Like many industries L’Oréal has many ranges of products that are being commonly used by the customers. It is very important to understand the different risk and also the rewards of an industry. With L’Oréal the rivalry among competitive firms is high. Various companies competitiveness like Proctor and Gamble, Avon, Estee Lauder and shiseido push L’Oréal into more of rivalry in the current business of cosmetics and skin care products. Therefore, L’Oréal has to enhance their marketing channels with the assistance of highest technology and innovation to obtain more market share and globally targeted their market. “Government policies and regulations can dictate the level of competition within the industry and will have a long term negative impact on this entity, which subtracts from the entity value.” (UK 2013). The suppliers in the business is what supplies materials and other products into the industry. The bargaining power is low because L’Oréal has many suppliers that are producing their products. Some of the examples of the high valued products or substitute goods are unavailable in the market place for example, raw material, packaging, point of sales and other equipment. The bargaining power of suppliers means that when buyers are less sensitive to prices, prices can increase. “inelastic demand positively affects L’Oréal Paris.” ( UK 2013) However, limiting bargaining leverage helps L’Oréal Paris. Moving on to the intensity of existing rivalry. The suppliers of L’Oréal will have low power as L’Oréal is an established company and it does 94% of its production in-house (www.loreal.com) . The bargaining power of buyer Generally the power lies with the buyers, as there are many firms that produce similar products. The buyers have considerable choice over whom they buy their products from. Therefore, the switching costs are relatively low, as buyers do not incur any costs for switching from L’Oréal products to other similar products. For example, customers have the choice of whether to buy Maybelline mascara or Maxfactor mascara; they will not incur switching costs if they change their minds about which company to purchase it from. Hence, buyer power can influence the prices that L’Oréal charges for its products. Threat for substitute products refer to produce in other industries. It exists when a product demand is affected by the price change of a substitute product there are number of chemicals in shampoo and other bath and body products which is frightening. Whereas with the threat of new competitors The important entry is for the Barriers quality, pricing and marketing which can overcome with the barriers in many different ways. Also new firms sometimes is easy to enter the industries because of high-quality products, lower price and substantial marketing resources. L’Oréal’s main competitors are the cover girls, Avon, Revlon etc. The main Threats for L’Oréal is their products are luxuries which could be hurt by an economic downturn however they are able to be global and act locally. Also it may affect their distribution system.
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