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ABSTRACT
Firms have to develop their strategies based on market and competition analysis. Key premise of shaping firm strategy is industry analysis. Michael Porters' five competitive forces model of industry analysis provides an insight into the effect that forces like supplier power, buyer power, threat of substitution, barriers to entry, and internal rivalry have on competitive intensity and profitability of cosmetic industry in Croatia. The profit potential of the industry is defined by the interaction of all competitive forces. Porter's five competitive forces model highlights how each of the five forces is not equally important, but it should be noted that it can help the firm to better understand the environment in which it operates, as well as its advantages and disadvantages, that enables the firm to affect its long-term profitability. Based on the strategic analysis it can be concluded that the key factor of success in Croatia, but also in Europe, including the global cosmetics industry, lies precisely in the power of having strong recognizable and established brands, which also affects the loyalty of customers. This fact is confirmed by the results of an empirical study that showed that the most important factor that contributed to the success at the cosmetic market is existence of strong and recognizable brand. The analysis showed that the cosmetic market in Croatia is attended by the numerous competitors, but with the presence of a few dominant industrial participants, which shows how competitors are not nearly equal in size and power. The research results showed that the profit potential of cosmetic industry in Croatia, as well as its prospects for the next five years, is not showing so great profit. Although there is the expected growth in the following years, which will certainly be moderate and slow.
Keywords: Cosmetic industry, Industry analysis, Industry profitability, Strategy
1 INTRODUCTION
Nowadays firms do business in a very insecure environment, and they are everyday faced with sudden, unexpected and unpredicted changes in the environment. Markets are becoming more demanding, complex, and new industries and industrial branches are constantly appearing. Competitiveness is becoming a key issue: how to be better than other firms. That question is exactly the foundation of not just success, but also survival at the market. Firms must be flexible,...