L'Oreal's strategy in China

Résumé du document

Since its creation in 1909 by a young French chemist called Eugene Schueller, L'Oreal has become one of the most powerful companies in the cosmetic industry.

History

Eugene Schueller established L'Oreal in 1909. Two years earlier, Mr. Schueller had developed an innovative hair-dye called Aureole, which was successful with the Parisian hairdressers.
Subsequently, Mr. Schueller established L'Oreal to expand his business in hair products. Mr. Schueller expanded his product range to include shampoos, soaps and hair preparations. L'Oreal also expanded to other countries. As early as 1912, the products of L'Oreal were on sale in the Netherlands, Italy and Austria. In 1920, L'Oreal became the first company to advertise products on the French radio. During the 1920s, the company expanded its operations to the US, Russia, South America and Asia.
Following World War II, the demand for L'Oreal products grew, especially in the foreign markets. In 1953, the company issued a license to Cosmair to distribute its products in beauty salons in the US. By then, the company's product range included cosmetics and perfumes in addition to hair care products. Following Mr. Schueller's demise in 1957, the company shifted its focus from marketing hair care products to other beauty and personal care products. In 1965, L'Oreal acquired the French cosmetic house, Lancôme and thereafter, entered the pharmaceuticals business through the acquisition of Synthelabo in 1973.

Extraits

[...] In 1920, L'Oreal became the first company to advertise products on the French radio. During the 1920s, the company expanded its operations to the US, Russia, South America and Asia. Following World War II, the demand for L'Oreal products grew, especially in the foreign markets. In 1953, the company issued a license to Cosmair to distribute its products in beauty salons in the US. By then, the company's product range included cosmetics and perfumes in addition to hair care products. [...]

[...] L'Oreal acquired YSL Beaute, a cosmetics and fragrance division of the Gucci Group, in June 2008. The company acquired YSL Beaute from PPR, which develops a portfolio of high-growth global brands. In March 2009 the French association for the Development of Industrial and Corporate sponsorship, Admical, presented L'Oréal with its 26th Oscar for its contribution to society. The award reflects the full extent of L'Oreal's philanthropy program, which covers three key areas: scientific research, education and solidarity. The company celebrated its 100th anniversary in June 2009. [...]

[...] L'Oreal has to face competition by the group leader of the market, P&G. Indeed, P&G penetrated the Chinese market in 1988 in a joint venture with the company Hutchison Whampoa, enabling P&G to gain operational experience. This company succeeded in establishing a strong presence there by developing its production and distribution facilities, studying Chinese consumers and improving its management. As a result, P&G became number one in the Chinese market in 2007 in all the categories it operated, although L'Oreal became competitive holding a market share of in the Chinese cosmetics market. [...]

[...] This kind of brand is usually in the later stages of its life and should be removed from the market as soon as possible Question Marks: high growth, low market share) “Question Mark” brands have a low market share but good growth potential. You have two choices with this kind of brand; you divest or you prioritize. In order to make it the ‘star', the company should increase advertizing and promotional activities for this brand. For L'Oreal, Uemura” can be considered as a “Question Mark” in the Chinese market. In every market, there are some customers who often change the brands of their products in order to try out products of other brands. [...]

[...] This acquisition allowed L'Oreal to reach the second position in the Chinese skincare market. In 2004 the company also acquired Yue-Sai, a Chinese brand which used many Chinese ingredients, which had a manufacturing facility in Shanghai and which also allowed to strengthen L'Oreal's distribution network in the country. For the advertising campaign, L'Oreal chose to present that it understood Chinese tastes completely with Chinese stars as brand ambassador for introducing its products so as to improve the loyalty of consumers. [...]