L’Oreal and the Cosmetic Industry Essay Example

Brazil, China, India, and Russia witnessed a significant rise in their sales. The sales grew by 7.3% in the first year and escalated further to an impressive 8.7% surge in the following year.

It appears that certain markets have hit their growth ceiling. The Western European market saw a minimal rise of 1.8% in 2004, whereas the Japanese market actually declined by 1%. Moreover, Europe witnessed an unexpected drop in consumer expenditure.

Despite a decline in sales during 2004, Germany and Japan are still considered mature markets as their economic climates remain unfavorable. In Germany, the high unemployment rate has prompted customers to be more price-conscious, resulting in the emergence of private label products and discount stores. The cosmetics industry is segmented into categories which include hair care, skin care, make-up, fragrances and perfumes, oral care, deodorants,sun care,baby care,and men's toiletries. Hair care dominates the market with a share of 22% and continues to introduce innovative products such as shampoos, conditioners,colorants,mousses,and styling products.

Although the men's personal care market makes up only 4% of the industry, it is experiencing notable growth and demand. This is due to a rise in global life expectancy and an increasing population of older individuals who remain concerned with their appearance. As a result, spending on personal appearance has been increasing. Furthermore, younger generations have also shown more interest in cosmetic products, further expanding this potential market. However, this growth has led to a highly competitive environment within the cosmetics industry.

The cosmetics industry has several main competitors, including L’Oreal (FR), Procter ; Gamble (US), Unilever (NED), Johnson ; Johnson (US), Shiseido (JAP), Avon (US), Schwarzkop ; Henkel (GER), Schering-Plough (US), Beiersdorf AG (GER),

and Colgate-Palmolive. L’Oreal currently dominates the market with 52% of cosmetics sales in Europe, 28% in North-America, and 19% in other regions. The key focus for competition is on innovation, which involves developing new products through laboratory research and effective communication and advertising strategies. With thousands of new cosmetic products introduced every year, staying ahead requires a commitment to ongoing innovation.

The cosmetics industry heavily relies on reinventing, creativity, and innovation to achieve product success, especially during a shakeout cycle. The constant need for innovation is due to the short life cycle of products, with around one thousand new launches each year. Despite its global presence, companies create region-specific products according to customer requirements. The second section of this report will analyze the factors driving change and future growth in the cosmetics industry.

By examining the impact of Economic, Political, Informational, Social, Technological, Legal and Environmental factors on an industry, an EPISTLE analysis can identify key strategic issues. This considers urgency, probability of occurrence and differential impact. For the cosmetics industry in the next five years, prioritizing research and development capabilities is crucial. Thus, companies must make significant investments in research and development activities while maintaining a strong commitment to them.

In order to stay ahead in highly competitive markets, companies must invest heavily in establishing new plants and laboratories while continuously innovating superior products. It is also crucial to enhance E-Commerce capabilities as this will determine the future of the consumer products sector. Developing robust technology infrastructure and IT systems can facilitate a more efficient purchase program, which is vital given the rapid pace at which online shopping is becoming increasingly popular.

Utilizing new technologies can assist companies

in reducing their prices and promoting products through additional communication channels such as SMS messaging and online versions. Implementing self-service digital kiosks in stores also allows customers to access information, including product descriptions and usage instructions.

Boots, an English retailer, is a pioneer in implementing an in-store system to meet the growing demand for cosmetics. Lifestyle changes and daily use have contributed to the increase in demand for these products. Men's personal care items are a significant driver of growth in this market segment, which has steadily expanded over the past ten years and is projected to reach $122 million by 2003 from slightly less than $100 million in 1996.

There is a developing tendency for men to buy their own cosmetics in the cosmetic industry. This trend is anticipated to continue growing and will primarily involve demographic changes as older individuals increase in mature markets such as Western Europe, North America, and Japan. Companies must adjust to these changes and address an aging consumer market.

Both older individuals who value their appearance and young populations in the "rest of the world" region, characterized by a high birth rate and large percentage of teenagers, can be advantageous to companies. Even in mature markets, cosmetics and toiletries are gaining popularity among children and teenagers thanks to greater access to disposable income from pocket money, parental funds, and personal earnings.

Improving communication and information technology capabilities will be vital for the cosmetics industry in the coming years. Several companies have already begun developing customized websites with product launches and usage tips. By offering websites in multiple languages, companies can meet diverse needs and reach a broader audience. To innovate, building new

manufacturing plants is essential over the next five years, including constructing facilities in countries where labor costs are low.

Empowering local staff with business responsibilities enables closer proximity to emerging market consumers, allowing companies' affiliates to adjust their product offerings and marketing strategies to better correspond with local demand. Advancements in technology and communication facilitate this shift. An integral component of successful innovation at L'Oreal lies in the ability to innovate and introduce new or improved products.

Adapting to changing consumer needs and sustaining popularity requires innovation in a market with numerous outlets. In the cosmetics industry, the product life cycle is short, necessitating constant innovation. To meet these demands, L’Oreal has developed a vast and successful research and development system. With almost 3,000 individuals, 13 research centres, and 13 evaluation centres worldwide, they continuously devise roughly 4,000 new formulas for their main cosmetics lines. Quality and safety are critical factors for success and should not be overlooked.

L’Oreal focuses on delivering top-notch quality to satisfy the cautious cosmetic consumers. The company strives to meet ever-rising standards annually while complying with industry norms and regulations set by a governing body that mandates rigorous certifications and high standards for product compliance.

L'Oreal has effectively adjusted its product advancements to fulfill customer desires and comply with regulations, while also preserving a robust brand identity and standing in the beauty sector. Additionally, the company's substantial expenditure on advertising and promotions adds to its ongoing prosperity.

It is crucial to comprehend the levels of quality and safety for consumers, as it impacts pricing. L'Oreal's financial strength, skilled personnel access, and established brand image are due to their market leader status. Core competencies

refer to distinct abilities and technologies that offer businesses a competitive advantage over rivals. L'Oreal classifies its products into four groups: Professional, Consumer, Luxury, and Active Cosmetics.

L'Oreal has four main sectors, including make-up, hair care, skin care, and fragrances. An evaluation of L'Oreal's performance relative to other companies in each of these areas will be conducted in the following sections. Procter & Gamble, Unilever, Johnson & Johnson, Henkel, and Revlon serve as the primary competitors in the European market. The product categories are divided into hair care, skin care, fragrances, make-up, deodorants,and oral care.

We will identify the core competencies that determine the success of L'Oreal, divided into its various divisions. The Professional Division includes L'Oreal, Henkel, P&G Hair care, L'Oreal professional, Schwarzkopf, Wella Kerastase, Igora, Maxfactor Redkin, Osis, and Matrix Skin care. The successful core competencies in this division are quality and safety, as these concern products that are delivered in beauty salons, and innovation. The Consumer Division includes Hair care, Skin care, and Make-up from L'Oreal, L'Oreal Paris, Maybelline, Garnier, P Head & Shoulders, Olay, Maxfactor Pantene, Wella Unilever Dove, Vaseline Sunsilk, Lux Lux, Ponds Henkel Toft Fa Gliss Diadermine Schauma Aok Fa Revlon Colorsik Almay Revlon High Dimension Gatineau Ultima II J & J Clean & Clear Neutrogena Roc. The main successful competencies in this division are market leadership, brand name and image, quality and safety, and innovation. Lastly, the Luxury Division includes Skin care, Make-up, and Fragrances from L'Oreal, Lancome, Biotherm and H.

Within this Division, prestigious brands such as H. Rubinstein, Kiehl's, Giorgio Armani, Ralph Lauren, Cacharel, P;G, SK II, Hugo Boss, De Wrinckle, Lacoste, RevlonRevlon Beauty, Charlie, Henkel, Scorpio, Sergio Tachini,

La Perla, and Unilever can establish a powerful brand image, ensuring quality and safety. The Active Cosmetics Division focuses on skin care products such as L'Oreal, Vichy, La Roche Posay, Inneov, J&JNeutrogena and Roc Aveeno. This Division requires high levels of innovation and quality to successfully sell products through dermatological and pharmaceutical stores. L'Oreal dominates all four Divisions and is the leading brand in the Consumer Division with a high standard image that rivals other major organizations.

L'Oreal's reputation is highly influential in consumer decision-making, yet the company has also established thriving brands like Maybelline that don't lean on the L'Oreal name. A robust brand image is essential in the luxury sector for all rivals.

Despite facing strong competition through advertising and promotion, L'Oreal maintains its leadership position. The Active Division appears to be the most competitive, with rivals like J & J which has a strong background in pharmacy, biology and medicine. While the analysis of L'Oreal's core competencies is helpful, it may not be sufficient to determine the company's exact position and potential growth in each division.

To gain a broader understanding of L'Oreal's brand positioning, it is recommended to incorporate a strategy clock matrix analysis that considers three dimensions. L'Oreal utilizes a differentiation strategy to achieve corporate advantage, with a wide competitive scope and a competitive advantage based on value. This is largely due to the company's strong branding and image. Additionally, L'Oreal employs a focused differentiation strategy, with a narrow competitive scope and a value-based competitive advantage.

L'Oreal's brand differentiation is its main focus, which gives the company a strong position in the industry. L'Oreal stands out as the only company with an extensive

product portfolio of almost 500 brands and 2,000 unique products, coupled with a premium brand image that highlights quality, safety and innovation. This positions L'Oreal as a leader in the industry, and currently, Procter & Gamble is the only company that can compete with L'Oreal in terms of sales volume.

Procter ; Gamble is poised to become the market leader in 2005 or 2006 after acquiring Gillette, a company that specializes in deodorant and depilatory products for both men and women. This move might prompt L'Oreal to respond, and there are several paths to growth available in the cosmetics industry for L'Oreal. One such path is continuing to develop products in its area of expertise.

Over the last 5 years, a strategy was set up. The preferred method is likely to boost its position in the Active cosmetics Division by creating novel products linked to the higher-end skincare category, utilizing existing brands such as Vichy, La Roche Posay or Inneov. This group will see an increase in sales potential over the next few years due to demographic changes and the emergence of an aging population who value their health and prefer ethical cosmetic products. Within the luxury division, L’Oreal has the chance to raise sales of fragrances from brands like Ralph Lauren, Giorgio Armani or Cacharel due to teenagers' growing purchasing power.

From a global perspective, L'Oreal must continue to explore new territories in emerging countries to maintain a strong market share. Although exploring new segments is a possibility, it is limited. A potential solution is to enter the deodorant market with a high-quality product and directly compete with its main opponent brand Gillette. L'Oreal has

many options available to secure its position as the market leader in this expanding industry, ensuring future success. The company's suitability for this venture is outstanding.

L'Oreal is a company that generates impressive profits, and it easily resolves the issues of feasibility, suitability, and acceptability. Over recent years, it has significantly improved its research and development potential, which is imperative for its future growth. The organizational structure of L'Oreal is transparent and firmly established. Moreover, its profitability is remarkable, as it earns only three times less net profit compared to a company called P while having five times fewer employees.

Books referenced include:

• R. Lynch, 2003, “Corporate Strategy”, 3rd edition, FT Prenctice Hall
• Johnson and Scholes, 2005, “Exploring Corporate Strategy”, 6th edition, Prenctice Hall
• C. Bowman and D. Faulkner, 1996, “Competitive and Corporate Strategy”, Irwin

Journal article referenced:

• J. Mickael Webber, J. C.

The following articles are referenced: de Villebonne, 2002, “Differences in purchase behavior between France and USA”, Journal of fashion marketing and management, vol. 6, issue 4, pp. 396-407; Carrigan, Szmigin, Wright, 2004, “ Shopping for a better world ?An interpretive Study of the potential for ethical consumption within the older market”, Journal of consumer marketing, vol. 21, issue 6, pp. 401-417; unknown author, 2005, “Risky business of new products: but can companies afford not to try? ”, Strategic Direction, vol. 21, issue 2, pp.

Internet sites related to marketing and business include www.marketingteacher.com and www.lhfm.salford from which valuable information can be obtained.

The following websites can be found within the given : ac. uk, http://freespace. virgin. net/p. chippindale and www.The website URLs for Keynote, Mintel, and CO.UK are

grouped together in a paragraph with .

Here is a list of annual reports from various companies on Carol.com:

• L’Oreal annual report 2004
• L’Oreal-finance annual report 2004
• Procter ; Gamble annual report 2004
• Unilever annual report 2004
• Johnson ; Johnson annual report 2003
• Henkel annual report 2004
• Revlon annual report 2004