L'expansion de L'Oréal en Chine

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The expansion of L'Oreal in China (titre original)

Since it was founded nearly a century ago by the chemist Eugène Schueller, L'Oreal has been focusing its research and expertise on one business: cosmetics. L'Oreal has consistently applied its policy of investing in research, ensuring that its products fulfil the highest possible standards of quality, safety and innovation in order to meet the beauty and well-being needs of men and women around the world. Because there is no single model of beauty, the group has 17 distinct and complementary brands enjoying worldwide recognition, each with different roots and offering the variety needed to match different physical features, tastes and lifestyles.
Since it was developed nearly a century ago, the cosmetics industry hasn't stopped its evolution. In 2000, the cosmetics industry represented a $166.2 billion market worldwide. As a result of research and innovation, this market was projected to reach $198.2 billion in the year 2003. The world market in cosmetics and fragrances is estimated to increase by 4 to 7% per year since 1995.
The cosmetics industry operates everywhere in the world. The biggest markets are Western Europe, North America and North-East Asia, in terms of numbers of customers and sales.
Cosmetics companies use to classify their customers and sales in four region:
• Western Europe
• North America
• Japan
• Rest of the world
The world's growth is dynamic, in particular in the region of “rest of the world”. This region includes new and emergent countries such as Brazil, China, India and Russia for example. The growth of sales in this region was +7.3% between 2002 and 2003 and even more between 2003 and 2004, with an increase by 8.7%.
However, certain markets look mature, apparently not much extensible. The Western Europe market has increased by only 1.8% in 2004, and even worst, the Japanese market has suffered from a decrease in sales by 1%. In Europe, there was a sharp and an unforeseable drop in consumer spending. As an example, Germany and Japan are considered as mature markets mainly because of the unfavourable general economic climate; sales experienced a slight decline in 2004. There was no economic growth in Germany due to a high unemployment rate, which created a price consciousness for customers, and also to the development of private label products and discount stores.

Sommaire

L'Oreal in the cosmetics industry
The best suited overseas expansion
1. An overseas expansion in China
2. FMS strategy to enter China: FDI

Extraits

[...] Developing countries´ inward stock of FDI amounted to about one third of their GDP, compared to just 10 per cent in 1980. One-third of global trade is intra-firm trade. (Source: www.earthsummit2002.org) Appendix Foreign Direct Investment in China China is the number-one recipient of FDI in the world and captures about 10 percent of global FDI, but hosts only 2 to 3 percent of global cross-border M&A activity. As foreign buyers and Chinese sellers become more comfortable with the acquisition process, the ratio of foreign M&A activity to total FDI should increase substantially over the next five years. [...]

[...] Such acquisitions will permit more effective integration of domestic manufacturing operations in China with imported product distribution and global product flows. [...]

[...] Foreign acquisitions of local Chinese companies surged in the first half of 2004. Following three years during which foreign acquisitions ran about billion per year (10 percent of FDI), acquisitions nearly tripled in the first half of this year to $ 7.3 billion and will likely reach 15 to 20 percent of FDI for the year, according to M&A Asia. Acquisitions of local companies are fast becoming a third wave of FDI in China, following the prevalence of joint ventures in the 1980s and early 1990s and the surge of wholly foreign-owned enterprises (WFOEs) during the past 10 years. [...]

[...] Today it represents a $200 billion market worldwide. The cosmetics industry operates everywhere in the world. The biggest markets are Western Europe, North America and North-East Asia, in terms of numbers of customers and sales. Cosmetics companies use to classify their customers and sales in four region: Western Europe North America Japan Rest of the world The growth of each market, at constant currencies, was as follow in 2003 and 2004: Source: L'Oreal-Finance report The world's growth is dynamic, in particular in the region of the “rest of the world” (including China, India, Russia, Brazil . [...]

[...] The biggest companies will search to maintain a high market share in every segment they have products (like Procter and Gamble, L'Oreal and Unilever), the others will try to have at least one leading brand on a segment and be just profitable on the others (Beiersdorf, Avon, Shiseido . The competition is doing mainly through innovation of products and advertising. SWOT analysis of L'Oreal A Swot analysis scrutinizes the external environment and the internal factors of a company. The internal factors are the strengths and weaknesses of a company and the opportunities and threats describe the external environment. [...]

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