REPORT ON L'ORÉAL GROUP
1.Introduction
This report focuses on a successful international company in China - theL'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 Lancôme and The Body Shop. As a corporation 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 arethe Bettencourt family, Nestlé, international institutional investors,French institutional investors, individual shareholders, treasury stock and employees.Together with other shareholders, they own theL'Oréal Group but have only limited liabilities.
1)Undesirabledisadvantages
As a corporation is that it pays income taxes twice. Firstly, the company is required to pay income tax forthecompany earnings. When it distributes dividends to its shareholders, the shareholders need to pay individual income taxes for the dividends.
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
largestcosmetics company concentrating on hair color, skin care, sun protection, make-up, perfume and hair care as well as toxicology, tissue engineering, and biopharmaceutical 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, MaybellineNY and Garnier. The professional are L'OréalProfessional,Kerastase and Matrix. The luxury brands are Lancôme, YSL, Giorgio Armani, Kiel’s, The Body Shop, and Shu Uemura.The active cosmetics brands arecosmeceuticals, such as Vichy,La Roche-posay, Skin Ceuticals, and INNEOV.
2)Four major distribution channels
Retailing, franchising and e-commerce. These distribution channels have theirmerits 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 sellsmass cosmetics brands products, the target customers of mass cosmetics products are ordinary or middle
