The beauty industry is broadly defined as category of products that associates in maintain the physical well-being of the user. Cosmetics, hair care products, foot and hand products and face care products are categorize under the industry. The demand for the product in this industry is elastic as the consumers are sensitive towards the changes in price. Surprisingly, the demand for beauty products in Italy has been steady increasing despite the global financial crisis. (italy’s beauty sector is worth 9 billion euros, 2010)

Size of the market

Figure 1 shows the global market size for beauty products. Hair care products represents 9% of the total market size (personal care industry overview, n.d). Out of the 9%, Italy’s market value worth more than £ 9 billion (italy’s beauty sector is worth 9 billion euros, 2010) and the revenue generated in the industry is predicted to increase further due to the introduction of new products with a cheaper price. According to Unipro research, the growth of locally manufactured beauty product about 2.5% with the demand valued at £8,995 million, where else the foreign companies regenerated sales worth £2,280 million, quarter of the total revenue during the second half of 2007.

Nature of competition.

It is nearly impossible for a business to not have any competition unless the product is extremely unique that the competitor is unable to replicate. In beauty industry, we often face what is called the monopolistic competition, where by a large number of companies exist and competing within the same market size. As the entry barrier are not too high, many companies can easily penetrate into the market. unfortunately, companies without proper resource management will long stay in that market for long. The ability to minimize the cost as low as possible will be the only competitive advantage to stay in the industry.

Changes in the industry

It is predicted that the beauty industry will continue to prosper during the recession as many consumer are unwilling to give up their ‘obsession’ in maintain their beauty. This was proven as the sales in health and beauty specialist retailers increased from £28,759.5 million in 2008 to £29,106.4 million in 2009(Euromonitor International, 2010). However, there are major change in their spending behavior. Many consumer are now demanding products that targets more specifically to their needs, with the combination of value for money options. This shift in consumer demand awakes the retailers to invest more on private label especially in improving the quality of the packaging. Decisions made by retailers to invest in private label were proven to be successful as the sales of discounters stores increase from £8,568.8 million to £9,783 million within a year(Euromonitor International, 2010).

Another change that is present in the industry is the increasing demand in organic products, especially health care products. The sudden increase of environmental awareness among consumers is attributed to the wide media coverage given by the members of the European Union (italy air pollution threatens EU, 2011). The demand is proven to be a profitable market to penetrate as the demand for organic food increased more than 8% based on volume during the first month of 2009, with revenue amounting £350 million.

At the same time, many consumers are willing pay premium price in order to forgo certain packaging which they think that might be hazardous to the environment. This spawn a series of changes made by retailers to stock up more organic products with environmental friendly packaging(Euromonitor International, 2010).

Primary competitions.

European countries like Italy play an important role in sustaining the growth of the beauty industry especially during the economic downturn. Many companies are eyeing on Italy in terms of potential growth in market size and profitability. And Ginvera is one of them. After analyzing all companies in the industry, Ginvera has identified three companies that might be the company’s primary competitors.

Two of the companies are direct competitors; companies that selling the same product with the similar pricing as Ginvera. The third company, will be our indirect competitors; company that sells product with slight differences but competing within the same market, especially if they are physically presence in the market that Ginvera planning to penetrate into.

Competitors profile

Competitor 1: Ganga Prasad Puneet Kumar

The company was established in 1991 as a sole proprietorship business by Mr. Ganga Prasad. The business is operated as manufacturer, exporter and wholesaler or distributor. Their major markets cover from countries in the East/Middle Africa, South/West Africa, Eastern Europe, Central America, Middle East and South East Asia. (Ganga Prasad Puneet Kumar, 2010)

Their heena hair dyes is the best seller although other henna products such as heena paste, henna shampoo and henna oil are being produced. In Figure 2, the company states that their primary competitive advantages are:

Experienced in R&D department

Good financial position & TQM

Large production line

Large production capacity

Abundance of the raw material; henna

However, the weakness of the company are:

Relatively new in that Italian market

No control over the market share

Weak marketing strategy

Unattractive packaging based on Italians standard

The company is operating at a small scale with annual sales turnover worth $0.25 million to $ 1 million with the help from the full-time workers ranging from 26 people to 50 people.

Competitor 2: Radico Fashion Pvt Ltd.

Founder by Sanjeev Bhatt 1992, the partnership business runs on manufacturing, exporting and online selling through their website. They have strong consumer base in Japan, although their main target markets are aiming countries in the American continent, East/West Europe, Asian region, African continent and the Oceania. (Radico Beauty, 2010)

The products that they offer are bleach cream, face wash gel, hair re-growth shampoo, henna products, natural hair color and nourishing body milk. Their competitive advantages are:

The abundance of raw material; henna

Have wide network and distribution warehouse in California, USA

Somehow strong consumer base in Japan

Large production line

Larger production capacity

As in 2010, the company have 50 full-time employees with sales regenerated $ 5 million annually. Unfortunately, the weakness of the company are:

Relatively new in Italian market

Weak marketing strategy

Only accessible through online retailing

Competitor 3: Alan Jey Laboratories

Set up in 1975 as an Italian company specializing in production of generic hair colorants and cosmetics for third parties. Ingredients were obtained directly from the country where the raw material is originated. A series of quality control procedures will be carried out before all the materials in being used. (Alan Jey, n.d.)

The company’s competitive advantages are:

Variety of substitute products

Strict quality control on each product

Have strong network with saloons and stores.

Operating in Italy for the past 30 years.

But the weakness of the company are

Higher cost per unit as raw material are purchase directly from the supplier’s country of origin

Have yet to develop any form of environmental conscious commitment in terms of packaging or/and using organic as part of the ingredients.

The competitive profile matrix in Figure 3 is being used to analyze whether Ginvera has the competitive advantage over the three other companies.

Based on the matrix, it is proven that Ginvera have the strongest competitive advantage over the three other companies. Ganga Prasad Puneet Kumar has the lowest overall rating, followed by Alan Jey Laboratories and Radico Fashion Pvt Ltd.

Ginvera’s advantages over its competitors

A few opportunities are presented to Ginvera by analyzing the overall industry and the three main competitors. First and foremost, is the intellectual property of the henna shampoo dye product. Although many small online enterprise sell these products but none of them were patent. The formula to the henna shampoo requires extensive research in finding the right ingredients to achieve certain properties without chemical assistance. The competition advantage will indefinitely be Ginvera’s once the patent for henna shampoo dye is being approved by the Italian patent and trademark office (italy-market access, 2005).

Secondly, the sudden increase of environmental and health awareness. Many consumers are willing to pay more on organic products despite the economic downturn(Euromonitor International, 2010). The changes in consumers’ pattern indicates that people are more aware that human action are responsible towards the erratic changes in their environment. They feel that every little thing that they do from buying pesticide-free vegetables to environmental friendly packaging might improve the badly damaged eco-system.

This is where all three companies like Alan Jey Laboratories, Ganga Prasad Puneet Kumar and Radico Fashion Pvt Ltd is at the losing edge. Direct competitors such as Ganga Prasad Puneet Kumar and Radico Fashion Pvt Ltd failed to deliver the demand of the consumer’s in Italy. Their competitive advantage is by offering low price but not in terms of packaging. Their core competencies are to manufacture products using high quality ingredients, but not in improving the product packaging to be environmental friendly.

They are likely to fail in maintaining their low cost products because more financial resources is needed to channel into the R&D department especially if the technology is not available in the country and needed to be import from elsewhere. The cost per unit will definitely increase if the company decides to invest into the technology.

Equipped with high technology, Ginvera manage to find a solution by creating a new product called magnifique, which uses high quality henna, packaged in attractive and eco-friendly materials but at a lower price. Vital information pertaining to the product such as the origin of the ingredients used and other information like stamp of approval by the Italian health authorities will be available on each and every product.

References

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