ENVIRONMENTAL AND COMPETITIVE FORCES OF LOREAL AND P&G

QUESTION

1- Environmental Forces:

– Financial Factors.

–   Demographic Factors.

–  Technology Factors.

– Terrorist Attacks.

– Deregulation.

2- Competitor Analysis and Advantages:

– Competitor Analysis.

– Domestic Competition.

–  International Competitors.

– Competitive Advantage.

the competitor is L’Oreal campany.

SOLUTION

In this project we are going to analyse the marketing strategies of P &G‘s Cosmetic Section which it has adopted to tackle various factors and gain a competitive edge over its strong competitor that is L’Oreal. L’Oreal is an internationally renowned cosmetic brand which has great market presence. It has been found in a research done in U.S. that P&G tops the chart amongst the most admired companies especially in the ‘soap and cosmetics’ section. On the basis of criteria’s like investment value, innovation, quality of management and social responsibility P&G was able to get the rank amongst top 50 companies amongst all the cosmetic players(Bird ,2009).

1- Environmental Forces: With the help of this module we will be assessing the effect of environmental factors on the cosmetics line of P&G. We need to study all the environmental factors affecting the cosmetics line of products of P& G. All the companies it has been found that are governed by macro-environment be it a global, regional or a local company. The companies cannot directly influence the broader environment like the society, technology, environment, global politics, financial factors etc. However they can save themselves from major threats and utilize the opportunities to gain competitive advantage. Thus the organization has to be in fine tuning with the external environment which keeps on changing time and again. They need to strike a balance between the external environment wants or needs and the cosmetic products P&G has to offer (Paul, 2009).

– Financial Factors: It is well evident that U.S. the world’s biggest and largest economy is under the impact of economic recession since 2007. It has been found that the real GDP and the entire amount of goods and services manufactured by U.S. have also diminished at the rate of more than 6% annually in the fourth quarter of 2008. The tight consumer credit conditions have caused the consumer to reduce their spending power which will continue till there is economic stability in the market. Thus P& G has to face the wrath too; it is quite evident from the steep downfall in the U.S. export figures which are also affected by the other foreign economic conditions too. The table below will explain the U.S> economic rescession indicators.

Chart below gives in detail the share of market globally of P&G and its competitors.

Source: Datamonitor & Kimberly Clark’s 10-K Annual Report

–   Demographic Factors:

Due to rapid growth in the population all over the world, it is facing great demographic transition .P&G has presence in 180 countries with its wide range of 300 brands all over the world catering to people of all ages, ethnicity, gender, social classes and different walks of life. Thus the demographic change gives an excellent opportunity to P&G to tap more people every year, thus it can increase the number of products sold every year. Since P&G already has its target markets in Asia, Africa and Latin America it has great opportunities to expand in these fast growing markets (external & internal analysis, 2010).

The table below depicts the percentage of wrold’s population mix according to every continent:

Source:Geohive

–  Technology Factors: With the growing technology the organizations are working towards incorporating the latest technology that is internet in their market planning. P& G has also integrated internet in its supply chain management system to gain an edge over its competitors. Competitive pressure across the globe and increasing expectations of the shareholders has caused this integration of Internet into the organization. Websites cater to all the needs of an organization like P&G by advertising, bidding for products in auctions, procuring the inventory and posting the information in the form of catalogue along with fulfilments and inventory management. P&G can utilize the wide base of these electronic markets to consolidate its place regarding where to procure the goods; this will help in lowering the administrative as well as inventory cost very drastically. This way P&G also gets an additional benefit of marketing their products using the internet channel( Kahl &  Berquist 2000).P&G can bring in new products and range very quickly in the market by suing its existing brands and distribution system which are technologically advanced.

– Terrorist Attacks: P&G follows the trends of global economy and terrorist attacks caused a massive setback to the economies world over, moreover the reach of cosmetics section is to each and every demographic segment so after the attacks there were few racial factors prevailing in the market, but P&G never got influenced by it and used the same equal platform all over the world without any demographic differentiation.

– Deregulation: many consumer protection groups are staunchly opposing the cosmetics world over as they use harmful chemicals which are carcinogenic. USFDA is supposed to launch stringent norms for exporting cosmetics which will hamper the new product launch of P&G. This will increase the expenditure done on new product development. P&G should monitor and control the distribution of fake products in the market which are damaging their image and taking their profit margins by selling counterfeit products.

2- Competitor Analysis and Advantages:

– Competitor Analysis: The company has many stiff competitors like Estee Lauder, Maybelline etc but the toughest one is L’Oreal which is posing a serious threat as it is the niche global competitor with great international presence. The other thing which is necessary to keep in mind is the switching cost in case of cosmetics the cost of switching is very less so the consumers of P&G can easily shift and become brand loyal to any other cosmetic product like L’Oreal etc. The main competitors are the ones which manufacture same range of cosmetics but at lower cost, mostly in developing countries and the large format retailers and wholesalers who are manufacturing private label brands o n their own name. It is rightly said that P&G products must be capable enough to put strong competition to its opponent products and the retail chains too (Procter & Gamble 2008).

– Domestic Competition: There are  new products coming with private labels in local markets every now and then , so to keep an edge over them P&G should follow some innovation and keep on introducing new and fresh products to attract the customers. Since Wal-Mart is the biggest buyer of P&G products so it bargains at the price with P&G thus reducing the profit margins to a great extent. It has formed strategic alliances with Wal-Mart

–  International Competitors: The most diversified product portfolio makes it most fit for survival across the international market, be it economic slowdown or recession. The huge global scale of P&G allows it to get an edge over L’Oreal in developing countries as it has scope of innovation in various target markets (Paul, 2009).

 – Competitive Advantage: It gains a real time advantage because of its diversified product portfolio. The P&G products are useful in everyday life of a person so the brand awareness is already there. With the help of product innovation they have to utilise that brand awareness fully which is not the case of L’Oreal. Since most of the cosmetic products are necessity products so the sales are not affected much by recession which is why it again gains an edge over L’Oreal which just has cosmetics range.
References

 Bird, K. (2009), P&G most admired companying cosmetics industry, William Reed Business Media SAS.

• Kahl, K. & Berquist, ,P. (2000), A primer on the internet supply chain, Supply Chian Management Review, retrieved October 13, 2011 from http://www.scmr.com/article/CA629930.html.
• Internal and External analysis (2010),My strategic Plan, http://mystrategicplan.com/resources/internal-and-external-analysis/
• Paul, F.J. (2009),Procter & Gamble, Individual project, Seminar in Strategic Management, Houston.
• Procter and Gamble (P&G) India (2011, October 07). Retrieved October 13, 2011, from http://www.academon.ca/Marketing-Plan-Procter-and-Gamble-P-G-India/100529
• Procter & Gamble Company, The. (2008), Datamonitor, p 1-11.

GG89

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