Business Environment: Loreal Paris

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Introduction

We live in rapidly changing times. So every business person must understand potential effects of various environmental factors. In this report as an example of manufacturing company was choose one of the biggest brands in the world L’Oréal USA, Inc. The company which I found interesting is engaged in beauty industry. Cosmetic business in widely spread all over the world as nowadays not only females but also males and children are interested in their appearance. L’Oréal USA, based in New York, NY, is a subsidiary of L’Oréal, headquartered in Paris, France, is a total beauty care company. The well-known slogan of company is “Because I’m Worth It.”, which represents the essence of the L’Oréal Paris brand as a whole.

History

The history of L'Oréal refers to a many years ago – in 1909 young chemist and natural entrepreneur Eugène Schuller design, produced and sold one of the first hair dyes to hairdressers in Paris. In the beginning it was founded as Cosmair, Inc. Later, company established by Eugène Schuller become L'Oréal, started to grow rapidly thanks to its innovations and quality, encompassing all aspects of beauty for everyone, everywhere.

Location

All product division headquarters and operation department of L’Oréal USA, Inc. are located in New York City. The Strategic Committee consists of 12 members, including six heads of product divisions and six heads of corporate functions. In 2009 in the company (USA) was fixed around 9,000 employees. L’Oréal USA is wholly owned subsidiary of L’Oréal.

L’Oréal USA, Inc. and its products

One able to buy L’Oréal USA products in 130 countries. All over the world L’Oréal has 64,600 employees in 66 countries. Also, there are 5 development centres of L’Oréal worldwide (Shangai, Rio de Janeiro, Dubai, New York, Paris). Company is engaged in a wide-range of in-house tailored programmes as well. L’Oréal USA has many such a famous brands as L’Oréal Paris, Garnier, Giorgio Armani Parfums and Cosmetics, Lancóme, Maybelline New York, Vichy, Diesel and many others.

Market share

The main competitors of L’Oréal in cosmetics market are Procter & Gamble and Revlon. Revlon only sells cosmetics, while only small part of Procter & Gamble’s business is cosmetics. Also L’Oréal is much larger than its competitors such as Avon and Estee Lauder. It means that L’Oréal spends more money on marketing which is very important to success in the cosmetics industry. For this reason, L’Oréal is proved to be a leader in the cosmetics market. L’Oréal occupies 15.8% of North and 10.5% of South America cosmetics market.

Economic Environment

Success of any business is depends on its environment. The demand for L’Oréal USA, Inc. products depends on economic indicators as well. (All financial figures based on an exchange rate €1=$1.42)

Economic growth

Economic growth is the annual increase in a country’s Gross Domestic Products (GDP). If there is a high level of economic growth in the country the income level of its population would be relatively high. For this reason the demand for cosmetic products will increase respectively. As it is shown in Figure 2.1, GDP rate increased till 2007, which reflected to L’Oréal USA, Inc. revenue (Figure 2.2) and stock prices (Figure 2.3) in the same year, while stock price and revenue are indicators of company’s value. Then, because of financial crisis United State’s GDP rate started falling down from 2008, which lead decreasing of demand for L’Oréal USA, Inc. products in 2008 and consequently falling share prices from the year 2008.

Figure 2.1

Figure 2.2 (From Annual Report of L’Oréal, 2009)

Figure 2.3 (From Annual Report of L’Oréal, 2009)

Income level of population

As it is shown on Figure 2.4 income level of USA population has been constantly rising, which had been reflecting on L’Oréal...
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