Analysis of Yue Sai's Expansion into Chinese Men's Cosmetics Market

This report critically analyzes the market for Chinese men's cosmetics, focusing on the expansion of the Yue Sai business. Based on a case study of L'Oréal in China, the report examines the Chinese cosmetic industry and potential challenges. Key areas of focus include management issues like distribution channel and workforce management challenges, advertising issues such as celebrity endorsements and cost considerations, and branding issues related to luxury brand image and marketing strategies. The report provides a detailed discussion and analysis of these issues, offering recommendations for successful market entry and expansion. The report also covers the industry context, providing insights into the rise of disposable incomes, market competition, and the growth of the men's grooming market in China. It concludes with a summary of the findings and recommendations for Yue Sai to capitalize on the growing market opportunity.

Management
Advertising and branding
3/3/2018
Yue Sai Company

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Contents
Introduction......................................................................................................................................2
L’Oreal Group.................................................................................................................................3
About: Yue Sai............................................................................................................................3
Industry context...............................................................................................................................3
Management Issues..........................................................................................................................5
Distribution channel issues..........................................................................................................5
Workforce management issues....................................................................................................6
Advertising Issues............................................................................................................................7
Branding Issues................................................................................................................................8
Discussion and Analysis................................................................................................................10
Recommendations..........................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13
Appendix........................................................................................................................................16
Appendix 1.1..............................................................................................................................16

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Introduction
The aim of the report is to critically analyze the market of Chinese men cosmetics for the
expansion of the Yue Sai business. The report is based on the case study; ‘L’Oréal in China:
Marketing Strategies for turning around luxury cosmetic brand Yue Sai’. It includes the Chinese
cosmetic industry analysis and the issues the company will face while expanding the business in
China. These issues are related to management, advertising and branding activities of the
company that are one of the most important activities of the company. Moreover, the decision of
Yue Sai Company is based on the overall analysis of the men cosmetic market.

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L’Oreal Group
L’Oreal is one of the highly recognized cosmetics company across the world with the total sales
of Euro 19.5 billion in the year 2010. In the same year, the company sales increased in China by
Euro 1 billion. Moreover, the company acquires the second largest beauty and skincare player in
China after P&G who is on the NO.1 position in the luxury segment. L’Oreal Group includes
different brands and one of the brands is Yue Sai (The Business School for the world, 2018). The
company acquired Yue Sai Company in the year 2004. The company declared that acquiring
companies having existence in the Chinese market like Yue Sai is like achieving the mission of
“beauty for all”.
About: Yue Sai
Yue Sai is known as a first modern cosmetic brand of China that came into existence in the year
1992 by Madam Yue-Sai Kan, an Emmy-winning TV host, socialite, and entrepreneur (Yue-Sai
Kan, 2018). The aim of the company was to create, produce, and sell the best beauty and skin
care products in the markets of Asian and across the world. The company offers women cosmetic
products in China but now the company should expand the market and should provide the male
cosmetic products (L’Oreal, 2018). Sooner, the company was acquired by L’Oreal under which
Yue Sai can look towards the bright future.
Industry Context
The continuous increase in the GDP of China leads to the rise in the disposable income of the
customers. This increase in income leads to the increase in the desire of the premium products in
different categories which include the skincare and beauty products (Yang, Chandon and Godart,

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2015). In the year 1989, Procter & Gamble was the first MNC who started offering its cosmetics
products in the market of China. Later, many other companies entered the Chinese market such
as L’Oreal in 1997, Shiseido in 1991 with Shiseido, etc. These companies brought extensive
portfolios of high-quality brand and products. Moreover, these companies established their
position in the market and by the year 2010, the top five companies in the skincare and beauty
market were P&G, L’Oreal, Shiseido, Unilever and Amway (The Business School for the world,
2018).
China has the largest market in the world not only for the women but also for men's cosmetics.
Around 65% of the Chinese men make use of skin cleansing products and the men’s cosmetic
has registered a growth of twice the rate of total beauty market in China. Moreover, L’Oreal
Company is leading in the retail value of the 16% in the year 2016 because of its attractive and
effective promotional strategies for the men’s beauty products which include men’s skin care,
men’s shaving and men’s hair care. Market of men’s grooming is predicted to increase by a
value CAGR of 4% at the constant 2016 prices over the particular period. In China, the lack of
education is hindering the growth of the men's grooming (Euromonitor International, 2017).
Though, this is expected that there will be growth in the market once the men’s will develop the
habit of using the grooming products. This habit will develop when they get education related to
men grooming. In addition, agreeing to Euromonitor, the total growth rate of the premium brand
reached 10% value terms or twice the growth among the mass brands which stood at 5% (Zheng,
2017).
Considering the expected rise in men’s grooming industry it is suggested to Yue Sai to start
offering the men beauty products in the China market as this is the opportunity for the brand to

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earn revenue (HKTDC, 2018). The brand will face some issues if they take the step to extend the
line of business and these issues are discussed in the report.
Management Issues
The foremost issue which will be faced by the brand Yue Sai in the men’s grooming market is a
management issue. The management issues comprise of issues related to the distribution channel
of products and workforce management issues.
Distribution channel issues
A distribution channel refers to as the chain of the intermediaries through which the goods and
services pass until it reaches to the end customers. These intermediaries include retailers,
distributors, and wholesalers.
Departmental store
In the Chinese market, different distribution channel is used by the premium cosmetic brands
such as departmental stores, beauty store and e-commerce portals. The brand will face the issues
related to the acquiring of the space in the departmental stores that mean forming tie ups with the
departmental store. The premium brands take the floor on rent and sometimes pay a sales based
commission to the departmental stores (Rushton, Croucher and Baker, 2014). These brands
create the separate counter where the customers can get all the products related to the particular
brand. Yue Sai brand also has to create such a counter in the departmental store which will
generate the awareness and sales of the company.
Brand stores

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The brand store is the second distribution channel that is commonly used by brands in the
Chinese market. Brand tries to open their stores on the prime location so that they can grab the
attention of maximum customers. Though, at these stores, the brand needs to appoint the
assistant who can actually sell the products in an effective way. Considering the fact that there
are very fewer people who would like to indulge in the sales of the men’s grooming products.
Therefore, it will be hard for the brand to identify the appropriate candidate for their brand
stores. These employees have to understand the usage of the products which helps them in
making the consumer awareness about the benefits of the products. This is one of the major
issues faced by the company which might affect the distribution of products to the customers
(Fernie and Sparks, 2014).
In addition, the company can distribute the products to retailers as these retailers directly contact
with the end users. This channel of distribution will become effective when Chinese men will
also visit the local stores. Most of the men don’t like to visit the store as they think these stores
offer most of the women beauty products. Therefore, there is very less number of people who
visit the local store in China.
E-commerce portals
Another channel of distribution is the use of e-commerce portals for making the products
accessible to the customers. This is the fact that more than a half billion of Chinese customer had
access to the internet. Internet-based retailing is likely to have a significant impact on existing
channels in the near future. There are different portals on which the company can offer its
products such as Amazon, Flipkart, etc. In Addition, the company can indulge in the online
advertisement of men beauty products that will help the company in generating profit (Hua,

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2013). The major issue in the internet distribution is forming the tie-ups with the vendors for the
men cosmetic products.
Workforce management issues
The management of the company will face the workforce management issues in the Chinese
market while entering the market of the men cosmetic products.
Appropriate candidate
In the China market, it is challenging for the company to find the appropriate candidate for the
company mainly for the men's cosmetic outlets (David, 2011). In addition, if the company will
be able to find the appropriate candidate then they have to pay high salaries to them which will
increase the budget of the brand.
Conflict among the team
The conflict among the team is one of the issues which might be faced by the company. In the
China market, most of the men’s are not aware of the actual use of the cosmetic and grooming
products. Therefore, the lack of knowledge in employees leads to the conflict which might affect
the working of the companies. Apart from this, the conflict in the team might occur due to the
uneven communication, personality clashes and the power issues (Witt, 2015). These conflicts
also affect the organizational culture.
Incapability’s of management to manage workforce
The company is not capable enough to manage the workforce in the market of China due to lack
of skills and abilities in the managers or leaders of the company. This is the only reason due to

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which the employee's retention increases and it affects the position of the company in the market
of China (Cascio, 2018).
Advertising Issues
The advertisement is one of the effective tools that are used by the companies to promote their
product in the market. This tool generates the awareness among the market about the product that
the company offers to its customers (Atwal and Bryson, 2014). Yue Sai will face different issues
while promoting the products in the market and one of the major issues is relying on celebrities.
Replace the model with celebrity
Maximum of the Chinese brands rely on the celebrity which includes actresses, singer, and
athletes for the advertising of the product. On the other hand, Yue Sai relies on the model Du
Juan. Considering the current market need the company should replace the model with the
celebrities to promote the products in the Chinese market as this is the only way through which
the company can win the trust of the people (Sonwalkar, Kapse, and Pathak, 2011). Moreover,
the company will be able to face the competitors. It is recommended to the brand to make use of
the new promotional tool to promote the products in the market. (Refer Appendix 1.1)
Increase in cost
Another issue is related to increase in the cost of traditional advertisement tools. This is the fact
that the cost of the media is rising in the competitive market. This rise in the cost of
advertisement makes the company think whether to change the current promotion tool or to
increase the budget. Currently, the company has 80% of the communication budget for the
skincare and 20% on the makeup. It is recommended to the company to make use of the different

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promotional tool with the help of which the brand can generate the in-store presence which is
essential for the good brand image (Dinner, Van Heerde and Neslin, 2014).
Branding Issues
Branding is the way through which the company can form an image in the eyes of customers. In
the year 2006, Yue Sai was transferred from CPD division to the smaller Luxury Product
Division (LPD). The company faced the issues related to the luxury brand image and to resolve
the issue the LPD promoted company with the help of popular Taiwanese movie star, Shu Qi.
This was one of the effective ways with the help of which the company was able to re-establish
the brand’s luxury image. Later, LDP hired a well-known Paris based branding agency to report
the brand in the market of China (The Business School for the world, 2018). This agency was
appointed when the company lost the branding in China for the cosmetic products for women.
Moreover, the L'Oreal group invested a huge amount in the television and print advertising
campaign that features the supermodel Du Juan for promoting the positioning of the new modern
Chinese women (Lake, 2017).
Increasing competition
The increase in the number of the premium brand has pushed the branding of the company down
again which reduced their sales and revenue in the market. If the company will step ahead in the
men's cosmetic market then the company will find the issue of branding again due to strong
competitors present in the market (Dinnie, 2015). There are many premium brands available in
the brand who offers the men products. The rise in the competition creates the impact on the
branding of the company again in the market.
Lack of consistency

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The company is not consistent with its branding position in the market. The company has faced
ups and downs in the market of China. Though, L’Oreal groups have put in efforts to improve
the branding with the help of the promotional activities. The brand should always try to maintain
consistency in the market regarding the brand image (Jain and Griffith, 2011). This will make the
customer change the perception of the brand which will create the impact on the new men's
product introduced by the company.
Trust issues
Most of the companies have faced major trust issues which created the impact on the image of
the brand. Mainly the issue is regarding the quality of the beauty products as China is well
known for its fake production of the products. Moreover, the customers have not only found the
fake products in retail stores but also in reputed supermarkets. Yue Sai will face the trust issues
for the men’s beauty products. These issues are increasing in China due to which most of the
consumer asks for the proof of brand authenticity before buying the products. In addition, the
online platforms are not able to resolve the authenticity issues faced by the customers (Verot,
2016). Here is an example that shows how the brand image gets exploited. For example:- If in
case a customer purchase a product with the name of Yue Sai later he/ she found it fake then the
customer communicate the same in the market which exploits the image of the product in the
market. This incident will stop the customers to buy the products of the brand.
Discussion and Analysis
The paper reflects the details about the Yue Sai company expansion in the men’s cosmetic
market in China. The industry analysis shows the expected growth in the cosmetic industry of
China in next few years. The market for men's grooming is expected to rise in China with the

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increase in the awareness about the products. In addition, this is the fact that the company will
face the management, advertisement, and branding issues in the market. The analysis of the
issues faced by the company is conducted which shows the issues which were faced by the
company along with the issues which the company is going to face in the market of China. To
overcome the issues the company needs to pay attention towards its position in the market.
Along with this, the company has to bring changes in the ways to promote the products in the
market of China. The change in the promotion strategy will not only help the company to make a
strong position in the market but also generate the revenue from the men's cosmetic products.
Considering the overall analysis the company can perform both the rational and emotional
appeal. In the rational appeal method the company try to generate the awareness regarding the
quality and usefulness of the products from the consumer point of view. On the other hand, in the
emotional appeal company make use of various techniques to appeal to consumer which include
tone, color scheme and mood (Lwin, et.al, 2014). It is recommended to the company to make use
of the rational appeal for the advertisement as one of the effective way because most of the
men’s are not aware about the uses of the products. This will help the company to generate more
of the sales which results in hike in revenue.
There are two theories that the shows that the firm should make the market entry through whole
owned subsidiary that are resource based view and transactions cost view. The theory of resource
based view states the increase in the control means the chances of the success of the firm as the
company will be able to deploy key resources that are necessary for the success. Another theory
is transactional cost view which states the increase in transactional cost with the increase in the
control of the mode of entry. Whole owned subsidiaries and joint-venture are high cost entry
modes because these models need high resource commitment (Johnson and Tellis, 2018).

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Recommendations
It is recommended to the company to enter into the men's market of cosmetic after knowing the
fact that there is a rise in the industry. Yue Sai should enter the Chinese market with the use of
the appropriate market entry mode. There are different market entry modes are present such as
exporting, licensing, franchising, joint venture, alliances and many others. Out of this market
entry mode, it is suggested to the company to enter with the whole owned subsidiary. Though the
company is already present in the Chinese women market but to enter the market of men's
company should make a new start. The new start of the company will make the entry effective as
this is the only way to create the existence in the market. Moreover, the company should try to
form the tie-ups with more of the departmental and retail stores for the distribution.
It is suggested to the company make strategies related to the workforce management after
considering the fact that this management issue affects the most to the company. The employees
of the company are the one who represents the company in front of the market but lack of
effective employees may lead to the problem for the company. Moreover, the company should
provide proper training to their employees regarding the products which help in avoiding the
conflicts.
It is recommended to the brand to make it differentiate from the other competitors for this the
brand can keep some consistent elements of Women’s branding. Moreover, to make the
company different from competitors should keep the combo offers or discounts to the customers.
In addition, the company should provide the organic cosmetic products to the customer which
makes the company different from its competitors.

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Conclusion
It can be concluded at the end that the after the acquisition of the company by the L'Oreal group
there an improvement in the positioning, sales, revenue and quality of products. Yue Sai brand is
now one of the L’Oreal brands due to which the company ensures that the activities conducted
by Yue Sai is effective and leads to the positive result for the brand. The company got the
support from the L’Oreal group due to which the company can make the position in the men’s
cosmetic market as well. These aspects are identified after the analysis of the issues that the
company is going to face. The report includes the different strategies that were formed by the
company to over the issue. It also includes the discussion and analysis of the overall market and
considering the same it has been suggested to enter the market. In the end, the reports include the
certain recommendations to the company.

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