Rebuilding Brand Strategy Assignment

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Rebuilding the Brand Strategy of L’Oreal for Men in Mainland China Chao Li Dissertation 17 October, 2008 Declaration Student Agreement: I understand that the Oxford Brookes University has the non-exclusive right to electronically store, copy or translate my thesis/dissertation, in whole or in part, for the purpose of future preservation and accessibility. I declare that the paper/dissertation submitted is my original work, and that the version submitted is the same as the final version approved by the Examiners.

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I wish to acknowledge the support and guidance received throughout the basic research, analysis and drafting of this dissertation. Firstly, I wish to sincerely acknowledge the staff of our department at Oxford Brookes University, in particular my project supervisor, Mr. Gibbs, who has provided me professional advice and enthusiastic guidance during the development of this project. I also wish to acknowledge the support received from the brand manager of L’Oreal Mainland China, Ms Chen Fang, through her thoughtful assistance and precious time.

Lastly, I wish to thank my friends and family for their help and support throughout this research. Abstract This dissertation aims to identify the ways to rebuild L’Oreal’s brand strategy for men in Mainland China. Introduction With the progress in economic development in Mainland China has come an evolution in male social behavior as regards attention and care for personal appearance. Chinese men, particularly in the main cosmopolitan centers, have become more sensitive to their skincare.

L’Oreal, with a well-known brand of cosmetics for female skincare, has been very successful in capturing this growing market in China. The company is currently redefining its branding strategy for products aimed at men. Mainland China is a very large market for many products, and particularly for cosmetics, whose consumption is very much dependent on population size and purchasing power. This dissertation starts with an analysis of skincare products for men in Mainland China, and of the present market penetration of L’Oreal for Men.

This is followed by a literature review, mentioning the most relevant theories of brand development and management strategies for consumer products, analyzing the current brand strategy of L’Oreal for Men as regards its internal environment, its external environment and trade constraints. Finally, the dissertation focuses on recommendations to rebuild the brand strategy of L’Oreal for Men in Mainland China, covering the following aspects: brand renaming, brand repositioning, brand image rebuilding, brand extension, rand protection and crisis management. Methodology This dissertation uses deductive and inductive approaches, including descriptive method, quantitative data collection methods, and qualitative methods to analyze the present brand strategy of L’Oreal for Men. It takes into account the increasing demand in Mainland China for cosmetics for men, as well as the market pressure for L’Oreal to consolidate its position in this market, and to develop a brand strategy for cosmetics for men.

Results After analyzing the general development of L’Oreal for Men in China and the need to develop a new brand strategy, this dissertation suggests effective ways to rebuild the brand strategy in 7 areas: brand renaming, including a survey before renaming, strategies of renaming, brainstorming, name connecting, interior selecting, experts examining, target consumer test, confirming the renaming; brand repositioning, covering the detailed market norms, the target guests, the product positioning and guest data ; brand image rebuilding including packaging; brand extension, including marketing, advertisement, and pubic relations promotion; brand protection and crisis management including legal protection, brand management and other related aspects. Recommendations Strategy rebuilding recommendations are made for L’Oreal; these recommendations may also be of interest for other companies intending to build a brand strategy for its skincare products for men in Mainland China, taking into account the social trends and the gender implications of cosmetics consumer products. Contents I. Declaration II. Acknowledgement III. Abstract IV. Contents Chapter One: Context and Background 1. 1 Introduction 1. 2 The development of grooming products for men 1. 3 Research Objectives 1. 4 Scope of research

Chapter Two: Literature Review 2. 1 Brand and brand strategy 2. 2. About skincare products for men in China Chapter Three: Methodology 3. 1 Research strategy 3. 2 Case study 3. 3 Research approach 3. 4 Research philosophy 3. 5 Methods and analysis 3. 6 Soundness of the research 3. 7 Conducting a literature review and analysis 3. 8 Research limitations Chapter Four: Analysis of the Current Brand Strategy of L’Oreal for Men 4. 1. External condition analysis 4. 2. Trade condition analysis/Five forces analysis 4. 3. Internal SWOT analysis Chapter Five: Rebuilding the Brand Strategy of L’Oreal for Men 5. 1. Brand renaming 5. 2. Brand repositioning . 3. Brand loyalty building in China 5. 4. Brand image rebuilding 5. 5. Brand extension/distribution 5. 6. Brand protecting 5. 7. Crisis management Conclusions References Rebuilding the Brand Strategy of L’Oreal for Men in Mainland China Chapter One: Context and Background 1. 1Introduction 1. 1. 1Development of the cosmetics and toiletries market and industry in Mainland China The fast evolution of the cosmetics and toiletries market in China is described in a recent report by Research and Markets, a specialized market research firm: “Cosmetics & Toiletries in China 2008: A Market Analysis”. This report reviews characteristics, trends nd developments over the 2001 to 2007 period in the cosmetics and toiletries market and industry of the People’s Republic of China, and provides forecasts of market performance to 2012. According to this report, the cosmetics and toiletries market in China reached a total value of RMB 116. 24bn (USD 14. 87bn) in 2007. This represents an increase of 18. 28% over the previous year, indicating continuing strong market growth; the market has grown a full 191. 70% since 2001, with an annual growth rate averaging 19. 41%. By 2007, cosmetics and toiletries had increased in significance to 3. 65% of the total value of non-food retail sales, up from 3. 05% in 2001. (Reporter of Research and Markets, 2008).

The cosmetics and toiletries sector continues to see a steady rise in significance within the total scheme of non-food retailing in China, largely due to the fact that the key manufacturers in the market have begun to segment their market strategies by income group. (Access Asia Ltd June 6, 2008). The overall cosmetics and toiletries market in China is expected to continue to see strong growth over the next few years, fuelled by continued strong growth in demand for consumer goods. It is expected that the annual growth rate will slow down year-on-year, but remain good. The total value of the market could reach RMB 195bn by 2012, up on a forecast RMB 130bn in 2008.

Market penetration is increasingly becoming saturated in the main urban centers, so emphasis is shifting to the mass markets opening up in tier-2 and -3 cities, pushing the industry to work out the logistics needed to reach these markets, and to adapt the products to suit regional variation in taste and income differences relative to tier-1 cities. This industry is facing new and important opportunities in China. ( China Today July 8, 2008) The success of many foreign companies in China is heavily dependent on their ability to adapt their brands to make them seem local to consumers, and on their ability to behave as local domestic manufacturers, instead of as foreign companies. For example, Avon China, the country’s first direct selling organization, was founded in January 1990. In 1998, it restructured into a conventional cosmetics company, and began selling its products through both stores and direct sales.

Today, it has set up more than 5,700 outlets and 2,000 counters across China. (Soap & Cosmetic, 2004). In 2003 it reported sales of RMB 2. 4 billion, four times higher than it had before pyramid selling was banned. Amway first entered China in 1995. The State Council authorized Amway to resume business in 1998, and the company chalked up sales of RMB 100 million that year. In 2003, Amway’s sales volume in China surpassed that of Japan and the U. S. for the first time, accounting for one fourth of its world total. In the five years from 1998 to 2003, Amway China’s business volume has increased 120 fold, achieving awesome growth of 50 percent in 2004.

This year, it plans to add another 40 stores to its 140 outlets around China. (Yuanjun Luo, 2005) Making international brands seem local to consumers requires a good knowledge of the socio-cultural environment and investment in local talent and advertisement campaigns. A faster alternative is to gain control of popular local brands. Foreign companies are thus increasingly looking to strong domestic brands as potential acquisition targets, especially to develop new product ranges best suited to emerging regional markets. According to Business Alert (2001), before the 1980s, there were only about 50 cosmetics manufacturers in China, with annual sales of less than RMB 500 million at best. Reporter of HKTDC, 2006). By 1990, cosmetics sales amounted to RMB 4 billion. In the wake of rapid economic growth in recent years, the industry has been developing by leaps and bounds. There were 3,514 licensed cosmetics manufacturers in China by the end of 1999, including 703 joint-venture and wholly-foreign-owned enterprises, about 20% of all companies in the industry. Of the RMB 28. 5 billion sales last year, domestic brands accounted for 40% while joint-venture and imported products had a 30% share each. (Reporter of HKTDC, 2006). One of the characteristics of China’s cosmetics industry is the prominent presence of foreign capital and production technology.

Lured by the huge market, famous international brands started to establish joint-venture or wholly-owned factories in China in the 1990s, with investment totaling USD 1. 5 billion. These foreign companies, including Procter & Gamble, Johnson & Johnson, Avon, Amway and Revlon of the US, Unilever of the UK, Henkel and Wella of Germany, Shiseido and Kose of Japan, and L’Oreal of France, have captured a fair share of the China market. Meanwhile, other leading international names have also entered the scene. Competition is expected to heat up further in the wake of China’s WTO accession. At present, more than 150 cosmetics enterprises in China have an annual turnover of over RMB 100 million, with eight of them netting more than RMB 500 million. (Reporter of HKTDC, 2006). The challenge for the uture is the opening up of the mass market in the tier-2 and -3 cities across China, while improving the currently narrow margins of many companies. 1. 1. 2 About L’Oreal As one of the biggest names in the make-up industry, L’Oreal runs a massive worldwide operation employing nearly 62,000 men and women of various races, backgrounds and religions across nearly 60 countries, and is increasing its worldwide expansion. Part of the reason for the corporation’s success has been its sensitivity not only to its consumers but also to each and every one of its employees. The corporation has made sure that all their employees have opportunities to develop themselves both personally and professionally.

This commitment by the corporation to take care of its employees has resulted in L’Oreal being rated by European business school students as The Employer of Choice for the year 2006. (L’Oreal China July 11, 2006). With over a century of experience in the cosmetics industry, L’Oreal has established 19 global brands and produces them in 40 factories across the world. These factories are all state of the art and ISO 140001 certified, and all of their industrial sites are audited with the standard SA 8000. (L’Oreal China July 13, 2006). The corporation makes sure that every product that rolls out from their factories complies with its own high standards and meets or exceeds quality and safety standards set by local governmental agencies such as the Food & Drug Administration of the United States of America.

L’Oreal’s success in the cosmetic industry is due not only to the high quality of its products, but also to the corporation’s marketing efforts to make sure their various brands have a strong market presence. There are generally two categories for L’Oreal’s products. The main category is the Consumer product line: its products are normally sold through mass-market retail stores. (Ac Nielsen, 2006). They are competitively priced and are marketed under brands such as L’Oreal Paris, Maybelline New York and Garnier. The second main product line is L’Oreal’s Professional Products: products are designed to meet the high requirements of professional customers, such as beauty salons, stylists and hairdressers.

Since it was established in 1909, L’Oreal has become one of the leaders in the beauty market, providing a wide variety of products for each market segment, all tailored to meet the expectations of its customers. L’Oreal has always believed in a strategy of innovation and diversification. Due to the products’ uniqueness, L’Oreal’s products have become well-known and popular among all ethnic groups, irrespective of gender. The company’s mission is to promote an approach to beauty that is fun, affordable, fulfilling, genuine and generous, while meeting all stakeholders’ expectations by providing a portfolio of deeply diversified ranges of products. (L’Oreal China July 16, 2007).

Its motto is Striving For Excellence: L’Oreal develops its brand portfolio by continuously innovating products while meeting all standards for quality and safety. 1. 2The development of grooming products for men Traditionally, maintaining a good physical appearance has been considered as a female issue. But this perception has evolved in recent years. According to Euromonitor (2004), the demand for men’s grooming products between 1998 and 2003 has grown 27. 5% from USD 12,718 million to USD 16,221 million worldwide (see table 1). This growth implies that male consumers have become more aware of their appearance and willing to spend more money for grooming products. (Facial plastic surgery, 2004).

Table 1: Global Sales of Men’s Grooming Products by Subsector: Value 1998-2003 ( USD million ) product yearMen’s pre-shave Men’s razors and blades Men’s post-shave Men’s bath and shower Men’s deodorants Men’s hair care Men’s skincare Men’s grooming products 19981,544. 65,665. 8 569. 2278. 1 2,683. 11,687. 6 290. 212,718. 5 19991,581. 35,810. 3 589. 2305. 1 2,722. 61,933. 6 368. 213,305. 3 20001,576. 35,853. 4 589. 9316. 6 2,801. 22,099. 3 413. 713,655. 4 20011,563. 75,912. 2600. 0346. 1 2,825. 52,109. 3 415. 413,772. 2 20021,604. 65,986. 0 648. 6417. 5 2,912. 12,145. 4 470. 114,184. 3 20031,777. 76,877. 8 741. 1502. 2 3,369. 02,382. 2 570. 616,220. 7 Source: Euromonitor (2004) Consumption behaviour has also changed in this market.

For example, female members in the family used to be the main buyers for men’s skincare products, because male members were not familiar with the offerings. Nowadays, access to product information is much easier; male consumers now buy the products themselves and tend to know more about them. These changes have pushed the industry to develop more sophisticated products for men; consumers have now more choice as regards men’s grooming products. (China Today, 2007). This trend has been observed in Western-Europe and North-America, and is now expanding to the rest of world. According to Euromonitor (2004), Asia-Pacific is the biggest market in terms of sales, outside Western-Europe and North-America.

The geographical focus of this dissertation will be Mainland China, where cosmetic sales have been growing fast in recent years, especially as regards skincare products (See table 2). Table 2: Retail Sales of Men’s Grooming Products in mainland China by Subsector: Value 2000-2005 RMB million Product yearMen’s pre-shaveMen’s razors and blades Men’s post-shave Men’s bath and shower Men’s deodorants Men’s hair care Men’s skincare Men’s grooming products 2000134. 82657. 728. 1497. 252. 9533. 2529. 64,073. 2 2001134. 42626. 428. 5502. 953. 3533. 4544. 94,064. 1 2002136. 02620. 229. 0517. 354. 1533. 7560. 54,090. 8 2003136. 8 2612. 829. 2527. 2 55. 8 535. 0567. 64,104. 4 2004137. 2 2600. 5 29. 4 536. 1 57. 9 536. 3 577. 7 4,115. 2 2005138. 02562. 029. 3561. 361. 8566. 682. 84,241. 9 Source: Statistic Bureau (2006) According to industry forecasts, the growth of skincare products in Mainland China is expected to be 149% over the 5-year forecast period from 2005 to 2010. (Economic Daily October 10, 2006). Because of the strong potential market growth, existing brands and new entrants are focusing on achieving the highest market penetration. For example, Shiseido, the best well-known brand in Shenzhen, has extended its product portfolio to include a men’s skincare product range. Estee Lauder, also claims that the categories for men’s grooming products have grown three times. (Economic Daily October 12, 2005).

These developments seem to imply that international players are ready to take advantage of future growth. Domestic companies are also entering this market segment. As a result, competition in mainland China is becoming more and more aggressive. L’Oreal has also developed several brands for the men’s skincare market segment. Some brands aim at the mass market, others at the premium market. For the mass market, Men Expert under the group’s core brand, L’Oreal Paris, has been successful in several countries. (L’Oreal China June 13, 2004). For the premium market, the group now owns Biotherm Homme, Lancome Homme and Kiehl’s. The company has introduced Biotherm Homme and Kiehl’s in the domestic market in China.

Biotherm Homme, in particular, has had strong growth in its market share of men’s grooming products, increasing from 1. 4% to 1. 8% over 3 years, from 2001 to 2003 (Biotherm October 4, 2003). The strongest competitors, Shiseido and Kao, rely on their dominant brand awareness, and have established a strong brand loyalty in male consumers in China. In comparison, L’Oreal is weaker in this sector in terms of market share. For example, Kao’s Biore is regarded as one of the pioneers in the local men’s skincare market. Its facial cleaner and body shower gel are best-sellers, with 7. 5% market share of men’s grooming products. Moreover, Shiseido’s Uno has 6. 6% market share, supported by Shiseido’s long history and good reputation with local consumers. Euromonitor 2004). Thus, to compete against established brands and increase its local market share in this fast growing market segment in China, L’Oreal for Men must increase its brand awareness and develop brand loyalty in male consumers in China. 1. 3Research Objectives L’Oreal, with a history spanning over 100 years, and also as one of the earliest entrants into the Mainland China market, has developed substantial experience in brand positioning, brand image, brand promotion and brand protection. In 2005, the L’Oreal Paris Men Expert brand was introduced in China; this brand has helped the company extend its product range of skincare products for men.

This brand brings, on the one hand, increased competition to other cosmetics companies, and on the other hand, an expansion of the market by developing demand and creating exciting opportunities. The market for skincare products for men in mainland China is both familiar and strange to players in the cosmetics industry. It is familiar because it can be treated as an extension of the market for women’s cosmetics, well known to industry players. It is also strange because skincare products for men are quite different from those sold for women. This market segment is open to increasing exploration, and is in constant development. There is only limited theoretical research on the market in China for skincare products for men.

What is available is not sufficient to guide the industry majors, nor new entrants. The research in this dissertation aims at determining how to rebuild the brand strategy of the L’Oreal for Men in Mainland China, and providing a useful reference to other players in the cosmetics and toiletry industry for their further development in this market segment. To achieve this goal, the research objective has been subdivided into the following sub-objectives: 1. Analyze why the Chinese market for skincare products for men offers major opportunities; 2. Elaborate the relative theories of branding and brand strategy, necessary to achieve the objectives of this research; 3.

Explain the current brand strategies of L’Oreal for Men in Mainland China including aspects such as external constraints, trade constraints, internal capabilities, a SWOT analysis, and finally recommend new strategies. 4. Develop a strategic framework for the company to rebuild its brand strategy for the Men Expert brand in mainland China, namely brand repositioning, brand renaming, brand image rebuilding, brand expansion, brand protection, brand crisis management, and others. The research plan is outlined in the following table: Literature review Current performance Internal capabilities (SWOT) analysis External constraints Trade constraints Rebuilding the brand strategy Table 3. Research framework ) 1. 4Scope of research The scope of research of this dissertation is focused on the market environment and current marketing strategies of the L’Oreal product range of cosmetics for men in Mainland China. The research attempts to define a theoretical reference framework for a branding strategy that will facilitate greater market penetration for skincare products for men in Mainland China. The research results are analyzed taking customer’s viewpoints into account, and applying the principles of marketing and brand management to the cosmetics industry, with newly developed skincare products for men as the main target.

Chapter Two: Literature Review 2. 1Brand and brand strategy 2. 1. 1 Brand and brand management Dibb et al (1994) state that a brand is a name, term, design, symbol or any other feature that identifies one seller’s goods or services and distinguishes them from the products of other competitors in the market. Jobber (2004) claims that branding is the process by which companies distinguish their product offerings from the competition. He also suggests that to have strong brands is crucial, because brands can add value to companies, positively influence consumer perceptions of brands, be a barrier to competition, enhance profitability and provide a base for brand extensions.

Moreover, a brand can represent product quality to consumers and thus build up their trust on the products. As a result, building a successful brand is crucial to today’s business. A successful brand can not only help the company earn extra value and purchasing preference from consumers, but also help the company to differentiate itself from its competitors. The discipline of brand management was started at Procter & Gamble PLC as a result of a famous memo by Neil H. McElroy. (Landor, 2001). In other terms: Brand management is the application of marketing techniques to a specific product, product line, or brand. It seeks to increase the product’s perceived value to the customer and thereby increase brand franchise and brand equity.

Marketeers see a brand as an implied promise that the level of quality people have come to expect from a brand will continue with present and future purchases of the same product. This may increase sales by making a comparison with competing products more favorable. It may also enable the manufacturer to charge more for the product. The value of the brand is determined by the amount of profit it generates for the manufacturer. This results from a combination of increased sales and increased price. The annual list of the world’s most valuable brands, published by Interbrand and Business Week, indicates that the market value of companies often consists largely of brand equity.

Research by McKinsey & Company, a global consulting firm, in 2000 suggested that strong, well-leveraged brands produce higher returns to shareholders than weaker, narrower brands. Taken together, this means that brands seriously impact shareholder value, which ultimately makes branding a CEO responsibility. (Business Scotsman July 17, 2001). Principles A good brand name should: •be legally protectable •be easy to pronounce •be easy to remember •be easy to recognize •attract attention •suggest product benefits or suggest usage •suggest the company or product image •distinguish the product’s positioning relative to the competition. Types of brands

A premium brand typically costs more than other products in the category. An economy brand is a brand targeted to a high price elasticity market segment. A fighting brand is a brand created specifically to counter a competitive threat. When a company’s name is used as a product brand name, this is referred to as corporate branding. When one brand name is used for several related products, this is referred to as family branding. When all a company’s products are given different brand names, this is referred to as individual branding. When a company uses the brand equity associated with an existing brand name to introduce a new product or product line, this is referred to as brand leveraging.

When large retailers buy products in bulk from manufacturers and put their own brand name on them, this is called private branding, store brand, or private label. Private brands can be differentiated from manufacturers’ brands (also referred to as national brands). When two or more brands work together to market their products, this is referred to as co-branding. When a company sells the rights to use a brand name to another company for use on a non-competing product or in another geographical area, this is referred to as brand licensing. An employment brand is created when a company wants to build awareness with potential candidates. (Aaker, D. 1996) Techniques

Brand rationalization refers to reducing the number of brands marketed by a company. Some companies tend to create more brands and product variations within a brand than economies of scale would indicate. Sometimes, they will create a specific service or product brand for each market that they target. In the case of product branding, they may do this to gain retail shelf space (and reduce the amount of shelf space allocated to competing brands). A company may decide to rationalize their portfolio of brands from time to time to gain production and marketing efficiencies. (Pengfei Du, 2006). They may also decide to rationalize a brand portfolio as part of corporate restructuring.

A recurring challenge for brand managers is to build a consistent brand while keeping its message fresh and relevant. An older brand identity may be misaligned to a redefined target market, a restated corporate vision statement, revisited mission statement or values of a company. Brand identities may also lose resonance with their target market through demographic evolution. Repositioning a brand (sometimes called rebranding), (Hussey, J. and Hussey. R. ,1997), may cost some past brand equity, and can confuse the target market, but ideally, a brand can be repositioned while retaining existing brand equity for leverage. Brand orientation is a deliberate approach to working with brands, both internally and externally.

The most important driving force behind this increased interest in strong brands is the accelerating pace of globalization. This has resulted in an ever-tougher competitive situation on many markets. A product’s superiority is in itself no longer sufficient to guarantee its success. The fast pace of technological development and the increased speed with which imitations turn up on the market have dramatically shortened product lifecycles. The consequence is that product-related competitive advantages soon risk being transformed into competitive prerequisites. For this reason, an increasing number of companies are looking for other, more enduring, competitive tools – such as brands.

Brand orientation refers to “the degree to which the organization values brands and its practices are oriented towards building brand capabilities”. (Chunyang Qiao, 2005) Problems The problems associated with setting objectives for a brand or product category are: •Many brand managers limit themselves to setting financial objectives. They ignore strategic objectives because they feel this is the responsibility of senior management. •Most product level or brand managers limit themselves to setting short term objectives because their compensation packages are designed to reward short term behavior. Short term objectives should be seen as milestones towards long term objectives. •Often product level managers are not given enough information to construct strategic objectives. It is sometimes difficult to translate corporate level objectives into brand or product level objectives. Changes in shareholders’ equity are easy for a company to calculate. It is not so easy to calculate the change in shareholders’ equity that can be attributed to a product or category. More complex changes in the net present value of shareholders’ equity are even more difficult for the product manager to assess. •In a diversified company, the objectives of some brands may conflict with those of other brands. Or worse, corporate objectives may conflict with the specific needs of your brand. This is particularly true in regard to the trade-off between stability and riskiness.

Corporate objectives must be broad enough that brands with high risk products are not constrained by objectives set with cash cows in mind. (Aaker, D and Joachimstholer, E 2000). The brand manager also needs to know senior management’s harvesting strategy. If corporate management intends to invest in brand equity and take a long term position in the market (i. e. penetration and growth strategy), it would be a mistake for the product manager to use short term cash flow objectives (ie. price skimming strategy). Only when these conflicts and tradeoffs are made explicit, is it possible for all levels of objectives to fit together in a coherent and mutually supportive manner. Many brand managers set objectives that optimize the performance of their unit rather than optimize overall corporate performance. This is particularly true where compensation is based primarily on unit performance. Managers tend to ignore potential synergies and inter-unit joint processes. In China, most consumers tend to buy and trust foreign brands, especially for premium brands in skincare and color cosmetics. There are two main reasons that lead to such consumer behavior. One is that the brand image of foreign brands is much stronger than local brands. The foreign brands build their brand image through media, distribution channels and professional skin-care consultation services.

Those methods are powerful to influence the local customers. The other is that local brands mostly focus on lower-end mass market, where the brand image is relatively low. Therefore, in the market for men’s skincare products, foreign brands seem to have the upper hand relative to local brands, as the market favors foreign brands and female family members usually are the first reference group for male consumers. Brand building Source: Jobber (2004) In terms of brand building, Jobber (2004) suggests 7 factors for success (see figure above). Firstly, the reason why quality is one of the key factors is because in many cases, low quality leads to brand failure.

Secondly, the company needs to develop positioning strategy for brand and introduce it to the right group. To develop the brand positioning strategy, the company must consider the following 6 factors: brand domain, brand values, brand reflection, brand personality, brand assets and brand heritage (Jobber 2004). For example, the slogan of L’Oreal is “because you are worth of it”. The slogan is a good example of brand reflection, as female consumers will feel themselves worth to be more beautiful. The company expects that they will act on their beliefs and buy the products. In addition, due to weak performance or market changes, some brands may need to reposition. As mentioned before, Samsung is the clear example of this.

Besides, to draw attention from consumers, the company should use different communications mechanisms, such as advertising, attractive display or design to promote the brand. Furthermore, brands should be built with a long-term perspective. In many cases, consumers are prepared to pay a premium price to buy brands with a long history such as Chanel and Louis Vuitton. (Porter, M. E. 1998) . Also, usually, being first may give the pioneer brand more chances to form a stronger position in the consumer’s mind than the followers. Lastly, often in the service industry, the staff are regarded as part of brand presentation to consumers. Therefore, internal marketing is essential to the company when planning its brand building strategy. A good training program is the main tool to achieve this.

The transformation of Samsung is a good example of the benefits mentioned above. After repositioning its brand, the brand value of Samsung has incredibly increased, and has even exceeded that of Sony, its main competitor in 2005. The new brand image also influences consumer perceptions in a positive way. The consumers now think Samsung is an international high-tech brand instead of an OEM company. (Solomon, M. , Bamossy G. and Askegaard, S. 1999). This new perception brings quality and trust to consumers as well. Moreover, a successful transformation helps the company increase profitability and provides a base for brand extensions. 2. 1. 2 Brand extension strategy

A strategy is a long term plan of action designed to achieve a particular goal, most often “winning”. Strategy is differentiated from tactics or immediate actions with resources at hand by its nature of being extensively premeditated, and often practically rehearsed. The word derives from the Greek word strategos, which derives from two words: stratos (army) and ago (ancient Greek for leading). Strategos referred to a ‘military commander’ during the age of Athenian Democracy (Encyclopedia Strategy, 2008) Strategy must be adaptable by nature – it cannot be a rigid set of instructions. A simple explanation would be an analogy to a sports scenario.

If a football team were to organize a plan in which the ball is passed in a particular sequence between specifically positioned players, their success is dependent on each of those players both being present at the exact location, and remembering exactly when, from whom and to whom the ball is to be passed; moreover, that no interruption to the sequence occurs. By comparison, if the team were to simplify this plan to a strategy where the ball is passed in the pattern alone, between any of the team, and at any area on the field, then their vulnerability to variables is greatly reduced, and the opportunity to operate in that manner occurs far more often.

This manner is a strategy (Encyclopedia Strategy, 2008). A marketing strategy also serves as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: “Use a low cost product to attract consumers. Once our organization, via our low cost product, has established a relationship with consumers, our organization will sell additional, higher-margin products and services that enhance the consumer’s interaction with the low-cost product or service. A strategy consists of well thought out series of tactics. (Lancaster, G. , Massingham, L. and Ashford, R. , 2002).

While it is possible to write a tactical marketing plan without a sound, well-considered strategy, it is not recommended. Without a sound marketing strategy, a marketing plan has no foundation. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives. It is important that these objectives have measurable results. A good marketing strategy should integrate an organization’s marketing goals, policies, and action sequences (tactics) into a cohesive whole. (Encyclopedia marketing + strategy, 2008). Similarly, the various strands of the strategy , which might include advertising, channel marketing, internet marketing, promotion and public relations should be orchestrated.

Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. (Kessler, C. , 1998) Each group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable. Marketing strategies are dynamic and interactive. They are partially planned and partially unplanned The idea of brand extension is to apply an established brand name to the extended product range. For instance, Biotherm Homme is the brand extension of Biotherm. It is a useful approach to benefit to the established brand, the company, distributors and consumers. (Biotherm August 18, 2008).

To the established brand, it can provide more communication opportunities, related to the introduction of the extension. Also, the company can reduce risks and save costs in comparison with launching a completely new brand to the market. Besides, based on the credit of the established brand, the distributors will have more confidence to stock the new products and the consumers will increase their willingness to try the new products. However, the extension approach may result in failures as well. For example, the characteristics of new products may not suit the original brand. Also the bad publicity about the new brand will influence the original brand. Moreover, the original brand may lose its position if being over-extended.

That is why, when introducing a new cosmetics brand for men L’Oreal announced a specific investment in promoting its brand by opening a research center in China : “L’Oreal, the world’s leading cosmetics company, announced today the opening of a new research facility in China, the Pudong L’Oreal Research Centre, whose main mission will be to conduct and support basic science research to vastly improve present understanding of the structure and behavior of Chinese hair and skin. Located in Pudong, on the outskirts of Shanghai, the Research Centre is the first facility of its type operated by a cosmetics company equipped with a world-class team of chemists and physicists to advance the understanding of the unique properties of the hair and skin of people of Chinese descent. The research complex of 3,000m? will also house product laboratories with expertise in Asian products and consumer products evaluation centers.

L’Oreal will leverage the valuable knowledge that is obtained from the research that is conducted at the Pudong L’Oreal Research Centre to develop innovative and better performing new hair care, skincare and cosmetic products for a growing number of Chinese and Asian consumers worldwide. (L’Oreal June 17, 2005) With more than 98 years of experience in the beauty industry, in 2004 L’Oreal reported consolidated sales of €14,534 million euros. The group has a global workforce of 52,000 employees and maintains a diverse, yet complementary, portfolio of 17 international brands, sold in 130 countries. L’Oreal’s international brands today include L’Oreal Paris, Garnier, SoftSheen.

Carson , Maybelline New York, Laboratoires Vichy, La Roche-Posay, L’Oreal Professional, Matrix, Redken, Lancome, Biotherm, Kiehl’s, Shu Uemura, Helena Rubinstein, as well as Cacharel, Giorgio Armani and Ralph Lauren perfumes; in addition to Yue-Sai and Inneov. L’Oreal is the cosmetics industry’s largest investor in research with a hi-tech industrial approach that guarantees innovative, high-value-added products. (L’Oreal China May 18, 2005) 2. 2. About skincare products for men in China 2. 2. 1 L’Oreal in Asia L’Oreal is the largest beauty group worldwide. According to its financial report, the group achieved double-digit earnings growth in 2004 for the 20th consecutive year (L’Oreal China July 13, 2005). The success of the group is supported by continuous product line development and brand acquisitions.

For instance, to boost sales in Asia, the company has increased its expansion through the acquisition of local brands, such as Shu Uemura from Japan and Mininurse and Yue Sai from China. Those local brands give the company a localized supporting platform to enhance its market strength in Asia. Based on its financial report in 2004, the like-for-like growth of Asia was +17% (L’Oreal China July 23, 2005). Shu Uemura in particular has helped the group increase sales in Japan and in China. On the other hand, the Mininurse and Yue Sai acquisitions have also become the strong foundation to access the local market and increase sales in China. 2. 2. 2 The development of men’s skincare products market in mainland China Market trends Gender-specific awareness:

Traditionally, Chinese men rarely use skincare products; they thought that such products were only for women. In the past decade, however, as a result of the influence of the media, such as fashion magazines and fashion shows, men have gradually developed a gender-specific awareness. They are being educated that the skin types between men and women are different and they need their own sophisticated products. The young, in particular, accept that skincare is fashionable, and are willing to spend time and money to take care of their appearance. Changing attitudes: In mainland China, men often use skincare products that belong to female family members.

However, they are gradually changing their attitudes and now feel comfortable to buy their own specific products. The best evidence of this is the increase in volume of the market for cosmetics for men. According to Euromonitor (2004), men’s skincare products was the most active performer in men’s grooming products, with a growth rate of 59% to RMB 73 million in 2003. Also, in terms of their share of value within men’s grooming products, men’s skincare products in 2003 nearly doubled its value share from 1998. (China Today February 16, 2004) Increased competition: Men’s skincare products were introduced to the local market at the end of the last century. Initially there were few brands of men’s skincare products.

But with the dramatic growth of the market after 2000, more and more brands have entered this market segment. For example, ClarinsMen, Shiseido for Men, DHC for Men were introduced to the market after 2000. ( CCTV News ,2004) Product extension: Initially the product range of men’s skincare products was very narrow, focused only on skin cleaners. As demand from consumers grew, both premium brands and mass brands have extended the product range from cleaners to post-shaving, anti-aging, oil control and even body care lotions. The impact of market trends A review of the market trends mentioned above show that they have had a strong positive impact on cosmetics companies operating in China.

Firstly, the change in attitudes has boosted the sales of men’s skincare products in Taiwan, with strong and constantly growing demand. Secondly, this remarkable growth has encouraged more and more brands to enter the industry. Thirdly, this not only reassures sales confidence to existing brands but also pushes them to develop a wider product range to meet the growing demands. (CCTV News, 2005) In spite of being a very traditional society, Chinese culture is also undergoing a remarkable transition. This has led to a growing preoccupation with personal care and hygiene, together with a voracious appetite for western-style goods – conditions that should ensure further growth for western cosmetic products, Euromonitor believes.

Amongst the categories that have shown the most growth in recent years, both men’s grooming products and skincare have been the shining stars. By far the best performance has been men’s grooming, which, although developed from a very small base, has seen a plethora of product launches backed by big ad campaigns. Men’s products are even starting to register in the booming skincare sector, showing the first significant sales ever in 2004. Overall, skincare is now the most valuable category in the China cosmetics and toiletries market, accounting for 38 per cent of total sales last year, Euromonitor says. Key to this growth has been the flourishing anti-aging and nourishing facial care product market.

Characteristic of the overall evolution of the market, this category has also seen particularly significant growth in the upper-mass market segment, where high prices make it a key target for manufacturers. The fashion for whiter skin in China has also prompted significant growth in the sunscreen market. Sunscreen products, and skincare products that incorporate SPFs, saw a 14% increase in sales, also due to the increasing awareness of the dangers associated with sun exposure. One category that still has not taken off, and which Euromonitor is tipping for expansion, is that of deodorant. Current consumption is largely limited to urban males who participate in sporting activities, suggesting the potential for diversification is enormous. Looking at the overall business picture it is clear that the market is still fragmented.

For this reason, large western companies have been able to enter the market and quickly establish themselves as the leading players. This situation leaves the domestic players out in the cold. Currently the largest player is Jiangsu Longliqi Group, with an overall market share of less than 2 percent. Chapter Three: Methodology 3. 1 Research strategy The overall aim of this research is to define a framework for rebuilding the brand strategies of L’Oreal for Men in Mainland China, and to recommend a branding strategy that will accommodate new profit zones successfully without weakening the corporate brand. Firstly, the reasons why skincare products for men are becoming more and more popular in China will be described. A case study is used to identify the key factors.

Then, the theories of brand and brand strategy are introduced, using the descriptive method and quantitative data collection methods to analyze relevant materials to show the expansion and extension of L’Oreal Paris, and more specifically the development of skincare products for men in China. Throughout the research, two philosophical approaches are followed: the positivist, and the phenomenological paradigms (Easter by-Smith e. a. ,1991). Research is carried out using the inductive and the deductive approaches, applying three methodologies, namely descriptive and qualitative methods, as well as quantitative data collection methods (Gillham, 2000) to analyze the materials from relevant books, journals, reports and the Internet. 3. 2 Case study Since some of the key areas of this research are to seek answers to the how and the why, the case study method was considered to be the most useful and appropriate research method.

According to Yin and Bradshow (1999), case studies can be used to provide an explanation of an observed phenomenon and to demonstrate understanding of the subject of investigation in its context and environment, when it relies on in-depth evidence that is evaluated on the basis of analytical generalizations. (Yin,1989). In this research, multiple case studies were employed as part of the theroretical approach, as mechanisms to resolve research questions. The case studies were divided into two parts: a successful brand rebuilding section and a failure brand rebuilding section. The information was collected from a number of sources, including the press, electronic data, internet, company profile, reviews of ompany history, annual reports, etc. The materials chosen were those containing considerable detail of the branding strategy of companies. 3. 3 Research approach Two approaches are used in this research: the deductive and the inductive approach The deductive approach starts from general ideas (such as a theory, laws, principles) and using them as a basis, specific hypotheses are formed which can then be tested in order to support the general ideas. If the hypothesis is supported, it may be deduced that the intial (general) idea was indeed correct. If not, it is rejected. The inductive approach starts with specific situations — observations of individual cases, for example.

Based on an accumulation of such observations, a general theory can be built that explains most or all of the observations. The inductive approach is often compared to what detectives do in police work. They gather as much small evidence and information around the place of the crime as possible (specific things) and pin down a motive and a murderer (theory). (Gillham, 2000) =3. 4 Research philosophy This dissertation makes use of two research philosophies, the positivist and the phenomenological paradigms (Easterby-Smith e. a. , 1991). The following tables show the main features of these two philosophies: 3. 4. 1 Basic beliefs Error! Objects cannot be created from editing field codes. (Easterby-Smith e. a. , 1991) 3. 4. 2: Researchers should Error!

Objects cannot be created from editing field codes. (Easterby-Smith e. a. , 1991) Please explain holism as shown above 3. 4. 3: Preferred methods include Error! Objects cannot be created from editing field codes. 3. 5 Methods and analysis: 3. 5. 1 Descriptive method The descriptive method of research was used for this study. Creswell (1994) defined the descriptive method of research as gathering information about the present existing condition, with emphasis on describing rather than on judging or interpreting. The aim of descriptive research is to verify formulated hypotheses that refer to the present situation in order to elucidate it. The descriptive approach is quick and practical.

Moreover, this method allows a flexible approach, thus, when important new issues and questions arise during the study, further investigation may be conducted. Descriptive research is mainly concerned with describing the nature or condition and the degree in detail of the present situation. This method is used to describe the nature of a situation, as it exists at the time of the study and to explore the cause/s of particular a phenomenon. This method is useful to obtain an accurate profile of people, events or situations. To apply this method, it is essential that the researcher already has a clear view or picture of the phenomena being investigated before the data collection procedure is carried out.

This dissertation has used this research method to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. 3. 5. 2 Quantitative data collection methods Quantitative data collection methods are centered on the quantification of relationships between variables. Quantitative data-gathering instruments establish relationship between measured variables. When these methods are used, the researcher is usually detached from the study and the final output is context free. Measurement, numerical data and statistics are the main substance of quantitative instruments. With these instruments, an explicit description of data collection and analysis of procedures are necessary.

An approach that is primarily deductive reasoning, it prefers the least complicated explanation and gives a statement of statistical probability. The quantitative approach is more useful for the detailed description of a phenomenon. It basically gives a generalization of the gathered data with tentative synthesized interpretations. (Research approach, 2001) The quantitative approach is useful because it helps the researcher to prevent bias in gathering and presenting research data. Quantitative data collection procedures are based on the epistemological postulations that reality is objective and unitary, which can only be realized by means of transcending the individual perspective.

This phenomenon in turn should be discussed or explained by means of data analysis gathered through objective forms of measurement. The quantitative data gathering methods are useful especially when a study needs to measure the cause and effect relationships evident between pre-selected and discrete variables. The purpose of the quantitative approach is to avoid subjectivity by means of collecting and exploring information which describes the experience being studied. Quantitative methods establish very specific research problem and terms. The controlled observations, mass surveys, laboratory experiments and other means of research manipulation in qualitative method makes gathered data more reliable.

In other words, subjectivity of judgment, which is not needed in a thesis discussion, can be avoided through quantitative methods. Thus, conclusions, discussion and experimentation involved in the process are more objective. Variables, both dependent and independent, that are needed in the study are clearly and precisely specified in a quantitative study. In addition, the quantitative method enables longitudinal measures of subsequent performance of the respondents. Fryer (1991) noted that qualitative researchers aim to decode, describe, analyze and interpret accurately the meaning of a certain phenomena happening in their customary social contexts.

The focus of the researchers utilizing the framework of the interpretative paradigm is on the investigation of authenticity, complexity, contextualization, mutual subjectivity of the researcher and the respondent as well as the reduction of illusion. (Research approach, 2001) 3. 5. 3 Qualitative Methods. Contrary to the quantitative method, the qualitative approach generates verbal information rather than numerical values (Polgar & Thomas, 1995). Instead of using statistical analysis, the qualitative approach utilizes content or holistic analysis; to explain and comprehend the research findings, inductive and not deductive reasoning is used.

The main point of the quantitative research method is that measurement is valid, reliable and can be generalized with its clear anticipation of cause and effect. Being particularistic and deductive in nature, the quantitative method is dependent on the formulation of a research hypothesis and confirming it empirically using a specific data set. The scientific hypothesis of a quantitative method holds no value. This means that the researcher’s personal thoughts, subjective preferences and biases are not applicable to this type of research method. “Don’t try to cram your data into an unsuitable theoretical framework, but think for yourselves! “(Gillham, 2000) Qualitative methods enable researchers: )To carry out an investigation where other methods (such as experiments) are either not practicable or not ethically justifiable b)To investigate situations where little is known about what is there or what is going on (more formal research may come later) c)To explore complexities which are beyond the scope of more ‘controlled’ approaches. d)To get ‘under the skin’ of a group or organisation to find out what really happens – the informal reality which can only be perceived from the inside e)To view the case from the inside out: to see it from the perspective of those involved f)To carry out research into the process leading to results (e. g. how reading standards were improved in a school) rather than into the ‘significance’ of the results themselves (Gillham, 2000) 3. 6 Soundness of the Research:

Both Easterby-Smith(1991) and Gillham (2000) justify the soundness of this research methodology. First of all, it provides very rich data and produces theory, which allows a close relationship between data collection, theory construction, and analysis ; it is particularly suitable for areas where theory is sparse or highly abstract ; it is also particularly suitable for certain similar research subjects; and it can be relatively inexpensive. The use of different methodologies, approaches and techniques in the same research, which is also called Trangulation, makes you analyze the data in a right way, and makes sure that all the methods come to the same conclusion. (Saunder, Lewis and Thornhill, 2003).

This dissertation adopts the multi-method approach by using information from interviews, secondary information from company reports and other secondary information from journals, newspapers and some important books. 3. 7 Conducting a literature review and analysis A literature review is an account of what has been published on a topic by accredited scholars and researchers(Dena Taylor, 2007). Occasionally the author will be asked to write one as a separate assignment, but more often it is part of the introduction to an essay, research report, or thesis. In this research, the purpose of the literature review is to convey to the reader what knowledge and ideas have been established on a topic, and what their strengths and weaknesses are. As a piece of writing, the literature review is defined by a guiding concept (e. g. the research objective, the problem or issue discussed, or the argumentative thesis). It is not just a descriptive list of the material available, or a set of summaries. Besides enlarging knowledge about the topic, the literature review demonstrates skills in two areas: information seeking (the ability to scan the literature efficiently, using manual or computerized methods, to identify a set of useful articles and books); and critical appraisal (the ability to apply principles of analysis to identify unbiased and valid studies. ) Thus, a literature review must do the following: 1. be organized around and related directly to the thesis or research question being developed 2. ynthesize results into a summary of what is and is not known 3. identify areas of controversy in the literature 4. formulate questions that need further research 3. 8 Research limitations: According to Easterby-Smith(1991), while many benefits can be reaped from the methodologies described above, there are also limitations, such as: pre-understanding may bias the collection of data; the researcher can filter, misinterpret or unconsciously misunderstand the respondent; the information and data from the secondary data may not be accurate; the data maybe old and out of date; the sample used to generate the secondary data maybe small; the company publishing the data may not be reputable and so on .

These limitations are taken into account in this research. Chapter Four: Analysis of the Current Brand Strategy of L’Oreal for Men In this part, the current brand strategies of L’Oreal for Men in China will be discussed from 3 aspects: external environment, internal capabilities and trade constraints. 4. 1. External Environment Analysis In the following, the PEST framework will be used to analyze the major influences in the macro environment in China. Johnson, Scholes and Whittingtion (2005) point out that the importance of a PEST framework is to look at the future impact of environmental factors which may be different from their past impacts. Economics

As the living standard improves, people pay much more attention to appearance and figure, in addition to health. After 20 years of expansion, since 1980s until 2004, the total output value of China’s beauty industries has risen from RMB 2 billion to RMB 200 billion, increasing by 100 times. This evolution has taken place in stages: from mid-1980s to the late 1990s, (the development of an industrialized product economy); from the late 1990s to 2004 (the advent of the sci-tech economy); and since 2005 until now (the operation-oriented knowledge-capital economy). (Mason, S. , 2002) China’s beauty industry has grown at an annual rate of over 15% since 2000. In 2006, total output value reached RMB 240 billion, with a customer base exceeding 16 million.

The number of beauty centers approached 1. 8 million in 2006, rising 20% from 2005; 93% of these centers are privately-operated. However, per capita spending on beauty remains low when compared to developed countries. China’s beauty industry still has a large development potential. Industry specialists forecast that the total output value of China’s beauty industry will exceed RMB 300 billion by 2010. (Reporter of Cosmetic design, 2008) Market competition is mainly focused on traditional beauty & hairdressing services such as whitening, macula removing, and breast enlargement, weight loss, hair dyeing, hairdressing and SPA (Mattews, I. ,1997).

These services are closely related to the daily needs of people, and this ensures their growth potential, on account of the country’s large population. Industry players can capture market share as long as they constantly seek innovation and follow market trends. In view of the increasingly fierce competition in beauty products for women, industry players have turned to beauty products for men, which so far have experienced less competition and are becoming a popular trend internationally. The current offering of male cosmetics products include: perfume, after shave lotion, shaving cream, hair-care & skincare products, and others. Products for men have set a foothold in the cosmetics markets during the past 3 years, with brands originating mainly from Europe and U. S.

This market segment is likely to expand and extend rapidly, as men who take care of their appearance will move from cosmetics to nutrition, physical therapy, multi-purpose services and organic raw materials. The demand for beauty professionals is leading to an increased demand for beauty education professionals. The need for training in non-medical and medical beauty skills will support the development of qualified professional teachers; higher quality training will also result in a quality upgrading of beauty centers. Beauty professionals will be expected to master modern knowledge & skills applied to beauty enhancement, to understand the development and orientation of the beauty industry, and to show experienced in operations and management. Social

The market trend analysis above shows that the social value of men’s skincare has increased over the period considered. During the past decade, cosmetics education campaigns through the media have succeeded in removing men’s perception that skincare is a “girly thing”. (Market report, 2002). Nowadays, the use of skincare products by male consumers has been generalized, and is considered quite “manly”. Metrosexual men, a term coined to describe the affluent male population in large cities, use skincare products quite regularly, and quite naturally, to maintain their appearance. Besides the media, distribution channels also play a key role to promote men’s skincare products.

The growing numbers of chain drug stores and department stores have given more chances for brands to promote themselves and enhance brand awareness. For example, the open shelves in c

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