The company L'Oreal describes the story of a French family business which has become the world's number one cosmetics manufacturer. It is a multinational, which continues to remain the market leader by investing in research and development to offer innovative products and recovers its investment through the introduction of new products on the market. L'Oreal uses modern marketing techniques, which it uses to diversify its products, to make profits and increase its market share.
Problem Statement
In the market of cosmetics and toiletries, L'Oreal has to decide whether to introduce the Synergie skin care line and Belle Couleur permanent hair colorants. Both products had successfully been introduced in France. The real question for L'Oreal is whether or not to introduce one new product line or two new product lines. Regardless of the decision taken, the introduction of the new product(s) should not affect the sales, and market share of the current product lines of L'Oreal.
Performance analysis
In 1992, the L'Oreal Group was the largest cosmetics manufacturer in the world. Its sales, in 1992, were $6.8 billion and net profits were 417 million dollars. France, in which L'Oreal is headquartered (Paris), contributed 24 percent of total worldwide sales. Due to the belief that innovation was a critical success factor, L'Oreal invested heavily in research and development. The company recovered its investment through global introduction of its new products. L'Oreal aims to introduce one or two new products each year as brand life cycles for cosmetics could be very short.
[...] has to decide whether to introduce the Synergie skin care line and Belle Couleur permanent hair colorants. Both products had successfully been introduced in France. The real question for L'Oreal is whether to introduce one new product line or two new product lines. Regardless which decision is made, the introduction of the new product(s) should not affect the sales, and market share, of the current product lines of L'Oreal. We have done external-, internal- and SWOT analyses, with that as a basis, we have made the strategic options. [...]
[...] In France Garnier was a complete separate division, and its sales force competed against the L'Oreal division. In the Netherlands, Garnier and L'Oreal products were marketed by the same sales force. Customer perspective Dutch consumers have little, if any, awareness or knowledge of Garnier and have not formed a brand image yet. Therefore it is very important that new Garnier products launched in the Netherlands have a strong concept and high market potential. To accomplish this the products need to offer unique, desired, and identifiable differential advantages to Dutch consumers, otherwise the products would be likely not only to fail but also to create a negative association with the Garnier name. [...]
[...] For both markets, we can then notice that drugstores and supermarkets are becoming more and more important. Another evolution which is essential to mention here is the increasing power of retailers, especially because of their increasing size; we can say now that they control the channels of distribution. Before introducing a new product on their shelves, they evaluate it on several different points. In this way, we can say that they are a real barrier to the market access. Key Success Factors We can distinguish two main KSFs in both Dutch skin care and hair colouring markets. [...]
[...] The entrance fee is relatively important because it is necessary to have the skill and method, but also meet the standards of health in Europe. Moreover, Dutch women are reluctant to change products, reputation and brand image is important. The threat is low The intensity of industry rivalry The skin care market is particularly competitive in terms of new brands (need to invest in advertising) for brands already on the market, competitiveness is too harsh, since the rule of thumb is that the percentage of market share equals the percentage of advertising expenditures on the total expenditure of the industry. [...]
[...] Nowadays, innovative products or new products can be easily imitated, and retailers can improve and introduce their new label in 4 months; the manufacturers propose and establish an advertising campaign of the product in 6 months. It is therefore necessary that the brands file their patents, to avoid being overtaken by competitors. Hair Colouring Market The table above the SWOT analysis describes the Major Brand of Hair Colorant. We observe in this market, two different segments: the upper-end and the lower-priced, but unlike the brands of skin care market, no brand of hair coloring market has a clear and defined positioning advertising, reflecting a weakness in this market, because a new entrant with a good positioning can easily attract the consumer. [...]
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