Introduction: Paragraph 1.1 provides short summary of the case. 1.

1 Executive summary At present, world economy totally depends on business and industry. Cosmetics industry due to its necessity and demand now become a profitable business. People are becoming more conscious about them and seeking quality products with new models and design. The LOreal Group is the world's largest cosmetics beauty company. It was founded in 1909. It has five key areas of expertise in hair color, skin care, sun protection, make-up, perfumes and hair care services. Its core activities comprise of the development, manufacturing and marketing of cosmetics and other products related to dermatology. The company is active in the dermatological and pharmaceutical fields and is the top nanotechnology patent holder in the United States. In this report we also briefly describe about key competitors (Unilever and Procter & Gamble) of LOreal and different strategy that they have performed.

For running a business and attract consumers making innovation and conducting research and development is a vital task for every organization. LOreals success in the several decades of its existence can be attributed largely to its huge investment in research and development, which enable it to create many top selling products. We also briefly explain SWOT analysis and SWOT matrix of LOreal and find out different strategy by merging variables of SWOT. There are lots of strengths are available to LOreal but at the same time there are some key weaknesses are also exist. The major problem that we noticed is luxurious nature of product and limited boundary with only developed countries.

Finally we recommend to launch new strategy the idea of Connect and develop (C+D) as well as invest in continuous improvement through research and development to keep capture the existing customer and to influence the other customer to buy their products. To adopt economies of scope as they already lie on diseconomies of scale to get the benefit of less average cost of total production. We also describe about alternative strategy to enter into Bangladeshi market with proper guidance and identify proper target market for them.

2. Business strategyHere are the business strategies that have taken LOral to world number one position in the beauty and cosmetics industry. As an entrepreneur, business owner or manager, Loreal can actually adopt these strategies to their business and experience similar success. Continue to improve on Products they cannot afford not to continue to improve on the value of their product gives to their customers. If they fail to improve on their product quality, it would either give room for new entrants with better offers into the market to upstage or opportunity to their competitors to create and pesent better product than loreals target customers. If they fail to make their product better from time to time, they are no longer relevant in the market place its that dangerous.

2.1 Make their Product Irresistible For DistributorsThere are stakeholders or certain people who are instrumental to the success of loreals business, and must recognize and relate with in a win-win situation. One of such people is their distributors. LOreals distributors can affect their sales positively or negatively depending on how well they are motivated to sell products. Give people great offer to distribute your product, and they will consider first over the competition, and help to achieve their sales goals. 2.2 Take Advantage of Events Many events that take place around usually hold good opportunity for their business to make money. Take note of these events and think of how possibly loreals business can benefit from them. By thinking about how its company was going to benefit from the first paid holidays introduced by the French Government in 1936, LOral came up with LOrals Ambre Solaire, which immediately became the leader in the new suntan market. 2.3 Develop the Ability to Continue To Create Innovative Products Attaining and remaining top in industry require the ability to create and continue to develop innovative products. Loreals needs to establish a system that will enable to do that and must set up a research and development unit or something similar. LOreals success in the several

decades of its existence can be attributed largely to its huge investment in research and development, which enable it to create many top selling products. From 500 staff in its research and development unit in 1970 to 1000 by 1984 tells how much serious the company considered it. 2.4 Research and Development Products are based on intensive scientific research with 3000 scientists who work in state-of- theart research centers around the world. One third of the companys Research and Development resources are allocated to fundamental research projects, which are targeted at progressing knowledge in three main disciplines: skin, hair and color. LOreal International Safety Evaluation Division uses a multi-disciplinary scientific approach to evaluate the safety of products, ensuring that commitment to product safety is upheld at every stage in the products life. This safety assurance procedure includes an assessment based on the latest medical and scientific research, rigorous safety evaluations of ingredients as well as finished products, examination of the effects of cumulative product use and ongoing safety monitoring once a product is on the market.

3. LOreal product & service3.1. Consumer services High technology products at competitive prices distributed through mass market retailing channels. Garnier, LOreal Paris, Maybelline NY. 3.2. Professional Products Portfolio of brands that meet the requirements of hair salons and provide customers with a wide range of innovative products. LOreal Professional, Matrix, Kerastase. 3.3. Luxury Products Prestigious brands which offer customer products and premium service in department stores, specialty stores and travel retail outlets.

3.4. Active cosmetics Dermo cosmetic products sold in pharmacies and specialist retailers and supported by advice from pharmacists and dermatologists. 3.5 The body shop Naturally inspired and fairly traded products sold in over 2300 stores throughout the world. 3.6 Joint venturesLOral holds 10.41% of the shares of Sanofi-Aventis, the world's number 3 and Europe's number 1 pharmaceutical company.The Laboratoires Innov is a joint venture in nutritional cosmetics between LOral and Nestl; they draw on LOral's knowledge in the fields of nutrition and food safety. Galderma is another joint venture in dermatology between L'Oral and Nestl. 4. LOreal sales & net incomeL'Oral's success is built on a strong foundation. The world's largest beauty products company, it creates cosmetics, perfume, and hair and skin care items. Its brands include L'Oral Paris and Maybelline (mass-market), Lancme (luxury), and Redken and SoftSheen/Carson (retail and salon). L'Oral, which owns Dallas-based SkinCeuticals, also conducts cosmetology and dermatology research. With more than 50% of sales generated outside Europe, L'Oral has focused on acquiring brands in those markets. L'Oral also owns the UK-based natural cosmetics retailer the body Shop International, which numbers some 2,550 stores worldwide. The firm's dermatology branch Galderma is a joint venture between L'Oral and Nestl. Key numbers for fiscal year ending December, 2010: Sales: $25,835.8M One year growth: 3.2% Net income: $2,968.1M Income growth: 15.6%

5. Competitors of LOreal
Here we describe about two major competitors of LOreal. Unilever and Procter & Gamble are operating business in cosmetics industry for several years. It becomes a vital task for any company to critically analyze their competitors.

6. Unilever
Unilever was founded on 1 January 1930 by Antonius Johannes Jurgens, Samuel van den Bergh and William Hulme Lever, 2nd Viscount Leverhulme. The amalgamation of the operations of British soapmaker Lever Brothers and Dutch margarine producer Margarine Unie (a 1927 amalgamation of Anton Jurgens Margarinefabrieken N.V. and Samuel van den Bergh) made sound commercial sense, as palm oil was a major raw material for both margarines and soaps, and could be imported more efficiently in larger quantities. In 1987 Unilever strengthened its position in the world skin care market by acquiring Chesebrough-Ponds, the maker of Ragu, Pond's, Aqua-Net, Cutex Nail Polish, and Vaseline. In 1989 Unilever bought Calvin Klein Cosmetics, Faberge, and Elizabeth Arden, but the latter was later sold (in 2000) to FFI Fragrances. In 1996 Unilever purchased Helene Curtis Industries, giving the company "a powerful new presence in the United States shampoo and deodorant market". The purchase brought Unilever the Suave and Finesse hair-care product brands and Degree deodorant brand. The company is multinational with operating companies and factories on every continent (except Antarctica) and research laboratories at Colworth and Port Sunlight in England; Vlaardingen in the Netherlands; Trumbull, Connecticut, and Englewood Cliffs, New Jersey in the United States; Bangalore in India; and Shanghai in China. In 2007, Unilever's Dove "Evolution" video that ran only online, was named the first ever nonTV spot to win the Grand Lion at the Cannes Advertising Festival. And in March, 2008, Unilever was named "Digital Marketer of the Year" by Advertising Age.

Major beauty and cosmetic brands of Unilever

Ponds Dove Lakme VO5 Aviance Sunsilk TRESemm Faberg,

TIGI (haircare)

Flora/Becel

Axe/Lynx

Lux Radox

/ Rexona/Sure

Vaseline

Helene Curtis

Fair & lavely

7. Procter & Gamble

William Procter, a candlemaker, and James Gamble, a soapmaker, immigrated from England and Ireland respectively. They settled in Cincinnati initially and met when they married sisters, Olivia and Elizabeth Norris. Alexander Norris, their father-in-law, called a meeting in which he persuaded his new sons-in-law to become business partners. On October 31, 1837, as a result of the suggestion, Procter & Gamble was born. In 18581859, sales reached $1 million. During the American Civil War, the company won contracts to supply the Union Army with soap and candles. In addition to the increased profits experienced during the war, the military contracts introduced soldiers from all over the country to Procter & Gamble's products. In the 1880s, Procter & Gamble began to market a new product, an inexpensive soap that floats in water. The company began to build factories in other locations in the United States because the demand for products had outgrown the capacity of the Cincinnati facilities. The company moved into other countries, both in terms of manufacturing and product sales, becoming an international corporation with its 1930 acquisition of the Thomas Hedley Co., based in Newcastle upon Tyne, England. Numerous new products and brand names were introduced over time, and Procter & Gamble began branching out into new areas Prior to this point disposable diaper were not popular, although Johnson & Johnson had developed a product called "Chux". Procter & Gamble acquired a number of other companies that diversified its product line and significantly increased profits. These acquisitions included Folgers Coffee, Norwich Eaton

Pharmaceuticals (the makers of Pepto-Bismol), Richardson-Vicks, Noxell (Noxzema), Shulton's Old Spice, Max Factor, and the Iams Company, among others. Gastrointestinal difficulties in humans. Procter & Gamble has dramatically expanded throughout its history, but its headquarters still remains in Cincinnati. In January 2005 P&G announced an acquisition of Gillette, forming the largest consumer goods company and placing Unilever into second place. This added brands such as Gillette razors, Duracell, Braun, and Oral-B to their stable. P&G agreed to sell its Spin Brush battery-operated electric toothbrush business to Church & Dwight. It also divested The companies officially merged on October 1, 2005. Liquid Paper, and Gillette's stationery division, Paper Mate was sold to Newell Rubbermaid. In 2008, P&G branched into the record business with its sponsorship of Tag Records, as an endorsement for TAG Body Spray. P&G's dominance in many categories of consumer products makes its brand management decisions worthy of study. For example, P&G's corporate strategists must account for the likelihood of one of their products cannibalizing the sales of another. 7.1. P&G's Beauty and cosmetics brands Always is a brand of feminine care products. Bounty is a brand of paper towel sold in the United States and Canada. Braun is a small-appliances manufacturer specializing in electric shavers, epilators, hair care appliances and blenders. CoverGirl is a brand of women's cosmetics. Fusion is a brand of men's wet shave razors and is the quickest P&G brand to have reached $1 billion in annual sales. Garnier is a brand of women's and mens skin care products Gillette is a brand of safety razor and male grooming products. Head & Shoulders is a brand of anti-dandruff shampoo and conditioners.

Herbal Essences is a brand of shampoo and conditioners. Mach3 is a brand of safety razor and male grooming products. Max Factor is a brand of women's cosmetics. Olay is a brand of women's skin care products. Old Spice is a brand of men's grooming products. Pantene is a brand of hair care products (conditioners/styling aids). Prestobarba/Blue is a brand of safety razor and male grooming products. Puffs is a brand of tissues. Rejoice/Pert is a brand of hair care products (conditioners/styling aids). Safeguard is a brand of soaps. Secret is a female anti-perspirant brand. SK-II is a brand of women's skin care products. Tampax is a brand of feminine care products. Venus is a brand female hair removal products. Wella is a brand name of hair care products (shampoo, conditioner, styling, and hair color).

7.2. New Strategy of Procter & Gamble What they've done is refine their thinking on how they conduct and evaluate research and development. They look at R&D in terms of two venues -- where do they focus their efforts and secondly, how do they get it done," said by Cloyd. "They made some changes. For example, historically, they tended to put the evaluation emphasis on technical product performance, patents and other indicators of internal R&D efforts.

Procter & Gamble has operated one of the greatest research and development operations in corporate history. But as the company grew to a $70 billion enterprise, the global innovation model it devised in the 1980s was not up to the task. CEO A. G. Lafley decided to broaden the horizon by looking at external sources for innovation. P&G's new strategy connect and develop, uses technology and networks to seek out new ideas for future products. "Connect and develop will become the dominant innovation model in the twenty-first century," according to the authors, both P&G executives. "For most companies, the alternative invent-it-ourselves model is a sure path to diminishing returns.

8. Comparative analysis between major cosmetic brands:

Attribute Familiarity price R&D Competitive approach R & D centers Leadership role(s) Customer response Competitive scope Competitive position LOreal Highly familiar High price Invest highest in R & D Focus on P&G familiar Moderate price High rate Unilever Familiar comparative Good investment in Low cost leadership

particular Differentiation

market niche In 4 countries Quality and innovation loyal Developed countries Market leader

product and service In 9 countries In five countries E-commerce, quality Quality at low price and innovation and innovation Medium loyal Medium Loyal Both Developed and average people underdeveloped Market challenger developed countries Market challenger

and

9. Comparative analysis between major cosmetic brands in context of Bangladesh:

Attribute LOreal P&G Unilever

Familiarity

Most unknown

people

are familiar

Highly familiar

Price Competitive approach Customer response Competitive scope Competitive position Sales and market share

expensive Focus on

Moderate particular Differentiation

affordable in Low cost leadership

market niche product and service Very little use, due to Little use and medium loyal high price Only upper upper class Not within 5 Very little loyal People of city area Market challenger 15% of total sales Within every possible

area Market leader 60% of total sales

10. SWOT Matrix:

Table 1: SWOT -matrix

Strengths Cost advantage (packaging and

Weakness Diseconomies to scale Over leveraged financial position No online presence Limited boundary Decentralized organizational structure

advertising) Strong brand image and reputation Better product quality High R&D Product Innovation skill Loyal customers

Opportunities Acquisitions Emerging markets and expand abroad More Innovative Product and services expansion Growth in demand

Threats Increased competition Downturn in economy Possibility of monopoly Change in Consumers preference

10.1. Confrontation Matrix:

Table 2: Confrontation-matrix (see appendix) Op1 + + + + Op2 + ++ ++ + Op3 + + + ++ Op4 + ++ + + Op5 + ++ ++ + T1 0 0 0 + T2 + + + + T3 + 0 0 + T4 + + + ++

St1 St2 st3 St4

St5 St6 W1 W2 W3 W4 W5

0 0 + 0 -

+ + + -

+ + 0 0 0 -

+ + + -

+ + -0 -

0 0 0 0 o 0

+ + -

0 --0 0 -

+ + 0 0 -

Possible results from confronting different strengths, weaknesses, opportunities, and threats: St2+op2 = ++ LOreal has a strong brand image and reputation towards the world. So LOreal can grab the new market where they want to enter easily compare to other companies.

St2+op4= ++ There is a chance to expand their product and service and we mentioned that LOreal has strong brand image and people are loyal to their product. So any new product expansion supposes to be accepted by customers.

St2+op5=++ There is a huge demand for cosmetics product into the market as people are increasingly sincere about themselves. LOreal with their better quality and brand image can attract the needy people and increase their sales.

St3+op2=++ As we mentioned people want quality product and in that case LOreal is best. So they can easily enter into new market and attract the consumer to buy their products.

St3+op5=++ We see that people are aware about beauty and ready to buy quality products. Again LOreal can use their better quality as competitive tool and meet the demand of customers.

St4+op3=++ Attaining and remaining top in industry require the ability to create and continue to develop innovative products. And for that purpose R & D is vital task. We know that LOreal invest highest amount in R & D. so through this R & D they can innovate the best idea.

St4+t4=++ People change in preference is a continuous process. And understanding their changing nature is vital for company. The best way to understand human nature is through R & D. this also helps LOreal to recognize consumers preference.

W1+op5=-Due to excessive demand from consumers LOreal need to produce more which results higher production cost due to Diseconomies to scale.

W1+t3=-Both Diseconomies to scale results in higher cost and economic downturn results negative impact company as both related with economic fall of the company.

W2+t3=-Over leveraged firm may fall into interest rate problem which effect the financial position of the company and they can not fulfill it as downturn of economy.

11.1. Ans to the question no-1:

Attaining and remaining top in industry require the ability to create and continue to develop innovative products. LOreal needs to establish a system that will enable to do that and must set up a research and development unit or something similar. LOreals success in the several decades of its existence can be attributed largely to its huge investment in research and development, which enable it to create many top selling products. But business world is a dynamic place where competitors make new ideas to grab the market. If they fail to make their product better from time to time, they are no longer relevant in the market place its that dangerous. For example; P&Gs new strategy connect and develop, uses technology and

networks to seek out new ideas for future products. Connect and develop will become the dominant innovation model in the twenty-first century, LOreal should invest a portion from the amount that they fixed for R & D to come up with this new idea Connect and develop (C+D) to keep capture the existing customer and to influence the other customer to buy their products.

11.2. Ans to the question no-2:

Before make any decision we should know about economic of scale and economies of scope. Economies of Scope Means an economic theory stating that the average total cost of production decreases as a result of increasing the number of different goods produced. For example, McDonalds can produce both hamburgers and French fries at a lower average cost than what it would cost two separate firms to produce the same goods. This is because McDonalds hamburgers and French fries share the use of food storage, preparation facilities, and so forth during production. Whereas Economies of Scale means the increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods. But After a point, an increase in size (output) actually causes an increase in production costs. This is called diseconomies of scale. From our research we find that diseconomies of scale is a weakness of LOreal. So we think LOreal should choose Economies of Scope. Perhaps the most important reason for choosing Economies of Scope is less average total production cost as a result of increasing the number of different goods produced. LOreal already has several product lines in their portfolio. Besides, large product categories are often an important advantage in organization with large research and development expenses. As, we know that LOreal expenses the highest amount in research and development Economies of Scope is best option for them.

11.3. Ans to the question no-3:

Based on the nature of the product we think joint venturing is the best option for LOreal to operate their business in Bangladesh. They can join with a renowned host company or companies to produce or market their products and services. Reasons are very clear in context of Bangladesh. Most of the people of this country are not supposed to be in the state of purchasing luxurious products of LOreal. Our target market can give a clear idea about the amount of people who might be willing to buy the products of LOreal. Due to the limited demand of LOreals products direct investment is risky. In addition Unilever and P & G rivals of LOreal are one of the two most renowned brands who already work at Bangladesh for many years successfully.

Target market:
We divided the total market based on geographic, demographic, psychographic and behavioral variables. Urban people age range 16-40, mainly young male and female are the main target market for LOreal. Personal or family income range from more than 60000 tk. per month with excellent profession and first-class family background are come under this group. Heavy users with upper uppers class people particularly University students are the most attractive target market for LOreal.

Appendix:
Legend to table 2 + ++ The two opposites have a low positive interaction effect The two opposites have a high positive interaction effect The two opposites have a low negative interaction effect

0 --

The two opposites have neither a positive nor a negative interaction effect The two opposites have a high negative interaction effect