Loreal Situational Analysis

Situational Analysis

L’Oréal is an international leader in the cosmetics and beauty industry, specialising in hair colour, hair care, skin care and cosmetics. L’Oréal has achieved success through their strong brand image, innovative and high quality products. However, whist L’Oréal has gained market share within the skin care and cosmetic market, the hair care segment continues to decline. L’Oréal’s hair care segment consists of the consumer and professional product division, where products are distributed through retailers or salons. These hair care products include shampoos, conditioners and oils catering to consumers with damaged, dry, frizzy or thick hair. In 2011, L’Oréal’s market share within the hair care segment dropped due to low profits within Western Europe (Figure 1). L’Oréal performed poorly amongst consumers within Western Europe due to the recent trend of salon brand hair care products, priced at affordable products distributed through retail market channels. This allowed competitors such as Pantene and Nivea to gain market share. Therefore, it is essential that L’Oréal is aware of these trends to ensure the organisation increases its success within the hair care market.

[pic 1]

Figure 1: L’Oréal’s market share 2006-2011

Target market

L'Oréal's consumer base is females aged between 16-55 years old, from various cultural backgrounds (L'Oréal 2015). These individuals are working professionals and educated individuals from the middle class. They possess values such as trendy, social and value conscious. Additionally, they seek hedonic value from the product.

Trends

Numerous trends and consumer tastes within the cosmetic and beauty industry have had a positive impact on L’Oréal. The expansion of global markets and the increased purchasing power of consumers in these emerging areas, has allowed L’Oréal to gain an understanding of consumers’ needs. Therefore, L’Oréal is able to develop products to fulfil these higher order needs as stated by Maslow’s hierarchy, such as self-actualisation and belongingness.  Additionally, the advancements of technology has assisted the research and development department to develop products of high quality at an affordable price. Moreover, social media such as YouTube, Facebook and Instagram has played a major role in promoting products and reviews to help inform consumers about products and plays an influential factor to assist consumers through the decision making process. Another slow growing trend is the increased amount of male consumers becoming more conscious about health and beauty, investing money into hair care, anti-aging and deodorant products.

Competitor analysis

As indicated in Figure 2, Pantene, Nivea and Avon are close competitors for L’Oréal within the hair care market. These competitors are L’Oréal’s strongest rivals as these products incorporate the same distribution, quality, price and promotional strategies as L’Oréal. Therefore, L’Oréal can be closely linked to its competitors, making it difficult for consumers to differentiate the brand for competing products. To ensure L’Oréal is the ‘top of mind’ brand for consumers, L’Oréal relies heavily on building a strong brand image and consumer loyalty.