History And Overview Of Frances Beauty Industry Economics Essay

France is graded 16th in the Global Competitive Report up two topographic points from last twelvemonth and showing a figure of competitory strengths, such as an substructure that is ranked 2nd in the universe, a healthy work force, a high quality of instruction, a sophisticated concern civilization and leading in the country of technological invention. On the other manus, as indicated in the Global Competitive Report, France suffers from high non pay labor costs and rigorous regulations on hiring and fire and hapless labor employer dealingss. There is besides a govern

GDP Per Capita, ( US $ ) , 2007… … … … … … … … .. $ 41,511.2

GDP: ( US $ one million millions ) , 2007… … … … … … … … … … … … 2,560.3

GDP ( PPP ) as portion ( % ) of universe sum, 2007aˆ¦ … … .3.17

Entire Population: ( 1000000s ) , 2007… … … … … … … … … 60.9

Median Age: 39

Land Area: Largest land country of all EU members

Unemployment: 7 % 2008

Current President – Nicolas Sarkozy

ment budget shortage which is above the EU threshold of 60 % and national nest eggs rates are low. ( Global Competitive Report, 2008/09 p.19 ) Although France is presently in a good place – in 16th topographic point, the planetary economic system is altering and new rivals are shuting in. This paper will analyze the challenges that France and their beauty industry are confronting.

France cardinal facts:

beginning: The Global Competitive Report 2008-09 Exhibit Angstrom

Economic PerformanceFrance ‘s Gross Domestic Product ( GDP ) has aligned with the European norm slightly, although, as the graph below illustrates, France has fared better than the EU within the last twelvemonth.

Exhibit Bacillus

This chart created on the Eurostat web site, compares France ‘s Real GDP with the European Union ( EU ) norm. Real gross domestic merchandise ( GDP ) is a macroeconomic step of the size of an economic system adjusted for monetary value alterations ( that is, adjusted for alterations in the value of money: rising prices or deflation. ) beginning: “ Real gross domestic merchandise. ” Web. ttp: //en.wikipedia.org/wiki/Real_gross_domestic_product & gt ; . Legend: Blue = FranceGreen = EU ( 27 states ) beginning: http//epp.eurostat.ec.europa.eu/tgm/graph.do? tab=graph & A ; init=1 & A ; toolbox=type & A ; language=en & A ; pcode=tsieb010 & A ; plugin=0http: //epp.eurostat.ec.europa.eu/tgm/graph.do

France ‘s Gross Domestic Product per capita ( PPP US $ ) The Human Development study and the Global Competitive Report demonstrate that France ‘s buying power para ( PPP ) has declined since 1993 to 33,000 plus/minus.

Human Development Report 2009 – Exhibit C

Human development index 2007 and its constituents

GDP per capita ( PPP US $ )

HDI Rank

















Irish republic





















beginning: hypertext transfer protocol: //hdrstats.undp.org/en/indicators/91.html accessed March 29 2010

beginning: Global Competitive Report 2008/09Exhibit D

Invention MeasuresThe Global Competitive Report says “ Although less-advanced states can still better their productiveness by following bing engineerings or doing incremental betterments in other countries, for states that have reached the invention phase of development, this is no longer sufficient to increase productiveness. Firms in these states must plan and develop cutting-edge merchandises and procedures to keep a competitory border. ” ( Global Competitive Report, 2008/2009, page 6 )

Exhibit D shows France in bluish is in front in the per centum of GDP for R & A ; D. This hides the fact that Germany one of France ‘s rivals which we will discourse subsequently in the Cosmetic industry analysis, spends a considerable sum more than France. Although France in bluish is in front in the per centum of GDP they spend on R & A ; D another of import facet of invention is patents. Exhibit Tocopherol shows that Germany has double the sum of patents. Gross Domestic Expenditure on R & A ; DExhibit D

France = Blue

EU = Green

Germany has double the sum of patents than France

Exhibit Tocopherol

Analyzing the day of the month from the Global Competitiveness Report it is clear that France is enduring in the ranking for invention and sophisticatio

n as illustrated below.

Exhibit F France is losing behind Germany who is winning presently in 4th topographic point

Exhibit F: Invention and edification factors

Harmonizing to Porter, a state ‘s fight depends on the capacity of its industry to introduce and upgrade. Companies gain advantage against the universe ‘s best rivals because of force per unit area and challenge. ( Porter, On Competition, p.171, 2008 ) In Exhibit F France is keeping steady in 14th place an account for their deficiency of betterment is shown in Exhibit G province of bunch development, where France is low and their rate of patent development is low compared to its rivals, for illustration, Germany, Japan and the U.S.A.

beginning: Global Competitiveness Report 2008-2009Exhibit G

France – P E S T Analysis



Gallic political system can be described as semi-presidential signifier of democratic democracy. France has improved sing the regulation of jurisprudence and answerability. France ranks in the 91.3 percentile on voice and answerability as of 2007, which is an betterment from 2002, when it was ranked in the 84.1 percentile. ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. Page 3 )

However, France is still considered as a extremely centralised state and the elect group is significantly involved in the province and corporate sectors. Furthermore, corruptness seems to be one of the chief issues in Gallic political relations.


Political stableness can be considered one of France ‘s strengths. Elections are just and crystalline. Although ab initio the socialist parties were more popular and hence winning the elections, recently the bulk of the society has voted for pro-reform parties. Before the elections president Sarkozy made following promises: a decrease of unemployment, flexible labor Torahs, pension reform and revenue enhancement alterations.

France ‘s attack to forestalling terrorist act is considered to be one of the most effectual in Europe. However, it did non come free and the monetary value was restricting civil autonomies. ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 14 )


Although the current Gallic authorities is decidedly pro-reform, the remainder of Gallic society seems to be opposed to the alterations. For illustration, the authorities wants to simplify public disposal and bureaucratism, advance the competition in the market every bit good as brand lower limit rewards flexible. ( www.lemonde.fr ) ( EWA – I kind of know what you mean but can you include a twosome of the alterations that the authorities want to convey in. I understand that the citizens would be unwilling to accept any alteration that would take down rewards but does the Gallic authorities want to take down rewards that would besides travel against what Porter says is the point of being competitory. The population is unwilling to follow any steps that cause a lessening in rewards. One of the grounds would be the diminution in buying power of the Gallic population. As already mentioned in exhibit B above France is already demoing a diminution in GDP ( PPP US $ ) per capita. Bettering the pension system and overhauling the labor market has been delayed because of the involuntariness of Gallic citizen to accept alteration. In general, the reforms are being delayed. Furthermore, the liberalisation procedure is besides non every bit dynamic as hoped for, in consequence, president Sarkozy is losing his popularity. In regional elections on 21st March the Socialist Party gained 54 % while UMP 35 % merely. ( Web. & lt ; hypertext transfer protocol: //www.economist.com/world/europe & gt ; . Accessed March 15 2010 ) .


Bettering Gallic foreign policy has been one of president Sarkozy ‘s chief ends. So far he has been successful. France has returned to NATO ‘s military bid. It has helped US in insulating Iran because of its atomic power. In general, France has been recently really active in international relationships. With no uncertainty improved foreign dealingss will assist the economic dealingss with these states.

Gallic National Assembly composing – Beginning: Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 39.

President Sarkozy ‘s disposal has besides eventually improved French bureaucratism which now should be more crystalline and efficient.


In France, the authorities has continued to play a outstanding function in concern

compared to many other EU states. ( Datamonitor ( 2009 ) . France: State

Analysis Report. London: British Library. Page 16 )

A concentration of elect citizens in power helps corruptness patterns and besides assist to act upon authorities policies which in consequence can barricade development. ( Political Science: An Introduction, Michael G. Roskin, June 2005, P. 79 ) Furthermore, since the authorities becomes more unpopular while seeking to implement the reforms ( can we acquire a list of the reforms so I can weave that into this paragraph – pension system reform, wellness attention system reform, public disposal reform, reform of work conditions ordinances – ‘un contrat unique ‘ , reform of public fundss, revenue enhancement system reform, corporation revenue enhancement reform ) there is a hazard that it will go populist to derive power back. There have been a figure of protests against reform steps.



The International Monetary Fund ( IMF ) has stated that France faced a 3 % autumn in growing in 2009. The lessening of income and rewards combined with lifting unemployment will impact domestic ingestion. Because of the resistance implementing Sarkozy ‘s reforms is non traveling swimmingly. France ‘s recognition evaluation might be affected. That will increase the cost of funding for future authoritiess and concern endeavors. ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 14 )


President Sarkozy ‘s pro-reform attack affected in general reappraisal of public policy. This caused the betterment in public services and hence cut downing the public costs.

Gallic substructure is one of the best in Europe. There are over 10,000 kilometers of well-maintained main roads in France. That is better consequence than in Germany or UK. Gallic railroad web is besides really good established. France is seen as planetary air conveyance hub with 27 airdromes. “ The world-class substructure web enables France to offer international investors first-class conditions for making concern and besides drive the overall economic engine of the state. ” ( ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 18 )


Gallic external debt is above the EU bound of 60 % and most likely will remain this manner. Furthermore, the portion in exports in the Eurozone has fallen by 16 % during 1999-2007. ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 18 )

As the grounds for this state of affairs can be named low degree of industry specialisation and hapless monetary value fight of Gallic industries. Furthermore, France ‘s effectual corporate revenue enhancement load is higher than EU norm.


The denationalization of telecommunications, electricity, gas, postal services, rail cargos every bit good as the services sector has been in topographic point for a piece. The authorities has besides introduced stimulation program. The hope is that increased investing disbursement will excite domestic ingestion.


The fiscal system in France is still significantly being regulated and administrated. What has helped Gallic economic system now to retrieve from planetary crisis, might make a job in the hereafter. Structural reforms in public endeavors, pensions and the fundamental law demand to be completed now ; otherwise France will lose the competition with states with more liberalized systems like UK or Germany.



While societal construction considered an aging population and comparatively high unemployment rate seem to be chief issues. Equally good as lacking educational system ; ( Global competitory study, Porter and Schwab, p.19 ) describes the instruction system as a whole is high/strength but the flexibleness of the labour force is the job every bit good as hapless labour dealingss ) this partially can be blamed for high unemployment rate. Unemployment rate was 10 % in January 2010. Web. & lt ; hypertext transfer protocol: //epp.eurostat.ec.europa.eu/ & gt ; Accessed March 15 2010.

Monthly unemployment rates August 2008 – January 2010:


Taking into consideration societal parametric quantities in general France has been instead successful. For illustration, life anticipation at birth is in France 80 old ages ; in footings of gender equality there is a positive societal clime for adult females.

France has one of the highest birth rate in Europe. Unlike in many other European states although the rate is diminishing, France is still making good. “ France ‘s birth rate of about 1.8 kids per adult female in 2006 makes it the lone European state with the possibility of keeping its current population. ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. p. 22 )


An aging population and early retirement are serious issues on Gallic societal landscape. These issues have non been given adequate attending by policy shapers which now may do large job of extra authorities outgo. Low labour engagement is another issue every bit good as the fact that Gallic workers work comparatively low hours annually.

Beginning: Web. & lt ; hypertext transfer protocol: //www.oecdobserver.org & gt ; Accessed: March 15 2010

Another challenge is educational system which has non kept with altering industrial order.


New strategy ‘Active Solidarity Revenue ‘ ( RSA ) has been introduced by Gallic authorities. The purpose is to forestall unemployment and poorness. The programme will carry people to look for a occupation instead than populating off societal benefits.


France ‘s pay hikings have non seen an equal addition in productiveness or increase in end product. Therefore, pay additions have become unrealistic.

( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 22 ) By go oning this policy while the rewards are increased but the productiveness is non increasing is a serious menace for economic growing. Furthermore, France is losing competition on planetary market where merchandises from emerging Asiatic states are present.

Gallic authorities has passed new regulations sing immigrants who want to populate in the state or geting Gallic nationality. On one side it will assist to halt illegal immigrants, nevertheless on the other side it will besides set off good educated aliens to work in France.



R & A ; D state of affairs in France is fulfilling, although far from perfect. The degree of public investing in R & A ; D is about 2 % of GDP while EU ‘s purpose is 3 % . Furthermore, private sector support is still non delighting. Public engagement is worsening and private sector support still non increasing. This state of affairs might do jobs in future. To better this status the Agency for Industrial Innovation has been established. Its chief undertaking is to back up invention in big companies. Web. & lt ; hypertext transfer protocol: //cordis.europa.eu/erawatch/index.cfm? fuseaction=org.document & A ; uuid=7D87D446-91D9-37E8-0FA23EEBD33AF2CE & gt ; Accessed March 15 2010


What can be considered as chief strength is comparatively big figure of patents received by France. France ranks 4th in the universe in footings of figure of patents granted for its invention. ( Datamonitor ( 2009 ) . France: State Analysis Report. London: British Library. P. 24 )

This state of affairs is caused by the attack of consecutive Gallic authorities to R & A ; D. Research and higher instruction are precedences of the current authorities. Large sum from annual budget is dedicated to back up these spheres. Political committedness to R & A ; D is hence high in France.


Although R & A ; D is considered as an of import issue by politicians France ‘s outgo is at 2 % of GDP merely. For comparing it is 2.68 % in US and 3.18 % of GDP in Japan.

Furthermore, the disbursement on R & A ; D as a per centum of GDP by Gallic authorities is worsening. In add-on, the input from private sector is still non honoring. This state of affairs will without any uncertainties influence future technological development of the state.


Gallic national research and invention policy aims to advance invention, increase the engagement of private sector, and better the cooperation between public and private sector. The end is to increase the disbursement on R & A ; D to 3 % of GDP and one tierce of this sum should come from private sector.


France lacks the coordination and one clear policy sing R & A ; D sector. There are many research and cognition institutes which aims are overlapping each other. One united scheme is needed. Furthermore, there is deficiency of efficient communicating between research institutes and private companies, hence resources are non being used to the full.

Furthermore, the deficiency of the connexion between the manufacturers and consumers of the engineering can be observed. Public R & A ; D centres really frequently do assist in application of new engineering in industry. In consequence, attempts and costs will be duplicated.

Beauty merchandises in France – bunch analysis

1/ Description of the bunch, bunch size and public presentation

The cosmetics and toilet articless ( C & A ; T ) industry in France is estimated at 8 billion EUR in gross revenues and can be divided into the undermentioned classs:

A A * Skincare, coloring material cosmetics: A 37 %

A A * Hair merchandises: A 23 %

A A * Perfumes: A 20 %

A A * Toiletries: A 19 %

A A * Other: A 1 %

Although in entire export value, the C & A ; T industry in France shows growing of 6.5 % between 1999 and 2005, in footings of planetary market portion, France has declined from 31,6 % to 28,5 % during the same period.

Despite this, France is still a dominant market leader with its export value gross revenues double the sum of the 2nd and 3rd largest exporters Germany and USA with export value of merely below 4 billion EUR respectively.Rossi, Prlic, Hoffman ; November 2007, Global Insight Report, p.14

France ‘s beauty attention industry has two specialised regional sub-clusters – the PASS bunch ( Parfum, Aromes, Senteurs et Saveurs – aroma, olfactory property, aromas and spirits ) in the Provence-Alpes-Cotes d’Azur part, and the Cosmetic Valley bunch ( Sciences de la Beaute et du bien etre – Science of beauty and wellbeing ) based in the Centre and Normandy region.ClickPress, July 2008 [ hypertext transfer protocol: //www.clickpress.com/releases/Detailed/82987005cp.shtml ]

The beauty merchandises cluster consists of merely few big corporations and over 400 Small medium endeavors ( SMEs ) with 25 – 250 employees. There has been an appraisal of 855 companies in the C & A ; T industry with less than 10 employees. Rossi, Prlic, Hoffman ; November 2007, Global Insight Report, p.4

Major companies include L’Oreal which is the planetary market leader with one-year gross revenues of US $ 17.7 billion, followed by Nipponese owned Shiseido ( US $ 5.4 billion ) , LVMH ( US $ 2.7 billion ) and Yves Rocher ( US $ 1.8 billion ) . Smaller companies include Chanel, Clarins, Pierre Fabre Dermo Cosmetique and Yves Saint Laurent. Beauty packaging, October/November 2005 [ hypertext transfer protocol: //www.beautypackaging.com/articles/2005/10/top-20-global-beauty-companies.php ]

International 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 concern environment that besides serves as a trial market.

France besides offers expertness in associated industries, such as bottle fabrication and the production of olfactory property and aromas. Invest in France bureau imperativeness release at ClickPress [ hypertext transfer protocol: //www.clickpress.com/releases/Detailed/82987005cp.shtml ]

Institutions for coaction

The Cosmetic Valley and PASS regional sub-clusters support active cooperation between companies, research administrations, preparation establishments, research labs, universities and providers. International investing into the industry is promoted and facilitated by the Invest in France Agency ( IFA ) . ClickPress, July 2008 [ hypertext transfer protocol: //www.clickpress.com/releases/Detailed/82987005cp.shtml ]

Cluster Map

2/ History

The ground behind the perceptual experience of France as the cradle of beauty and luxury goes back to the sixteenth century when it became the centre of decorative industry get downing with the fabrication of parfumes.

Although historically the first European parfume shapers originated in Venice, the trade with parfumes developed strongly during the seventeenth century in France which is today recognised as the dominant parfume maker. This is the consequence of the attending and support given to the industry by the King Louis XIV whose policies stimulated luxury trade. The usage of parfumes spread among the blue bloods and the trade flourished with first parfume club being established in 1729 in the Provence part.

By the eighteenth century, the original parfume shapers started selling other beauty merchandises such as hair dyes, pulverizations, paints, soaps and white face pigments.

The industry started being commercialised after the Gallic revolution in 1789 as makers seeked ways to avoid the association with nobility. The club system was abolished in 1791 and first decorative stores were opened in Paris, exports to neighboring states besides started during this clip.

In the nineteenth century, Gallic makers developed chemical procedures of replacing olfactory properties obtained by natural agencies with beauty merchandises based on scientific research. This has led to innovations of wholly new aromas that were non merely aˆscopying ‘ bing natural aromas. Separate male and female aromas were besides introduced during this period.

Increased demand led to necessitate for larger production installations. First parfume mill was built in 1840 in Parisian suburb La Villette by an entrepreneour L.T. Piver.

Distribution channels were developed as monetary values of cosmetics became more accessible to the common adult male and makers were by now bring forthing branded merchandises every bit good as private labels for section shops.

During the late nineteenth century, an enterpriser Francois Coty made a major impact on the decorative concern. His accomplishments include puting up ain salesforce ( unheard of in the cosmetics concern until than ) and utilizing interior decorator bottles for parfumes ( until than parfumes were sold in pharmacy-like simple bottles ) aˆs to pull the oculus every bit much as the olfactory organ. His purpose was to maintain the perceptual experience of decorative sA as a luxury that more people can afford and he succeeded in conveying cosmetics and parfumes to the multitudes.

By the terminal of 19th century three quarters of Gallic parfumes and beauty merchandises were sold abroad thanks to the developed infractracture which made it easy to export merchandises to Europe and the US. Typically gross revenues were managed through local import agents. Some bigger manufactuterers such as Coty or Piver subsequently established their ain stores in other states ( Pivor in London, Coty in New York ) .

In 1907 Eugene Schueller started new company Societe Francaise de Teintures Inoffensives pour Cheveux selling hair dyes for hairstylists. The vision of the company was to doaˆsresearch and invention in the involvement of beauty. Subsequently renamed as L’Oreal, the company had by 1950s over 100 research workers. Today L’Oreal is a leader in the beauty merchandises industry. Geoffrey Jones, 2007, Imagining Beauty: The History of the Global Beauty Business, p.16 – 38

3/ Competition and tendencies

Harmonizing to the Global Insight Inc, the universe cosmetics market grew between 2000 and 2006 in Europe and China but declined somewhat in US and Japan ( Exhibit 2 ) .

EU15 – United Kingdom, Germany, France, Spain, Portugal, Greece, Luxemburg, Belgium, Austria, Ireland, Netherlands, Denmark, Finland, Sweden, Italy

EU 12 – Czech Republic, Slovak Republic, Poland, Hungary, Latvia, Lithuania, Estonia, Slovenia, Bulgaria, Romania, Malta, Cyprus

EU 27 = amount of the above

Exhibit 2

The prognosiss show expected farther growing particularly in developing parts

such as China and cardinal & A ; eastern Europe ( EU12 ) . ( Exhibit 3 )

Exhibit 3

France has kept its dominant place as the taking exporter of beauty merchandises over many old ages selling double the sum than its closest rivals Germany and US. The growing in value is 6.5 % between 1999 and 2005. This nevertheless is lower compared to EU norm ( 8.3 % growing ) every bit good as compared with the remainder of the major beauty exporters in universe – USA, China and Japan ( 8.1 % growing ) . This means that on the planetary graduated table, France is losing market portions. ( Exhibit 3 )

Exhibit 3

Revealed comparative advantage

Global Insight Inc measured the ‘Revealed comparative advantage ‘ of states exporting beauty merchandises and in its findings we see that France is positioned in the upper right quarter-circle ( Cosmetic Industry RCA Analysis, Exhibit 4 ) – the threatened industries. The graph shows us that France is by far the largest exporter, is good positioned but its place is weakening due to lesser growing compared to other states. On the other manus, the lone states demoing intensive growing are developing states that started at a much weaker base. The market for Gallic merchandises has matured in the developed parts of western Europe and the US which have been traditionally the largest export states for Gallic merchandises.

As a decision, France will now hold to be more aggressive in making a strong place in the developing markets of BRIC ( Brazil, Russia, India, and China ) states + cardinal and eastern Europe to recover its growing.

This premise is supported by the informations from French imposts which point to fast turning cosmetics gross revenues to the emerging markets, while the EU plays a less of import function in Gallic exports ( 50 % against 64 % ) . Between 1998 and 2008, gross revenues growing in emerging states was two times faster than it is for all exports of cosmetics.

The portion of emerging states in entire gross revenues of cosmetics rose from 14.9 % in 1998 to 24.6 % in 2008, with peculiarly strong gross revenues in China and Russia. A tendency confirmed by Jean-Paul Agon, the Managing Director of the L’Oreal Group, in an interview to the Gallic newspaper Le Monde, dated November 6: “ In the 10 approaching old ages, our clients will largely be Chinese, Indian, Brazilian or Indonesian. ” While the group L’Oreal already achieves 60 % of its concern outside Europe, this proportion is expected to quickly lift to 90 % , harmonizing to Jean-Paul Agon “ Sooner or subsequently gross revenues catch up on human ecology ” , he claims.

Exhibit 4

France ‘s 2nd largest rival in Europe – Germany – shows a better public presentation in footings of growing and is somewhat deriving market portions from 13 % in 1999 to 14 % in 2005. Although this might look merely a little betterment, in footings of growing in absolute Numberss, Germany has grown faster than European norm and about twice every bit fast as France ( 10.9 % growing for Germany versus 6.5 % for France ) . Compared to other three top exporters of cosmetics ( France, US and UK ) , Germany is the lone state turning in market portions.

In 2007, German exports rose by 14.4 % compared to old twelvemonth and summed up to EUR 964 million in the first half of 2007, with highest demand from France, the United Kingdom and Russia. Gentry Earlene, German-Arab Industry of Commerce, December 2008 [ hypertext transfer protocol: //aegypten.ahk.de/index.php? id=1093 & A ; L=15 ]

The growing of German exports is driven by local SMEs which are strategically managed by IKW – the German Cosmetic, Toiletry, Perfumery and Detergent Association ( Industrieverband Korperpflege- und Waschmittel e. V. ) whose mission is to assist German SMEs to come in and suppress foreign markets. Gentry Earlene, German-Arab Industry of Commerce, December 2008 [ hypertext transfer protocol: //aegypten.ahk.de/index.php? id=1093 & A ; L=15 ]

As a consequence of its strategic focal point and investing, German SMEs have developed quality cosmetics for about all sections. Etre Belle Cosmetic Vertrieb GmbH is an interesting illustration of those successful German SMEs. The company is now present in more than 35 states. The trade name has developed complete aroma and skin care scopes segmented by skin types.

German companies are besides universe leaders in some specific niches, such as organic and natural cosmetics which shows the most dynamic growing in western Europe and USA. ( German-Arab Chamber of Industry and Commerce, [ hypertext transfer protocol: //aegypten.ahk.de/index.php? id=1093 & A ; L=15 ] )

Udo Frenzel, manager of economic personal businesss at IKW, the German Cosmetics, Toiletry, Perfumery and Detergent Association, sums up the success behind Germany growing:

“ The exports of the German cosmetics, toilet articles and perfumery industry in the last 10 old ages are a narrative of success based on the quality image of “ Made in Germany ” . There is about no state on the full Earth where non at least one German trade name 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 [ hypertext transfer protocol: //aegypten.ahk.de/index.php? id=1093 & A ; L=15 ]

Research and Development

Gallic companies sustain their comparative advantage by puting to a great extent into research and development which is a cardinal demand to remain competitory in the cosmetics industry. As the following tabular array shows, France ‘s R & A ; D outgo in 2001 was 2.5x higher than that of the 2nd largest rival Germany in 2004. ( Exhibit 5 ) Data for other prima states are unluckily non available but the premise is that France is a taking investor into R & A ; D worldwide.

This is besides supported by the fact that the Gallic authorities actively supports research and has introduced a competitory R & A ; D tax-credit system, which reimburses 50 % of R & A ; D costs in the first twelvemonth. This provides inducements to non-French companies to put up research installations in France. Companies that have done this include Pacific Chemical Corp. ( South Korea ) , Takasago ( Japan ) or Hutchison Whampoa ( Hong Kong ) .Invest in France bureau imperativeness release at ClickPress [ hypertext transfer protocol: //www.clickpress.com/releases/Detailed/82987005cp.shtml

Exhibit 5


The most important menace to the on-going fight of the industry in most EU states but largely relevant to France and Germany, is comparatively low productiveness combined with high unit labor costs which shows a broad spread between EU companies and the U.S. and Japan. Rossi, Prlic, Hoffman ; November 2007, Global Insight Report, p.4

Although merely mean EU15 ( refers to the first EU states before entry of post-communist states ) informations for productiveness in the beauty merchandises industry are available, given the size of the Gallic market, the leaden norm is likely to be similar to the existent informations for France. Mentioning to the beginning above, the remainder is an premise, hence has no beginning

U.S. gross value added per individual employed is merely over a‚¬310,000 while in EU15 it is about fifth part of this degree. The grounds behind this difference are:

– Production on the whole in the U.S. ( and Japan ) is more capital intensive than in the EU where the handcrafted nature of many merchandises is reflected in a high portion of micro-businesses. Rossi, Prlic, Hoffman ; November 2007, Global Insight Report, p.4

The productiveness spread between the U.S. and the EU is non specific to the cosmetics sector. The EU KLEMS2 surveies found that since 1996 productiveness growing in the U.S has outpaced European productiveness growing significantly. These surveies reveal a figure of of import differences between the U.S. and EU economic systems, including: a greater portion of ICT ( information and communicating engineering ) in entire U.S. fabrication ; a better usage of ICT in non-ICT bring forthing industries in the U.S. ; important differences in the productiveness growing of market services and eventually stronger growing in multi-factor productiveness in the United States. Rossi, Prlic, Hoffman ; November 2007, Global Insight Report, p.4

Cluster Diamond

Designation of strategic issues confronting France and decorative vale bunch:

Further to the overall France economic analysis, concern environment and decorative vale analysis, cosmetics and aromas bunch is the fourth largest bunch in France in footings of export and 16th in footings of fight and development.

Despite France ‘s dominant place as the taking exporter of beauty merchandises, R & A ; D investing and recognition system ; France is falling behind and decorative bunch is losing force, its place is damaged due to lesser growing than other European states every bit good France is enduring in the ranking for invention and edification and steadiness in development. Following are issues confronting France and the decorative bunch:

Lack of decorative bunch development due to miss of fight happening in the state.

High unemployment rate France 9.7 % v/s Germany 7.9 % , aging population and early retirement seem to be chief issues on Gallic societal construction.

In 2010, 9.7 % france unemployment rate

( France unemployment rate ) hypertext transfer protocol: //www.indexmundi.com/france/unemployment_rate.html

Low productiveness: Gallic workers work low hours annually, France is the state where mean on the job clip is the shortest in Europe with 35 hr workweek ( http: //www.cee-recherche.fr/fr/doctrav/working_time_policy.pdf ) every bit good rewards are increasing but the productiveness is non increasing which provoke a serious menace in economic growing. The most important menace to the on-going fight of the industry in most EU states but largely relevant to France and Germany ( 2nd largest exporter following France ) , is comparatively low productiveness combined with high unit labor costs which shows a broad spread between EU companies U.S. and Japan.

d- France is losing market portion and competition on planetary market where merchandises from emerging Asiatic states are present.

Policy Recommendations

France ‘s Cosmetic bunch enjoys strong trade name equity and a history of quality and expertness. However, due to France ‘s extremely socialistic labour ordinances it has lost land in recent old ages to neighbouring states such as Germany.

France ‘s mission is to keep its place as planetary leader in the Cosmetic industry and as such it must be argus-eyed in indentifying pending menaces and act in a timely manner in order to relieve possible menaces.

In figure 1 below we can see how Germany has been able to turn at a more rapid rate than France mostly due to higher rankings in labour market efficiency, invention and Macro Economic Stability with most other of the 12 pillars of the Global Competitiveness Report about indistinguishable.

Figure 1

( Global Competitiveness Report Michael E Porter, 2008-2009, p.xx )

In order for France to barricade the German incursion on the market, the Cosmetic Valley Cluster which was officially recognized and labeled as a “ fight bunch ” by the Gallic province in 2005, must turn to the more ambitious issues that are impeding their growth-


Labor Market Efficiency

Macro Economic Stability


France is in the 3rd and most advanced phase of state development labeled by Porter as the “ Innovation driven ” phase. In this phase as the state competes with other taking states in the same phase. In comparing to the two closest rivals in the Beauty and cosmetics industry- Germany and the U.S.A. – ( Harvard Business School, 2007 is this a website? ) France achieves a ranking of 16134 as opposed to Germany-8 and USA-1 in invention. The Gallic authorities has allocated merely 46 Million Euro from authorities disbursement towards invention and R & A ; D. ( OECD, 2009 ) which is less than 0.001 % of the GDP. In comparing, Germany will put 1.4 Billion euro in invention and R & A ; D stand foring 0.1 % of GDP. ( OECD, 2009 ) .

When reexamining the activities and actions taken by the “ Cosmetic Valley ” bunch, strong grounds exists to back up that focused attempts have been made by the non-profit-making association to guarantee investing and way to heighten the advanced capablenesss by motivating operators in a part to bring forth synergisms around advanced undertakings which may be eligible for public subsidies.

Policy recommendation – Invention

Make a squad focused at buttonholing the authorities bureaus and offices responsible for the allotment of financess to R & A ; D undertakings to bring forth a higher investing and acknowledgment of the Cosmetic bunch as an of import and historical bunch.

Labor Market Efficiency

Strong socialistic Torahs have been in topographic point in France for many old ages accompanied by strong trade brotherhoods. Although the Sarkozy authorities is dedicated to reform, consequences are yet to be seen. Rigid labour ordinances prevent leting workers who chose to work longer hours or to be transferred between industries. Harmonizing to the OECD ( Organization of Economic and Co-operation Development ) Gallic unemployment reached 9.8 % in July 2009 with one young person out of four aged 15-24 old ages old unemployed. ( OECD ) can you include the web site )

However, to the mean worker, alterations to societal benefits are perceived as hurtful to their private economic system and therefore any call or action for reform in the labour market is met with resistance amongst the people. Brave steps accompanied with strong public account and way is needed to better the state of affairs. ( Raghu Krishnan, Adrian Thomas, ” Resistance to neoliberalism in France, Social Register Vol. 44 ( 2008 ) hypertext transfer protocol: //socialistregister.com/index.php/srv/article/view/5888/0

Policy Recommendations-

Improved labour market efficiency depends on the flexibleness of workers and employees to relocate workers to the most efficient countries of the economic system and to supply inducements for most productive workers.

The Cosmetic Cluster has an established occupation board on the Cosmetic Valley web site where bunch participants can seek for workers and frailty versa. This board focuses strongly on managerial places or higher educated forces. The occupation board nevertheless does non turn to the demands of the simplest untrained worker seeking work.

However, a board must be formed to organize with the local and industry trade brotherhoods in order to maximise labour efficiency, cut down unemployment and offer improved income chances for improved end product. In acknowledgment of the high degree substructure in France, both parties should seek ways to travel unemployed workers to countries in which mills are seeking workers. Until province labour ordinances are changed maximal coaction to the common benefits of both employees and employers should be sought.

Particular attending and focal point should be put on unemployed young person offering instruction, preparation and callings. Youth are more flexible in resettlement as the frequently have no household committednesss.

Labor Market Efficiency

France achieves a Labor Market efficiency evaluation of 105/134 as opposed to Germany ‘s ranking of 58/134 and the USA ranking of first topographic point 1/134. ( Michael E Porter, 2008-2009 are you citing the planetary competitory study ) Low productiveness due to rigorous labour Torahs combined with a tradition of a smaller “ Hand crafted “ nature of merchandises with a high portion of Micro-businesses.

USA ‘s productiveness has outgrown Europe ‘s productiveness rate in recent old ages ( see figure 2 below ) offering a stronger competitory advantage over European states, amongst them France. New members of the EU with a higher productiveness degree and lower rewards. ( web site. www.oecd.org, “ International Comparisons of Productivity Levels, accessed March 29th, 2010, Url: hypertext transfer protocol: //www.oecd.org/dataoecd/31/7/29880166.pdf )

Beginning: OECD.Org “ International Comparisons of Productivity Levels, accessed March 29th, 2010, Url: hypertext transfer protocol: //www.oecd.org/dataoecd/31/7/29880166.pdf

Figure 2

Policy Recommendations

The stiff labour ordinances of France and slow execution of reform besides have their affect on the labour market efficiency. In order to vie with states such as the USA the Gallic Cosmetic Cluster must move on 3 degrees.

The industry must revisit the concern construction of fabrication and hunt for ways to increase efficiency. The traditional “ manus crafted ” attack may non be suited for today ‘s planetary markets and new methods of production must be visited.

Continue on the way to back up economic reforms in France enabling more flexible hiring and fire and promoting more efficient workers.

The Cosmetic industry must see relocating their production installations outside of France to states with lower labor costs and more flexible labour policies.

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