Question

L’Oréal is one of the largest luxury cosmetic firms in the world. L’Oréal has 4 distinct product lines: (1) consumer products, (2) professional products, (3) luxury products, and (4) active cosmetics. Distribution of revenues by segment is identified in Table 1.

Consumer products are L’Oréal’s largest business segment. It accounts for €11.19 billion of total revenues. L’Oréal defines consumer products as "the best in cosmetic innovation at accessible prices in mass-market retail channels."

Luxury products are L’Oréal’s 2nd largest business segment. This segment focuses mainly on three business segments: skincare, make-up, and fragrances. This segment accounts for €6.44 billion of total sales.

Professional products are L’Oréal’s 3rd largest business segment. This segment

"distributes its products in hair salons all over the world." This segment accounts for

€3.15 billion of total sales.

Active cosmetics are L’Oréal’s 4th largest business segment. This segment addresses "all consumers’ health and skincare needs." These products are sold through pharmacies, drugstores, spas, and dermatologists. The segment accounts for €1.73 billion of total sales. Table 1 Distribution of Revenue by Segment (2014) (€ Millions)
Business Segment	Revenues (€ billions)	Segment Revenues of a Percent Total
Consumer Products	11.19	49.7
Luxury Products	6.44	28.6
Professional Products	3.15	14.0
Active Cosmetics	1.73	7.7
Total	23.01	100

Table 2 shows L’Oréal’s revenues by geographic market (2014). Table 2 Revenues by Geographic Market (€ Billions)
Market	Revenues (€ billions)	Percent of Total
Western Europe	11.53	50.1
North America	2.39	10.4
New Markets	9.11	39.6
Total	23.01	100

Table 3 identifies L’Oréal’s distribution of operating profit by geographic region. Table 3 Breakdown by Operating Profit (2014)
Market	Profit (€ Billions)	Percent of Total
Western Europe	8.17	40.5
North America	5.73	27.9
New Markets*	4.86	23.3
Rest of World	4.25	8.3
Total	23.01	100

*Fully developed markets outside Western Europe and North America

Discussion Question:

1. Where (what countries) should L’Oréal expand?

Answer 1

Q) Where (what countries) should L’Oreal expand?

Answer –

L’Oreal should use the strategy of target marketing and expand to Asia. The number mentioned above clearly shows L’Oreal’s domination in the Western Europe and North America and now it’s time is to expand to Asia.

L’Oreal target marketing should not only be based on the geographic region but also the taking the ever-growing population of Asia in mind. India and China two of the most populated country in the world are world’s fastest growing economy. With more than 50 % of the population below the age of 35, Asia will be the right market to start with the expansion. Target marketing is nothing but to understand who is most likely to buy the products and what will be the sale of the auidence.

We have to understand that Asia is an economically developing continent unlike Europe and America which is already developed. The Asian market has potential and is in need of consumer products, we have to understand that the luxury products may not be an easy launch in this market.

With mostly working middle class the consumer products will likely be a hit in this market. L’Oreal consumer products baseline is strong with over 49.7% of the overall revenue, they have a very strong base in it.

Understanding the need of the Asian market is necessary, consumer products from a brand like L’Oreal will be a hit considering the young generation in mind.

Post the success of the consumer products by target marketing the launch of luxury , professional and active cosmetics can be done.