is optimal. (EU KLEMS study) (Euromonitor, 2007 Jones, Kanno Egawa, 2005).

Technology has also influenced the course of the cosmetics industry in China and continues to shape the direction taken by this sector. Upon entry into the Chinese market, Shiseido could hardly produce cosmetics due to the countrys poor technological advancement. This restricted them to the manufacture of toiletries only with cosmetics being imported into the country (Tang, Teo and Wei, 2007). Many firms have invested heavily in new technology, helping them to improve turnaround times and throughput, enhance efficiency and consequently attain competitiveness. For instance LOreal pumped in 0.

2 billion USD in the Shang Mei Factory (Jones, Kanno Egawa, 2005 Euromonitor, 2007). It has also been observed that many customers are now shifting to multifunctional products and that these products now offer firms with significant growth opportunities. However, companies wishing to tap into this lucrative segment must invest heavily in the acquisition of the requisite technology which can help them meet fulfill these market demands (Global Insight, 2007). As well, there is an upsurge in the demand for technologically advanced cosmetics such as self-tanning lotions and creams

Industry Analysis with Porters Five Forces Model Analysis of industry is usually modeled along Porters five forces model. According to this model, supplier power, barriers to entry, rivalry, the threat of substitutes and buyer power are the most significant factors affecting any given industry (Porter, 1998). Barriers to entry Barriers of entry are low because the cosmetics companies operate in a market that is monopolistic in nature. Being monopolistic, there are very many cosmetic firms. Government barriers are perhaps the most formidable

hindrances and this is largely due to regulations that require the operators to attain certain minimum safety conditions (Euromonitor, 2007). The Japanese market has been inaccessible to many entrants in the past. This is due to the stringent regulations framework that existed in the country. However, Japan has formulated a designated ingredient list, abolished pre-market approval and the designated abolition list. However, many other products for example deodorants are still classified as quasi-drugs and they must get pre-market approval before they can be allowed entry into Japan.

Besides, such cosmetics are stringently controlled by regulations on their composition and manufacturing and this is a significant barrier as such cosmetics cannot be exported into the country or manufactured in the country unless they meet the required specifications (Euromonitor, 2007). In China also, government regulation of the cosmetics sector is a formidable entry barrier. To begin with, 2 separate government entities regulate the sector. Secondly, the country has burdensome regulations. However, the Chinese government has initiated favorable policies that are meant to reduce the barriers to entry.

For one, the government has lifted a moratorium on direct sales and hence foreign firms now find it easier to sell their products in China. Accession to WTO and reduced tariffs are other factors that have helped reduce the entry barriers (Jones, Kanno Egawa, 2005 Wang, 2002). The low proprietary learning curve and high differentiation of products are also barriers to entry. The high brand visibility enjoyed by leading operators such as Estee Lauder and Shiseido also pose entry barriers to new operators.

Switching costs are high because of the significant investments required in technology and licensing requirements (Euromonitor, 2007). Yet another barrier to entry is the need for strong RD functions. As stated before, the cosmetics industry is highly dynamic with innumerable changes occurring everyday due to shifting consumer perceptions. Companies are thus called upon to innovate in order to stay ahead of the pack. Thus, they need to invest in RD for them to survive and this is a cost barrier (Euromonitor, 2007). The biggest entry barrier however is the distribution channel.

This is because customers buy these products based on the distribution channel. Besides, cosmetic companies are usually charged very high fees for them to distribute their products in big department stores and hypermarkets. They also have to meet other tough requirements for their products to be allowed shelf space and this can hinder new entrants from getting into the market. Across the board, tariff barriers are not very significant barriers (Euromonitor, 2007). Supplier power Supplier power is quire low since the supplier concentration is high and the inputs used are well differentiated.

Besides, the switching costs are relatively low. Ingredients used in the manufacture of these products include vitamin C derivatives, elagic acid, chamomile, arbutin and rucinol among others. The inputs have an impact on both differentiation and costs and there are also substitute inputs. These 2 factors also reduce supplier power. There is a considerable threat of forward integration especially in the European market (Euromonitor, 2007). Threat of substitutes The threat of substitutes is high especially for the mass products. This is due to the low switching costs.

Besides, many more players have now entered the cosmetics market, giving consumers more leeway to choose the desired products. Substitute products include minimally invasive surgical procedures such as facelifts, laser resurfacing, microdermabrasions, laser and light treatments and chemical peels. As Euromonitor (2007) reports, the demand for these techniques has increased tremendously at the expense of cosmetics. Introduction of Botox as a substitute for anti-ageing creams has also eaten into the market share o cosmetic firms (Euromonitor, 2007 Jones, Kanno Egawa, 2005). Rivalry

There is a high degree of rivalry and this is because of the high exit barriers (Global Insight, 2007). The degree of rivalry is also enhanced by the high market segmentation. As noted before, half of the entire global market share is held by only 10 companies. Yet other factors which have been associated with the high degree of rivalry include the high industry growth, low switching costs, high corporate stakes and the high diversity of rivals. Additionally, the degree of rivalry is enhanced by the well-defined brand identities. The high degree of rivalry is also as a result of the many firms in the industry.

Besides, the cosmetics market is highly concentrated (Euromonitor, 2007). The global cosmetics market is highly concentrated as only 10 companies control more than half of the market. According to estimates by Euromonitor (2007), Procter and Gamble, LOreal Group, Unilever Group Colgte-Palmolive Co and Estee Lauder Cos Inc are the top 5 companies, commanding about 38 of the entire cosmetics market. Other major players are Avon products Inc, Beiersdorf AG, Johnson Johnson Inc, Shiseido Co Ltd and Kao Corporation (Figure below) Figure SEQ Figure ARABIC 4 Leading Cosmetics Firms Buyer power

Consumers have high buyer power largely attributable to the innumerable education campaigns that are initiated by the cosmetic firms. Well defined brand identities and high price sensitivity among rural and mainland residents is also a pointer to the high buyer power. Besides, buyer incentives are widely available as are substitute products. Finally, the concentration of buyers relative to the industry is low (Euromonitor, 2007). The Micro-environment SWOT analysis Strengths The following were identified as some of the key strengths of Shiseido extensive and strong distribution channel

strong corporate governance high brand visibility strong political connections in countries that have had restrictive practices such as China strong brands such as Whitess, Maquillage, Shiseido, and Elixir Superieur, Large market share. Shiseido holds 2. 6 of the global cosmetics market. In countries such as Japan and China, Shiseidos brands are among the market leaders. For example, Shiseido is the market leader in Japans skin lightening market with a 21. 2 market share. Shiseidos UV White has a 10 market share and is followed by Blanchir of Kanebo (7. 3), Fair Crea of Kanebo (6.

4), Sofna of Kao (6. 3), and Whitess of Shiseido (6. 1) (Figure 1 below). Figure SEQ Figure ARABIC 5 Japans skin lightening market Diversification. The Shiseido Group is highly diversified and has extensive interests in the pharmaceutical, beauty foods, salon, restaurant, fine chemicals and boutique sectors. This is a source of strength as it gives the company many avenues of revenue and shields it from downturns in the cosmetics industry (Shiseido, 2005). Weaknesses The following were identified as the weaknesses of the company Declining profitability Opportunities

The following are the opportunities which are available to Shiseido The rapidly expanding Chinese market presents Shiseido with an opportunity to increase its market share the increasing population of old people has created a huge market for anti-ageing cosmetics which the firm can tap into environmental concerns have led to an increased demand for products that are not harmful to the environment and this presents an opportunity for Shiseido to venture into this segment changing consumer perceptions manifested by increased health consciousness have led to a surge in the demand for organic and natural beauty products and Shiseido can boost its profitability by developing products for this market the rapidly expanding mens cosmetics segment offers an opportunity for Shiseido to venture into this segment Technological advances have led to a rise in the demand for multi-functional products.

As noted before also, products arising from technologically advanced processes are in very high demand in Europe and Shiseido can do well to develop such products Threats The following are the threats which face Shiseido counterfeits substitutes and alternative interventions such as minimally invasive surgical procedures lax legal policies which do not adequately protect the firm against patent infringement and counterfeiting the continuing global economic recession. Core competencies of Shiseido From the foregoing analyses of the macro and microenvironment, the following were identified as the core competencies of Shiseido. Extensive Distribution network Innovation manifested by RD Strong corporate governance Technology Business Level Strategy

The company employs both the cost leadership and differentiation strategies. For instance, its JS range of products is highly priced and is targeted at the high- end market. On the other hand, Uno, a range of skin and hair care products is targeted at the mass market and is lowly priced (Wang, 2002). The Cost Leadership Strategy and Shiseido The Differentiation Strategy and Shiseido Since its inception, the firm has strived to position itself as a premium brand, high quality. Its focus has largely been on the high end market segment and the segment has helped to drive the companys profitability The company has faced many challenges which have made it necessary for it ot review this strategy.

Among the challenges are the intense competition and the world economic crisis which has eaten into the companys sales as more and more people are finding it hard to afford the highly priced products. The solution for Shiseido therefore would be to take advantage of the opportunities facing it by innovating new products that are specifically targeted to the emergent market segments. The differentiated products would serve the segments created by consumers who want cosmetics from natural and organic sources, and multi functional products. This would be easy to attain as one of the key competencies of the firm is innovation which is driven by a strong RD department. The firm should also consider increasing its products for the mens cosmetics segment as it is one of the fastest growing segments globally. Global level strategy

Shiseidos global level strategy is to expand its presence in overseas markets. The company has increasingly pursued a strong acquisition strategy in recent years. The rationale behind this strategy is threefold. First, the company hopes to utilize this strategy to introduce new and innovative product lines to the market. Secondly, the company hopes to broaden its portfolio of products through this strategy. Thirdly, the company seeks to pursue this strategy as a means of restructuring production so that higher levels of efficiency are attained (Shiseido, 2005). This is a sound strategy as the domestic (Japanese) market has registered a negative CGAR since 2006.

Venturing into overseas markets or increasing its exposure in overseas markets which show a strong potential for growth such as China will go along way towards enhancing the firms market share and profitability. Shiseido needs to take into account the country-specific factors. For instance, one of the most visible trends in Europe is that the premium brands are increasingly being sold at reduced prices. There is also an obvious dichotomy in demand for different products across the countries. In France, expenditure is highest for skin care products. In Britain and Germany, expenditure is highest for toiletries while in Sweden, Finland and Norway people spend less on fragrances. Portugal and Spain spend less on decorative cosmetics.

The highest growth was seen in skin care products (CAGR 5. 6) followed by decorative cosmetics (CAGR 2. 8), fragrances and perfumes (CAGR 2. 4), hair care products (CAGR 2. 1) and toileterie (CAGR 1. 7). Except for skin care products however, all the other products exhinited a CAGR that was below the mean CAGR of 3 (Euromonitor, 2007). According to growth forecasts, Chinas cosmetics sector has exhibited the fastest growth. The EU has experienced a 4. 4 annualized growth for the next 10 years. Estimate suggest that this growth rate will not be equally distributed across the member countries but will be higher in new members (CAGR 8. 8) than in older member (3.

7). Japans cosmetic sector is forecast to grow by 3. 1 over the next 10 years while that one of the US will grow at 5 over a similar duration (Figure below). Figure SEQ Figure ARABIC 6 Forecast growth rates Source Euromonitor (2007). With this information in mind, Shiseido needs to venture more in markets in Europe especially in the countries which have recently joined the EU as the growth rates here are higher and look to be more sustainable. China is another country where Shiseido needs to expand its presence. Corporate Strategy Shiseidos global level strategy is to grow sales from foreign markets to more than 30 percent (Utsunomiya, 2003).

Shiseidos Three Year Management Plan aims at attaining annualized growth rates of 20 percent. However, the company has faced innumerable challenges which have made it difficult to optimally fulfill its corporate strategy. Perhaps the biggest challenges faced by the firm are intense competition and the widespread counterfeiting of its products. The widespread counterfeiting is manifested by the presence of imitations in shopping malls and retail outlets throughout China and from China to neighbouring countries such as Thailand. The most notorious path that is used by the counterfeiters is through the Thai Cambodian border (Wattanachewanopakom, 2006).

Other challenges such as political-legal challenges, socio-economic challenges especially cultural biases in the overseas markets, economic factors such as high taxes in target countries and technological factors such as poor development in overseas countries where it wants to venture in have been discussed. To overcome these challenges, Shiseido needs to leverage its competencies. Shiseido has embarked on a major quest to strengthen its RD functions in China towards this end, the company commissioned a new research building to house these functions and concentration of R D functions in the firm is a pointer to the importance with which the firm attaches to this function (Shiseido, 2005). The China Research Centre Co, Ltd as it is referred is tasked with the following mandate.

First, it is mandated to carry out research on traditional Chinese medicine and use the knowledge to originate products that can attain a global appeal. It is also mandated to investigate the cosmetic practices of Chinese consumers and to develop beauty products specifically tailored for the Chinese market. The centre is also mandated to conduct research on skin and hair products for China. This will help it to become even more innovative and come up with novel products to satisfy the emergent market segments. Shiseido has also done well to scale up its CSR activities and this will help it when venturing into overseas markets. To penetrate global markets, Shiseido has the option of forming joint ventures, exporting its products to the target markets or foreign direct investment (FDI).

As discussed before, there are country specific factors that affect the cosmetics industry and Shiseido will have to consider these before selecting the entry strategy for each particular country. Finally, Shiseido needs to utilize the direct sales approach to further enhance its distribution network. Shiseido is a market leader in the cosmetics industry. In recent times, the company has witnessed decreased profitability and this has largely been occasioned by economic factors such as the global economic meltdown, socioeconomic factors such as changing consumer perceptions, environmental concerns and threats such as intense competition, and counterfeit products.

Shiseido operates in an industry which has a high degree of rivalry, high buyer power, low supplier power, high entry barriers and a high threat of substitutes. The strengths of the company include an extensive and strong distribution channel, strong corporate governance, high brand visibility, diversified products, strong brands and a large market share. The major weakness of the company is declining profitability. Opportunities faced by Shiseido include a rapidly expanding Chinese market, the increasing population of old people which has created a huge market for anti-ageing cosmetics and environmental concerns have led to an increased demand for products that are not harmful to the environment.

Others are a surge in the demand for organic and natural beauty products, the rapidly expanding mens cosmetics and higher demand for multi-functional products. Threats faced by Shiseido include the global economic crisis, counterfeit products, substitutes and lax legal policies which do not adequately protect the firm against patent infringement and counterfeiting The core competencies of Shiseido were identified as a strong and extensive distribution network, innovation, technology and strong corporate governance. Adoption of the direct sales approach especially in its Chinese subsidiary will help the company to improve its sales. To fulfil its strategy, Shiseido needs to leverage its key competencies. This wi

Cite this Analysis: Cosmetics Industry

Analysis: Cosmetics Industry. (2016, Aug 13). Retrieved from https://graduateway.com/analysis-cosmetics-industry/

Show less
  • Use multiple resourses when assembling your essay
  • Get help form professional writers when not sure you can do it yourself
  • Use Plagiarism Checker to double check your essay
  • Do not copy and paste free to download essays
Get plagiarism free essay

Search for essay samples now

Haven't found the Essay You Want?

Get my paper now

For Only $13.90/page