Case Study on L'Oreal

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Executive Summary ---------------------------------------------------------------------------------------2 Introduction --------------------------------------------------------------------------------------------------3 Background Information ----------------------------------------------------------------------------------3 Findings and Analysis ----------------------------------------------------------------------------------4-5 Recommendation ----------------------------------------------------------------------------------------5-6 Conclusion ---------------------------------------------------------------------------------------------------6

Executive Summary
L’Oreal was the world largest French-based cosmetic company, achieved successfully in global marketing with businesses in East and Western Europe, North America, Latin America, Asia and some other countries. Later, they spotted on China as a potential cosmetics market due to its extremely high population and entered the Chinese market to compete with other cosmetic brands as a late entrant. This report attempts to discuss on L’Oreal’s expansion in China. For example, in order to speed up the growth in the Chinese market, L’Oreal signed agreements to acquire two famous Chinese cosmetic brands, Yue-Sai and Mininurse. Moreover, according to the contracts, both the founders of Mininurse and Yue-Sai were required to never enter the cosmetics market. Were these problems that affect L’Oreal’s management on the two Chinese brands and its future growth in China? They are to be identified and analyzed in detail. Conclusion and recommendations will be given at the end of the report on how to well manage the two Chinese brands and make sustainable growth in the future. For example, keep the original cosmetics product packaging of Yue-Sai instead of re-packaging it due to the risk of losing brand loyalty. Remain the original core identity of the cosmetics when improving the formula of it. Yet, it is suggested to build up better business strategies for L’Oreal’s development in China in the future.

This report aims to discuss base on L’Oreal’s expansion of business in China and addresses mainly on three questions: First, how would you see L'Oreal managing the Chinese brands without their Chinese founders? Second, how would you manage L'Oreal's portfolio in China with their newly acquired Chinese brands? Third, how would L'Oreal continue to grow in China? At the beginning, the basic background information of L’Oreal and its two acquisitions in China will be given. Issues will be identified and analyzed in related to the acquisitions of L’Oreal and the two Chinese brands, Yue- Sai and Mininurse. Approaches will be recommended as in solutions at the end of the report.

Background Information
* L’Oreal: Largest cosmetic manufacturer in the world, engaged in the production and marketing of hair styling, hair care, skin care, body care and make-up with 17 brands over 130 countries. Its cosmetics make the most profit out of all sales.

* China’s cosmetics market: Around 1.3 billion population with an increasing annual income and living conditions. Meanwhile, L’Oreal discovered China as a potential place with cosmetics sales growth in the last 20 years for business expansion and had acquisitions with two famous brands, Yue-Sai and Mininurse.

* Mininurse: Brand of Shenzhen Raystar Cosmetics Company. Its sales reached $47 million in 2003. It is listed in the top 3 domestic skincare brands in China. It gained strong reputation and brand recognition among Chinese woman and young customers as the best domestic products with reasonable price.

* Yue- Sai Kan Cosmetics (Yue-Sai): Became the top cosmetic line in 1996. It sold products at more than 900 stores in 240 of China’s largest cities with sales of almost $47 million in 2003. The founder Yue-Sai Kan used her own imaged as the product packaging and brought adverse effects on...
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