Sunday, March 10, 2019
LÃ¢â¬â¢Oreal Case Study Essay
This report awaits at how did LOreal, a multinational corporation, managed its already portfolio as easily as its freshly acquired topical anesthetic patsy when entering on a new food merchandise place mainland China. LOreal, a french comp any founded in 1907, decided at the end of 2003 to acquire two local Chinese brands in ensnargon to enter the national mart Mininurse and Yu-sai. While this coming together seems to be a win-win deal, we will look at several issues LOreal was confronted with how did the brand managed its impertinently acquired brand, as good as what were the opportunities of growth for the corporation. Recommendations will also be given on how would we shake manage LOreals already alert truly diversified portfolio in this new market.2.Background to the CompanyFounded in 1907, LOreal is now managing a very diversified portfolio including augmentatives, skin and copper c are products as well as senior advanced school end air brands such(prenominal) as Ralph Lauren. This diversified portfolio reflects the brands strategy to be as important as possible on the market and convey every segment, in order to avoid competition as oftentimes as possible, reinforce their reputation world widely and convey done their various brands images several cultures. For instance, Ralph Lauren will convey a very American preppy sense of fashion, while Lancme will convey a very glamourous parisian image of cosmetics.Research&Development is a major enthronisation for the company, as it changes the company to found innovative product on various markets, as well as protecting its product from copying judgment its patents. Furthermore, innovation aimed at high end product is diff purposed to consumer products, which modify the brand to lower the total cost of R&D. The brand has nonionized its portfolio using a pyramid, classifying ever of its brands at one stage depending on the butted market.3.DevelopmentTo develop on the Chinese Market, LOreal acquired two local brands. China is potentially the largest market in the world, with increasing life standards, a ripening interest 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 main consumers groups, depending on criteria such as their location, their interest in cosmetics, their willingness to pay for foreign products(see exhibit 1).This evolution interest for fashion among Chinas inhabitants, the very large bite of potential customers as well as the increasing disposable income among Chinese people constitute opportunities for lOreal to expend on the local market.GroupLocationCharacteristics High-Income Earners. time-honored young to middle-aged.Large/medium size cities all around China.Willing to pay for high end luxury products imported from France, United States, Japan. Medium income earners. core aged to older women.Large/medium sized cities all around China.Preference fo r well set up nationalated brands. Migrant women labourers.Mainly aged 18-30Large/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 refer point of this case. Why did LOreal acquire those two brands?The main melodic phrase people could answer is that LOreal wanted, according to their global strategy, to occupy the market as much as possible. However, could LOreal be really bothered 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 avow. LOreal may have wanted this merging in order to custom the already existing facilities of both brands for its own products.For instance Mininurse, with its extensive distribution origin made of 280 000 corners and p oints of sale all across China, represents a already established and widely spread distribution channel for LOreal to launch any of their products. Furthermore, the knowledge Yu-sai developed regarding Chineses use of cosmetic would process the brand to adapt each of its product to the chinese market, which is very assorted 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 organism even higher among under twenty customers.This could help LOreal to ca-ca customer recognition for their own brands quite easily. We can see this merging is not only about just acquiring new brands to alter 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 market 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 distribution 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 likely 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 good idea as it enables LOral to skip a very long step companies normally to go through when entering a new market.However, following LOrals global branding strategy, LOral has got no interest in alivenessing Mininurse as the products are similar to Garniers products. In that way, I would indeed progressively interpose Minin urse with Garnier.Regarding Yue-sai, I think LOral should keep it liberation regarding the good financial results of the brands during the past few years (11% of the countrys total market share) as well as the very special brands identity. LOral can use the knowledge Yue-sai Kan has been generating for the past twenty years as well as the research facility opened in Pudon and apply the knowledge to its products on the chinese market. I do think LOreal should view 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 antithetic 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 out 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 horse operas 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 strain 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 burst 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 offering them the local aspect of the brand, and as said previously progressively substitute Mininurse to Gar nier to this market. victimization Mininurse to launch Garnier would enable LOral to use Mininurses high brand recognition among young people ( which is one of the characteristics of this market ), with a brand recognition rate of over 96%, and and then take new market shares.