Five forces Threat of new entrants Porter said that if the barriers to entry are low then new entrants will be attracted by any rise in industry profitability (Gordon Pearson, 1999). Applied to the Company, it has been created and developed a niche market sector for naturally inspired skin and hair care products by introducing the benefits of natural ingredients to personal care products.
But the natural ingredients seem to be not the only core technology of the Company, concept was copied by other competitors in the years to come like Bath & Body. However, the Company still has retained high brand recognition and gained competitive advantages on the good relationship with the long-term suppliers of raw materials in the third world countries under the project of “Trade Not Aid” and “the Soapworks Project” and on the unique ethic values it promoted.
According to Body Shop, firstly, through 28 years hardship, body shop established a strong image with good reputation by the customers, so for the new entrant it is not easy to build up a strong brand loyalty in short time. Besides, through advocating fair community trade, body shop formed good relationship with the long-term suppliers of raw materials in the 3rd word countries, which is more like a friendship than a partner in business environment and cannot be imitated by new entrants.
In addition, body shop share a developed Distribution channel through its own franchise system and appropriate technology of natural ingredients against animal test, all of above set big barriers for new entrants. On the contrary, the existing products of body shop are becoming more and more homogenous. For the reason that the natural ingredients seem to be not the only core technology of body shop, for instance the big competitors Bath & Body works with huge resource had entered the cosmetic market in the middle of 90th with similar natural cosmetic products.
Because of lack of innovation in new product, designing, packing, from 1996 to 1998, around 20 franchises canceled the contract with the body shop in US which result in dramatically declining of market share in US. The bargaining power of buyer In personal care industry, it can’t be denied that the bargaining power of buyers is relatively high. The buyers have nearly no switching cost to change another brand and the differences between brands are slight. The products of rivalries such as Bath & Body, have similar product functions but at relatively cheaper price.
Even the social and ethic value the Company promoted have little influences on the decision marking by the youth generation who concern less on the environment and public issues. So it becomes harder to attract them to buy Body Shop solely because of the differentiation of the social issues. As for the cosmetic product markets, although the Body Shop doesn’t concentrate on youths, the majority of consumers are the young generations who are more inclined to be changeable comparing with the old