Marketing and Small Relative Market
Considering L’Oréal’s product portfolio and analyzing the BCG matrix created, we can make a few recommendations to L’Oréal.
Firstly, we notice that there are a few categories that are considered, in the BCG matrix, as Dogs, being these areas that have a low relative market share and a low growth rate. These are the following: Normal; Antidandruff; and Greasy. Dogs are normally considered unattractive, but there are exceptions, when the size of these markets is still a great volume of the company’s sales, as we may see in this case.
For the Normal market, the company should maintain or increase its investment, as it represents a big slice of their sales (18,44%), and, if they disinvested, there could be a decrease in sales of this category, thus perhaps losing their position as the second biggest in the market (31%). On the other hand, since the market is decreasing for this category, there would be an amplification of the decrease that is happening to L’Oréal. With a raise in investment, there could be an increase in sales, stealing market from their main competitors and becoming the market leader, which would make this market a Cash-cow. This is, assuming that P&G wouldn’t respond with a more aggressive strategy, which could make investments irrelevant and even lead to a decrease of sales. If the analysis was that P&G would respond, the best strategy would be to maintain investment and keep the market share, which is close to the leader’s (difference of 9%).
For Antidandruff, there should be a maintenance of investment, as, even though it represents a relatively high percentage of the company’s sales (9,37%), it has a small relative market share (15% compared to 57% of the leader), making its position a very fragile one, undeserving of a great investment.
For Greasy, L’Oréal should proceed to disinvesting, since it possesses a small relative market share and it also represents only 2,86% of the company’s sales, being in a market that is decreasing in size.
Firstly, we notice that there are a few categories that are considered, in the BCG matrix, as Dogs, being these areas that have a low relative market share and a low growth rate. These are the following: Normal; Antidandruff; and Greasy. Dogs are normally considered unattractive, but there are exceptions, when the size of these markets is still a great volume of the company’s sales, as we may see in this case.
For the Normal market, the company should maintain or increase its investment, as it represents a big slice of their sales (18,44%), and, if they disinvested, there could be a decrease in sales of this category, thus perhaps losing their position as the second biggest in the market (31%). On the other hand, since the market is decreasing for this category, there would be an amplification of the decrease that is happening to L’Oréal. With a raise in investment, there could be an increase in sales, stealing market from their main competitors and becoming the market leader, which would make this market a Cash-cow. This is, assuming that P&G wouldn’t respond with a more aggressive strategy, which could make investments irrelevant and even lead to a decrease of sales. If the analysis was that P&G would respond, the best strategy would be to maintain investment and keep the market share, which is close to the leader’s (difference of 9%).
For Antidandruff, there should be a maintenance of investment, as, even though it represents a relatively high percentage of the company’s sales (9,37%), it has a small relative market share (15% compared to 57% of the leader), making its position a very fragile one, undeserving of a great investment.
For Greasy, L’Oréal should proceed to disinvesting, since it possesses a small relative market share and it also represents only 2,86% of the company’s sales, being in a market that is decreasing in size.