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        Report on L'Oréal Group

        1. Introduction   

        This report focuses on a successful international company in China - the L'Oréal Group. The topics covered include “The basic information”, “Should the company use e-commerce as the main distribution channel?” and “Suggestions under the current macroeconomic situation in China”.

        2. The basic information

        Primarily, the form of L'Oréal Group is corporation. It operates in many countries in the world and has many successful subsidiaries. Two of the best known are Lanc?me and The Body Shop. As a co

rporation the company has some distinct features. Firstly L'Oréal Group is a separate legal entity and secondly, the owners of L'Oréal Group are shareholders. Currently the major shareholders are the Bettencourt family, , international institutional investors, French institutional investors, inpidual shareholders, treasury stock and employees. Together with other shareholders, they own the L'Oréal Group but have only limited liabilities.

        1) Undesirable disadvantages

        As a corporation is that it pays income taxes twice. Firstly, the company is required to pay income tax for the company earnings. When it distributes pidends to its shareholders, the shareholders need to pay inpidual income taxes for the pidends.

        As a transnational corporation, the board of directors and officers comprise the management of L'Oréal Group. The top manager of L'Oréal is Jean-Paul Agon, who is the chairman and chief executive officer of the corporation.

        In terms of what products or services provided, L'Oréal is the world largest cosmetics company concentrating on hair color, skin care, sun protection, make-up, perfume and hair care as well as,?, and??research fields. Besides, the products it provides can be categorized as mass, professional, luxury and active cosmetics markets. Respectively, the mass cosmetics brands are L'Oréal Paris, Maybelline NY and Garnier. The professional are L'Oréal Professional, Kerastase and Matrix. The luxury brands are Lanc?me, YSL, Giorgio Armani, Kiel’s, The Body Shop, and Shu Uemura. The active cosmetics brands are cosmeceuticals, such as Vichy, La Roche-posay, Skin Ceuticals, and INNEOV.

        2) Four major distribution channels

        Retailing, franchising and e-commerce. These distribution channels have their merits and shortcomings. First, retailing has small transaction size but high transaction frequency. Additionally, retail sale is largely influenced by consumer buying behaviors. Second, franchising has its own merits. The franchise owners can use franchising to make large-scale sale and achieve low-cost expansion, but franchise can only focus on one area, and can't be a strategic victory in every market. The third is e-commerce. The upside is that using e-commerce as a distribution channel is convenient, time saving and costs reducing. But on the other hand, for customers to buy products online, especially cosmetics, takes risk because they cannot check the quality of the products as they do in a physical store. 3) L'Oréal should use e-commerce

        As every distribution channel has its merits and demerits, it needs to be finding out if L'Oréal should use e-commerce as the main distribution channel. Electronic commerce makes it possible to sell commodities in a cheap, efficient, easy and global way. In accordance with the operation and saling situation of L'Oréal, e-commerce is an optimal distribution channel. For one thing, L'Oréal sells mass cosmetics brands products, the target customers of mass cosmetics products are ordinary or middle class people, who are increasingly interested in buying online with the development and convenience of e-commerce. Consequently, using e-commerce as a main distribution channel meets the needs of these customers and is profitable. Nevertheless, as for the luxury and professional products, using e-commerce as its main distribution channel is not a good choice, because sales of luxury and professional products should provide extra service and customers will need other assurance for buying the products. Since the service system of e-commerce is not completely perfect to satisfy the need, not all the products and services of L'Oréal should use e-commerce as the main distribution channel.

        3. Conclusion

        Although L'Oréal Group has been a great success story since 1909, improvements are still possible for L'Oréal Group to remain its profitability in China given the current macroeconomic situation. In China, the main economic indicators show that the Chinese economy is growing slower in recent years. However, the overall consumption growth is basically stable. Specifically, for the first 8 months of this year, the accumulative total retail sales grew by 10.3% and the national commodity online retail sales increased by 25.5%. It can be seen that the economy in China is still expanding. With people’s income increasing, consumers will continue to buy luxury products to improve their quality of life. So a great market exists for L'Oréal to sell its products in China. Although L'Oréal pays much attention to innovation and research to keep their products up to date, to sell their products successfully in China requires more attention to any other respects. Firstly, Chinese government is strict to standardize the cosmetics industry, and has intensified the quality supervision of the domestic cosmetic products. From this perspective, the quality of raw materials for the production of cosmetics must be up to the standard. To upgrade the package of the products to guarantee sealing and non-pollution is another way to achieve this objective.

        Secondly, from the perspective of economy, the cosmetics industry in China is in the?period?of?transition?from growing?to?maturity with competition intensifying and market pressure increasing. To face this challenge, L'Oréal should make full use of online retailing in China as a sales strategy since the national commodity online retail sales in China increased by 25.5% this year.

        Thirdly, from the perspective of brand culture, once consumers have the identity of a brand, is not easy to change. That means brand culture will bring high profits. It can also play a role in hindering or reducing the competitors' entry into the market. But the band culture of L'Oréal products lacks of publicity activities in China.

        What is more, the relationship between all brands of L'Oréal is so not close enough, which leads to weak brand culture or whole sense of the company. So L'Oréal should promote their own brand culture, and base on the L'Oréal target market marketing environment to choose their representative spokesperson in China to help improve brand culture.

        Fourthly, to improve anti-counterfeiting?technology to deal with the?fake?merchandise problem also counts in order to increase sales. The fake will give a bad reputation to the company products, as a result, will decrease the sales.