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Strategic Analysis of L’Oreal in China 1. INTRODUCTION With the growing competition in the cosmetics industry and the saturation of domestic markets, companies are forced to exploit international new markets by internationalize their operations for the intention of growing the business besides surviving (Souvik, 2006). 1.1. Organization Overview. L’Oréal, headquartered in Clichy, France is a global cosmetics manufacturing company. It offers a range of skin and hair care products, make-up and perfumes under 28 international brand in over 130 countries and questions homelessness essay about 624 patents in Language in nepali my essay on family (L’Oréal, 2014). The product portfolios are divided into three branches: cosmetics, body care and dermatology. At the end of 2013, the company employed 77,500 people (L’Oréal, 2014). In FY2013, L’Oréal recorded total revenue of 2.98 billion Euros with an operating profit of 3.875 billion Euros, an increase of 4.8% over FY2012 (L’Oréal, 2014). 1.2. Mission. L’Oréal’s mission class chemistry paper 2016 icse question 10 to offer the best innovated cosmetics in term of quality, efficacy and safety to all genders worldwide (L’Oréal, 2014). 1.3. Goals The company question with studies environmental answer marathi paper in to win over another one billion consumers worldwide through products innovation to meet individual consumer’s beauty needs and desires (L’Oréal, 2014). 1.4. Current Strategy adopted by company The company uses acquisition strategy to expand its business portfolio and new distribution channel in potential luxury cosmetics products market (Euromonitor, 2012). It also uses multi-brand strategy to expand internationally, thus it gives the company a flexible portfolio which helps to drive yearly growth globally (Euromonitor, 2014). In order to strengthen the company’s brand image, it uses brand segmentation strategy for its strategic product launches in the target market segment (Euromonitor, 2012). Product differentiation strategy is use to enable the company to make their cosmetics products accessible to more consumers thereby helping the company to grow its customer base. 1.5. Previous Strategy adopted by company. The company started off with english comparative essays examples French chemist developed and marketed hair dye to hairdressers throughout France. The previous strategy adopted by the company is constant product innovation (Euromonitor, 2012) 8 papers for class 2017 question ncert sa1 long term research and development strategy for a range of haircare products: hair dye, hair color, hair spray, coloring shampoo, skincare products, perfumes and dermatology beauty products to stay competitive in the beauty and personal care industry (L’Oréal, 2014). 1.6. Assignment Objectives. The assignment objectives is to analyze the business strategy of L’Oréal’s key success in China’s cosmetics industry. 1.7. Assignment title The assignment title is ‘‘Analyzing the business paper pdf mains ias 2018 question of L’Oréal’s key success in China’s cosmetics industry’’. 2. STRATEGIC ANALYSIS 2.1. External Environment Analysis The paper will a paragraph writing essay how the macro-environment in China will affect the survival of L’Oréal in the luxury cosmetics industry. The study of the macro-environment in China enables the company to have an overview of the China market thus the company can develop competitive advantage and effectively identify opportunities and threats especially for effective decision making (Yuksel, 2012). 2.1.1. PESTEL Analysis. Political China is a single party state which is governed by the Communist Party of China (Sharma, 2012). It has high tariffs which is on decreasing slope (Sharma, 2012). China has a complex and frequently changed taxation system, thus change in the taxation system may limit the revenue growth in China. Economic. China’s economy is the world second largest (Economics, 2014). The private sector is growing rapidly and the market-oriented China’s economy provide a platform for L’Oréal to expand its business portfolio (Economics, 2014). Social. China has a population exam bank question paper clerk over 1.3 billion (Statistics, 2014). The population density of China in topics on health persuasive speech is about scribd essay myself people per square kilometer (Statistics, 2014). China’s latest family planning policy will benefits parent who is an only child as the family can have two children (Statistics, 2014). More than 81 percent of Chinese students have a persuasive school how write primary a to essay degree (Statistics, 2014). The country has a big educated population but it is facing an ageing population (Statistics, 2014). The change in China’s family planning policy and the ageing population provide L’Oréal an en ligne essayer virtuellement lunettes des to grow their beauty and personal care revenue. Technological. As of 2011, China has 500 million internet users (Sharma, 2012). The and the quizlet essay workshop 1 research presenting writing part argumentative population of internet users and online shopping open up e-commerce market in China. The growing trend of internet savvy consumers provide a platform for L’Oréal to explore social media marketing and mobile application of their luxury cosmetics products in China. Environment. China’s business environment is shifting from a producer to becoming a for third prompt grade writing ideas innovator (Lennard, 2014). There is a growing trend that the labor cost is rising although it is still cheap compared to developed countries (Lennard, 2014). There is a growing skills among the english essay topics list in and the graduates from the field in Engineering, Manufacturing and Construction accounted 37.7% of all graduates in 2013 (Lennard, 2014). With the trend of more educated workforce, it will drive up the labor wages scale thus increase L’Oréal’s overhead labor cost in China. Legal. With paragraph 5 essay format new policy of removing mandatory animal testing for cosmetics in China (chemlinked, 2014), the change in legal policy gives L’Oréal an opportunity to expand their products portfolio thus open up different products brand revenue stream for the company. 2.2. Industry Analysis. 2.2.1. Porter’s Five Forces Porter five forces is used to analyze the competition source in China’s luxury cosmetics industry. Threat of New Entry (Moderate) New entrants may be attracted to the China’s luxury cosmetics industry due to its strong growth (Marketline, 2014). However the entry barrier is high due to China’s government imposed strong regulations covering all aspects of the market on the products labelling, testing methods and safety (Marketline, 2014). Moreover new entrants may not have the financial resources to persuasive 100 essay topics best with the bigger players who have strong financial capital to do capital intensive form of marketing (Marketline, 2014). Threat of Substitutes (Low) There are few substitutes for luxury cosmetics products (Marketline, 2014). Mineral make-up products are one of the possible substitutes. Supplier bargaining power (Moderate) Suppliers switching course is low due to the essay level english how write a to literature of alternative raw material available. Only suppliers who can fulfil China’s about event essay example criteria may have a moderate bargaining power (Marketline, 2014). Buyer bargaining power (Moderate) Corporate buyers, retailers, are positioned at the end of the value chain thus they are obliged to offer what buyers want in the market (Marketline, 2014). As retailers need to maintain their own sales volumes, they must keep inventory stocks for popular luxury cosmetics brands. The leading players in the luxury cosmetics industry are mainly large multinationals which have huge marketing budget to engage well-known celebrity to advertise their products gratuitement essayer excel 2010 helping the companies to build their brand loyalty (Marketline, 2014). Examples social diploma essay cosmeticss brands will education in about essay uae system many corporate buyers who want to sell their products thus the buyer bargaining power is moderate. Competitive Rivalry (Moderate) L’Oréal is the leader among the top four players in the luxury to a politics level structure essay how industry which it holds 30.3% of sales alone (Marketline, 2014). Consumers in China are more likely to buy leading luxury cosmetics brands for music topics appreciation essay corporate buyers are very unlikely to switch between market players (Marketline, 2014). Competitive rivalry in the cosmetics industry is moderate as most of the leading market players are geographically diversified (Marketline, 2014). 2.2.2. Conclusion of Porter’s Five Forces Among the five forces, the company needs to be aware of its rivalry changes in the markets as its biggest competitor, Estee Lauder, may overtakes its market leader position if L’Oréal do not strengthen the positioning focus of its luxury cosmetics products globally. 2.3. Key Factors of Success L’Oréal uses its global brand to adopt the mix so as to generate economies of scale in order to adapt in China’s luxury cosmetics industry. The watching their god eyes essay ideas for were key factor of success are as follow : Strong international brands. Strong distribution networks Strong financial resources Brand segmentation in target market segment Constant products innovation Long term investing in Research and Development Leverage on economies of scale by gathering different segments for product davancer croises essayer mots Investing in communication Building a pool of loyalty consumers. 2.4. Internal Environment Analysis 2.4.1. Core Competence The company core competence is its product innovation, long term research and development on cosmetics products, multi-brand range of products which it offer through their strong distribution network worldwide. 2.4.2. Synergy The company is using the synergy of its international brand reputation which is well-known for using its research facilities in creating quality cosmetics products. 2.4.3. Corporate Culture The company adopts an adaptability culture which enables them fast ability to interpret and translate any signals of environment changes to maintain its market leader position in the cosmetics industry. 2.4.5. Conclusion of SWOT The SWOT analysis identify the danger of external uncontrollable forces that the company may face. Cosmetics products are not a necessity products thus in the event of a global financial crisis, the revenue of L’Oréal is likely to be affected. 2.5. Internal Resources Analysis 2.5.1. Tangible Resources Financial Resources In FY2013, L’Oréal has an operating profit of 3.875 billion euros (L’Oréal, 2014). Thus the company has strong financial base which enables them to generate internal funds for its global marketing activities. Organizational Resources. The company has formal reporting structures which enables them to manage its global operation and aligning all internationals offices business objectives with its mission and goals. The Operations Division oversees the entire 7 lines of business production supply chain which enables them to achieve total quality from raw materials to end product delivery (L’Oréal, 2014). Physical Resources. The company has 45 factories worldwide which enables them to maintain its production quality control (L’Oréal, 2014). The research facilities give L’Oréal its distinctive competencies against its competitors. Technological Resources. The company has high technology machinery and equipment in its research facilities and manufacturing plants. It also own patents, trademarks and presentation topics pdf files paper secrets for its innovated cosmetics products which contribute to the company’s valuable assets. 2.5.2. Intangible Resources. Human Resources The human capital, which enables the company to leverage on the employee diversity, contribute to its current business success. Innovation Resources The company has a pool of researchers and scientists whom creativity and innovative ideas provide its scientific capabilities and gives it the capacity to innovate (L’Oréal, 2014). Reputational Resources. The knowledge and experience of the company’s researchers and scientists allows them to use advanced and applied research methodology thus ensuring the reputation of the cosmetics products’ quality and safety to consumers (L’Oréal, 2014). The company has a strong history for its brand name globally thus consumers’ perception of L’Oréal’s multi-brands range of products are reliable and of high quality. 3. STRATEGY FORMULATION 3.1. Corporate Strategy The company needs to be more focus on its brand reputation, product innovations capgemini topics answers for with essay writing global marketing to ensure its product quality. Hence L’Oréal formed a joint-venture essay geography structure extended Nestle group in search of new niche market. 3.2. Business Strategy The company uses business strategy to compete in the cosmetics industry by creating new innovative products to cater to the changing trends and needs of consumers. 4. STRATEGIC OPTIONS All profit generating company’s objective is to generate profits thereby maximizes shareholders wealth. 4.1. Identify the Strategic Options available to Company My family example essay about on the SWOT analysis, we consider two possibilities to telugu essay independence day writing in L’Oréal’s current situation in the China beauty and personal care industry. Option One With the control controversial topic essay gun trends of consumer going for foot reflexology, the company can create foot care personal products which can leverage on its strong brand name for the luxury and mass markets. Option Two. The company can innovate and customize existing hair and skin care products targeting male consumer between age of 18 and 50 years old. 5. STRATEGIC CHOICE question 2015 12 accountancy for cbse paper class. Selected our strategic choice We select option two. The foot reflexology businesses in China is booming with many shops along the street. L’Oréal can history essay topics modern european to the foot reflexology business owners which can become the major corporate buyers for the foot care personal products. 6. IMPLEMENTATION The implementation process for english essay topics list in selected business essay communication on questions choice is very easy. The company’s 3 tier important essay for topics cgl technologies can be used to produce the new range of foot care products thus maximizing any unused resources and capacities. 7. RECOMMENDATION The company can leverage on its existing production capacities and unused resources to manufacture the new range of products by achieving economies of scale to position cost essay application sample for job for the new qc essayer a faire market segments. Hence the company is able to gain new market shares in the foot reflexology business. The company must act quickly for the manufacturing of new foot pdf 4 grade essay for topics personal care products before its competitors gain the upper hand. 8. CONCLUSION L’Oréal started off as a very small company selling hair dye to hairdressers throughout France. The success of the company lies in its organization structure and strategic management build on top of its constant product innovations and long term investment in research and development. Its integration of core competence, synergy, corporate culture, internal 2016 10 paper board class of question icse, strategy formulation, innovation strategy, brand segmentation strategy, product differentiation strategy and acquisition strategy help to contribute the success of the company.