L\'Oréal markets 32 brands of cosmetics, fragrances, and hair care products in 1
ID: 350529 • Letter: L
Question
L'Oréal markets 32 brands of cosmetics, fragrances, and hair care products in 130 countries. The company's international strategy involves manufacturing these products in 40 plants located around the world. L'Oréal's international strategy is discussed in its operations section of the company's website (http://www.loreal.com/careers/who-you-can-be/operations) and in its press releases, annual reports, and presentations. Why has the company chosen to pursue a foreign subsidiary strategy? Are there strategic advantages to global sourcing and production in the cosmetics, fragrances, and hair care products industry relative to an export strategy?
Explanation / Answer
The company realized that in any competitive market, the price plays an important factor that can potentially make or break the market value that a company hold especially in countries where the economic trends keep changing on a daily basis. This made the company focus on creating subsidiaries instead of exporting their own products from the home base. This strategy has various advantages when compared to the exporting strategy which includes the ability to research the market and create a sense of competition for the other companies and brands before introducing their products in the market. This also allowed them to create their products at a cheaper price when compared to the exported goods and country's tax laws and policies and therefore was a better option. This has an advantage over exporting which essentially allows it to control quality, position themselves better in the market, at a better price point competition with the existing products and allow the company to expand their reach and essentially create globalization.
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