Macroenvironment of Loreal Company - Essay Example

See the assignment criteria. (Essay too long) Contents Introduction 3 Discussion 3 Conclusion 9 References 10 Introduction L’Oreal is agiant French company in the cosmetics industry. It was established in 1907 by the entrepreneur Eugene Schueller. L’Oreal has a number of brands under the umbrella brand catering to different consumer groups ranging from low income groups to premium segments. The company has actively exported its assortment of beauty care products and cosmetics in different parts of the world. Later on, it started the global expansion processes to enter into different new potential markets. The company enters into the emerging markets and established markets with their differentiated range of products according to the need of the consumers in the market. Discussion a. A brief introduction to the company and its products (mass and premium) L’Oreal is ranked as the number one cosmetics company across the globe. It is the second largest beauty care manufacturer in the globe after Procter & Gamble. The company has a variety of products catering to the beauty care and personal care needs. These include skin care, hair care, sun care, premium cosmetics, mass cosmetics, bath and shower products, perfumes and deodorants, colour cosmetics, shower products, men’s grooming products and beauty kits. The major brands under the name of L’Oreal are Maybelline New York, Lancôme Paris, Garnier, Essie, Cacharel, Ralph Lauren fragrances, Helena Rubinstein, Diesel, Clarisonic, Biotherm, Yves Saint Laurent, Kiehl’s, and Shu Umerus and so on. The premium brands include Lancôme Paris, Kiehl’s, Yves Saint Laurent; Helena Rubenstein etc (L’Oreal Brands, 2013). The mass market brands of L’Oreal include Garnier and Maybelline. The Carson, Red Ken and Soft Sheen brands are included in the retail and salon products range. L’Oreal has a narrow concentration on the product ranges, which is in contrast with other major players such as Unilever and Procter & Gamble, which are more diversified in their product portfolios. L’Oreal is a leading company in the market of colour cosmetics, in which it holds more than 19% of market share. The company is also focused on skin and hair care products, involving the use of high end technology and innovations (Forbes Magazine, 2011, p. 3). (Source: Lundberg, 2006, p. 115). b. A comparison of host markets’ selection criteria Lancôme Paris is the premium cosmetics brand of L’Oreal, which is aimed to tap the niche customers focusing on the factor of luxury. Lancôme operates in different product ranges including skin care products, fragrances and colour cosmetics in its global operations. The global market share of Lancôme has remained constant at 4.5% in 2011–2012 (Euro monitor, 201, p.1). The cosmetics markets in Europe and the United States are developed. Therefore, entering these markets with premium products would be beneficial for the company. These markets are dominated by the desire of the customers towards high-end luxurious beauty products and fragrances. The consumers in the European market are known to have more affinity for premium beauty products, which makes the market a potential for L’Oreal to introduce its high-end brand Lancôme Paris (Daneshkhu, 2012, p. 15). The strong brand reputation of L’Oreal would help the company to penetrate the niche market in the cosmetics industry in Europe and the United States. The German market in Europe seems to be the most potential market in terms of volume and growth. The markets in the Asia-Pacific region are fast developing ones that have been major contributors to the skin care value growth from 2011 to date. The Asian market including China and India is a highly potential market where a wide range of beauty care brands can be easily absorbed. These markets have strong prospects of growth, and the large beauty and personal care manufacturers have been known to establish profitable businesses in these markets. Yet to cater to these markets, mass beauty product brands would be more useful (Dawar and Parker, 1999, pp. 81–95). Therefore for launching Garnier as a mass product, L’Oreal should effectively choose the developing markets in the Asian region, particularly the Chinese market. The markets in Asia, India and Latin America can be considered as the most dynamic ones that L’Oreal should consider for launching its mass market brands such as Garnier skin and hair care products (Solomon, 2002, p. 140). c. A comparison of host markets’ macro environment Lancôme in Europe and the United States: The United States and European markets can be effectively analysed for understanding their macro environmental factors that would affect the business of L’Oreal. This can be done by doing a PEST analysis of the cosmetics market in these countries. Political: The markets in Europe and America are favourable for the cosmetics companies to enter into. The cosmetics companies’ operations are regulated in the United States by the Food and Drug Administration (FDA). To enter these markets, L’Oreal must create the right products for a company and focus on the labelling, documentation, processes and use of materials to suit the regulatory policies in the specific countries (Strandakov, 2005, p. 214). These markets are dominated by international regulatory policies and trade practices. Economic: The markets in the United States and Europe are profitable markets with high growth rates. Russia and Germany are expected to be the most dynamic markets for the premium range of beauty and personal care products in the future. The beauty and personal care markets are effectively dominated by the innovation and competitiveness and are major contributors to the economies of these countries. Social: The social landscapes of these countries are characterised by the consumers’ increasing interest in and affinity for luxurious brands and cosmetic products (Deresky, 2001, p. 54). L’Oreal is renowned for its high innovations, which it should couple with the ability of the company to meet the local demands of the region. This would ensure that continued growth is achieved in these countries. Technological: The European cosmetics industry is a dominant cosmetics industry in which innovation plays a major role. The cosmetics markets in these countries are driven by investments in the research and development process resulting in major innovations (Hofstede, 2001, p. 60). The use of efficient technological equipment and laboratories are employed for effective innovation in the products of the cosmetic industry. A PEST analysis of the Asian market should be done to understand the macro environmental factors that may influence the introduction of mass market brands of L’Oreal, such as Garnier, in this market. Political: The political factors in the Asian markets are critical in deciding the success of a cosmetic brand in the region. The governments in these regions, especially the Chinese and Indian governments, have strict standards implemented in the cosmetics policies. These are to be followed by the cosmetics companies in their manufacturing and testing procedures. Relevant cosmetic laws imply that proper animal testing should be done for the cosmetics. L’Oreal should follow proper ethical policies and adhere to the regulations specific to different regions in Asia. Economic: The cosmetics market in the Asia Pacific region is growing at an accelerated rate, and these markets are forecasted to have a higher growth rate in the future. The Indian, Chinese, Korean and Japanese cosmetics markets are the industries with maximum potential. Therefore, L’Oreal can introduce its mass market brands, such as Garnier and Maybelline, effectively in these markets. Social: The Asian market can be considered as a dynamic market for growth of the company. These markets are the most expensive across the globe, which makes them attractive for foreign companies to enter into because of high profit margins (Gestland and Seyk, 2002, p. 102). To operate in these markets, however, the company has to adapt to the complex and unique multicultural landscape of these regions (Lundberg, 2006, p. 90). Technological: Technological innovations form the main supporting framework for product development in the cosmetics company (Aaketr, 1990, p. 117). Asian countries, especially China and India, are becoming more technology oriented (De Burca and Fletcher, 2004, p. 160). Therefore, it is critical to implement innovative factors in the products and invest heavily in technological research and development processes. d. A comparison of the 4Ps in the host markets Product: L’Oreal should offer the premium luxury brand products, such as Lancôme, in the developed European markets, e.g. the Russian and German markets (Nielsen, 2011, p. 34). In contrast, for penetrating the developing markets in Asia, the company should launch its mass market products such as the Garnier range. Price: Pricing should be done in the European market based on strategies of high pricing for premium products. The company should follow a product differentiation strategy in the developed markets to compete in the market. The pricing in the Asian countries should be on the lower end for the mass market products as the competition level is high and the consumer has many options. Therefore, the company will have to follow a cost leadership strategy in these markets. Place: The luxury brand in Europe should be sold through direct selling, flagship stores and distributors. In the Asian market, the products should be sold through retail outlets and salons for increased visibility. Promotion: The promotion for the luxury brand of Lancôme should be done on the basis of reaching the high end consumers. The advertising processes should include digital processes and high scale investment. The promotion in the developing markets would follow more world of mouth and media publicity and investments in the promotional activities would be low (Hedge, 2012, p. 114). Conclusion L’Oreal is renowned for its overseas expansion processes and continues to expand its operations in various countries across the world. L’Oreal is one of the largest players in the cosmetics industry and focuses extensively on increasing their market share and profitability by capturing a heterogeneous variety of markets all across the globe. The global expansion processes should be categorised effectively by proper market research to understand the feasibility of launching different products according to the market demands. From the analysis of host markets’ selection criteria, it can be concluded that the company can enjoy a premium product market in the developed countries such as USA and UK. The buying behaviour of most customers of cosmetic products in these two markets is characterised by luxurious and high-end beauty products. The Asia-Pacific market is also developing, where the company can penetrate through products of wide price ranges as the target customers in this market are from different income levels and have different buying behaviours and lifestyles. From the macro environment analysis of host markets it can be concluded that the political and economic scenario of developed markets such as USA and UK are favourable for their business whereas mainly the political scenario in developing countries such as India and China are less favourable for foreign player entrants in these market. Social factors highly favour the demand of their products as the luxurious lifestyle of people of developed markets is the key positive social factor for the company whereas a portion of developing markets such as Asia Pacific is still conservative and not much open to taste the high-end beauty products. Therefore, overall the company can perform well in all the selected markets by implementing effective marketing strategies as stated in the marketing mix. References Aaketr. D. A. 1990. Marketing research. New York: John Wiley. Daneshkhu, S. 2012. Glamorous and rich, LOreal goes shopping [Online]. 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Marketing across cultures in Asia: a practical guide. Copenhagen: business School press. Hedge, P. 2012. L’Oreal in China: marketing strategies for turning around Chinese luxury cosmetic brand Yuen Sai [Online]. Available at http://www.thecasecentre.org/educators/ordering/selecting/featuredcases/yuesai. [Accessed on 14 February 2014]. Hofstede, G. 2001. Culture’s consequences. New Jersey: Sage Publication. L’Oreal. L’Oreal brands. 2013 [Online]. Available at http://www.loreal.com/brands/brands--‐homepage.aspx. [Accessed on 14 February 2014]. Lundberg, J. 2006. The role of cultural differences: A L’Oreal Paris case study. [PDF]. Available at http://www.diva-portal.org/smash/get/diva2:207152/FULLTEXT01.pdf. [Accessed on 14 February 2014]. Nielsen, A. 2011. L’Oreal: Locally Adapting Elsevier’s Global Strategy. Available at http://loreal.esade.edu/download/loreal_case_b.pdf. [Accessed on 14 February 2014]. Solomon, M. 2002. Consumer behaviour. Harlow: Prentice Hall. Strandakov, J. 2005. International marketing. Harlow: Prentice Hall. Read More