Powerful may suffer from not honest strategies of

Powerful new
entrants or big amount of them may bring profit potential of the industry down,
for example to decrease the prices or to increase the quality and product
differentiation. “Entry barriers are advantages that incumbents have relative
to new entrants” (Porter, 2008).

New entrants to
the NOC industry can be not only freshly emerged cosmetic start-ups, but also
strong players of neighbor categories. As far as industry is recognized as
profitability attractive, big classic cosmetic brands may allocate budgets and
resources into natural line development, same as organic food brands and
manufactories, that have advantaged access to supply.

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High brand
identity and economics of scale of existing players is the first barrier of the
industry. That means that firms that are already established on the market have
lower supply and production costs per one unit, which they can spread over more
units being produced and sold. Due to big marketing budgets and time advantage,
existing brands occupy targeted niches and market segments.

Lack of centralized
universal regulations is second challenge of the industry. Legitimate natural
and organic companies are forced to fight for customer with many pseudo-natural
products. Moreover, whole reputation of the NOC products quality may suffer
from not honest strategies of competitors. This barrier is strongly connected
to the next one, which determines lack of product understanding by customers.
Huge variety of “green” labels and absence of a single European association for organic
cosmetics is confusing for the target audience. “There are more than 50 labels
with regards to product quality in this segment, but there is no leading label,
and this makes natural cosmetics a bit weak. Consumers are sometimes confused
about what is natural and what is organic, and there are translation mistakes
too. In German speaking countries, natural products are defined by being
organic, but in the UK, natural means nature-inspired”, said E. Dambacher in the
interview to Jo Allen for the article Germany: Inspired Leaders (Allan, 2017).  The lack of regulation, and the fact that
there is no leading label, means that it is even more important for brands in
this market to have a very clear positioning. “This is now the leading point
for consumers when they are deciding if a brand is authentic and reliable. They
look at the brand image before looking at the ingredients”, continues the
expert in the interview for the magazine (Allan, 2017). The progress
and standards developments by European-wide organizations, such as NaTrue and
Cosmos would help to take this defect
under control.

Access to
distribution channels was also one of the problems for developing firms a few
years earlier, while not only pharmacies and bio markets were holding the dominant
shares, but also retailers started bringing out their natural labels. „The
natural & organic cosmetics market is far from saturated. Demand and
fulfillment of demand are increasing, but rarely do consumers find attractive
shopping locations that meet their expectations”, claims E.Dambacher during her
speech on the Natural & Organic Cosmetics Conference 2016 in Berlin (Naturkosmetik
Branchenkongress, 2016). Nowadays small niche brands migrate to
online trade, following audience shopping preferences and avoiding distribution
barriers.

Costs and prices are also significant
from market restraints analysis. Supply cost and switching cost of materials
provider is high for firms and short shelf life of the product reflects on the
final price.