LOreal Case Assignment IB610 Eastern Michigan University

Team 1 Michelle Abd'Elaziz Deana Jackson Anthony Mlynarek Robert Sellers Jeanette Williams

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History of LOreal LOreal is a company that has taken many strides to become a highly recognized beauty resource for consumers of all demographics and economic status. The now global iconic company began in France with its initial hair color and body wash lines. These products were the stepping stones to taking control of everysegment of the beauty industry. French based LOrealshad a strong regional following as a beauty company but needed to expand into the United States before it was able to boom as a global company.To accomplish this there was a major reorganization of the company in the 1960s that helped to set the stage and design strategic business philosophies that would lead to the successful expansion in to other countries and regions. This reorganization led to LOreal choosing to produce products internally and to acquire establishedcompanies in order to satisfy consumer needs in all markets. LOreal became known for its savvy style of streamlining production and investing in research and development. By combining efforts of several different brands in one central location, they could find the least expensive and best way to develop, produce, and market each item. They were even able to transfer many of these processes to their production sites throughout the US and overseas. Although, it took some time getting there, LOreal found its place in the US, Europe and Asia. This continuous effort for innovation and efficiencyled to famous industry people saying LOreal sold hope in a jar (Jones, et.al 11).

Global Expansion The global company that LOreal is today is a far leap from where the company was positioned when it first began. The beauty industry is a competitive one and even more so for foreign interests. LOreals first big global move was to penetrateUnited States beauty market. In the US, LOreal conducted much research and development and worked to establish itself as a viable cosmetic and hair care company, but struggled in several areas and it prevented its expansion to Asia and other European countries. Even as recently as the 1980s LOreal still had yet to really branch out and connect beyond the US, France and a few other places. The biggest thing holding LOreal back from expanding its reach was its lack of affordable products that would be desirable to the middle class consumer. LOreal recognized that a broader portfolio was needed before further global expansion could be possible. According to Jean-Paul Agon, president and CEO of LOreal USA, We didnt have an accessibly priced, genuinely popular (brand) with a global potential. We had a couple in Europe, but we didnt have anything that we thought had potential (Jones, et.al 1).To meet these needs, LOreal chose to acquire establishedcompanies with product lines that would round out LOreals portfolio. . Major purchases of Maybelline, Kiehls, Ralph Lauren, and others all helped to broaden the portfolio and meet the needs in the different spectrums of beauty. In addition,

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LOrealworked to enter the ethnic beauty market by acquiring Soft Sheen and Carsons, a move which helpedfurther diversification and provided opportunities for sales in other countries (Jones, et.al 8). However, LOreal needed a way to tie their growing businesses together. They did so by moving many of the brands headquartersto New York where LOreals US headquarters is located. There they could have the different companies and divisions work together to streamline processes and act as advocates for the different components of the company. LOreal worked to have all staff members working together with the same understanding of the companys strategy. From there they placed country managers in each of its international regions which helped to ensure there was a finger on the pulse of that region. LOreal became a company that was willing to try new things and go after it.

Entering the US Market Just after World War II, LOreal made the move to the US and entered the beauty market in mainly the hair care division. To help facilitate this entry they licensed several of their products to Cosmair Inc., LOreal was at a significant disadvantage to their US competitors. Not having previous relationships with the sales people and stylists put a roadblock up for the company. Because of the initial struggles that LOreal was having in this new market it chose to reorganize and refocus the company. They recognized that to be a major global company they needed to think globally about their decisions and be quick to meet the needs of the new places they invested in. Later on these decisions would lead to purchases of other companies such as Redken and Cosmair that helped LOreal further diversify their product lines. In addition to gaining a large part of the hair care market share, LOreal sought to gain market share in several other US divisions: fragrances, cosmetics, and other beauty elements. Wanting to create a diversified portfolio, LOreal acquired Ralph Lauren, Helena Rubenstein, Matrix, and Kiehls (5-10). One of the biggest challenges LOreal faced in the US market for these areas was prime sales space. After much battling with major department stores, LOreal gained prime locations which helped facilitate larger sales of their high end products. LOreal rounded out their portfoliowith the acquisition of Kiehls, a specialty beauty store originally from New York. LOreal found that its other luxury acquisitions would prove valuable in sales overseas. When LOreal chose to go further expand their European market and enter Asia, it chose to do so by promoting the beauty products as American products. They did so, because that was the other great alternative in the beauty industry (10). There were already many high end French and British products, but the American version of becoming hip and chic presenteda new option of beauty possibilities. Maybelline LOreal made a strategic decision to purchase Maybelline in order to help reach a segment of the market that was more price conscious and to better position itself in

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other countries. Although LOreal recognized that Maybelline needed to be refocused, they knew Maybelline would be a strategic asset in the long run. Some of the key issues that Maybelline faced were customer connections with the company, finding ways to compete with other major companies, and lack of focus. As Ketan Patel said, Consumers were unable to define what Maybelline was (Jones, et.al 6). To solve these problemsLOrealmovedMaybellines offices to New York in order to join forces and share R&D resources with other LOreal brands. This move allowed the company to share staff, resources, technology, and marketing. , LOreal wanted to create differentiated productlinesat an affordable, moderate and luxury price point. The Maybelline acquisition met the demographic of the consumer seeking affordable products. But to reach those consumers Maybelline needed help. To help revitalize the brand, Maybelline became focused on ways to connect with consumers over time. First,they created a color collection theme that changed with the seasons, helped keep the company fresh, and encouraged consumers to keep coming back. In addition, they brought back their original tagline of Maybe Shes Born With It, Maybe Its Maybelline (Jones, et.al, 6). The tagline was catchy and consumers recognized it. From there they needed to help consumers reconnect with the tagline and feel like it was a product for them. Maybelline as a successful part of the LOreal brand line because it appealed to a vast market spectrum and was easily accessible in stores in several countries. Maybelline had a large variety of cosmetic products that were appealing because there was something for everyone. Not only did this make them successful in the US, but also in other countries such as Japan.

Global Brand Strategy LOreal chose to position itself as a company that was going to be successful in each dimension of beauty in the affordable, moderately priced, and luxury markets. To do so they determined that they wanted to promote their products as American Brands. We did something that was basically unthinkable for most multi-national companies. We didnt just accept to have local brands. We tried to put our [American] brands everywhere (Jones, et.al, 10). That move was gutsy and helped define the type of company LOreal strived to be. As an organization there was a sense of responsibility to both the American brand and the countries they served. There were teams of staff, located in each country served, that could analyze the markets and seek out innovative ideas to meet the local needs. R&D was what helped drive LOreals success in fulfilling the needs of consumers. They werent afraid to try new things and find ways to make better products and make them more efficiently. If a process worked better in one brand, line, or region, it was often duplicated in other places. LOreal had an interconnected organization that helped to serve each component of its portfolio; the openness helped to build up each facet. This is also seen in their marketing department where there is a strong relationship

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between LOreals marketers and its R&D teams (Jones, et.al, 12). It is common to also see completely different departments working together to fulfill unmet needs. The needs are different in each region and that is where the individual country divisions play a role with keeping track of the evolving consumer. The color collection or makeup of a particular product may need to be altered to meet the preferences of consumers in different areas. Some may want a more neutral color collection, while other regions prefer a bold, vibrant collection. Also the textures and consistencies may need to be changed. LOreal was able to accomplish these regional changes due to its involvement in the development, production, and distribution of the products.

Reorganization When LOreal moved to the United States and started acquiring companies to enhance its beauty portfolio it was helpful to have all the key players brought to the same location. ThisNew York location continued to bevaluable LOreals strategic planning processes. However, as it chose to become a global organization it had to create a presence in the countries where they weresetting up shop. LOreals global headquarters remained in Clichy, France and served as the central decision making hub and from there individual zone and country teams were created (Jones, et.al 11). The teams had to follow the strategy designed by the chiefs but they had more freedom to make decisions on products that would meet the needs of the consumer. LOreals decision to have a more wheel and spoke design helped to facilitate organizational goals and allow for empowerment of the various teams. They were able be successful with this approach because LOreal invested intheir employees and made sure everyone understood and promoted what the company represented and where it wanted to go.

Competitive Strategy LOreals competitive strategy was to be a top contender in each of the various beauty divisions. While much of their high end products were produced in-house, many of the other specialty products and widely accessible products needed to be acquired from other brands. By acquiring brands like Redken, Matrix, Maybelline, Ralph Lauren, and Kiehls, LOreal filled in the different beauty divisions. Having brands that met the consumer needs in each beauty division wasnt enough for LOreal; they wanted to make sure that they had significant sales for each brand in each division. To do so they configured products that were constantly evolving to meet the changing looks, needs, and preferences of consumers. They also fought to gain competitive advantage in product placement in stores. To be successful in beauty it is all about consumers seeing the products and sales people being educated enough to sell them.

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The competition in each of the beauty divisions varied and included companies like P&G, Unilever, Revlon, LVMH, and Estee Lauder (Jones, et.al, 15). During the time that LOreal began to expand, much of the competition was struggling. LOreal took advantage of this opportunity and refocused Maybelline, found prime shelf space for its luxury products, and put its hair care educators to work in selling their brands. LOreals goal was to be the premier beauty organizationand they succeeded at thisby producing revolutionary products that met the needs of consumers.

Growth Strategy LOreal was a company that wanted to be successful in a few areas of beauty prior to expanding or acquiring new components. In the early phases of focusing on hair care and soaps it spent several decades in those divisions before realizing that it wanted to be more. When LOreal determined that it wanted to become a beauty industry powerhouse it saw the US market as its way of getting there. Once in the US they chose to acquire existing companies to meet the needs lacking in its portfolio. LOreal wanted to be the top contender in each division of beauty and each price point. Our priority is internal growth, but well make acquisitions if we think theyll add internal growth over a number of years (Jones, et.al, 13). This showed that it was strategic in what companies they acquired and did so to benefit the main brand, LOreal. During the 1990s 2000s LOreal made many acquisitions in the US that were quickly turned in to assets. When they had the momentum on their side they took those American companies and started expanding in to other European and Asian countries. The things that they learned to become a strong company in the US helped them enter new markets overseas.

Recommendations LOreals well designed global growth strategy has positioned it as the #1 cosmetics producer in the world. To remain the leader in the industry, LOreal must continue its diverse global vision and market approach. Demographic trends in 2004 provide significant opportunities for LOreal to continue its successful global growth strategy. These trends include: an aging population in the Western Hemisphere, aspiring consumers in emerging markets, and a growing interest in beauty products among males all over the world (Jones, et.al, 15). The aging population in the Western Hemisphere presents a significant opportunity for LOreal. As the baby boomer population ages, the demand for anti-aging skin care and other age related products will continue to increase. This demand will come from the aging population for products that repair damage as well as from the younger population to prevent aging. LOreal has tried to penetrate this market in the past with Maybellines Revitalizing brand. At the time, Maybelline had lost its focus and subsequently dropped

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the brand which was being overshadowed by Revlons Age-Defying products. LOreal is in a much better position now with Maybelline New Yorks strong international presence as well and its successful luxury brands including Lancme and Kiehls. LOreals commitment to R&D will aid in identifying products targeted at all levels of the demand demographic. This strategy will also serve to increase market share in the skin care market where Estee Lauder currently leads. Boost to LOreals skin care market can also be possible with the growing demand of mens skin care. This market is not as saturated as female cosmetics so LOreal will face minimal competition at first. LOreal can go beyond traditional skin care such as shaving lotion and razors to hair care, advanced skin care and anti-aging products to draw in this growing segment. Since this demand is growing world-wide, LOreal can continue its strategic international growth strategy and build a new international brand. This strategy could also fall in line with the growing demand of emerging markets. Emerging markets present significant growth opportunities with their growing middle class and increase in disposable income. Eastern Europe is a logical region for expansion focus.While LOreal has successfully introduced LOreal Paris, Lancme and Garnier into the market, it has yet to bring the more moderately priced Maybelline. Maybellines accessibly priced products will appeal to this emerging market and further LOreals strategy of promoting American brands around the world. LOreal is in an excellent market position. The demographic trends of an aging population, emerging markets, and international demand for male oriented beauty products fit well within LOreals current diversification strategy. Their current presence in every distribution channel provides an advantage over the competition. By following demographic trends and capitalizing on their previous successes, LOreal will further its position as the global cosmetics leader.

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Works Cited Jones, G; Kiron, D; Dessain, V; Sjoman, A. (2005). LOreal and the Globalization of American Beauty.Harvard Business Review, 9-805-086.