Following in part four the report will identify organizations and alliances, what impact they may have on the industry and on the competitive position of L'Oreal. Finally, I determine what strategic options are the most appreciate to this organization to ensure its success in the next five years.
The sales of cosmetics and toiletries is on the rise after it slowed down globally in 2004, the world market was valued at $253 billion in 2005. With a positive growth after sentimental recovery from SARS scares and the war in Iraq (GCI, 2006), with strong cosmetic sales in Latin America and Eastern Europe, peaking in Western Europe the largest market. According to indications there was a 4% growth in 2004, an according to the Global Cosmetic Industry Magazine the Euromonitor International forecast of a possible 20% can be obtained if current key trends are followed.
Dividing the world cosmetic market in two sections, the mature and the developing markets, it is possible to show where sales are peaking, and where there are still opportunity for expansion. The mature markets can this be seen as Western Europe, Asia Pacific, North America and Latin America as this are where the lion share of the market currently lies. Many of the consumers in this mature market demand more sophisticated products and due the amount of competition product prices needs to be reduced if a company wants to stay competitive. The one market in this section that shows promise are China and most of the high profile players are entering this new market, such as Este Lauder and P&G, with retailers including Sephora and Sa Sa, and direct sellers Avon, Alticor, Mary Kay and New Skin (GCI, 2006).
Developing markets can be seen as Venezuela, Vietnam, New Zealand, Australia, South Africa and Russia. In 2003 Vietnam showed a 19% growth in cosmetic sales even though demand are still concentrated in the urban areas, offering ample opportunity to expand. The South African market showed a healthy growth as consumers started to buy high margin multi-functional products. With more black South Africans entering the middle income group with the governments aggressive affirmative action policy,