L’Oréal’s product recommendations Essay

Custom Student Mr. Teacher ENG 1001-04 22 May 2016

L’Oréal’s product recommendations

Considering L’Oréal’s product portfolio and analyzing the BCG matrix created, we can make a few recommendations to L’Oréal. Firstly, we notice that there are a few categories that are considered, in the BCG matrix, as Dogs, being these areas that have a low relative market share and a low growth rate. These are the following: Normal; Antidandruff; and Greasy. Dogs are normally considered unattractive, but there are exceptions, when the size of these markets is still a great volume of the company’s sales, as we may see in this case.

For the Normal market, the company should maintain or increase its investment, as it represents a big slice of their sales (18,44%), and, if they disinvested, there could be a decrease in sales of this category, thus perhaps losing their position as the second biggest in the market (31%).

On the other hand, since the market is decreasing for this category, there would be an amplification of the decrease that is happening to L’Oréal. With a raise in investment, there could be an increase in sales, stealing market from their main competitors and becoming the market leader, which would make this market a Cash-cow. This is, assuming that P&G wouldn’t respond with a more aggressive strategy, which could make investments irrelevant and even lead to a decrease of sales.

If the analysis was that P&G would respond, the best strategy would be to maintain investment and keep the market share, which is close to the leader’s (difference of 9%). For Antidandruff, there should be a maintenance of investment, as, even though it represents a relatively high percentage of the company’s sales (9,37%), it has a small relative market share (15% compared to 57% of the leader), making its position a very fragile one, undeserving of a great investment. For Greasy, L’Oréal should proceed to disinvesting, since it possesses a small relative market share and it also represents only 2,86% of the company’s sales, being in a market that is decreasing in size.

The company would then proceed to reducing its costs with advertisement and R&D for this category, since it would not bring enough revenues to cover costs and make the company competitive. Secondly, there is a group of categories in L’Oréal’s Hair Care portfolio that are in the Problem Child quadrant, which have a small relative market share, but are in a market which has above average growth rates. The categories included in this group are as follows:

Kids and Colour. Problem Child normally are called cash users, as high growth rates require higher investments, but are not able to generate substantial cash to cover these. Kids is a category where there is a great dominion of the leading company (Johnsons), and L’Oréal’s product is the second most sold product. The difference between them is still quite large (16%) and the market is growing at a good rate, with 10% growth in the period analyzed.

The company should increase its investment in this category, making use of revenues from other categories, to try and increase its sales and decrease its competitor’s sales. The company must take advantage of the market growth and be able to make as much of a market share as possible, while there is still “free space” on which to grow. As of Sleek, we may see that it is one of the categories which has the greatest growth rate (9%), and in which L’Oréal has a strong position, though it is divided in two products (Elvive and Fructis), while competing with P&G’s Pantene.

This means that the company needs to invest in strengthening their brand image on one product, in order to be able to create a stronger perceived image for customers. Thirdly, there is a group of categories that are Stars in the BCG matrix. These have high relative market share and their markets present a high market growth. Products in this quadrant are usually cash neutral, being able to provide enough cash to cover their expenses in investment, due to being leaders in their markets.

The categories that L’Oréal has in this category are: Colour; Dry & Break; Shine; and Sun. Dry & Break is a category that deserves an increase in investment, due to it being a market which has high growth, in which the company has a high market share (35%) in comparison with its largest competitor (22%). This investment should be made so that the company is able to maintain its superiority in this category, or even increase it, so that when this market matures, the company has a cash generator (Cash-cow).

Being the category with most sales in L’Oréal’s portfolio (22,04% of total sales), this should be the greatest priority of the company. Colour has a high market growth (9%) and represents a large percentage of company sales (17,17%), but since its growth is on the border between Cash-cow and Star, there should be a maintenance of the investment. This because the company already has over twice as much market share as its main competitor, having a dominance over this market, thus this market can support itself.

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