Because of the growth in income per capita as a consequent to the growth of global economy, skin care and cosmetic products have changed from luxury items to daily essentials. Together with the human nature of pursuing attractive appearance, factors such as decrease in the level of average age of cosmetic consumers, the increase of frequency of using cosmetic products, strong demand for high end skin care products with medical effects, and government support in developing cosmetic manufacturing as a key industry, suggest that the cosmetic market still has a significant growth potential. In addition, the recent popularity of ¡§cosmo-ceutical products¡¨ is pushing a number of major local corporations to enter the cosmetic market with biotech innovations. Because of the ease of transforming from chemical-related product manufacturing to cosmetic manufacturing, the local cosmetic industry is now saturated by small to medium-sized manufacturers. However, the local manufacturers are faced with the challenges of lack of GMP related legislation system for the cosmetics industry, shortage of financial resources, insignificant company size, and local R&D still awaits effective improvement. Therefore, it impossible for local companies to compete with the international cosmetics corporate giants. This paper will discuss the example of Taiwan Salt¡¦s successful transformation to a cosmetics manufacturer with collagen products. The example will be followed by analysis on the cosmetics industry in Taiwan and the competitiveness of global cosmetics companies such as P&G, L¡¦Oreal, Estee Lauder, and Shiseido. Selected companies will be analyzed for comparing their operational strategies. The findings will be further elaborated into the discussion of the current condition and demands in the local market of skin care product with whitening effect. The research suggested that the companies under study attempt to increase their competitiveness through product diversification and a focused operational strategy. Taiwan Salt for example started with specialized salt-related skin care products, and later on diversified the product lines to include collagen-related products. On the other hand, S-company capitalized on the unique demand for whitening products in the Asian market by orienting the product innovations with whitening and freckle-control effects. The company is faced with major threats of potential leak of production knowledge and counterfeit products. Due to the significant reduction of tariff, imported cosmetics from Europe and North America are increasing popular in the local market. Under the joint impact of decreased effectiveness of the traditional distribution channels, and change in consumer preference, brand diversification and distribution through multiple channels will be the future trends for survival. To succeed in the cosmetics industry, local companies must be dedicated to establishing new brands and promoting the brand recognition, and innovating new formula (i.e. skin care products with Chinese herbal medicine and natural herbal essences). In turn, to constitute a constructive persuasion for profitability in this industry, government would have to establish a GMP legislation system specialized for cosmetics manufacturing to improve the competitiveness of the local companies.