L’oreal: Expansion in China

L’Oreal: Expansion in China

Jamie O’Neill

A9079721

BUS3047

L’Oreal’s Positioning Introduction

L’Oreal originally founded in Paris is the worlds largest manufacturer, marketer and distributer of Health and Beauty aids. After their success in Europe and America they decided that it was time to focus on their expansion in to China, the worlds 2nd largest economy. In December 2003 L’Oreal acquired Raystar Cosmetics (Shenzen) Co. Ltd’s skin care brand, Mininurse, and then in January of the next year signed an agreement to acquire the famous Chinese cosmetics brand Yue-Sai.

Aim of Report

The aim of this report is to analyze the structure of these new acquisitions and see how these two firms will continue to be a success for L’Oreal without their Chinese founders, how these two firms may work together to help target a wider demographic of China than already reached by L’Oreal and lastly what the plan for the further should be for L’Oreal to concur China’s Cosmetic industry.

Analysis

China as a whole,

China is the worlds 2nd largest economy with a population of 1.3 billion and an estimated GDP of $7.298 Trillion, for this reason it is easy to see why L’Oreal is so keen to crack the cosmetic market. L’Oreal sees the cosmetic market as a huge opportunity for expansion due to its rapid growth in the last 20 years. (See figure 1) The reason for this growth is due to the developing cities; due to China sheer scale there has been a huge development in hundreds of Chinas cities creating excess demand for there luxury goods which are manufactured by L’Oreal. The opportunity for expansion however comes from the less developed or undeveloped parts of China. (This is where the acquisition of the two local brands could be a deciding factor however this will be looked at later in the report.) In these undeveloped parts of china there is a huge demand for cosmetics however the demand is hugely price elastic, therefore it is a competition on price as the...