Title：Case Study about Global Strategic Management of L’Oréal
Author(s): 王玉寶、高水玲、吳采芝、阮坤輝、康新慧
Class: 1st year of Department of International Business
Student ID: M0458689、M0414490、M0427674、M0461893、M0561257
Course: Global Strategic Management Instructor: Dr. 羅芳怡
Department: Department of International Business
ABSTRACT
This paper attempts to analyze L’Oréal as a beauty leader and its strategies which made the company become and remain the largest cosmetics and beauty company. L’Oréal is a worldwide company and has large shares of market in the most of marketplaces where it invests, making use of powerful variety of marketing tools and strategies. Exploiting both traditional and innovative marketing techniques, L’Oréal aims to grown its customer base to two billion by 2020 while implementing CSR strategies, analyzing their business units by identifying high-growth prospects according to growth rate and market share and investigating the strategies that have been used to achieve it.
The evolution of the L’Oréal journey throughout the years shows how the brand combination within a portfolio is a key factor for company growth and development which is a crucial phase to understand the company competitive advantage. With the combination of large amount in capital available and high technical capabilities, L’Oréal has access to resources to produce in a large scale while making use of its strong research and development department to bring up innovation. The corporate level strategies involve horizontal integration, vertical integration and strategic alliances to build a stronger image in different geographic markets. The importance of market analysis in all business areas, the corporate strategies and marketing challenges as they globalize, the importance of understanding the customer, proper use of resources and capabilities, customizing its products and business strategies as key points to strive and prosper are being discussed in the paper.
Keyword： L’Oréal, Global Strategy, Global Strategic Management, Globalization, Product
TABLE OF CONTENT Abstract ...1 Table of Content ...2 List of Tables ...3 List of Figures ...4 Chapter 1. Introduction ...5
Chapter 2. Corporate Strategy ...11
Chapter 3. Strategy Map ...21
Chapter 4. Industry Analysis ... 33
Chapter 5. Strategy Group ...43
Chapter 6. Analyzing Resources and Capabilities ...50
Chapter 7. Value Chain Analysis ...66
Chapter 8. BCG Matrix Analysis ...76
Chapter 9. Outsourcing and Differentiation ... 82
Chapter 10. National Diamond Analysis ...85
Conclusion ...92
Reference ...93
LIST OF TABLES
Table 1: Acquired brands of L'Oréal from 1967 – 2015 ...11
Table 2: Resource VRIS ...60
Table 3: Capabilities VRIS ...64
LIST OF FIGURES
Figure 1: Business level strategy ...16
Figure 2: Strategy map of L'Oréal ...21
Figure 3: Research and Innovation ...21
Figure 4: Corporate Social Responsibility ...24
Figure 5: Human Resource Management ...26
Figure 6: Marketing ...28
Figure 7: Finance ...30
Figure 8: Growth of the worldwide cosmetics market from 2006 to 2015 ...33
Figure 9: Porter Five forces ...34
Figure 10: Bargaining power of suppliers ... 35
Figure 11: Bargaining power of new entrants ...38
Figure 12: Intensity of rivalry ...40
Figure 13: Capabilities and Resources ...53
Figure 14: Sale of operational divisions ...76
Figure 15: Sale breakdown ...77
Chapter 1
INTRODUCTION I. Background of L’Oréal
1.1. Overview
L’Oréal is the world's largest cosmetics company headquartered in France. It’s core business focuses on manufacturing cosmetics. Their main products are hair colour, hair care, perfume, skin care and make-up. Dedicated for the beauty for over 100 years, L’Oréal ranks number 1 in the list of the world’s top cosmetics companies in 2016 by Women Wear’s Daily Magazine which is a fashion-trade industry journal sometimes called “the bible of fashion”. L’Oréal annual report has shown that it has the highest sales in 2015 with US$29.94 billion, followed by Unilever with US$21.66 billion and nearly twice higher than Procter & Gamble.
1.2. History
Founded by Eugène Schueller - a young and creative chemist in 1909, L’Oréal innitially began with first hair dyes that he himself formulated, produced and offered to hairdressers in Paris. Since this first step, the founder set up culture that is now typical gene of L’Oréal: research and innovation in the service of beauty.
Through one century operation, the company experienced four main phases. 1909-1956: The first steps, constructuring a model
Its founder - Eugène Schueller graduated from France’s national chemical engineering school in 1904 and went on to establish his own enterprise on 30th July 1909 that later wellknown as L’Oréal .
Thanks to deep knowledge in chemics , Schueller developed his abiity for new ideas and came out his fitrst hair dye named Oréal which was combination of blended harmless chemicals. The dye was an outstanding breakthrough at that time, offering a wide range of colors different to others in the market which commonly used henna or mineral salts so gave quite artificial look.
In 1925, the company renamed as L’Oréal. Since that time, It has changed consumer’s daily life much.
1957-1983: Globally expanding through acquistions
This period was formative years of “Le Grand L’Oréal”. At the decision of its former chairman – Mr. François Dalle, the Group went to internationalization. Its strategy was acquisitions of other strategic brands, grounding spectacular growth for the Group. Emblematic products joint in. The company’s motto was “Savoir saisir ce qui commence”
(seize new opportunities).
Brasil was the prior destination with a direct presence in 1959 which became platform for the whole of Latin America. The acquisition of Lancôme - a fantastic perfume, skincare and make-up brand - in 1964 was the first strategic move to become a luxury cosmetics empire. One year later, purchasing Garnier enabled L’Oréal to own a portfolio of organic haircare products – a different compliment to haircare. In 1970, by taking over Biotherm, L’Oréal stepped its research effort to skincare field. Specially, the year 1973 revealed the growth of the Group in dermatological and dermopharmaceutical activities after its acquired a majority interest in pharmaceutical company Synthelabo. In 1976, L’Oréal bought mascara brand Ricils to enter make-up segments. At that time, the agreement with Netsle provided L’Oréal’s international development in particular markets as Japan to expansion in Asia. In 1983, it set up an R&D centre focusing on hair care and skincare to tailor its products to the Japanese .
1984-2000: Become number one in the beauty industry
These seventeen years were marked by a great growth, dominated by significant investments in research. The Group had successfully become the world cosmetics leader through its global presence of brands owing to numerous strategic acquisitions.
2001-now: Embracing diversity in its global growth
Building a portfolio of powerful and international brands, L’Oréal has enhanced its competitive advantage by embracing diversity in its global growth agenda. The Group keeps making new acquisitions to catch global and regional needs. It also undertakes social responsible initiatives to enjoy sustainable development. Interestingly, the acquisition of The Body Shop in 2006 marked its encouragement in natural products and against test on animals.
1.3. Key facts and figures
Until now, L’Oréal operates in 140 countries by 82,900 employees. It has about 35,000 patents granted in total and nearly 500 patents newly registered every year. Its strength in Rerearch and Innovation is recognized in top 20 Diverse and Inclusive companies by Thomson Reuter in 2016. It has 34 research and evaluation centers, 44 factories and 153 distribution centers worldwide. In 2015, it recorded US$29.94 billion of sales, in which 17.4% acounted for operating profit.
II. Performance of L’Oréal 2.1 A global success
L’Oréal presents in 140 countries on all five continents. While the world was in affection of global crises, L’Oréal still earned money in all over the countries they opperate and continued to improve and develop their current capability. In 2015, L’Oréal’ sales in Europe
growth 2.3% in Western Europe and 9.8% in Eastern Europe while that number in North America was around 3.5%. Because of good performances in Japan, India, Australia and Thailand, specially L'Oréal Luxe brand improved in the fourth quarter, its sales went up by 4,7%. 4.6% growth in sales was revealed in Latin America. The highest growth was particularly in Africa, Middle East with figure of 12.1%. Specifically, Egypt, Pakistan and Saudi Arabia sales growth reached the top of 20%.
2.2 L’Oreal Mission
Beauty is a language
For over a century, the company has devoted energy and its capacity for an only purpose: beauty. It is a rich business sense, as it allows all individuals to express their individuality, get confidence and open up to others.
Beauty is universal
L’Oréal is committed to all the world's women and men to provide the best quality, efficacy and safety of cosmetics innovation. By satisfying the infinite diversity of beauty needs and desires around the world
Beauty is a science
Since its inception, the group has been pushing the frontiers of knowledge. Unique research arm enables it to continuously explore new fields, invent future products, and inspire beauty rituals from all over the world.
Beauty is a commitment
The company provides access to products that enhance well-being, mobilizing its innovative strength to preserve the beauty of the planet and supporting local communities. These are exacting challenges, which are a source of inspiration and creativity for L’Oréal.
Beauty is for all
By leveraging the diversity of its team, as well as the richness and complementarity of its brand portfolio, L’Oréal has made cosmetic the universalization of its next few years of projects.
2.3 L’Oréal ambition
L'Oréal's ambition is to create more and more people around the world by creating an unlimited variety of cosmetic products to satisfy their beauty needs and desires.
Beauty for all, beauty for each individual
In L’Oréal, there is no single and unique beauty model, but numerous forms of beauty, with the period, culture, history and personality linked to attract more women and men to use our products to contact an extremely diverse population, with Universalization of the beautiful vision. In our view, universalization does not imply reunification, but instead is
inspired by the diversity of innovation. Observing local beauty customs
L’Oréal’s research and innovation team to reshape themselves, to create the world's diversified cosmetics. In every region of the world, it has set up a research platform, a true professional center, designed to customize the beauty. These fields of study have created new products that can be a global success. This is a real turning point in thinking about innovation.
Facilitating access to cosmetics products
In the market undergoing major changes, L’Oréal every year forward, bringing the best beauty for everyone. With a portfolio of 32 international brands and an organizational structure based on distribution channels, the company has the ambition to meet the needs of each consumer according to his or her habits and lifestyles. Therefore, L’Oréal in their own way to promote the development of the border, and to meet the challenges of more and more innovation.
Accelerating the regionalization of our expertise
In order to win another billionaire in the world is an ambitious project to inspire L’Oréal. An economic, but also human adventure requires rapid deployment of its forces and companies in various fields, including research, manufacturing, marketing, sales, interpersonal and administrative teams to accelerate the transformation. This big project is also an opportunity for innovation and the establishment of L’Oréal tomorrow.
III. Divisions of L’Oréal
L’Oréal has a strong and long-term brand which is being positioned to consumers across all income levels by providing a wide range of beauty product. The company wants people around the world to have easy access to their products that match their desire, lifestyles and beauty needs. L’Oréal’s segmented its brand into five different Division where each of the brands develops a specific image of beauty by universal consumption and distribution channels.
L'Oréal has 5 brands and divisions that are detailed below.
3.1 L’Oréal Luxe
L’Oréal Luxe opens a unique world of beauty. Its international brands incarnate all the phase of elegance and purification in three major specializations: skin care, makeup and fragrances. This division product is sold in department stores, cosmetics stores, travel retail, own-brand boutiques and online site.
3.2 L’Oréal Consumer Products
The Consumer Products Division offers the best in accessible cosmetics innovation to a wide customer around the world and distributed in mass retailing channels.
3.3 L’Oréal Professional Products
The objective is to be the leader in each professional beauty category: hair care, nail beauty and skincare and distributed in worldwide salons.
3.4 L’Oréal Active Cosmetics
Highly complementary beauty-health brands supported by professional healthcare partners and sold in health care channels worldwide including pharmacies, drugstores and etc.
3.5 The Body Shop
The Body Shop using the world’s finest natural ingredients to create a high-quality product in a sustainable and ethical way.
Consumer Products Division has generated highest sales compare to other brand divisions and is strengthening its leadership in a dynamic dermo-cosmetics market. L'Oréal Luxe are also catching up with its growth driven by its cutting-edge innovations. The Professional Products Division is taking benefits of new plan to boost the professional beauty market, and continues to improve steadily. Last, the Active Cosmetics Division are doing well by conquering the health care channels worldwide.
IV. Reasons why we choose L’OREAL as our case
The background of L’Oréal has motivated and inspired us to make deeper research on. It is obvious that L'Oréal got start from the hair-color business, such a small business with one person in that time but shortly after, successfully branched out into other cleansing and beauty products. For over a century L’Oréal has been devoted all energy and competencies to just sole business – beauty. Nowadays, L'Oréal is such a truly global beauty brand with a large number of internationally famed products. The beauty of passion of L'Oréal really excites our attention.
The second impression is the unique strategy of L'Oréal – universalization strategy. It is convinced that there won’t be existed a single and unique model of beauty at L’Oréal, However, it is an infinite diversity which changed according to the times, cultures, histories, individuals…etc. The definition for L’Oréal’s strategy is: “Universalization means globalization that respects differences. Differences are at desires, needs and traditions”. L’Oréal is driven by the vision of universalization of beauty over the world to catch a larger numbers of male and female and meet intensive diverse populations. With prosperity of unique and international portfolio of 32 complementary brands on 140 countries, L’Oréal believes to push back the boundaries and meet every demand of customers according to his or her habit and lifestyle.
Last but not least, Product innovation is a factor that makes L'Oréal to become special. In order to create cosmetic products which could adapt to the rich diversity of people on over the world, L’Oréal has have established many Research platforms, veritable centers of
expertise in the service of a personalized beauty on five continents. They believe that product innovation ought to meet cultural expectation, it managed to adapt to specific cultural difference in beauty market on over the world. L'Oréal currently has six worldwide research and development centers, two in France, One in the U.S. Another in Japan. In 2005, L'Oréal established one R&D in Shanghai, China, and the final is in India.
“For a Brazilian woman, hair and body are most important, for a Chinese woman facial skin is the priority, for an Indian woman it’s make-up. Our approach is the ‘universalization’ of beauty, i.e. globalization without uniformization” explained Jean-Paul Agon – Chairman of L'Oréal.
Chapter 2
CORPORATE STRATEGY I. Corporate strategy
1.1. Expand through Acquisition
L’Oréal growth strategy has been carried out both through internal development and through acquistion of companies already operating in the cosmetics industry. In particular, external growth by acquisition is part of L’Oréal’s long-term strategy, with a long-term annual growth goal of 10%. This option has also been facilitated by the group’s liquidity and low debts. Purchases of more companies allows the group to reach the critical size needed for exploiting economies of scale both in R&D activities and in marketing and distribution. The acquisitions also promote L’Oréal to quickly expand its geographical horizon and develop its market segments. The actual portfolio of 25 prestigeous brands is the results of a series of acquisitions that began many year ago, which is described in the table below.
Table 1: Acquired brands of L’Oréal from 1967 - 2015
Year Luxe Consumer
Products Professional Products Active Cosmetics The Body Shop 1967 Lancôme (France) Garnier (France) 1971 Biotherm (France) 1980 Vichy (France) 1985 Ralph Lauren
(the U.S); Giorgio Armani (Italy) 1989 La Roche-Posay (France) 1993 Redken (the U.S) 1996 Maybelline New York (the U.S) 2000 Kiehl’s (the U.S) SoftSheen.Cars on (the U.S) Matrix (the U.S) 2002 Shu Uemura (Japan) 2005 SkinCeuticals (the U.S) 2006 The Body Shop (UK) 2008 Yves Saint Laurent Beauté (France)
2010 Essie (the U.S) 2011 Clarisonic (the U.S) 2013 Urban Decay (the U.S) 2014 NYX Professional MakeUp (the U.S); Magic Moment (China) Decléor (Japan - Shiseido); Carita (Japan - Shiseido) 2015 Niely (Brazil)
All acquistion of L’Oréal had been decided strategically. The target firms usually have ideal characteristics:
- Diversifying products in different geographical markets which L’Oréal is already there (Redken in the U.S as example);
- Operating in profitable geographical markets in which L’Oréal aims to be leadership (Magic Moment in China is a good example);
- Offering types of products that completes the portfolio of L’Oréal products or brands (the American Essie helps L’Oréal complete consumer products by its diverisified nail care and art products);
- Having technologies and competences complementary to those of L’Oréal, both on products and on market segments (La Roche-Posay entered in L’Oréal, thanks to its strong dermatology research capability).
As a results, these critical acquisitions provide L’Oréal chances to obtain important objectives. They help the group reach a needed size for exploiting economies of scale not only in R&D but also in marketing and distribution, therefore enhancing its market share. New resources, competences and technologies have been quickly acquired thanks to several purchasing of companies owning series of laboratories. Satisfying local needs is another advantage of this strategy. Owing to own local companies, L’Oréal easily overcomes entry barries in some market where cultural obstacles and tariff barriers are presented.
1.2 L’Oréal global strategy
L'Oréal is a global company that spans the globe. French cosmetics company French cosmetics company (SFTIC) set up more than 100 years, developed into a multinational company in 140 countries and regions with more than 88,900 employees. Its global product portfolio is represented by 32 global brands, controlling 19,9% of the world's cosmetics market.
They have a very well-known and trusted image because they have been around for so long as a quality brand. They also have a professional sector (Keratase, Redkin, L'Oréal Professional) that is used and trusted worldwide throughout high end salons. L’Oréal Laboratories has developed groundbreaking innovations such as the first shampoo without soap, the first fast bleaching agent, which first highlights the enhanced enhancement shampoo, the first hair color without ammonia or artificial skin called Episkin. With the slogan "Because we're worth it", they push the message "beauty for all" to attract a wide range of consumers regardless of their ethnicities, gender, and age.
L’Oréal chose a unique strategy: the popularity of. This means capturing, understanding and respecting the globalization of differences. The difference lies in desire, needs and
traditions, to provide tailor-made beauty, and to satisfy the wishes of consumers around the world. L’Oréal is driven by the vision of the world.
L’Oréal very powerful design brands / products to meet the regional and national needs. They have a wide variety of products ranging from make-up, skin care to hair care, attracting all different types of consumers. They also started men's products, such as Kiehl's men's fragrance, lotion and shower gel.
They feature famous celebrities such as Beyoncé, Penelope Cruz, and Jennifer Lopez to attract worldwide attention but also to appeal to a wide range of ethnic consumers. They have also started to offer products that are all-natural, plant-based, and sensitive or acne-prone skin types.
Based on conditions such as demographic, geographic, socioeconomic, lifestyle / personality, L’Oréal determines the characteristics of the client so that they can approach best suited to each audience segment groin
- Demographic: Age, marital status, gender
- Geographic: Global, hemispheric, national, state, city, postal code, climate, rural, urban. - Socioeconomic Income, class, vocation, education, religion, ethnicity.
- Lifestyle/personality Attitudes/opinions, interest, tastes and preferences.
II. Business Level Strategy
The detail action of Business level strategies is to provide value to customers and gain a co competitive advantage by exploiting core competencies in specific, individual product or service markets. In other words, business-level strategy is concerned to create the differences between firm's position and rivalries in an industry. In order to pinpoint the position, the firms have to decide whether it should perform activities differently or act different activities in comparison with its rivals. In business level strategy, there are two types of competitive advantage, one of them is Lower cost, the other is Uniqueness (or Differentiation). Firms ought to compare which kind of competitive advantage would create more value. Before doing it, it is required to define
which competitive scope firms want to choose to compete across, a broad market or narrow market. The final step of business strategy is to decide generic strategies in business level. There are five generic strategies, as demonstrating in figure 1:
Figure 1: Business level strategy
In L’Oréal, it is obvious to see that differentiation is the strategy they has chosen over a century whichever are the divisons. The target market is always global. In order to make our reports more clearly and accurately, it is decided to analyze according to one brand of L’Oréal only - L’Oréal Paris. The reason why we choose L’Oréal Paris is that it belong to L’Oréal Consumer product divisions. As we know, L’Oréal’s Consumer product divisions are all highly sensitive to global economies of scale and scope, it not only reached customers’ demand but also is reponsive to expectation of L’Oréal, achieve global to local balance and the sale is increased year by year. Now we can take a look of multicultural in unique diversification strategy of L’Oréal Consumer product divisions are going to apply to achieve broad target market.
2.1 Multicultural
Serving diversity type of markets need an adaptation of products, services, and business models that meet the local country conditions by understanding different type of cultures and the various needs of consumers in the cultural market area which we can seen in context of L'Oréal market as well.
The French cosmetics companya indicate this global-local tension which has formed a portfolio of international brands from many different cultures such as French (L'Oréal Paris, Garnier, Lancôme), American (Maybelline, Kiehl’s, SoftSheen-Carson), British (The Body Shop), Italian (Giorgio Armani), and Japanese (Shu Uemura). L'Oréal dedicated multi-cultural beauty as part of consumer products division.
All L’Oréal products have been spread around the world, inspired by the beauty rituals and culture. They are not only successful in the place where they originated from but also have go international, they think the traditional concepts of beauty change as you travel the world.
Beauty is short-term and can be expressed in diverse ways, it is not just an esthetic but reflects a deep and bold personality. L'Oréal has chosen famous stars with inimitable charisma that inspire women around the world with their unique style. The incredible careers and charismatic personality of L’Oréal’s ambassadors appeal in the motto "Because we're worth it", a powerful message of empowering beauty for the last 40 years. Furthermore, the market for multicultural beauty is set to become even more diverse, as the growth of interracial couples creates new dynamics in terms of skin,hair colour and behaviour.
2.2 L’Oréal Paris
L’Oréal Paris is one of the brand of L’Oréal’s parent which encompasses in many field of beauty business. There are four major beauty categories now, these are hair-colour, cosmetics, haircare, and skincare. All branches of L’Oréal Paris are really famed and successful. In hair-color, some renowed brands like Superior Preference® and Couleur Experte® . In
skincare, these are Revitalift® , Age Perfect® , Men Expert, Sublime Glow, Sublime Bronze, Excellence et Feria®. L’Oréal Paris Cosmetics are Colour Riche®, True Match™, Voluminous®, Telescopic®, and Volume Shocking™ mascaras. Hair Expertise™ is the famous products as talking about Hair-care. With a wide porfolio of products under L’Oréal Paris brand, the market segment of L’Oréal Paris become larger and larger. In 2015, the sale percentage of L’Oréal Paris make up at the half the sales of the consumer products SBU.
As the leader of beauty industry over the world, L’Oréal Paris has made an unparalleled commitment R&D, technology in order to provide piece of groundbreaking innovation, high quality products for not only femal, male, children but also person of all ages and ethnicities. L'Oréal Paris has developed from one philosophy: “to innovate and offer top performing products at great prices to the greatest number of consumers possible”. L’Oréal Paris has placed executives from combined socio-cultural backgrounds in its activity: new product diversification and new market development.
2.2.1 New product diversification
With the mission is to make these scientific innovations accessible to all. L'Oréal Paris believe offering opportunity the whole world for improving their well-being and self-worth. Keep up with the lastest beauty fashion trend, L'Oréal Paris work really hard to offer a wide range of new products which gain high ranking from all type of customers in 2016 from skincare, haircare to makeup. For example, three kind of clay mask with main ingredient (Kaolin), a most common ingredient could remove oil and dirt quite well without stripping the skin. A full set of L'Oréal Paris Extraordinary Clay hair care including shampoo, conditioner and mask with 30% mineral clay, which is believed to absorb excess oil and purify the hair right after, providing long-lasting freshness. In addition, L'Oréal Paris seem to the first drugstore brands that spotlight the first make-up for hair, . “Root cover up” – a temporary root touch up spray, quickly cover gray hair.
However, the most successful for L'Oréal Paris in 2016 is broght from make-up “L'Oréal true match foundation” with 23 shades. It is believed to bring the best beuaty to every women all over the world, no matter what their ethnicity or background. To celebrate this products, L’Oreal Paris has launched the #YoursTruly True Match campaign, which share the diversity stories behind the relationship of True Match. Discovering 23 influential individuals stories of what diversity and finding what perfect shade truly express one’s esteem. In addition, the “Youth truly campaign” is not target for women, is aim for man as well. L’Oréal Paris is the first cosmetic company who is featuring a man as a mass market cosmetics. With the slogan “ because we’re worth it”, L'Oréal Paris desire to create beauty product which can be used by all, they fancy to bring beauty to as many people as possible, no matter their genders are.
2.2.2 New Market development
For developing new market, in 2015, L’Oréal Paris focuses on developing China. Many products were sold in China from skincare, hair care to make-up, not only for female but also for male. “Facial skin is the most important for Chinese women” Understanding the culture of this countries, L'Oréal Paris researchers have latched onto cosmetic waters in vogue. This routine has recently emerged in China which was inspired by Japanese, and have thus offered a unique and special innovative texture for skincare products is necessary. For make-up, Chinese girls are likely to be surfing on cushion as well as all in one liquid trend. In addition, L'Oréal has launched an app, named Makeup Genius, to let women virtually try on make-up with many styles. This app is really successful attracting 4.7 million over total 14 million downloads.
Furthermore, China where is becoming one of the giants of global e-commerce with greatly influential by social networking site. L’Oréal Paris has quickly to follow and take advantage of the kind of this platform, built up the first international brand on T-mall and some powerful online selling website of China. In 2015, L’Oréal Paris was voted as the first foreign and successful brand in China. Currently, China has become the second larger market in sale
generation, behind the United States yet before France.
III. Functional Strategy - Operational
L’Oréal’s operational decisions are guided by some overall strategic considerations, such as distributing around the globe headquarters, production sites, evaluation centers and research centers.
Nowadays it consists of:
- 5 Hubs – USA, Japan, Brazil, China, India and world center. - 23 – Research Centers
- 16 – Evaluation Centers
- 49 – Scientific and Technico-regulatory departments
Managing operations on the universalization strategy is based on a specific industrial policy, arranged by regions in order to stay close to markets, and make the most of all opportunities faster.
Each headquarter has its own marketing, human resources, financial department, etc. Even though these departments have their own local strategies they all follow guidelines. Operations at L’Oréal cover seven different fields: purchasing, production, quality, environment-health & safety, supply chain, packaging & development, and real estate. L’Oréal has a tactical plan towards to improving and opening new factories and hubs to facilitate the distribution of products and be closer to the markets.
Since 2010 they are implementing a “wall to wall” approach. This tactical plan is based on including a packaging production unit on-site in order to reduce the time between production and preparation of orders. It also increases the productivity and the flexibility of the factories. L’Oréal has been expanding geographically open new markets, accordingly to the corporative strategy of globalization. Along the years L’Oréal has started important changes related to the way the company operates, focusing on streamlining, simplifying and making business more efficient. The business has been through continuously industrial re-engineering in all areas, focused in optimize its operations and increase productivity. The long-term goal is to consolidate growth around globe while establishing strong and sustainable growth in the new markets.
Chapter 3
STRATEGIC MAP
L'Oréal’s mission is to provide beauty for all. To take it in practical, a strategic map is very crucial to clarify what tasks to do to reach a particular goal. L'Oréal’s strategic map is centered by mission BEAUTY FOR ALL and five dimensions circulated to help the Group achieve its mission. The five dimensions are: research & innovation, corporate social responsibility, human resource management, marketing and finance management. What L'Oréal does in each dimension are described as followed.
Figure 2: Strategy map of L'Oréal
I. Research and Innovation
For 100 years, L'Oréal has built its unique research model to response to the world’s vastly diverse beauty expectation. It believes only strong cosmetics research can generate products that provide apparent and sustainable results. Its research & innovation model is organized to three major pillars with main function as follow:
- Advanced Research: to enrich knowledge and discover new active ingredients for all kind of product lines;
- Applied Research: to develop new effective formulations from vast collection of ingredients;
- Development Research: to tailor formulations adapted to particular brands identities and consumer expectations.
1.1 Assets for innovation
To keep staying ahead of the world market and bring cosmetic innovations to everyone, L'Oréal builds three precious assets: a unique collection of effectively active ingredients and formulation which is constructed by Advanced and Applied Research; huge amount of experts in cosmetics industry and expertise in evaluation which is indispensable for convincing new products to the market by demonstrating their safety and effectiveness scientifically and rigorously.
1.2 Research that listens to customers
L'Oréal is founded on not only scientific research but also attentive listening to consumers from all walks of life and observation of their behavior to beauty.
By strengthening its global presence through the six regional poles - Europe, Brazil, the U.S., India, China and Japan - L'Oréal's Research and Innovation can step closer to its major customers and enrich its beauty concepts of each region. The research teams build partnerships with local experts to discover new territories. To be clearer, L'Oréal develops 19 research and innovation centers located in 6 poles all over the world. The European pole majors Advanced Research, covering 3 global centers for each of the 3 lines of business – skin, hair care and
make-up. Other poles are in the U.S., China, Japan, Brazil and India. Mission of these poles is to tailor the global strategy to specific features of their markets. They are not only there to invent new products that later may become global innovations; but also observe and listen to local consumers in partnership with 16 evaluation centers. In the evaluation centers, "bathroom laboratories" which are equipped with several cameras support local teams to explore consumer behavior all around the world. These teams also go to customers houses to meet them, interview and gather information. Besides, importantly, compliance of L'Oréal global products with local regulations is another crucial role of these teams.
1.3 Advance technology to support research teams
L’Oréal provides scientists powerful means to take advantage of their creativity. They typically have medical imagery technology, intelligent robots and even 3D modeling. Thanks to medical imagery, the L'Oréal researchers are able to collect information in real time and three-dimensional images inside human skin, including thickness, structures’ variety and composition till micro level. This is a modern means of assessing effectiveness of active ingredients and formulas in the epidermis up to the upper dermis. Automatic robots are now working alongside scientists to help them doing routine tasks, following by saving a lot of time and giving freedom to their creativity. Interestingly, success development of an energizing model of a head of hair assists researchers to hypothesis aggression of hair lines being wet, cut, or grown with a real challenge.
II. Corporate Social Responsibility
Figure 4: Corporate Social Responsibility
Inherent in its mission of providing beauty and personal care products is L’Oréal’s responsibility towards its consumers, partners, employees and other stakeholders.
Sharing growth is part of the main topics underlying L'Oréal's commitment to its community. Especially, it means that the group pays a lot of attention to its surrounding communities, by creating helpful projects that meet real social needs and are aligned with L'Oréal's activities.
The Group has also developed a remarkable platform of predictive strategies that allows them to identify new ingredients or new innovations to constantly enhance our products’ safety as well as their performance. In addition to this, their practice of listening to our consumers or other stakeholders helps them to understand their concerns and to consider these also when deciding to reduce or to remove certain ingredients.
L’Oréal developed a sustainability program to explore their 2020 objectives, commitments and concrete achievements. The program explores four pillars Innovating, Producing, Living and Developing. Some of actions include:
Enhance biodegradability and reduce the water footprint in order to minimize the environmental impact of formulas, and thus have a better environmental footprint of their products. Amid the products launched in 2015, some show biodegradability levels between 97% and 99% in the L’Oréal Group’s brands.
The Water Footprint Network explains water footprint through a ‘‘virtual water’’ concept, which identifies the quantity of water necessary for the production and use of a product. It incorporates two key parameters that mirror the environmental quality of raw materials, biodegradability and aquatic eco-toxicity.
By 2020, L’Oréal aims that 100% of their new products will have a better environmental or social profile while the consumer will experience better benefits, and better packaging solutions is really important to achieve this goal.
In 2007, L’Oréal started a responsible packaging policy with three important pillars: Respect, Reduce and Replace.
Having better packaging solutions relies on responsible sourcing of the materials used. Especially, using resources from sustainably managed and preserve biodiversity. Likewise, L’Oréal aims to completely stop using PVC in its packaging by 2016.
L’Oréal’s approach is built upon three pillars: - Using renewable and raw materials.
- Creating eco-friendly processes.
- Creating ingredients with favorable environmental characteristics. Eco-design helps improve the formulas’, particularly by improving their biodegradability and reducing the water footprint.
Achieving zero deforestation is another crucial commitment. As part of its commitment to zero deforestation, L’Oréal puts in practice action plans to make sure a sustainable supply of soya oil, palm oil and wood-fibre based so that none of its products is related with deforestation.
Final, but not last, is respecting biodiversity. By 2020, 100% of their new products will have better environmental or social characteristics. To achieve this goal, the Group prefers to use renewable raw materials sourced from sustainable supply chains or processed using Green chemistry.
III. Human Resource (HR) Management
Figure 5: Human Resource Management
L’Oréal’s quest for universality has profoundly changed the challenges and lives of the group around the world, while developing a positive strategy for recruiting international talent. Their HR policies focus on two areas: exploring talented individuals, diversity in all, being able to manage the markets around the world today and tomorrow, but also ensuring that talent can be expressed in a collective framework that provides them with respect, Incentives and career development possibilities. This is a key point because economic success and best social performance must go hand in hand. They have a responsibility to put their values into practice and to create a working environment based on respect, solidarity and recognition of individual values.
L’Oréal’s human resources management strategy can be classified as: the diversification of management as the company's core values, global recruitment strategies, investment resources
and training programs. Because their ethical principles shape their culture, strengthen our reputation, and must be recognized and recognized by all honest L’Oréal staff - to act in good faith is essential to building and maintaining trust and good relationships, respecting their Work on many people's lives, courage ethical issues and transparency to be true, sincere, able to prove our actions and decisions. For their culture, they accept up to 50 graduates per intake, as well as more than 140 interns and placement. They are looking for innovative, socially competent entrepreneurs who will invest in our culture and make incredible new bonds, support each other inside and outside the office, and discover active social life in L’Oréal as their sports team, Dance classes and fantastic event planning. Their goal is to make L'Oréal a great place in which to work and treat their employees is the greatest asset. Employees have a right to a safe and healthy working environment in which individual talent and merit are recognized, diversity is valued, respect for privacy is maintained, and the balance between professional and personal life is balanced. They provide employees with an exciting environment, exciting personal opportunities and a changing opportunity to encourage openness, courage, generosity and respect for the atmosphere so that all employees are free to raise their questions, thoughts and concerns. For their global recruitment strategy, they unified brands across all sites in the countries they operate in. Each site's work section lists available positions in the country, with only a few links to the relevant social networks. Their work site links to Facebook pages, LinkedIn pages, Twitter feeds and YouTube. In order to ensure that employees in the earliest stages of career exposure to staff, L’Oréal decided to establish a formal entry plan. L’Oréal organized "FIT Week" activities, held a series of meetings for all employees. At the same time, it is widely publicized via e-mail, intranet, posters and contests. New recruits or persons transferred from another country or department are automatically enrolled in Level 6 courses. At least five days before their arrival, the HR department ensures login details, e-mails and phone calls are in place, and a desk and security pass is ready, as well as a product "goodies package". On their first day, the new arrival coincides
with human resources and their line manager. They are shown to their desk, introduced to the team, and then spent time with their HR manager, who explains how FIT plans to work. There is a team lunch, and they are assigned a mentor who is in this role for at least the first year. In the next two weeks, new employees meet with other employees from the company - whether it be marketing, health and safety, or product planning. In the first month, they and the human resources department to review, follow-up on a regular basis.
IV. Marketing
Figure 6: Marketing
L'Oréal had success so far in reaching out to the diverse needs of customers from different countries around the world, across different income level, cultural patterns and offering them products that worth every penny. L’Oréal sold its product based on the fundamental of customer demand in a country rather than selling identic type of products across the globe. The company build a large number of brands adapted to local culture and attracted to different market segment instead of generalizing the brand. L'Oréal went on not only being a local product but also doing well in international market. Below several marketing strategies that L'Oréal use to sold their beauty products across the world.
4.1 Digital Marketing
At the forefront of the digital revolution, L’Oréal is constantly looking for new ways to connect with consumers. From innovative e-commerce strategies to cutting-edge apps, they are leading the way into a new era of beauty. The digital strategy adds value to L’Oréal innovations by catching up to latest trends via Internet monitoring, introducing the new cutting edges mobile apps called Makeup Genius and creates an even closer relationship with consumers through their well-known brand ambassadors with millions of fans following them on social networks.
Social media is crucial to driving engagement and affinity for marketing. L’Oréal’s social media presence is impressive. Being present where your customers are, being part of the wider conversation and playing a part in the evolving consumer journey are the key element in the use of social media for business purposes.
From E-commerce side, L’Oréal had great potential in its distribution channel, thanks to a strategy tailored to the specifics and different practices of each market. They also set up an online shopping to enhance customers online shopping experience.
4.2 Content Marketing
The beauty category is a perfect for content marketing where most of women do blogging and following influential beauty expert through those platforms which give brands the opportunity to teach and entertain consumers in an authentic way. In 2011 L’Oréal launch a website called Makeup.com, providing beauty hacks, tutorial video and expert tips daily in a unique design. L’Oréal used to partner with YouTube influencers, beauty bloggers which allows the brand to reach an elusive audience, the essential key to increasing company growth. When combined with product recommendations from L’Oréal’s brand, the result is not too obvious which made it that looks relevant without overselling it to customers.
4.3 Collaboration
L’Oréal had done many campaign with well-known celebrities, partner with famous designer in launching new product lines and fashion shows. By doing this kind of collaborations had make L’Oréal brands getting more popular and known worldwide, fashion designers may get all the attention during fashion week but beauty brands also play a significant role from makeup to professional hair style which presented during a catwalk soon consumers will start to look up for the products that being use in the models.
For the campaign, a beautiful campaign built of the raw insight of the everyday struggle of women of color. Beauty does not apply to only single face shape but there’s a lot different face shape all over the world. The problem that we have in the beauty industry is the lack of makeup shades variety. L’Oréal Paris finally introducing the solutions through its new campaign for the True Match Super Blendable Foundation, this campaign aims to highlight that there is a perfect foundation shade that fit each person, regardless of what your skin tone is.
V. Finance
Figure 7: Finance
Together with the business units, the finance and management control are key important part for L’Oréal’s performance, making valuable contribution to its dynamics of growth. Finance and Management control has some grass-root functions, such as the teams directly contact with the
business units to provide accurate information for their need, and also help draw up appropriate predicts and recommendations. There are three kind of financial strategic management in L’Oréal. Those are corporate finance, finance management and business control, and internal audit.
5.1 Corporate Finance
Accounting and treasury have a major part for L’Oréal acquisition globally. With security and reliability, the main mission is to provide relevant information on accounts and financial file for entity in together will local regulatory timeline.
In close collaboration with other business and the internal audit, the accounting teams have to ensure that procedure and accounting standard must be properly applied. For instance, they have to modify the organization operation pursuant to the changes in accounting or tax law and regulation both at national or multinational level.
The treasury teams appraise the cash-flow and currency exposure throughout the fiscal year. They also manage banking relationship, focused more on security and some payment method to ensure L’Oréal correctly applied.
Simply speaking, corporate finance is overall L’Oréal financial consolidation. They analyze and interact with other division, reporting their activities directly to Paris headquarters.
Other corporate finance functions include:
- Financial communication: the task is to provide the annual Report, the L’Oréal Finance digital magazine, the Letter to Shareholders, digests and newsletters. Their activities mainly involved in publication
- Brand/ Commercial Finance: it used to analyze, manage with interaction with different functional department like Marketing, Sales, Operations, and Purchasing
- Operation Finance: their activities are to provide financial analysis and strategic support for all production and distribution from manufacturing, supply chain to corporate operation.
5.2 Finance management and business control
Here are the “financial eye” of each subsidiary of L’Oréal. They analyze, plan and control the way which the revenue is generated. They also help to make the right investment decisions and profitable evaluation and prediction. There are some functions which are divided in finance management and business control
- Junior Controller: The purpose is to participate in the budget planning and make forecasts for brands or SBUs. Within high responsibility, it is required to check expenditure allocation and help optimize costs. The contribution of Junior controller for business is offering monthly reports, being involved in the main strategy.
- Business Unit or Plant Controller: It is also responsible for budgets drawing, but for higher level than Junior controller. Besides that, accounts checking, cash flow, expenditure allocation are another task of them. They help to manage all resource and expense to make sure the optimize for each investment.
- Country Chief Finance Officer: It ensures the economic scale and balance by managing different functions from management, account, finance, legal and tax for whole countries in which subsidiary is located.
5.3 Internal audit
Obviously, the mission of internal audit teams is to ensure that all regulations standards and internal controlled methods are properly applied. It is need to assess and timely assist management teams by carrying out audits, recommendation and implementation. Their identification and risk assessment may affect L’Oréal’s operation for not only subsidiaries but also divisions and whole L’Oréal. The Internal audit teams must deal with a wide range of problems such as commercial policy, logistics, stocks, cash flow, purchases, accounts, etc. Sometime they also need to work with accounting approaches or audit systems to make sure providing the excellent opportunities and financial exposure.
Chapter 4:
INDUSTRY ANALYSIS
The field business of L'Oréal group is mainly in cosmetic industry, which has grown over the past few decades to become a billion-dollar industry nowadays. However, there are certain factors which affect the profitability of cosmetic industry. These are bargaining power of customers and suppliers, threat of new entry, the threat of substitutes as well as intensity of rivalry in the industry. In this report, we will briefly analyze those factors by using Porter Five forces analysis. Before analyzing the five forces, it is better to understand cosmetic industry, the growth rate, market share, the structure of market in general.
I. Cosmetic industry
The cosmetic industry is such a highly competitive and timely changing market due to consumer preferences and industry trends. These products are facing, and will continue to face, with competition of consumer recognition and market share. The graph below illustrates the growth of global cosmetics market, estimated annual growth rate, as %.
Obviously, the worldwide cosmetics market has been slightly stable over the past five years, pushing up the total market value from €127 billion in 2005 to reach the peak at €203 billion in 2015. The latest growth number, estimated for 2015, grew by an estimated 3.9%.
There was a considerably slowdown at 2.9%% and 1% respectively in the financial crisis years of 2008 and 2009 only.
In conclusion, the whole market in general, is a particularly robust market. The value of product is adaptable of consumer preference, it changes over and over. The cosmetics consumer always seeks for quality and novelty value with leading-edge technology and new trends.
One the other hand, notably, it must be admitted that cosmetic industry is large market which has high entry costs. It is such a dynamic industry yet requires huge investments in research and development to meet client needs. Furthermore, although it is competition market, however, all competitors are rather intensive. Those are large and famous manufactures such as The L'Oréal Group, The Procter & Gamble Company, Unilever, Shiseido Company, Limited and Estée Lauder Companies, Inc.
Further analysis with respect to the Porter Five forces will be undertaken below. Figure 9: Porter Five forces
II. Number of suppliers
Figure 10: Bargaining power of suppliers
L'Oréal works with several hundreds of suppliers world-wide whom it has long and close relationships with. Suppliers for L'Oréal are varied in four main domains: raw material, packaging material, contract manufacturing and machinery. The Group has selected them on their sensitivity to create new things, ability to deliver service on time and a bunch of standard including flashpoint of their supplied ingredients. All suppliers are regularly assessed based on key performance indicators: quality, efficient logistics, social and environmental responsibility, innovation, competitiveness.
In general, in cosmetics business, there are hundreds of suppliers but a few giant customers dominating market (L'Oréal, Unilever, P&G, Shiseido and Estée Lauder), leading to weak bargaining power of supplier. Moreover, because L'Oréal is the biggest cosmetics company, its suppliers are put in very weak negotiating position.
2.1 Cost of switching suppliers
Having an enormous account of suppliers always available for 44 factories around the world provides L'Oréal easy way to switch from one supplier to another if anyone of their
suppliers does not satisfy its conditions.
2.2 Unique/differentiated products of suppliers
Mass production in giant factories of L'Oréal needs standardize inputs. Therefore, L'Oréal issues a strict regulation to their supplier to follow. Let’s take renewably sourced raw materials as an example. L’Oréal has been engaged since 2005 in principles from the Convention on Biological Diversity to no longer reference products with an unfriendly environmental source. Therefore, a series of actions were implemented to its partners to guarantee they also follow all of these principles. The Group provides them what it wants to have on the environmental profile of the purchased materials. Same approach is taken with packaging and equipment suppliers.
L'Oréal strongly supports its suppliers in reaching its expectations, also restrict give an end to relationship with suppliers who persistently lose track. Therefore, products of suppliers are generally hard to differentiate
2.3 Ability to forward intergrated in to focal industry
Many of L'Oréal’s products are sold through retail channels, such as department stores or supermarkets, drug stores. It makes close and long lasting relationships with these chains to prevent any potential threats as supplier’s upgrade to producers and sell their new but alternative products in the market.
With these factors, the bargaining powers of suppliers can be considered very low.
III. Bargaining power of buyers - low
Customer profile of L’Oréal
Age 16 to 60 years’ old
Middle to upper class
Higher education and cultural knowledge
Higher income level
Man and woman, the majority of women
Have leisure time
Is critical, and informed consumer
Not afraid to complain, not tolerant of mistakes and failures in products
The customer is the company's main source of income. However, it is possible for buyers to switch between competing products / services, which gives them the power to bargain for price, quality, availability of information and place of purchase. Buyers' bargaining power depends largely on the degree of market competition and the number of alternative products. Buyers' ability may be high when buyers focus on the ratio of firm concentration, dependence on existing distribution channels, buyer information availability, buyer price sensitivity, and differential advantage (uniqueness) Home switching costs. The customer's bargaining power analyzes the impact of consumer price changes on the beauty industry. This factor analyzes the power of consumers to manipulate price changes caused by changes in demand (Aaker, 2000: 102-120). When consumers have high bargaining power, manufacturers and sellers may not be able to fully predict the future needs of the market. This may prevent them from achieving long-term profitability due to unpredictable demand patterns.
The power of the consumer to the company is growing, because the accessibility of the company's information is growing. However, L’Oréal is considered a high-end and high-tech industry leader, guiding demand rather than follow. Purchases are quite low, so suppliers have a high level of product quality and differentiation. Because of the high price (luxury), do not need a lot of buyers. Incentives for higher quality products and products with a strong brand identity make L’Oréal and luxury cosmetics industry, consumer bargaining power is relatively low.
IV. Threat of new entrants
Figure 11: Bargaining power of new entrants
The strength of the L’Oréal brand amongst new entrants relies on the offer of a vast gamma of products for different segments and the benefit from economies of scale for its production.
In the cosmetic industry, brand identity and product differentiation is very high. Also, a high capital is required for investments in R&D to create new products. As well as it needs high investment in product testing, and advertising.
Only a few middle and small-scale firms have access to the funds and expertise required to perform this effectively and new entrants might encounter challenges positioning their products on the shelves due to the high control of the distribution channels, and having to deal with government policies and regulations that continue to get stricter in the cosmetic industry, creating capital and social barriers.
It also needs to be considered the switching cost, which apparently doesn’t seem high. However, consumers develop a trust relationship with brands and might not want to take the risk of trying a new product and being allergic to it.
global cosmetics market that have the power to create barriers to entry. In spite of that, visionary new entrants can dedicate their products to markets that aren’t fully explored, for example products dedicated to vegans and celiac allergy.
V. Threat of substitutes
It is rather less potential for products substitution. L’Oréal is a big beauty company that had many diversifications for its beauty products which divide into different type of product divisions. Their products ranging from cosmetics, skin care and down to hair care products. Honestly, it is complicated to find substitute product of L’Oréal products in beauty market business. The only substitute that believe might become a replacement for the products called cosmetics surgery.
Most women feel that wearing makeup does make them feel more secure and confident where it remarkably affects the way people view themselves and how they feel about their own looks. When you feel lack of self-confidence to go out without putting makeup then it’s supposed to be a problem that should not be ignore further.
The concept of cosmetic surgery has finally gained the popularity that it has now especially among its takers in this modern world. There’s a lot of cosmetic surgeries like embroidery eyebrow, eyeliner tattoo, lips filler and so on, by getting those surgeries women think it help them save a lot of times and pure utter laziness.
Yet, it remains as one among the many interesting and controversial issues discussed in beauty industry. The cost of surgery is very expensive and considering side effects that might happens, customers are unlikely to get cosmetics surgery. Still, the rise of cosmetics surgery considers to be a threat to L’Oréal.
Another potential substitute called ‘no makeup’ or so called natural looks. Those who was born with natural and fair skin might not need to put on makeup cause somehow, they already good without makeup.
environment within the company in the same industry and will drive company ability to achieve greater profit because consumers can choose to purchase the substitute products which offer almost equal standard. In conclusion, due to L’Oréal wide variety of products that covers most of the beauty lines the potential of substitute products considers low.
VI. Intensity of rivalry in industry
Figure 12: Intensity of rivalry
6.1 Concentration
The cosmetic market is highly concentrated with most major key players The L'Oréal Group, The Procter & Gamble Company, Unilever, Shiseido Company, Limited and Estée Lauder Companies, Inc., being mentioned in cosmetic industry part. Those are large multinational companies with great facilities, finance, capital…, resulting in high fixed cost on manufacturing and high competition on price.
In conclusion, the degree of rivalry’s concentration must be assessed as high due to the elevated level of competition.
6.2 Industry growth
The industry growth rate is considered relatively high. This is because, consumers are aware of the necessary and important of cosmetic, especially for their self-esteem and confidence.
6.3 Exit barriers
Barriers to exit which included the high fixed cost for development and research, manufacturing… so forth. There are a large number of machines and equipment which used for researching and developing cosmetic products. Due to the high investments, it is really difficult for firms to leave the industry without achieving, at least the ROA (return on assets).
6.4 Diversity and Product differentiation
L’Oréal has a strong and long-term brand which is being positioned to consumers across all income levels by providing a wide range of beauty product. The competitive advantage of L’Oréal is diversity and product differentiation. This is because L’Oréal has strong marketing abilities and product engineering. They also have strong capacity in research from basic to advance level, reputation for quality and technological advance, long history and strong cooperation of channels. However, for perfume industry, it is quite difficult for L’Oréal to position and differentiate itself from competitors.
VII. Conclusion
In summary, based on some analysis above, it can be concluded that the intensity of rivalry in cosmetics industry is extremely high to medium.
All in all, the impact of Porter Five forces on L'Oréal has also been discussed thoroughly. It is shown that L'Oréal has low threat of suppliers, substitutes, new entrants and customers bargain power and high competitive rivalry. Those factors create for L'Oréal a great amount of opportunities and threats.
As analyzing above, global cosmetic industry is robust market with high profitability, lucrative as well as competitions. L'Oréal should be able to vindicate their position, predict the change in market segment in order to become a pioneer who seizes profitability of industry. There are three major trends underpinned the growth worldwide of cosmetics market nowadays. The first one is
the expansion driven by digital communications, next is the high-end channels, and final one is the increase of the middle classes in the New Markets, in which more and more consumers are looking for innovative, high-quality products. By focusing on these tendencies, L'Oréal could ensure that they will definitely achieve a market segment, develop customer loyalty and long-term profitability over the years. Particularly, defeat industry rivalries.
Chapter 5:
STRATEGY GROUP
I. Variables identification
Beauty is a diverse market that has a wide range of products, it offers from hair products to skin care cosmetics and make up. Cosmetic buyers are viable prospects for marketers as women today are constantly being reminded of what is considered beautiful. Cosmetic buyers are as diverse as the products they buy since we all have different preferences while making purchase decisions.
When it comes to product selection, aside from choosing brands the most used parameters are age, divided by teenagers (below 18 years old), young adults (19 – 34 years old), adults (35 – 49 years old) and mature (above 50 years old) then price range was divided by low, medium and high.
The cosmetics brands were categorized in three categories, each one of them having six different brands as showed below:
High End: Cle De Peau, Chanel, YSL, Dior, Lancôme, NARS
Mid End: Shiseido, Make Up Forever, Smash Box, MAC, Clinique, Benefit
Low End: L’Oréal Paris, Maybelline, Cover Girl, Avon, Revlon E.L.F
Teenagers consider makeup really exciting when they first start wearing it, probably because it is something they haven't been allowed to wear before or had the opportunity to try it, which stimulates them to buy and try it themselves, starting with light makeup such as lip-gloss, mascara and progressing further. For example, America has seen a sharp upswing in marketing geared to teens since the 1980s, indicating their significant buying power. The use of beauty products by teenage girls circulates over $9 billion dollars a year. The money
