L’Oreal Case Study Essay

This report looks at how did LOreal, a multinational corporation, managed its already portfolio as well as its newly acquired local tick off when entering on a new market mainland China. LOreal, a french company founded in 1907, decided at the overthrow of 2003 to acquire two local chinese brands in order to enter the national market Mininurse and Yu-sai. While this merging seems to be a win-win deal, we will look at some(prenominal) issues LOreal was confronted with how did the brand managed its newly acquired brand, as well as what were the opportunities of growth for the corporation. Recommendations will also be given on how would we have manage LOreals already existing precise diversified portfolio in this new market.2.Background to the CompanyFounded in 1907, LOreal is now managing a very diversified portfolio including cosmetics, fur and hair c are products as well as high end fashion brands such as Ralph Lauren. This diversified portfolio reflects the brands strategy t o be as important as possible on the market and occupy every segment, in order to avoid competition as much as possible, reinforce their reputation world widely and convey through their polar brands images several cultures. For instance, Ralph Lauren will convey a very american preppy sense of fashion, enchantment Lancme will convey a very glamorous parisian image of cosmetics.Research&Development is a major investment for the company, as it enables the company to introduction innovative product on variant markets, as well as protecting its product from copying thought its patents. Furthermore, innovation aimed at high end product is diff dropd to consumer products, which enable the brand to baseer the total cost of R&D. The brand has organised its portfolio using a pyramid, classifying ever of its brands at oneness stage depending on the targeted market.3.DevelopmentTo develop on the Chinese Market, LOreal acquired two local brands. China is capabilityly the largest market i n the world, with increasing life standards, a growing post for fashion and a new group of people forming a middle class willing to pay for cosmetic products. Chinese market can be divided into three chief(prenominal) consumers groups, depending on criteria such as their location, their interest in cosmetics, their willingness to pay for foreign products(see exhibit 1).This growing interest for fashion among Chinas inhabitants, the very large number of potential nodes as well as the increasing disposable income among chinese people invent opportunities for lOreal to expend on the local market.GroupLocationCharacteristics High-Income Earners.Aged unfledged to middle-aged.Large/medium sized cities all around China.Willing to pay for high end luxury products trade from France, United States, Japan. Medium income earners.Middle aged to older women.Large/medium sized cities all around China.Preference for well established domestic brands. Migrant women labourers. in the main aged 1 8-30Large/medium sized cities all around China.Do have disposable incomes. Poor knowledge of cosmetics, their purchases are price-driven. Very large and yet untapped customer base.4.DiscussionHow would you see LOreal manage the chinese brand without their chinese founders?This question leads to a key point of this case. Why did LOreal acquire those two brands?The main argument people could answer is that LOreal cute, according to their global strategy, to occupy the market as much as possible. However, could LOreal be really fazed by those two competitors?Indeed, at one point, the Case states that the total revenues of domestic brands were less important than LOreal on his own. LOreal may have wanted this merging in order to employ the already existing facilities of both brands for its own products.For instance Mininurse, with its extensive distribution channel made of 280 000 corners and points of sale all across China, represents a already established and widely spread distribu tion channel for LOreal to launch any of their products. Furthermore, the knowledge Yu-sai developed regarding Chineses use of cosmetic would avail the brand to adapt each of its product to the chinese market, which is very different from the western market. Both brands have very high consumers recognition, with for instance Mininurse having a 90% recognition rate among chinese customers, this recognition rate being even higher among under twenty customers.This could help LOreal to gain customer recognition for their own brands quite easily. We can see this merging is not only about just acquiring new brands to saturate the market, but it is about using two well established brands to launch the companys products, avoiding constraints such as establishing a distribution channel, use of marketing to increase brand recognition.Therefore, what I think LOreal will do, is use Mininurse to launch their mass market product Garnier using Mininurses high brand recognition and massive distrib ution network. The brand will use their knowledge and technology to improve Mininurses products at a low cost. Progressively, LOreal will probably change Mininurse into Garnier.This would enable LOreal to use Mininurses high brand recognition and target consumers would are more believably to pay for local brands, such as the untapped labourer migrant women market. (see exhibit 1 for an overview of the chinese market).How would you manage LOreals Portfolio in China with the newly acquired brands?I think using Mininurses distribution channel for its own products is a really skilful idea as it enables LOral to skip a very long step companies usually to go through when entering a new market.However, pursuit LOrals global branding strategy, LOral has got no interest in keeping Mininurse as the products are similar to Garniers products. In that way, I would indeed progressively substitute Mininurse with Garnier.Regarding Yue-sai, I think LOral should keep it going regarding the good fi nancial results of the brands during the past few years (11% of the countrys total market share) as well as the very particular brands identity. LOral can use the knowledge Yue-sai Kan has been generating for the past twenty years as well as the research facility open up in Pudon and apply the knowledge to its products on the chinese market. I do think LOreal should reconsider their decision to exclude Yue-sai Kan from the company.LOreal could use her as a marketing figure, as she seems to be very important in the chinese cosmetic market regarding the fact that she is the person that popularised cosmetics thought her different books, TV shows. As stated in the Case, Yue-Sais product were created only for chinese woman. Regarding the high number of chinese people all around the world, LOreal could start exporting this local brand using the brands very local chinese identity. This could reflect LOreal strategy to convey different cultures through its diversified portfolio.LOral needs to keep in mind that Chinese market is very different from the Westerns market. The market is different by the consumers needs, with for instance chinese women using as much as 18 cosmetics products daily, as well as by the consumers products, with for instance beauty criteria being totally different than in western countries.How would you see LOral continue to grow in China?I think LOral in China should mainly focus on the domestic market, as it is the market with the more potential customers. A quick look at exhibit 1 shows us that a large part of the chinese market is yet untapped. This market, made of young labourers migrating to big cities, has got disposable income but is mainly price-driven and prefer local brands. LOral could easily use Mininurse to target this market by crack them the local aspect of the brand, and as said previously progressively substitute Mininurse to Garnier to this market. Using Mininurse to launch Garnier would enable LOral to use Mininurses high br and recognition among young people ( which is one of the characteristics of this market ), with a brand recognition rate of over 96%, and then sate new market shares.