Le Creuset Essay, Research Paper

Concentration of Manufacturing:

In comparison to the diversified nature of Le Creuset’s approach to export markets, manufacturing in the company is very much concentrated. All Le Creuset’s products are manufactured at the two production sites in France (Fresnoy-le-Grand and Cousances).

What could be the reason or reasons behind such a concentration in manufacturing? One reason could be the nature of the production process at the company. It is highly specialised. The products have to meet certain standards and levels. It consists of four distinct stages (production of cast iron; casting; finishing; and enamelling). The process thus is a distinct and orderly method.

In addition there is the factor of the presence and remoteness to raw materials (in this case pig iron and recycled iron). Also the production process needs appropriate specialised equipment to support the highly specialised stages of production. Beside Le Creuset’s products have the image of being traditional, made in France with experience for long consecutive years. The production has been going on in France since 1925. This therefore creates or is part of the brand image.

All these factors make it difficult for the company to found other production sites for the company in its foreign markets. The company instead concentrated on a more diversified level of marketing, sales and distribution. However this does not mean that production is neglected for still great attention is focused on improving productivity in the company through an on-going investment programme targeted at re-organising and modernising the production facilities and process at Le Creuset. As a result the process has now become more cost-efficient, effective, and automated. In fact automating the casting process for example has proved to be six time more efficient than the labour-intensive method that has been replaced.

Culture or the Image of Le Creuset:

What does Le Creuset as a brand name suggest a vision or an image of? Above all we should at first point out that it is the very qualities of Le Creuset products that create its image and culture world-wise. Le Creuset cast iron cookware has three outstanding features by which its recognised: its high quality, its superior durability, and the brightness and depth of its colour. These three distinct characteristics guarantee a very up-market product that consumers would highly desire and aspire to buy.

The name, image and culture of Le Creuset created by the properties of the company’s products are very unique. Le Creuset in known to be the ‘cream of the crop’. It represents the ‘perfect blending of fashion (appearance) and function to bring you the best in versatility and long lasting value’. It is also known to be recognised by chefs worldwide for its superior cooking and serving capabilities. It known simply thus for its excellence.

In addition it is believed by the market of consumers that Le Creuset cookware has been ‘crafted with meticulous, old-world care in France since 1925’. This specially describes Le Creuset’s culture. its products have a unique personality; they have a historical background attached to them. This could account for why manufacturing in the company is until today still concentrated. It is for the benefit of the makeup of the company’s image and brand name.

This takes us to yet another related subject: the price of the products. Because Le Creuset’s products are the top of the line, they cost to manufacture and in addition as a result they cost to purchase. In other terms they are relatively expensive. The products are thus targeted at the middle class to upper class population. This is more obvious if we were to analyse the nature of the company’s key markets-being more or less developed economies with a high population of middle-class consumers.

The question however that arises here is what would make people choose Le Creuset’s products over less expensive alternatives?

Market Choice:

There are so many choices in the market place. There are other high quality products. Tefal cookware is one example. There are less expensive alternatives. There are local alternatives in local market (Prestige cookware in the UK). Why choose Le Creuset?

On one hand it could be the superior qualities and properties that drive consumers to purchase Le Creuset. It could be the specialised type of the cookware itself being made out of cast iron. It could be the beautiful appearance, which comes after the fact that it is actually excellent cookware. Although it costs more, Le Creuset cookware in addition will last and look good for much longer than any other cookware-for 101 years (the longest warranty in the industry). This means that the consumer will not replace the cookware in 10, 15 or even 100 years.

Another reason that might drive consumers to Le Creuset is the fact that it is a well-known international brand name that has firmly secured its presence and status in the market place across the world. Beside the efficiency in the delivery of the product as a result of a well-managed distribution system is another reason. Deep emphasis on the marketing of the product could be yet another reason.

Distribution Channels:

Le Creuset has set up to create their own distribution network worldwide to replace previous arrangements that mainly focused on the use of independent agents. The importance of distribution channel control in key markets was first established by the new management team lea by Paul van Zuydam. The main objectives of such a strategy were:

 To gain full control in the distribution of the company’s products

 Proximity to consumers

 Cost factors-it is cheaper in the long run

 To keep up with other competitors

 Market penetration, coverage, control and communication

Although the company’s strategy has significantly increased the company’s fixed cost base, Le Creuset is still confident that the benefits accrued will still outweigh the additional costs. Some of these benefits are:

 Better control to the point of sale

 Improved communication with customers-securing customer’s satisfaction and confidence

 The ability to exert greater influence on price and ensure it reinforces brand image

In each of its key markets thus the company has sought to build its own distribution network. Examples are:

 UK market: the company purchased the Kitchenware Merchants Limited which has been its main UK distributor since 1960.

 US market: Le Creuset of America Inc. and its former affiliate Schiller and Armus Inc. were legally merged into one distribution company in 1991.

 Japan: Le Creuset Japan KK was set up in 1998 to consolidate distribution. It has its own dedicated marketing and sales staff that serves over 80 department stores, which display the company’s products.

 Germany: Le Creuset in 1993 purchased a German distribution firm Wolo GmbH to create a Le Creuset sales and distribution company which became operative in 1994.

In other markets Le Creuset hopes to penetrate the market through using another method of distribution-the use of independent agents. Agency agreements have been established with independent distributors by the company in some 20 countries including Western Europe, Scandinavia, Korea, Malaysia and Singapore.

Another measure is adopted by the company to improve its distribution scheme and avoid the long delivery times in meeting customer orders. Usually orders for the US take two to three month and for the UK four weeks to fulfil. Traditionally the company used to hold high levels of finished goods. However more recently the company is beginning to move both production and delivery onto a just-in-time basis. This would both improve customer service and release funds for investment elsewhere.

International Marketing- the Company’s Present Strategy:

In the 1993 annual report for Le Creuset Zuydam stated: “…This team has turned what was mainly a manufacturing orientated business into an international marketing led organisation with emphasis on professional, sales, and distribution.”

Le Creuset has changed to be a multi-national corporation. In order to acquire a firm basis worldwide a corporation has to today depend greatly on the role of marketing. In other words it has to make its products known to consumers and also know what customers demand and seek their satisfaction to secure profits.

The company still did not neglect its production and control aspects. Considerable investment has been made to modernise production and emphasis has been especially put to strengthen financial control and provide the latest appropriate computer technology.

Product Diversification:

Le Creuset has concentrated traditionally on the manufacture and distribution of high quality cast iron cookware. However the company’s strategy since the new management team has acquired control has changed. The company expanded, developed and diversified its product range. This was mainly the result of the work of the new product design and development team established since the company’s take-over.

A range of high quality earthenware and Sabatier Kitchen knives products has been introduced. The company is also further developing its Screwpull range of wine accessories. Le Creuset also distributes Weber barbecues and Zyliss kitchen tools for third parties. The full line of Le Creuset products includes the following:

 French ovens, Rectangular Bakers, Grills and more

 Le Creuset speciality food products (oils, vinegar, and seasonings)

 Low fat cookware

 Serve ware

 Speciality pieces which includes the matte enamel Wok for stir frying

 Cookware essentials and accessories including teakettles, steamers and stock pots

There are reasons behind why the company has sought to broaden its product range. The most important reason could be perhaps that cast iron makes up only a small proportion of total cookware sales in any one market. By broadening its product range the company is seeking to expand its market share, its sales and its growth rate. Satisfying more customers would mean more sales and therefore more profit. Another reason would be the need to keep pace with the company’s main competitors like for example Tefal that already have a wide and established product range. This is directly related to securing competitive advantage in the market place through product development, innovation and diversification.

Porter’s Concept of Competitive Advantage:

Porter’s concept applies appropriately to the company. Innovation drives competitiveness. A firm thus must avail to all the dimension of competition:

 Factor Conditions: Le Creuset has successfully upgraded and transformed its factors of production especially its skilled labour. Although there is a fall in the number of production employees, the number of employees engaged in sales, marketing and distribution has trebled. This reflects restructuring and changes in the organisation of labour in the company.

 Demand conditions: the company has broadened its range of products to suit customer demands. The demand for cast iron cookware is quite limited in the market place. Thus the company has to broaden its product range to satisfy more customers.

 Related and Supporting Industries: Le Creuset has purchased a number of distribution firms in its key markets to help build its own distribution network that would make distribution more cost-effective and efficient.

 Firm Strategy, Structure and Rivalry: this relates directly to the company’s emphasis on marketing and distribution, the concentration of its manufacturing and product diversification to remain competitive in relation to its main largest competitors in the market place.

External and Internal Forces Shaping the Company:

1. PEST ( factors influencing Le Creuset in the outer environment)

 Political:

 Legal regulations in the host market

 Political risks in the host market

 The need for a validated or general license in certain markets

 Economic:

 Company is highly exposed to currency fluctuations. Production is situated in France but profits are reported in the British pound. The French franc and the pound are the most important currencies thus together with dollar-the US being a chief key market too. Thus the movement in these currencies influence directly the translation of the company’s profits and its costs of production

 The level of economic activity recorded in each geographical market also effects company’s performance. In 1993 for example profits were badly effected by recession in the French market

 Social:

 Demand conditions: the demands and tastes of society influence product design and development

 There exists a tension between national market need and the corporate brand image worldwide (there is little overlap in the top ten products in the three key markets of France, UK and USA). A balance should be somewhat reached.

 Technological:

 Appropriate technological development especially in computers should be applied to reduce production costs and increase levels of efficiency

 Technological development in the form of increased automation in the production process can lead to a shift in the concentration of personnel in the company-overall decrease in employees especially in production and in comparison increase in the relative number of employees in the fields of marketing and distribution

2. SWOT ANALYSIS (SW-INTERNAL : OT-EXTERNAL)

 Strengths:

 Brand image, name, culture

 High quality and superior features and properties

 Strong motivated management

 Efficient distribution and marketing

 Stable market status

 High market coverage and penetration in the field of speciality

 Weaknesses:

 High price-decisions on pricing worldwide

 Image is highly dependent on historical image which provides some sort of rigidity and limits development

 The concentration on a relatively limited number of export markets all similar

 Opportunities:

 Emerging financial markets worldwide

 Technological developments

 Factor condition- raw materials in other markets for example

 Threats:

 Currency fluctuations

 Economical fluctuations

 Competition-there is a large number of competitors in the field

Future Strategy:

What can we predict Le Creuset’s future to be like?

On one side there are wide opportunities for the company to further expand overseas. Stock marker analysts believe that opportunities exist to increase US and export sales substantially and also to add new product without increasing costs. This stems partially from the fact that cast iron production is sensitive to small increases. This means that small increases in volume can translate into large changes in profitability. In other words, above a certain level additional production can be made with little extra costs.

In the future in addition the company has to work on its strategies. There is for example the need for a structured sales force in all key markets to meet the differing market demands. Also increased emphasis on product development and design is absolutely integral in the future if the company is to secure its competitiveness in the market place.

Many challenges exist in the path of the company that stems from the nature of the international environment. Currency and economic fluctuations will thus still influence the company’s profits. The need for continued motivation and dedication from management therefore is crucial for the success of the company. It was the management who in the first place succeeded in increasing the company’s profits from ?1.6 million in 1984 to ?4.4 million in 1993.

In addition technological development is very important for the progress of the company in the future in all fields: production, marketing, and distribution.

The Role of Management:

It is not far from true to state that the new management team who controlled the company since 1988 were responsible in leading it to success. The members are very experienced in the cookware and kitchen accessories sector. They work harmoniously together. Four of them have actually previously worked together at Prestige. They are highly committed and motivated. An amazing point to bring up is that all the changes and developments they have made to revitalise the company since 198, they have internally funded from the group’s strong cash flow. This reflects organisation and dedication. Their strategies have transformed a relatively small local company into a famous MNC.

Conclusion:

The progress of Le Creuset since 1987 has been quite impressive. Development on the part of the company has taken the form of the rationalisation of manufacturing together with increased expenditure on distribution and marketing to build brand strength. However in the future Le Creuset has to adapt and face the many challenge characterising the international environment in order for it to maintain its previous successes.