Most organizations are going through massive changes. Their customers are changing, their competition is changing, their customerâ€(tm)s needs are changing and their resources availability is changing - the cosmetics companies are no different. Organizational survival and success depends on the ability of the managers to detect and adapt to critical changes in the environment, which may impact the company. \\r\\nThe paper has two main purposes. First to underline the importance performance measurement has in todayâ€(tm)s business and second to present a few key elements regarding the performance of the cosmetics sector in Romania. For this we have tried to answer the following question: Are the cosmetics companies competitive? \\r\\nThis paper is based on exploratory literature review of different approaches regarding organizational performances in organizations in general. \\r\\nDespite the global economic crisis and the general slowdown of many markets, the Romanian beauty and personal care market continued to grow in 2009. Consumer awareness and product knowledge is growing rapidly and the development of retailing chains and their widening product offer have also helped to further the development of the beauty and personal care market.\\r\\nThe paper also presents the results of section three of an online survey conducted at 10 cosmetic companies from Romania. The results have shown that multinationals have both the economic and managerial power to succeed in obtaining their goals. Even though the sample of 72 respondents was rather small, we managed to conclude from the received answers that the majority of companies focus on economic and managerial performance rather than on social and ecological performance indicators. \\r\\nThis paper aimed to contribute to the literature review development in the field of performance management. The results of this study can be of use for managers from the analyzed domain or for other researchers in the economic field. \\r\\nThe authors have contributed to the originality of this paper, by presenting pertinent conclusions about the cosmetics market from Romania, resulted from the literature review and from an empirical study. \\r\\nmanagement, performance, cosmetics market, competition

Bagu Constantin

Catanet Alina

Grigore Ana - Maria

Radu Catalina

English

Research Papers in Economics

￿
681 
COMPETITIVENESS AND PERFORMANCE ON THE COSMETICS MARKET 
Grigore Ana-Maria 
Academia de Studii Economice Bucure￿ti, Facultatea de Management 
Bâgu Constantin 
Academia de Studii Economice Bucure￿ti, Facultatea de Management 
Radu C￿t￿lina 
Academia de Studii Economice Bucure￿ti, Facultatea de Management 
C￿t￿ne￿ Alina 
Academia de Studii Economice Bucure￿ti, Facultatea de Marketing 
 
Most organizations are going through massive changes. Their customers are changing, their 
competition is changing, their customer’s needs are changing and their resources availability is 
changing  -  the  cosmetics  companies  are  no  different.  Organizational  survival  and  success 
depends on the ability of the managers to detect and adapt to critical changes in the environment, 
which may impact the company.  
The paper has two main purposes. First to underline the importance performance measurement 
has in today’s business and second to present a few key elements regarding the performance of 
the cosmetics sector in Romania. For this we have tried to answer the following question: Are the 
cosmetics companies competitive?  
This  paper  is  based  on  exploratory  literature  review  of  different  approaches  regarding 
organizational performances in organizations in general.  
Despite the global economic crisis and the general slowdown of many markets, the Romanian 
beauty and personal care market continued to grow in 2009. Consumer awareness and product 
knowledge  is  growing  rapidly  and  the  development  of  retailing  chains  and  their  widening 
product  offer  have  also  helped  to  further  the  development  of  the  beauty  and  personal  care 
market. 
The paper also presents the results of section three of an online survey conducted at 10 cosmetic 
companies from Romania. The results have shown that multinationals have both the economic 
and  managerial  power  to  succeed  in  obtaining  their  goals.  Even  though  the  sample  of  72 
respondents  was  rather  small,  we  managed  to  conclude  from  the  received  answers  that  the 
majority of companies focus on economic and managerial performance rather than on social and 
ecological performance indicators.  
This paper aimed to contribute to the literature review development in the field of performance 
management. The results of this study can be of use for managers from the analyzed domain or 
for other researchers in the economic field.     
The authors have contributed to the originality of this paper, by presenting pertinent conclusions 
about  the  cosmetics  market  from  Romania,  resulted  from  the  literature  review  and  from  an 
empirical study.  
 
Key words: management, performance, cosmetics market, competition  
 
JEL Code: M10, L25, L66 
 
1. Introduction 
It is amazing to look back at the different changes that management has gone through in the past 
20 years. But even with all the so-called management trends that were supposed to “solve” all the 
problems of management, there are two things that have remained constant (Rieley 2006: 123)  ￿
682 
1) Managing an organization to high performance is not easy. 
2) There are a small number of organizations that are able to consistently demonstrate high 
performance over time. 
The senior managers of companies that are able to sustain consistent performance growth over 
time  seem  to  have  a  clear  understanding  that  everything  that  has  to  do  with  organizational 
performance is interrelated, and being able to command an understanding of those relationship 
can be significant differentiator in business today.  
The question that arises for most managers must be “how can I improve performance in my 
business?” 
The  paper  offers  an  interesting  perspective,  both  theoretical  and  practical,  on  overall 
organizational performance with special focus on economic, managerial, social and ecological 
performances, analyzing the cosmetics industry in Romania.  
 
2. The concept of organizational performance  
Organizational performance refers to the ability of the organization to achieve its objectives. 
Management organization should be guided by one objective, for example maximizing the value 
of equity, or several objectives that may not necessarily involve maximizing actions. Examples of 
such objectives could be to maintain or increase employment, environmental protection, increase 
customer satisfaction, etc.  
The question that arises is: “What measures should be oriented towards this type of objectives?” 
To answer this question it is necessary to have clear and measurable targets because:  
-  Assessing  the  individual  and  department  is  objective,  this  being  based  on  individual 
contribution to overall goals. 
-  Having  a  clearly  defined  purpose,  people  are  more  motivated,  focused  efforts  and 
resources are directed towards achieving the goal.  
- Monitoring and evaluation is made easier and more equitable because the focus moves 
from the man on the result.  
- Enabling more effective management control is to intervene only when the parameters set 
are not met.  
- Allows a clearer communication and better understanding of management expectations.  
- If you understand, at management level, that "you get what you measure" such a system 
becomes a way of empowerment of employees.  
- Role ambiguity disappears. Everybody knows what to do, what results are expected and 
the resources available.  
- A systematic approach to assess how it affects all of its components changes.  
- Measuring performance against established standards allow early action when results are 
not expected.  
- Move the focus on customer needs.  
- Engaging in a cycle of continuous improvement is the basis of a performance. 
 
2. Categories of organizational performance   
Organizational  performance  can  be  divided  in  several  categories:  economic  performance, 
managerial, social and environmental, technical and technological, financial, etc. 
 Economic performance is a consequence of the provision of an efficient management and aims 
to achieve at high levels, with targets, the results measurable by volume and efficiency indicators. 
The purpose is to obtain the lowest production cost for the best quality possible (as a combination 
of  both).  Economic  performance  aims  to  obtain  the  highest  possible  income  (total  income, 
turnover or net income - from the work). Economic performance and profitability is expressed 
best by the rate of return (the benefit of capital). ￿
683 
Managerial performance refers to adapting to the needs of the organization in general and not 
least,  the  cultural  conditions  (in  particular  the  organization  and  operating  area).  Managerial 
performance is all about decision making. How and why decisions are made. How they are 
implemented and communicated. Managers need ongoing training in how to think differently to 
understand the challenges they and the organization face; how to influence employees, peers, as 
well as suppliers and customers to help the company successfully address these challenges.  
Social  performance  refers  to  the  customers'  needs  and  their  purchasing  power  by  providing 
products / services of technically good at a reasonable price. The organization shall provide 
satisfactory wage jobs and a favorable climate within. 
The technical performance refers to the efficient use of available resources in the organization 
and is  measured primarily  by  productivity.  Increased  technical  performance is  influenced  by 
increased productivity and a better organization of production. 
In conclusion, increased organizational performance can be achieved by increasing the efficiency 
and effectiveness.  
 
3. Cosmetics market study 
An overview of the broad cosmetics industry made by Global Insight, in the EU, Japan, China, 
and the U.S. reveals that Europe's market size is almost as large as the U.S. and Japan combined, 
due to its large population. 
Data revealed by Euromonitor International showed (Table no. 1) that U.S. cosmetics market was 
€38.2 billion, while Japan's was €23.7 billion and China's €8.2 billion. The total EU 27 cosmetics 
market was valued at €63.5 billion. Among the EU countries, Germany has the largest cosmetics 
market, valued at €11.7 billion, followed by France (€10.4 billion), the U.K. (€10 billion), Italy 
(€8.8 billion), and Spain (€7.4 billion). 
 
Table 1: Market Sizes - Historic - Retail Value RSP - Current Prices 
 
Categories  Zone  2004  2005  2006  2007  2008  2009 
Beauty and 
Personal 
Care - US$ 
mn - Year-
on-Year 
Exchange 
Rates 
Eastern 
Europe  14902.5  17387.2  19986.1  24080.5  28192.4  22935.7 
Beauty and 
Personal 
Care - RON 
mn 
Roman
ia  2105.1  2480.7  2863.1  3192.2  3536.7  3737.1 
Source: Euromonitor International 
 
As could be expected in a vast region with different tradition and cultures such as the EU, unique 
trends in buying patterns may be found in particular countries, as well as some common trends 
across the board. 
From  country  to  country,  spending  on  cosmetics  varies  by  product.  The  French  primarily 
purchase  skin  care  products  while  Germans  and  the  British  spend  mostly  on  toiletries.  The 
Nordic countries, Finland, Norway, and Sweden spend a much lower share of their consumption 
basket on fragrances, compared to the EU average, while Spain and Portugal spend lower-than-
average shares on decorative cosmetics. ￿
684 
 
3.1 Nature of competition 
Currently, large cosmetic corporations combine to control over half of the cosmetics market. The 
tables below lists each of the top 10 companies in 2001-2009 and their respective shares of the 
global cosmetics market (retail sales value).  
 
Table 2: Company Shares (by Global Brand Owner) - Retail Value RSP - % 
Companies  2001  2002  2003  2004  2005  2006  2007  2008  2009 
Procter & Gamble Co, 
The  7.3  7.3  8.4  8.4  12.1  12.1  12.1  11.9  11.7 
L'Oréal Groupe  8.4  8.8  9.3  9.5  9.5  10  10.2  10.4  10.1 
Unilever Group  7.3  7.2  7.2  7.1  6.7  6.6  6.7  6.6  6.8 
Colgate-Palmolive Co  3.8  3.7  3.6  3.6  3.7  3.7  3.7  3.7  3.6 
Avon Products Inc  2.9  2.9  2.9  3.1  3.2  3.2  3.3  3.3  3.4 
Beiersdorf AG  2.4  2.6  2.8  2.9  2.9  3  3.2  3.3  3.3 
Estée Lauder Cos Inc  3.8  3.7  3.7  3.6  3.5  3.4  3.3  3.2  3.1 
Johnson & Johnson Inc  2.1  2.2  2.2  2.2  2.2  2.9  2.9  2.9  2.9 
Shiseido Co Ltd  2.8  2.7  2.7  2.7  2.6  2.4  2.3  2.3  2.5 
Kao Corp  1.6  1.5  1.5  1.5  1.5  2.3  2.1  2.1  2.2 
Source: Euromonitor International 
 
Holding a position as one of the top 10 manufacturers is enviable, however, these companies 
understand  that  they  must  constantly  reconsider  and  re-evaluate  their  market  positions  by 
listening to the demands of their customers, gaining footholds in new markets, and evaluating 
their organizational structures. These large multinational firms are finding themselves facing stiff 
competition from other popular brands. Other cosmetics companies are pushing ahead, trying to 
gain their own place in the market, and have largely been successful in developing their own 
name.  
The industry's key players pursued a strong acquisition strategy in recent years. The purpose of 
this strategy was to introduce new business lines, streamline production, and expand the types of 
products under company control. Over the next few years, the success of these acquisitions will 
have to be evaluated as the relentless demand for the consumer's loyalty will surely continue. 
The great majority of the products sold in Romania are produced and distributed by multinational 
chains, such as L’Oréal or Beiersdorf as shown in table no 3. The economic crisis of the last two 
years of the review period helped local producers be noticed on the market, as they offer cheaper 
products characterized by a good price/quality ratio. Local company, Farmec took over smaller 
local producers and their brands and expanded its market share, but still remained behind the 
multinationals. Although company advertising budgets decreased in 2009, the sums invested by 
multinationals  in  media  advertising  increased  the  visibility  of  their  products  and  made  an 
important difference in their sales levels. 
The situation is not likely to change in the first few years of the forecast period, given that the 
multinationals have the ability to adjust rapidly and efficiently to the changing requirements of 
the market, unlike their Romanian counterparts. The strongest Romanian player on the beauty 
and personal care market is Farmec. However, even with its latest investments in new production 
technologies and in promotional activities, it cannot overthrow the established hierarchy.  
This does not mean the demise of Romanian manufacturers, but rather new development trends. 
These trends will take the form of mergers or takeovers as well as reorientation towards export 
and more easily accessible markets. Players will also have to adjust to those requirements which 
do not demand a huge financial investment but which can bring considerable benefits. ￿
685 
 
Tabel 3: Company Shares (by Global Brand Owner) - Retail Value RSP - % 
  2001  2002  2003  2004  2005  2006  2007  2008  2009 
Beauty and Personal Care Romania 
Avon Products Inc  7.2  11  13.2  15  15.2  14.1  13.3  12.7  12.3 
Procter & Gamble 
Co, The  6.5  6.7  8.1  8.3  10.2  9.8  10.5  10.4  10.5 
L'Oréal Groupe  4.1  4.5  5.2  6.1  6.6  7.6  8.1  8.5  8.7 
Beiersdorf AG  4.5  5  5.9  6.5  7  7.8  8.1  8.1  8.3 
Unilever Group  6  5.6  5.2  5.1  5  5.1  5  4.8  4.9 
Colgate-Palmolive 
Co  7.9  7.5  6.8  5.9  5.3  5  4.8  4.7  4.7 
Oriflame Cosmetics 
SA  4.4  5  5.8  6.4  4.6  5  4.7  5  3.9 
Henkel AG & Co 
KGaA  5.8  5.5  4.8  4.1  3.8  3.7  3.7  3.6  3.7 
Coty Inc  3.2  3.2  3  2.9  3.2  3.5  3.5  3.4  3.4 
Sarantis SA, Group  2.1  2  2  2  2.9  2.9  2.8  3.2  3.3 
Farmec SA  4.5  4.2  3.9  3.6  3.3  3.2  3.1  3.2  3.2 
Source: Euromonitor International 
 
4. Organizational performance in the cosmetics industry 
In order to determine what are the best performance indicators used in the cosmetics companies 
the  authors  developed  a  questionnaire  (Grigore,  2010),  which  was  applied  on  10  cosmetics 
companies  from  Romania:  Procter  &  Gamble,  L'Oreal,  Avon,  Oriflame,  Farmec,  Beiersdorf, 
Unilever, Colgate-Palmolive, Elmi Prodfarm LLC and Genmar Cosmetics. The results presented 
in  this  paper  are  part  of  a  bigger  on-going  research.  For  the  main  research,  we  built  a 
questionnaire aimed at identifying specific management practices inside Romanian organizations 
with special emphasis on those which have as main activity the production and sale of cosmetics. 
About 90% of the participants who answered the questionnaire were mostly mid-level and low-
level managers. The questionnaire consisted of 40 questions grouped into ten sections. Section 
three had as purpose identifying key elements for strategies and organizational performances. 
The  existence  of  a  development  strategy  revealed  that  the  organization  have  inclination  for 
strategic  planning.  Because  of  the  trend  towards  long-term  policy  actions  and  financial 
projections made trimistrial, strategy helps establish a unified direction for the organization in 
terms  of  its  operational  goals  and  provides  the  basis  for  allocating  resources  to  guide  the 
organization towards achieving these objectives. In this respect, the development objectives of an 
organization  implement  a set  of  performance  indicators.  70%  of  respondents working  in  the 
organization,  acknowledged  the  existence  of  a  development  strategy,  among  them  a  similar 
percentage saying that the strategy has objectives related to organizational performance.  
In an attempt to define the concept of performance we noticed that, in spite of uses, it becomes a 
multivocal  word.  Many  of  the  respondents  defined  the  performance  thinking  how  it  can  be 
measured. In general knowledge, organizational performance measurement is seen as a further 
evaluation of the results. Therefore we came to one conclusion, performance has to be measured, 
for example it can be described by a set of indicators with a degree of complexity more or less 
elevated. Particular emphasis is given to economic and management performance indicators, over 
50% of respondents stating they use a measurement system for these types of indicators. ￿
686 
The variety of indicators for performance measurement shows that they differ depending on the 
information received by managers are on each hierarchical level and depending on their interests. 
Thus, higher level managers are focused on their company's overall performance and mid-level 
managers perceive performance and lower profitability through the department or team working. 
The respondents gave some examples of organizational performance used in their organization: 
profit, productivity, revenue, reducing the amount of non-compliant products manufactured from 
3% to 2%, reducing the time spent honoring orders from 30 days to 20 days, indicators measuring 
the  number  of  products/services  sold  in  a  period,  the  number  of  customers  attracted,  gross 
margin, carbon footprint, etc 
 
5. Conclusions 
A number of EU countries have developed a large trade surplus and a significant comparative 
advantage in cosmetics products. This is clear evidence that cosmetics manufacturers in these 
countries have, over the years, identified the most important consumer trends and have responded 
with new product offerings that have been successful. These companies have accomplished this 
task in both domestic and export markets. In the process, these companies have successfully 
developed strong brand recognition in a highly competitive and dynamic market place. 
In  conclusion,  based  on  the  results  presented  in  this  paper,  we  believe  that  most  of  the 
multinational have managed to be competitive on the Romanian market.  
 
Acknowledgements 
This  work  was  co-financed  from  the  European  Social  Fund  through  Sectoral  Operational 
Programme  Human  Resources  Development  2007-2013,  project  no.  POSDRU/1.5/S/59184 
“Performance and excellence in postdoctoral research in Romanian economics science domain”. 
 
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3.Collins, Jim. Excelen￿a în afaceri. Bucure￿ti: Editura Curtea Veche, 2010. 
4.Rieley, James. Strategy and Performance. London: Hodder Arnold, 2006. 
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2 (2010): 1153-1162 
6.Hoon  Oh,  C.  and  Rugman,  A.  “Regional  sales  of  multinationals  in  the  world  cosmetics 
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COMPETITIVENESS AND PERFORMANCE ON THE COSMETICS MARKET

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