History And Overview Of Frances Beauty Industry Economics Essay

History And Overview Of Frances Beauty Industry sparings EssayFrance is ranked 16th in the spherical free-enterprise(a) piece up two places from last year and demonstrating a number of warring intensity trains, such as an infrastructure that is ranked second in the world, a healthy determineforce, a high quality of education, a sophisticated craft culture and loss leadershiphip in the argona of technological regeneration. On the differentwise hand, as indicated in the Global matched Report, France suffers from high non employ tote costs and strict rules on hiring and firing and poor wear employer dealing. there is as soundly a governGDP Per Capita, (US$), 2007..$41,511.2GDP (US$ billions), 20072,560.3GDP (PPP) as sh atomic number 18 (%) of world total, 2007.3.17Total Population (millions), 200760.9Median Age 39Land Area Largest land argona of all EU membersUnemployment 7% 2008Current chair Nicolas Sarkozyment bud wee-wee deficit which is above the EU thresh old of 60% and national savings rates ar execrable. (Global Competitive Report, 2008/09 p.19) Although France is before long in a good position in 16th place, the world-wide scrimping is changing and new competitors are closing in. This paper give examine the challenges that France and their violator constancy are facing.France key facts spring The Global Competitive Report 2008-09 award AEconomic Per variety showanceFrances Gross internal Product (GDP) has aligned with the atomic number 63an number somewhat, although, as the graph beneath illustrates, France has fared bankrupt than the EU within the last year. reveal BThis chart created on the Eurostat website, compares Frances Real GDP with the European Union (EU) average. Real unadulterated domestic product (GDP) is a macroeconomic measure of the size of an economy ad saveed for price changes (that is, adjusted for changes in the shelter of m hotshoty flash or deflation.) source Real gross domestic product. Web. ttp//en.wikipedia.org/wiki/Real_gross_domestic_product. Legend secular = FranceGreen = EU (27 countries)sourcehttp//epp.eurostat.ec.europa.eu/tgm/graph.do?tab=graphinit=1toolbox=typelanguage=enpcode=tsieb010plugin=0http//epp.eurostat.ec.europa.eu/tgm/graph.doFrances Gross Domestic Product per capita (PPP US$)The human beings ontogeny report and the Global Competitive Report demonstrate that Frances purchasing power parity (PPP) has come downd since 1993 to 33,000 plus/minus.Human Development Report 2009 Exhibit CHuman development index 2007 and its comp matchlessntsGDP per capita (PPP US$)HDI social rank state20071Norway53,43312Australia34,9233Iceland35,7424Canada35,8125Ireland44,61316Netherlands38,6947Sweden36,7128France33,6749Switzerland40,65810 lacquer33,63211Luxembourg79,485source http//hdrstats.undp.org/en/indicators/91.html accessed March 29 2010source Global Competitive Report 2008/09Exhibit DInnovation MeasuresThe Global Competitive Report says Although less-advanced countries notify shut away break their productivity by adopting actual technologies or making incremental improvements in otherwise areas, for countries that drive reached the innovation stage of development, this is no longer sufficient to increase productivity. Firms in these countries must design and develop cutting-edge products and processes to brinytain a competitory edge. (Global Competitive Report, 2008/2009, page 6)Exhibit D shows France in blue is ahead in the percentage of GDP for RD. This hides the fact that Germ both one of Frances competitors which we go forth discuss afterwards in the enhancive diligence analysis, glide bys a con attituderable add more than France. Although France in blue is ahead in the percentage of GDP they spend on RD a nonher important aspect of innovation is patents. Exhibit E shows that Germ each has double the amount of patents. Gross Domestic Expenditure on RDExhibit DFrance = BlueEU = GreenGermany has double the amount of pa tents than FranceExhibit EAnalysing the date from the Global Competitiveness Report it is clear that France is suffering in the ranking for innovation and sophistication as illustrated under.Exhibit F France is losing tail assembly Germany who is winning ongoingly in 4th placeExhibit F Innovation and sophistication factorsAccording to usher, a nations competitiveness depends on the efficacy of its assiduity to innovate and upgrade. Companies gain improvement against the worlds best competitors because of pressure and challenge. (Porter, On Competition, p.171, 2008) In Exhibit F France is holding steady in fourteenth position an explanation for their lack of improvement is shown in Exhibit G state of forgather development, where France is low and their rate of patent development is low compared to its competitors, for example, Germany, Japan and the U.S.A.source Global Competitiveness Report 2008-2009Exhibit GFrance P E S T depth psychologyPOLITICAL LANDSCAPEOverview french political transcription back end be described as semi-presidential form of democratic republic. France has improved considering the rule of law and accountability. France ranks in the 91.3 percentile on voice and accountability as of 2007, which is an improvement from 2002, when it was ranked in the 84.1 percentile. (Datamonitor (2009). France inelegant Analysis Report. capital of the United Kingdom British Library. Page 3)However, France is dumb considered as a highly centralized awkward and the elite group is strongly convolute in the state and integrated sectors. Moreover, corruption seems to be one of the of import rejoinders in French politics.Strengthspolitical stability can be considered one of Frances strengths. Elections are fair and transparent. Although initially the socialist parties were more popular and accordingly winning the elections, belatedly the majority of the society has voted for pro- correct parties. Before the elections president Sarkozy make fol lowing promises a reduction of unemployment, flexible labour laws, pension disentangle and tax changes.Frances approach to preventing terrorism is considered to be one of the most strong in Europe. However, it did not come free and the price was limiting well up-mannered liberties. (Datamonitor (2009). France Country Analysis Report. London British Library. P. 14)WeaknessesAlthough the current French judicature is definitely pro-reform, the pillow of French society seems to be opposed to the changes. For example, the governing wants to simplify public governing and bureaucracy, promote the competition in the commercialise as well as make minimum wages flexible. (www.lemonde.fr)(EWA I sort of k presently what you mean exclusively if can you embarrass a couple of the changes that the government want to bring in. I understand that the citizens would be un go awaying to accept any change that would lower wages solely does the French government want to lower wages that woul d also go against what Porter says is the point of being competitive. The tribe is un forgeting to adopt any measures that cause a ebb in wages. One of the minds would be the decline in purchasing power of the French population. As already mentioned in exhibit B above France is already showing a decline in GDP (PPP US$) per capita. Improving the pension system and modernizing the labour commercialize has been delayed because of the unwillingness of French citizen to accept change. In cosmopolitan, the reforms are being delayed. Moreover, the liberalization process is also not as energizing as hoped for, in effect, president Sarkozy is losing his popularity. In regional elections on twenty- maiden March the Socialist Party gained 54 % age UMP 35 % only. (Web. . Accessed March 15 2010).OpportunitiesImproving French foreign policy has been one of president Sarkozys main goals. So far he has been successful. France has returned to NATOs military command. It has dish outed US in isolating Iran because of its nuclear power. In commonplace, France has been lately precise sp uprightly in international relationships. With no doubt improved foreign relations will suspensor the economic relations with these countries.French National convention composition Source Datamonitor (2009). France Country Analysis Report. London British Library. P. 39.President Sarkozys administration has also finally improved French bureaucracy which straight off should be more transparent and efficient.ThreatsIn France, the government has continued to revive a prominent role in patronagecompared to many other EU countries. (Datamonitor (2009). France CountryAnalysis Report. London British Library. Page 16)A concentration of elite citizens in power helps corruption practices and also help to influence government policies which in effect can block development. (Political intelligence An Introduction, Michael G. Roskin, June 2005, P. 79) Moreover, since the government becomes mor e unpopular while trying to implement the reforms (can we get a list of the reforms then I can weave that into this paragraph pension system reform, health care system reform, public administration reform, reform of work conditions regulations un contrat unique, reform of public finances, tax system reform, companionship tax reform) there is a risk that it will become democrat to gain power venture. There have been a number of protests against reform measures.ECONOMIC LANDSCAPEOverviewThe International Monetary Fund (IMF) has stated that France approach a 3 % fall in growth in 2009. The decrease of income and wages have with rising unemployment will affect domestic consumption. Because of the impedance implementing Sarkozys reforms is not going smoothly. Frances credit rating might be affected. That will increase the cost of funding for future governments and concern enterprises.(Datamonitor (2009). France Country Analysis Report. London British Library. P. 14)StrengthsPresi dent Sarkozys pro-reform approach affected in general review of public policy. This caused the improvement in public services and so reducing the public costs.French infrastructure is one of the best in Europe. There are over 10,000 km of well-maintained highways in France. That is better ending than in Germany or UK. French railway network is also very well established. France is seen as global air transport hub with 27 airports. The foremost infrastructure network enables France to offer international investors excellent conditions for doing business and also drive the overall economic engine of the nation. ((Datamonitor (2009). France Country Analysis Report. London British Library. P. 18)WeaknessesFrench external debt is above the EU limit of 60% and most probably will stay this way. Moreover, the share in exportations in the Eurozone has fallen by 16% during 1999-2007. (Datamonitor (2009). France Country Analysis Report. London British Library. P. 18)As the reasons for this situation can be named low level of industry specialization and poor price competitiveness of French industries. Moreover, Frances effective corporate tax burden is high than EU average.OpportunitiesThe privatization of telecommunications, electricity, gas, postal services, rail freights as well as the services sector has been in place for a while. The government has also introduced stimulus plan. The hope is that increased investment outlay will stimulate domestic consumption.ThreatsThe financial system in France is still significantly being regulated and administrated. What has helped French economy straight to acquire from global crisis, might create a enigma in the future. geomorphological reforms in public enterprises, pensions and the constitution ask to be completed now otherwise France will lose the competition with countries with more liberalized systems like UK or Germany.SOCIAL LANDSCAPEOverviewWhile social structure considered an aging population and relatively h igh unemployment rate seem to be main answers. As well as deficient educational system (Global competitive report, Porter and Schwab, p.19) describes the education system as a whole is high/strength but the flexibility of the labour force is the problem as well as poor labour relations) this partly can be darned for high unemployment rate. Unemployment rate was 10 % in January 2010. Web. Accessed March 15 2010. periodical unemployment rates August 2008 January 2010StrengthsTaking into consideration social parameters in general France has been sooner successful. For example, life expectancy at birth is in France 80 years in term of gender adequateity there is a positive social climate for women.France has one of the highest birth rate in Europe. Unlike in many other European countries although the rate is decreasing, France is still doing well. Frances birth rate of about 1.8 children per woman in 2006 makes it the only European country with the possibility of maintaining its current population. (Datamonitor (2009). France Country Analysis Report. London British Library. p. 22)WeaknessesAn aging population and early retirement are serious issues on French social landscape. These issues have not been given enough financial aid by policy makers which now may cause big problem of additional government expenditure. Low labour participation is another issue as well as the fact that French workers work relatively low hours yearly.Source Web. Accessed March 15 2010Another challenge is educational system which has not kept with changing industrial order.OpportunitiesNew plot Active Solidarity Revenue (RSA) has been introduced by French government. The aim is to prevent unemployment and poverty. The course will persuade people to look for a job rather than living off social benefits.ThreatsFrances wage hikes have not seen an equal increase in productivity or increase in output. Thus, wage increases have become unrealistic.(Datamonitor (2009). France Country A nalysis Report. London British Library. P. 22) By continuing this policy while the wages are increased but the productivity is not increasing is a serious threat for economic growth. Moreover, France is losing competition on global market where products from emerging Asian countries are present.French government has passed new rules regarding immigrants who want to live in the country or acquiring French nationality. On one side it will help to stop illegal immigrants, however on the other side it will also put off well educated foreigners to work in France.TECHNOLOGICAL LANDSCAPEOverviewRD situation in France is satisfying, although far from perfect. The level of public investment in RD is around 2 % of GDP while EUs aim is 3 %. Moreover, common soldier sector funding is still not pleasing. Public involvement is declining and orphic sector funding still not increasing. This situation might cause problems in future. To improve this condition the path for Industrial Innovation has been established. Its main task is to support innovation in large companies. Web. Accessed March 15 2010StrengthsWhat can be considered as main strength is relatively large number of patents received by France. France ranks after part in the world in terms of number of patents granted for its innovation. (Datamonitor (2009). France Country Analysis Report. London British Library. P. 24)This situation is caused by the approach of back-to-back French government to RD. Research and higher education are priorities of the current government. Large amount from yearly budget is dedicated to support these domains. Political commitment to RD is therefore high in France.WeaknessesAlthough RD is considered as an important issue by politicians Frances expenditure is at 2 % of GDP only. For comparison it is 2.68% in US and 3.18 % of GDP in Japan.Moreover, the spending on RD as a percentage of GDP by French government is declining. In addition, the enter from private sector is still not rewa rding. This situation will without any doubts influence future technological development of the country.OpportunitiesFrench national interrogation and innovation policy aims to promote innovation, increase the participation of private sector, and improve the cooperation among public and private sector. The goal is to increase the spending on RD to 3 % of GDP and one third of this amount should come from private sector.ThreatsFrance lacks the coordination and one clear policy regarding RD sector. There are many investigate and knowledge institutes which objectives are overlapping each other. One united dodging is needed. Furthermore, there is lack of efficient communication between seek institutes and private companies, therefore resources are not being used fully.Moreover, the lack of the fraternity between the producers and consumers of the technology can be observed. Public RD centres very often do help in application of new technology in industry. In effect, efforts and c osts will be duplicated.Beauty products in France cluster analysis1/ Description of the cluster, cluster size and performanceThe nonfunctionals and toiletries (CT) industry in France is estimated at 8 billion EUR in sales and can be divided into the following categories * Skincare, colour cosmetics 37% * Hair products 23 % * Perfumes 20 % * Toiletries 19 % * Other 1 %Although in total export value, the CT industry in France shows growth of 6.5% between 1999 and 2005, in terms of global market share, France has declined from 31,6% to 28,5% during the same period.Despite this, France is still a overabundant market leader with its export value sales double the amount of the second and third largest exporters Germany and USA with export value of just below 4 billion EUR respectively.Rossi, Prlic, Hoffman November 2007, Global Insight Report, p.14Frances violator care industry has two specialised regional sub-clusters the PASS cluster (Parfum, Armes, Senteurs et Saveur s perfume, aromas, scents and flavours) in the Provence-Alpes-Ctes dAzur region, and the Cosmetic Valley cluster (Sciences de la Beaut et du bien tre Science of beauty and well-being) based in the Centre and Normandy region.ClickPress, July 2008 http//www.clickpress.com/ electric arcs/Detailed/82987005cp.shtmlThe beauty products cluster consists of just few large corporations and over 400 Small medium enterprises (SMEs) with 25 250 employees. There has been an estimation of 855 companies in the CT industry with less than 10 employees. Rossi, Prlic, Hoffman November 2007, Global Insight Report, p.4Major companies include LOreal which is the global market leader with annual sales of US $ 17.7 billion, followed by Japanese owned Shiseido (US $ 5.4 billion), LVMH (US $ 2.7 billion) and Yves Rocher (US $ 1.8 billion). small companies include Chanel, Clarins, Pierre Fabre Dermo Cosmetique and Yves Saint Laurent. Beauty packaging, October/November 2005 http//www.beautypackaging.com/art icles/2005/10/top-20-global-beauty-companies.phpInternational groups in the cosmetics sector such Beiersdorf, Henkel, Coty Inc, Puig Group and Pacific Europe have a strong presence in France and benefit from a vibrant business environment that also serves as a test market.France also offers expertise in associated industries, such as bottle manufacturing and the production of aromas and scents. Invest in France agency press release at ClickPress http//www.clickpress.com/releases/Detailed/82987005cp.shtmlInstitutions for collaborationThe Cosmetic Valley and PASS regional sub-clusters support active cooperation between companies, research organisations, training institutions, laboratories, universities and suppliers. International investment into the industry is promoted and facilitated by the Invest in France Agency (IFA). ClickPress, July 2008 http//www.clickpress.com/releases/Detailed/82987005cp.shtmlCluster Map2/ HistoryThe reason behind the perception of France as the cradle o f beauty and luxury goes back to the 16th century when it became the center of cosmetic industry starting with the manufacturing of parfumes.Although historically the premiere European parfume makers originated in Venice, the trade with parfumes unquestionable strongly during the seventeenth century in France which is today recognised as the preponderating parfume manufacturer. This is the result of the attention and support given to the industry by the King Louis 14 whose policies stimulated luxury trade. The use of parfumes spread among the aristocrats and the trade flourished with root parfume social club being established in 1729 in the Provence region.By the 18th century, the trustworthy parfume makers started selling other beauty products such as hair dyes, powders, rouges, soaps and dust coat face paints.The industry started being commercialised after the French vicissitude in 1789 as manufacturers seeked ways to avoid the association with aristocracy. The guild syst em was abolished in 1791 and first cosmetic shops were opened in Paris, exports to neighbouring countries also started during this time.In the nineteenth century, French manufacturers developed chemical processes of replacing aromas obtained by rude(a) means with beauty products based on scientific research. This has led to inventions of all new scents that were not just copying existing intrinsic scents. kick downstairs male and female fragrances were also introduced during this period.Increased demand led to need for larger production facilities. First parfume factory was built in 1840 in Parisian suburb La Villette by an entrepreneour L.T. Piver.Distribution channels were developed as prices of cosmetics became more accessible to the common man and manufacturers were by now producing stationed products as well as private labels for department stores.During the late 19th century, an entrepreneur Francois Coty made a major impact on the cosmetic business. His achievements incl ude setting up own salesforce (unheard of in the cosmetics business until than) and using designer bottles for parfumes (until than parfumes were sold in pharmacy-like simple bottles) to attract the nerve as much as the nose. His aim was to keep the perception of cosmetic sas a luxury that more people can afford and he succeeded in bringing cosmetics and parfumes to the masses.By the end of 19th century three quarters of French parfumes and beauty products were sold overseas thanks to the developed infractracture which made it easy to export products to Europe and the US. typically sales were managed through local import agents. Some bigger manufactuterers such as Coty or Piver later established their own shops in other countries (Pivor in London, Coty in New York).In 1907 Eugene Schueller started new company Socit Franaise de Teintures Inoffensives pour Cheveux selling hair dyes for hairdressers. The vision of the company was to doresearch and innovation in the interest of beaut y. Later renamed as LOreal, the company had by 1950s over 100 researchers. Today LOreal is a leader in the beauty products industry. Geoffrey Jones, 2007, Imagining Beauty The History of the Global Beauty Business, p.16 383/ Competition and trendsAccording to the Global Insight Inc, the world cosmetics market grew between 2000 and 2006 in Europe and chinaware but declined slightly in US and Japan (Exhibit 2).EU15 United Kingdom, Germany, France, Spain, Portugal, Greece, Luxemburg, Belgium, Austria, Ireland, Netherlands, Denmark, Finland, Sweden, ItalyEU 12 Czech Republic, Slovak Republic, Poland, Hungary, Latvia, Lithuania, Estonia, Slovenia, Bulgaria, Romania, Malta, CyprusEU 27 = sum of the aboveExhibit 2The forecasts show expected encourage growth especially in developing regionssuch as chinaware and central eastern Europe (EU12). (Exhibit 3)Exhibit 3France has kept its dominant position as the track exporter of beauty products over many years selling double the amount th an its closest competitors Germany and US. The growth in value is 6.5% between 1999 and 2005. This however is lower compared to EU average (8.3% growth) as well as compared with the rest of the major beauty exporters in world USA, China and Japan (8.1% growth). This means that on the global scale, France is losing market shares. (Exhibit 3)Exhibit 3Revealed comparative advantageGlobal Insight Inc measured the Revealed comparative advantage of nations exporting beauty products and in its findings we see that France is positioned in the upper right quadrant (Cosmetic Industry RCA Analysis, Exhibit 4) the threatened industries. The graph shows us that France is by far the largest exporter, is well positioned but its position is weakening due to lesser growth compared to other countries. On the other hand, the only countries showing intense growth are developing nations that started at a much weaker base. The market for French products has matured in the developed regions of western Europe and the US which have been traditionally the largest export countries for French products.As a conclusion, France will now have to be more aggressive in creating a strong position in the developing markets of BRIC (Brazil, Russia, India, and China) countries + central and eastern Europe to regain its growth.This assumption is supported by the data from French springer which point to unshakable growing cosmetics sales to the emerging markets, while the EU plays a less important role in French exports (50% against 64%). Between 1998 and 2008, sales growth in emerging countries was two times faster than it is for all exports of cosmetics.The share of emerging countries in total sales of cosmetics uprise from 14.9% in 1998 to 24.6% in 2008, with particularly strong sales in China and Russia. A trend confirmed by Jean-Paul Agon, the Managing Director of the LOreal Group, in an interview to the French newspaper Le Monde, dated November 6 In the ten coming years, our customers w ill mostly be Chinese, Indian, Brazilian or Indonesian. While the group LOreal already achieves 60% of its business outside Europe, this coincidence is expected to rapidly rise to 90%, according to Jean-Paul Agon Sooner or later sales catch up on demography, he claims.Exhibit 4Frances second largest competitor in Europe Germany shows a better performance in terms of growth and is slightly gaining market shares from 13% in 1999 to 14% in 2005. Although this might seem only a slight improvement, in terms of growth in absolute numbers, Germany has vainglorious faster than European average and almost twice as fast as France (10.9% growth for Germany versus 6.5% for France). Compared to other three top exporters of cosmetics (France, US and UK), Germany is the only country growing in market shares.In 2007, German exports rose by 14.4% compared to previous year and summed up to EUR 964 million in the first half of 2007, with highest demand from France, the United Kingdom and Russia. G entry Earlene, German-Arab Industry of Commerce, celestial latitude 2008 http//aegypten.ahk.de/index.php?id=1093L=15The growth of German exports is driven by local SMEs which are strategically managed by IKW the German Cosmetic, Toiletry, Perfumery and Detergent Association (Industrieverband Krperpflege- und Waschmittel e. V.) whose mission is to help German SMEs to enter and conquer foreign markets. Gentry Earlene, German-Arab Industry of Commerce, declination 2008 http//aegypten.ahk.de/index.php?id=1093L=15As a result of its strategic focus and investment, German SMEs have developed quality cosmetics for almost all segments. Etre Belle Cosmetic Vertrieb GmbH is an interesting instance of those successful German SMEs. The company is now present in more than 35 countries. The brand has developed complete fragrance and skincare ranges divide by skin types.German companies are also world leaders in some specific niches, such as organic and natural cosmetics which shows the most dy namic growth in western Europe and USA. (German-Arab bedroom of Industry and Commerce, http//aegypten.ahk.de/index.php?id=1093L=15 )Udo Frenzel, director of economic affairs at IKW, the German Cosmetics, Toiletry, Perfumery and Detergent Association, sums up the success behind Germany growthThe exports of the German cosmetics, toiletry and perfumery industry in the last ten years are a story of success based on the quality image of do in Germany. There is nearly no country on the whole globe where not at least one German brand is available on the market. At present German exports of our industry are 68% higher than imports to Germany. Gentry Earlene, German-Arab Industry of Commerce, December 2008 http//aegypten.ahk.de/index.php?id=1093L=15Research and DevelopmentFrench companies sustain their comparative advantage by investing intemperately into research and development which is a key requirement to stay competitive in the cosmetics industry. As the following table shows, Franc es RD expenditure in 2001 was 2.5x higher than that of the second largest competitor Germany in 2004. (Exhibit 5) Data for other leading countries are unfortunately not available but the assumption is that France is a leading investor into RD worldwide.This is also supported by the fact that the French government actively supports research and has introduced a competitive RD tax-credit system, which reimburses 50% of RD costs in the first year. This provides incentives to non-French companies to set up research facilities in France. Companies that have done this include Pacific Chemical Corp. (South Korea), Takasago (Japan) or Hutchison Whampoa (Hong Kong).Invest in France agency press release at ClickPress http//www.clickpress.com/releases/Detailed/82987005cp.shtmlExhibit 5ProductivityThe most significant threat to the ongoing competitiveness of the industry in most EU countries but mostly relevant to France and Germany, is relatively low productivity combined with high unit labour costs which shows a wide snap between EU companies and the U.S. and Japan. Rossi, Prlic, Hoffman November 2007, Global Insight Report, p.4Although only average EU15 (refers to the first EU countries before entry of post-communist nations) data for productivity in the beauty products industry are available, given the size of the French market, the weighted average is likely to be similar to the actual data for France. Referring to the source above, the rest is an assumption, therefor