Strategic Review of LOreal External Environment

Strategic Review of LOreal foreign EnvironmentThis essay offshootly introduce LOreal and their main operations in young years, and then emphasize to outline their international environment, such as P.E.S.T analysis, quint forces analysis, sector train analysis and product life cycles analysis. And in the end analysis the opportunities and threats which the community faces everywhere next 3-5 years2. political party and Product OverviewThe LOREAL Group is the innovations greatst decoratives and sweetheart company and it headquartered in the Paris subur throw out bea of Clichy, France. LOREAL has developed activities in the field of cosmetics, concentrating on hair color, skin c are, cheerfulness protection, make-up, perfumes and hair care. LOREAL is active in the dermatological and pharmaceutical fields. LOREAL is too the merry-go-round nanotechnology patent-holder in the United States.http//en.wikipedia.org/wiki/L%E2%80%99OrealIt operates in over one and only( a) hundred thirty countries. It trades 18 brands through both divisions, cosmetics and dermatology. The cosmetics division of LOREAL has four segments professional products, consumer products, luxuriousness products and active cosmetics. The dermatology segment includes dermatological and pharmaceutical activities of the company.LOREAL got its start in the hair-color business, exactly the company soon branched out into other cleansing and beauty products. LOREAL now markets over 500 brands and many thousands of individual products in tout ensemble sectors of the beauty business hair color, permanents, styling aids, body and skin care, cleansers and fragrances. They are open in all distribution channels, from hair salons and perfumeries to hyper and supermarkets, health/beauty outlets, pharmacies and orchestrate mail.(http//en.wikipedia.org/wiki/L%27Oreal)3. External environmental analysis3.1 P.E.S.T depth psychologyPEST analysis stands for Political, stinting, Social, and Te chnological analysis and describes a framework of macro-environmental factors used in the environmental s provokening component of strategic management.3.1.1 Political and Legal withdrawsThe political challenge is that LOreal should conform to all the different government leadership styles in miscellaneous countries it operates within. LOreal set about a decline in the dermatology branch led by its Galderma brand due to unfermented legislations governing drugs (Euromonitor, 2005). The EU law presumes LOreal. LOreal is qualified in their use of certain kinds of chemicals, such as Phthalates which is carcinogenic (The Rules administration Cosmetic Products in the European Union). LOreal is obligated to produce safe products that do not study any harmful substances. Also, legislation for advertising is also affecting LOreal. LOreal has to follow the rules set by Advertising Standards Authority. For example, advertisements cannot be tawdry that over-exaggerating the functions o f a product (The Control of Misleading Advertisements Regulations 1988).Recent policy instructions in the European Union (EU), that is the safety of cosmetics is directed standards. Seventh Amendment cosmetics directive eventually approved by the European Parliament and the Council of the European Union, It is expected an neighboring(a) put away on zoology testing products and a total ostracize on animal testing of cosmetics raw materials, no later than six years to implement the directive.(Anonymous,http//www.jrc.ec.europa.eu/to a greater extent_information/download/ecvam2.pdfIn addition, It needs an immediate ban on new cosmetics sales (of finished products and raw materials) and the experimental animal alternative methods pick up been tested in ecvam and accept the existence of the ban on the sale of cosmetics, on human health affected to a certain extent. It is thought that LOreal should fully understand these policies, and to avoid a rape of these policies and regulatio ns, strictly control chemical products and related banned substances content3.1.2 Economic Environment AnalysisLOreal should adapt to all the different economic environments and problems in all countries it operates in. For example in 2004, LOreal was affected by the continued flunk of the dollar and other currencies.Economic crisis is a bad news for LOreal, The world GDP is fall sharply from 2007 to 2009, The economic downturn will be a great chanllege for the breeding of LOrealAlthough the crop last year is under that in 2008 due to the financial crisis, it is fortunate that it still met the target, said Paolo Gasparrini, chair cleaning woman of LOreal China, at the 6th China Young Women in Science society Award Ceremony sponsored by LOreal in Beijing Tues daylight. In the first tercet quarters of 2009, LOreals total gross sales increased 0.7 percentage compared to last year, of which growth in Asia, where the Chinese market is a super contributor, totaled 21.2 percent, h e said.(http//msn.huanqiu.com/bizchina/2010-01/700911.html)3.1.3 Social Environment AnalysisThe culture of countries in which a business operates can be of particular importance. The culture of a country consists of the values, attitudes and beliefs of its people. (David Campbell, George Stonehouse and Bill Houston 119). For example, with modern standard of living continues to improve and the level education get laid-backer and higher, the social increasingly recognize the external image, and people are increasingly focusing on the image appearance, the adopt of quality and effectiveness of cosmetic and related skin care products change by reversal higher and higher.3.14 Technological Environment AnalysisChanges in technology affect the products available to consumers and business, the quality of the products and their functionality. (David Campbell, George Stonehouse and Bill Houston. 124).Todays society is constantly changing, technology updates mode that the product updates, cosmetic update speed, short product life cycles, a cosmetics market, we should immediately prepare for the next fulfilment. As the technology develops, people can be much channels to purchase products, business and customer contacts more and more ordinary. So technology is the come outprise competitive wages.Along with the development of science and technology the latest scientific and technological achievements and advanced technologies quick apply in cosmetics industries, particularly biotechnology, nanometer technology, information technology, electronics technology, which provide a lot of opportunities for the development of cosmetics industry. LOreal has strong investigate and development (RD) capability, concord to new technological development, the company registered 529 patents related to cosmetics and dermatology in 2005.(http//dbic.datamonitor.com/companies/company )3.2 Five troopss AnalysisAccording to Porters five forces which determine the nature of competitio n within an industry. The five forces areThe threat of new entrants to the industryThe threat of substitute productsThe former of buyers or customersThe billet of suppliers (to business in the industry)Rivalry among businesses in the industry.Force 1 It is thought that because cosmetic industry needs products quality follow-up for safety, and large investments which including technology and a great deal of capital, it is difficult to enter the cosmetic industry. However, at present, there is few entrants can threat LOREAL.Force 2 By reason of many ain cosmetics may contain a series of potentially toxic compounds, including artificial membrane. One research found cosmetics containing some spices and xylene which easily lead to the abortion of gravid women. Many facial cream are also contain compounds which comparable with the role of female hormones. So the threat of substitutes is using pure congenital products.Force 3 According to a survey commissioned by New Woman magazine and published in April 2006, the average woman is estimated to spend a staggering 182,528 on beauty products between the ages of 18 and 80. 5,000 women were questioned, (Anonymous, http//www.keynote.co.uk/kn2k1) eight in ten of whom said they wore make-up every day and almost half of whom admitted that they would not leave the house without it. So the power of buyers is very strong, which is very favorable to LOREAL.Force 4 LOREAL products were sold in many large department stores or supermarkets. The suppliers are all create strong bargaining power. So LOral should develop a adjacent partnership with suppliers, in order to sell products better.Force 5 The globular cosmetics business is intensely competitive, with a few big corporations and a large number of small companies vying for market share. The company competes against global companies such as Avon, Este Lauder, Procter Gamble, Revlon, and a number of smaller companies as well. Of late, those bigger companies alter their focus on the market of beauty and personal care products. increase competition may lead LOral to price reductions, pull downd pull in margins and loss of market share.3.3 Strategic Space/Group AnalysisA business can rarely confine its analysis to the level of the industry and markets in which it operates. It must also pay particular attention to its adjacent foes who are known as its strategic group.PRICEBRANDING ardorLOWHIGHLOWHIGHEste LauderAvonRevlonP GLOralFrom the strategy groups above, it is obviously that LOral has a high branding intensity and medium price, therefore compare with other competitor LOral has competitive advantage.3.4 Life Cycles AnalysisGenerally speaking, cosmetic products are in the maturity period of the product life cycle. In this period users tend to saturation and users repeat purchase reliance. In competitive chassis competitor fight to maintain market share, but it is difficulty in gaining market share. All competitors emphasis on low cost (eff iciency). LOral should pay attention to the quality of products and improve the packing, in order to have got old customers and attract new customers.4. Opportunity and threat analysis over next 3-5 years4.1 OpportunitiesIt is thought that LOral faces the following opportunities and threats, these main changes will influence the companys planning over the next 3-5years.First of all, it is thought that the luck of LOREAL is maturation people. The most developed countries are already highly aging society, aged 60 or older in the proportion of the population is above 15%, and for example the percentage of the US population who are over 55 years is forecast to increase from 20% in 2007 to 33% in 2027.(Anonymous, http//dbic.datamonitor.com/companies/company ) This is likely to increase demand for anti-aging products. LOREAL successfully launched many anti-aging products in 2007, including RevitaLift Double Lifting, Collagen Filler, and Lancomes Renergie Morpholift. As aging baby boome rs tackle to preserve their looks through anti-aging products, LOREAL will not be short of opportunities.The secondly opportunity is proposed acquisition of Body Shop. As the rapidly growing of personal care products market, demand for the products is rising as consumers shift to products which are safer and more eco-friendly. The earthy personal care products market is expected to grow at an annual rate of 12% a year, to reach an estimated $1 trillion in 2010.(Anonymous, http//dbic.datamonitor.com/companies/company) The proposed acquisition of the UK-based Body Shop International, a company founded by Anita Roddick that uses primarily organically-derived ingredients, would allow LOREAL to capitalize on the growing demand for natural personal care products.Thirdly, the growth of India and China. LOREAL could offset weak performance in Western Europe by expanding its presence in fast-growing markets such as India and China. The company already has a presence in these two countries , whose economies are forecasted to grow at a high rate in the coming years. In 2007, the companys sales in China grew by 27% while sales in India expanded by 46%.(Anonymous,http//dbic.datamonitor.com/companies/company)Further amplification in China and India may help LOREAL overcome sluggish growth in Western Europe.4.2 ThreatsHoweverit is thought that there are three main threats which will influence LOREAL.Firstly, Economic crisis is a bad news for LOreal, The economic downturn will be a great chanllege for the development of LOrealThe secondly, the competition is intense in the market. The global cosmetics business is intensely competitive, with a few big corporations and a large number of small companies vying for market share. The company competes against global companies such as Revlon, Estee Lauder and Procter Gamble, (Anonymous, http//dbic.datamonitor.com/companies/company ) in addition to a number of smaller companies. Recently, some big companies have sharpened their fo cus on beauty and personal care products market, as well as emerging markets. Increased competition could dissolver in price reductions, reduced profit margins and loss of market share.The third one are new regulations. Several consumer protection groups are voicing concerns over the presence of harmful chemical ingredients in cosmetic products. A recent study showed that about one-third of cosmetic products contain known carcinogens.(http//dbic.datamonitor.com/companies/company ) Due to increasing public pressure, in US the Food and dose Administration (FDA) is expected to impose stringent quality norms on cosmetic products.(Anonymous, http//dbic.datamonitor.com/companies/company ) New regulations may delay the launch of new products and result in higher product development expenditure, not to mention the likely effects of the adverse publicity generated by the new regulations.The last one is counterfeiting. The counterfeiting of popular cosmetic products has increased in recent years. Increasing sales of counterfeit products negatively impact the companys sale. Low quality counterfeits also reduce consumer confidence in the products of a company. More important, the companys key differentiator, exclusivity, is damaged by counterfeiting operations. Widespread counterfeits reduce the exclusiveness of the companys brands. Counterfeit products not only ransack the company of revenues, but also dilute the reputation of the brand.5. ConclusionAccording the discuss above, it is conclusion that among LOrals external environment, it is thought that the competition of cosmetic and fragrance market become more and more drastic, especially faced with strong competitors, and it is thought that there are opportunities and threats to LOral, the company should take advantage of these opportunities and to etain its status as the leader of cosmetic and fragrance industry.Word 1779