Loreal Environment Analysis

L’OREAL

Analysis of the Environment

To examine the environment of L’Oreal I have used Porter’s 5 forces model:

Rivalry Among Competing Sellers

This is high in the cosmetics industry as companies are continually competing for market share and gaining competitive advantage against others in their industry. L’Oreal have many rivals especially because they are a worldwide company. They face competition from other worldwide companies as well as companies that are only in individual countries. Main competitors include Bath and Body Works, Estee Lauder and Alliance Boots. To deal with this rivalry L’Oreal have created a strong brand image and their slogan ‘Because your worth it’ is recognised by many. They have created a broad choice for customers including high technology products at competitive prices; professional products which they supply to hair salons, for example; luxury products and premium services in such places as department stores; dermo-cosmetic products; and finally they bought the Body Shop in 2006 who supply naturally inspired and fairly traded products in over 2300 stores worldwide. This gives L’Oreal a huge consumer market and therefore a big competitive advantage over its rivals. It could be said that they cater for all needs. This year they continued to increase their investment in research and development and advertising and promotion expenses to gain the edge on rivals.

New Entrants

There are new competitors constantly entering the cosmetics industry. For example in recent years there has been a rapid increase in the amount of celebrity branded make-up coming to the market. Economies of scale mean that there is a low cost per unit for products and others would see this as an advantage to step into the industry. The internet also means that new entrants