International Business Context - Cosmetics Market

COURSEWORK BY ISABELLA ONITA

STUDENT NUMBER: 14103503

INTERNATIONAL BUSINESS CONTEXT

INTRODUCTION

This report critically evaluates the situation in the cosmetic industry in the last five years (2010 – 2015). This report achieves this by using demand and supply curve, concept of price elasticity of demand and supply, excess supply and demand. In accordance to that the report discusses how these concepts and curves have affected the pricing strategy of L’Oreal. As well as discuss competitive strategies, which support these pricing strategies.

COSMETICS MARKET

In this market, the females are mostly the entrepreneurs. The market has innovated to making natural and organic products. Whole concept of grooming in these recent times is taken seriously. In this time you need to be able to rival Kim Kardashian. This has lead to a growth in demand for beauty products and services.

In a different light, beauty products do not occupy a significant amount of space. They are also relatively cheaper. Hence, peoples itch to spend on these goods.

The beauty marketplace is usually a crowded place. There are a couple of important things a company should do and have when operating in this industry (Fairley, 2014). This report would only focus of three of them.

One of them is Originality, which is a company manufacturing their product or products make an impression on most retail beauty buyers. Second is branding. This is a company packaging products to steal the attention of the customers. And lastly, each brand needs a background story or history that would also advertise their products to customer that can relate to the situation especially when the product just launched.

The UK has one of the top five In the UK the overall value of the cosmetic market fell by 0.1% from the figure in 2013 to £8,381 million in 2014 (retail sales price)( Ctpa.org.uk, n.d.). According to Steve (2014), the year 2014 was challenging for the market. He also stated that the value sales and unit sales fell by 0.1% and 0.5% respectively between 2013 and 2014.

DEMAND AND SUPPLY

 The L’Oréal company has a beautiful supply chain (Cecere, 2015). According to the suppliers’ information by L’Oréal, the amount of purchases related to production such as raw materials, packaging and sub-contraction was £3.69 billion. At L’Oréal, the purchasing department operates under a single director but is divided into four sourcing centres (i.e. sections or sectors through which the resources needed for production is gotten from). The purchases of certain goods and services are done by specialised team that are divide into six different purchasing divisions such as Raw Materials, Packaging Components, Point-Of-Sale (Promo and Marketing Services), Indirects, Contract Manufacturing and Industrial and Property (Loreal.com, 2015).