Strategic Management and Swot Analysis
Contents: I. INTRODUCTION a. Brand Extension for L’OREAL II. LITERATURE REVIEW a. Ansoff Matrix b. SWOT Analysis c. BCG Matrix III. REFLECTIVE STATEMENT IV. REFERENCES Brand Extension for L’OREAL Brand extension takes place whenever a company wants to enter a new market by using the name of one of its existing brands, rather than using a new one. Especially the luxury sector takes advantage of its well-known brand names when it comes to launching new products into new markets (Kapferer, 2008, p. 295).
The popularity of brand extension strategy is due to the belief that it leads to higher consumer trial than the use of a new brand name because of the awareness levels of the brand name being leveraged (Keller, 2003, p. 582). L’Oreal as a global brand is known for high quality cosmetic goods like make-up and hair care products for women, men and kids. Its mission “Beauty for all” connects with the company’s slogan “Because you’re worth it”, which is used in nearly every single L’Oreal advertisement.
To identify all the different products of the brand’s portfolio they utilize the same logo for all of their goods by adapting to the specific field (L’Oreal homepage, 2012). Considering L’Oreal’s image of good appearance we decided to extend the brand by entering a new market with a new product. The diversification L’Oreal shoes should be placed in the customer products area with a target group of professional women. The leather shoes should be available for middle to high income consumers. Though the price is affordable for this group of customers the quality is still high.
With this strategy we want to cover the needs of the existing customers and reach out for new potential clients. On one hand we intend to increase our sales and profits; on the other hand we use the good reputation of L’Oreal to get our new product connected to the values of the umbrella brand. To make sure that we created a new logo keeping the traditional L’Oreal letters with a reference to the shoe sector as shown in (image 1). Meanwhile, we forecast that L’Oreal shoes can strengthen the global brand in future.
Image 1: Traditional L’Oreal letters mentioning the new sector Brief Literature Review Before putting theory into practice every company needs to consider its internal and external situation. In this part, three marketing theories will be applied to L’OREAL. These are: The Ansoff matrix, the SWOT analysis and the BCG matrix. Ansoff matrix is a model that helps firms to outline the range of marketing options open to them (Riley, 2012). L’Oreal shoes classified as a diversification was made according to the Ansoff matrix.
A diversification is described as a new product for a new market. L’Oreal added shoes to its existing product range, left the skin and hair care market and entered the new footwear area. Image 2: Ansoff matrix With the SWOT Analysis we could discover our strengths and weaknesses, and identify both the opportunities and the threats for L’Oreal. In other words, as Renault stated “A SWOT is to reveal positive forces that work together and potential problems that need to be addressed or at least recognized”.
Comparing the strengths to the weaknesses for L’Oreal shoes we have to mention that the variety of suppliers and the competitive quality price relation of the product overweight the missing expertise in the shoe sector. The opportunity of using the strong image of L’Oreal and the fact that there are no other middle price shoes in our own umbrella brand product range can be used to attract new customers. Taking into account that the economic situation has changed and people are not willing to spend as much as they did before the recession took place (Price, 2012).
Using the BCG Matrix a company can recognize if a product is profitable or not. It can be helpful if a company has to decide whether investing additional resources in a certain product or services. There are four categories developed to the relative market share and market growth rate: star, cash cow, poor dog, question mark (Lu ; Zhao, 2006). A star is a product with a high market share and a high market growth rate. With this kind of product the company gains revenue. Therefore, a star can be used to support weaker sectors. These products with a low market growth rate and a low market share are called poor dogs.
Cash cows are well-established with a high market share but as the market growth rate is low the company has to be aware of limited opportunities. Those limitations do not exist for question marks as they are located in high growth markets with a low market share. These unknown new products like L’oreal shoes do have the potential to establish and become stars or even cash cows. In future they could be able to promote weaker sectors and create a trade-off (Lu ; Zaho, 2006) ;;; I found another website to reference these two paragraphs From which website did you get this?! gt;;;; According to the Internet Center for Management and Business Administration (2012) the BSG matrix is limited. The different products in a company’s portfolio cannot be taken as independent; they are related to each other. This has to be taken into consideration when it comes to the question whether you keep or you eliminate a product. Reflective Statement To develop the topic we firstly did some research about the definition of brand extension and L’Oreal as a company.
We discovered that creating a brand extension for L’Oreal is a difficult task as the umbrella brand already covers a lot of sectors in the beauty and care area. We thought about a product that would fit into the enterprise’s image of beauty and decided to choose shoes for middle-aged professional women. We looked into several marketing theories to support our decision such as the SWOT analysis, Ansoff matrix, and the BCG matrix. However, we discovered that The SWOT analysis is the most helpful theory for our research.
Since L’OREAL shoes classified as diversification, the SWOT analysis helped us to discover our brand’s current strengths and weaknesses; as well as the potential opportunities and threats that we might find in the future. This made it easier for us to set our brand’s short term and long term goals. References: Collett, S. (1999). Business Planning, E-journal of SWOT Analysis, 33(29), 58. Retrieved November 05, 2012, from http://jr3tv3gd5w. search. serialssolutions. com/ Hussey, D. (1999). Strategic Change, E-journal of Igor Ansoff’s Continuing Contribution to Strategic Management, 8(7), 05.
Retrieved November 06, 2012, from http://onlinelibrary. wiley. com/doi/10. 1002/(SICI)1099-1697(199911)8:7%3C375::AID-JSC462%3E3. 0. CO;2-U/pdf Kapferer, J. N. (2008). The New Strategic Brand Management: Advanced Insights and Strategic Thinking. London: Kogan Page. Keller, Kevin L. (2003). Strategic Brand Management. (2nd ed. ). Upper Saddle River, NJ: Prentice Hall. Lu, H. & Zhao, L. (2006). INTEGRATING GIS AND BCG MODEL FOR MARKETING STRATEGIC PLANNING. 14(18), 02-04. Retrieved November 06, 2012, from http://iceb. nccu. edu. tw/proceedings/APDSI/2006/718-725. df Price, E. (2012). A reduction in European over-consumption will be undone by any Eurozone solution. Retrieved November 01, 2012, from http://blogs. lse. ac. uk/europpblog/2012/07/23/eurozone-over-consumption/ Riley, J. (2012). Ansoff Matrix. Retrieved November 07, 2012, from http://www. tutor2u. net/business/strategy/ansoff_matrix. htm Renault, V. (n. d. ). SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats. Retrieved November 08, 2012, from http://ctb. ku. edu/en/tablecontents/sub_section_main_1049. aspx
