Test Essay

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POTENTIALENTRYOFNEWCOMPETITORS Loreal’scompetitorsarecovergirls,avon,revlon,andsoon•Besides,localcompetitorssuchassafi,sendayutinggi,andsoon.•Thethreats:Loreal’sproductsareluxuriesthatcouldbehurtbyaneconomicdownturn. …however…•Theyareabletobeglobalandtoactlocal(marketleader)•SuitResearch&Developmenttodifferenttargetgroups•Highquality•Effectivedistributionsystem Substituteproductsrefertoproductsinotherindustries.•Athreatofsubstitutesexistswhenaproduct’sdemandisaffectedbythepricechangeofasubstituteproduct.•Aproductpriceelasticityisaffectedbysubstituteproducts. POTENTIALDEVELOPMENTOFSUBSTITUTEPRODUCTS•Thenumberofchemicalsinshampooandotherbathandbodyproductsisfrightening.Yourskinisthelargestorganonyourbody.Whatevergetsputonyourskingetsabsorbedintoyourbody,intoyourbloodstreamandintoyourorgans,ashasbeenprovenbymanystudies.Essentially,whateveristoxictoputinyourmouthistoxiconyourskinaswell. E xample: BARGAININGPOWEROFSUPPLIERS Bargainingpowerhighwhen:ManybuyerandfewdominantsupplierUndifferentiated,highvaluedproductSwitchingcostSubstituteproductareunavailableinthemarketplace•Thepowerfulofsuppliertoanindustry,thelessprofitableth industry tend to be Bargacing power of consumers BargainingLeverageBuyerVolumeBuyerInformationBrandIdentityPriceSensitivityThreatofBackwardIntegrationBuyerConcentrationvs.IndustrySubstituteavailability BARGAININGPOWEROFCONSUMERSBuyersarePOWERFULif:BuyerareWEAKif:Buyersareconcentrated–fewbuyerswithsignificantmarketshareProducercantakeoverowndistribution/retailingProductisstandardizedUniqueproductandbuyercannoteasilyswitchtootherproductBuyerpossesacrediblebackwardintegrationthreat–tobuyproducingfirmorrivalManybuyers–hasnoinfluenceonproductorprice “A theory of strategic management that focuses on relating a firm to the competitive environment within which it operates”. (The New Penguin Business Dictionary, 2003)

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