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Case: L’Oreal

Case Background
Headquartered in Clichy, France, just outside Paris, L’Oreal is the world’s largest beauty
products company, with brands that include L’Oreal Paris and Maybelline (mass-
market),Lancôme (luxury), and Red ken and Soft Sheen /Carson (retail and salon). L’Oreal owns
Dallas-based Skin Cuticles that conducts cosmetology and dermatology research. With more
than 50 percent of sales generated outside Europe, L’Oreal has focused on acquiring brands
globally. L’Oreal owns UK-based natural cosmetics retailer the Body Shop international, which
has about 2,550 retail stores worldwide. L’Oreal’s dermatology unit, Gal derma S.A., is a joint
venture with Nestlé.

L’Oreal SA is structured into three branches: cosmetics, the Body Shop, and Dermatology. The
cosmetics branch is divided into four sectors: consumer Products, Professional Products, Luxury
Products, and active cosmetics. Consumer Products are marketed under L’Oreal Paris, Garner,
Maybelline, Soft sheen, and Carson brands. The company’s Professional Products segment
includes hair care products for use by professional hair dressers ,such as Kerasotes, redden, and
Matrix. L’Oreal’s Luxury Products are sold globally under such brands as Lancôme, Diesel,
Giorgio Armani, and Cacharel. The firm’s active cosmetics division ,which consists of products
under Vichy and La rochePosay brands, are for sale mainly in pharmacies.

L’Oreal is the leading nanotechnology patent-holder in the USA. L’Oreal recently opened a huge
new factory in Indonesia. L’Oreal is a listed company with 66,000 employees, but the founder's
daughter Lillian Bettencourt and the Swiss food company Nestle each control over a quarter of
the shares and voting rights. In November 2012, L’Oreal began construction of the largest
factory in the Jababeka Industrial Park in Ciaran, Indonesia with a total investment of US$100
million. The production will be absorbed 25 percent in Indonesia and the rest will be exported.
L’Oreal’s sales in Indonesia are growing rapidly. L’Oreal is also building a Research and
Innovation Centrino Jesus Island Rio de Janeiro, Brazil at an estimated cost of 30 million euros
(70,000,000 real’s).
Vision Statement
To be the cosmetics company of choice that women, men, and children the world over rely upon
to feelmore beautiful.

Mission
the company’s mission statement is provided onthe corporate website, as follows:

Beauty for all—For more than a century, L’Oréal has devoted itself solely to one business
:beauty. It is a business rich in meaning, as it enables all individuals to express their personalities
,gain self-confidence and open up to others .Beauty is a language—L’Oréal has set itself the
mission of offering all women and men worldwide the best of cosmetics innovation in terms of
quality, efficacy and safety. It pursues this goal by meeting the infinite diversity of beauty needs
and desires all over the world.

Beauty is universal. Since its creation by a researcher, the group has been pushing back the
frontiers of knowledge. its unique research arm enables it to continually explore new territories
and invent the products of the future, while drawing inspiration from beauty rituals the world
over.

SOWT ANALAYIS
Strengths Weaknesses
1. Strong Brand Image 1. Internal family disputes on heritage and
2. Perceived high quality standards and company control
products 2. High investment in constant innovation
3. High Brand Awareness among men and means high risk of failure
women 3. Their smallest cosmetic production and
4. Knowledge of different cultures and sales is in North America
rituals worldwide 4. Decentralized organizational structure
5. Strong Research and Development 5. Worldwide marketing strategy that
departments adapts to the culture: blurring of the company
6. Strong advertising image
7. Diversity of beauty products and 6. Hard to know who is
services accountable/responsible for problems relating
8. Positive social responsibility image to one or another brand of the company
9. Increase in operating profit
10. Portfolio of International brands in
different distribution channels (23 global
brands, including L’Oreal Paris, Garnier,
Maybelline NY, YSL Beauty,Biotherm)
Opportunities Threats
1. Market development in untapped 1.Increasing competition from pharmaceuticals
countries such as Korea and the South East 2.Cosmetic surgeons, and trend towards
2. Technological advancement cosmetic surgery with TV shows, etc.
3. Growing demand for beauty products 3. Image of beauty is changing towards a
(trend): hairstyling, color, skin care, and more “natural” look, makeup-free
perfumeries 4. On-going, lasting recession
4. Growing affluent market 5. Unemployment rate keeps increasing,
5. Growing aging market in Western meaning people have less disposable income,
countries are more conservative
6. Growing market in developing 6. Wars and conflicts in developing
countries (Asia): aspiring customers in countries: hard to approach these markets
emerging markets 7. Increase government policies and
7. Men growing interest in beauty regulations on cosmetics: may increase
8. Cultural growing interest in aesthetic production price
beauty 8. Increase in price of oil and
9. Growing concern for UV protection transportation: global distribution gets
and minimize aging of skin expensive
10. Growing concern for the environment
and environmentally friendly products

Internal Factor Evaluation (IFE) Matrix


Key Internal Factors weight Rating weighted
Score
Strengths
1.Strong Brand Image 0.14 3 0.42
2.Perceived high quality standards and products 0.11 4 0.44
3.High Brand Awareness among men and women 0.13 4 0.52
4.Knowledge of different cultures and rituals worldwide 0.1 4 0.4
5.Strong Research and Development departments 0.04 1 0.04
6.Strong advertising 0.1 2 0.2
7.Diversity of beauty products and services 0.02 4 0.08
8.Positive social responsibility image 0.07 3 0.21
9.Increase in operating profit 0.02 2 0.04
10.Portfolio of International brands in different 0.02 3 0.06
distribution channels (23 global brands, including L’Oreal
Paris, Garner, Maybelline NY, YSL Beauty ,Biotherm)

Weaknesses
1.Internal family disputes on heritage and company 0.04 2 0.08
control 0.02 2 0.04
2.High investment in constant innovation means high risk
of failure 0.09 2 0.18
3.Their smallest cosmetic production and sales is in North
America 0.02 3 0.06
4.Decentralized organizational structure 0.03 2 0.06
5.Worldwide marketing strategy that adapts to the culture:
blurring of the company image 0.05 2 0.1
6.Hard to know who is accountable/responsible for
problems relating to one or another brand of the company 1.00 2.93
Total

External Factor Evaluation (EFE) Matrix


Key External Factors
weighted
weight Rating
Score

Opportunities
1. Market development in untapped 0.14 3 0.42
countries such as Korea and the South 0.44
East
2. Technological advancement 0.52
0.11 4
3. Growing demand for beauty products 0.13 4
(trend): hairstyling, color, skin care, and 0.4
perfumeries
4. Growing affluent market 0.1 4 0.04
5. Growing aging market in Western 0.04 1
countries
6. Growing market in developing countries 0.2
0.1 2
(Asia): aspiring customers in emerging
markets
0.08
7. Men growing interest in beauty 0.02 4
8. Cultural growing interest in aesthetic 0.04 3 0.12
beauty
9. Growing concern for UV protection and 0.02 0.04
2
minimize aging of skin 0.06
10. Growing concern for the environment and 3
environmentally friendly products

Threats 0.08
4
1. Increasing competition from 0.08
pharmaceuticals 2
2. Cosmetic surgeons, and trend towards
0.04
cosmetic surgery with TV shows, etc. 2
3. Image of beauty is changing towards a
more “natural” look, makeup-free 0.18
4. On-going, lasting recession 0.02 2
5. Unemployment rate keeps increasing, 3 0.06
meaning people have less disposable
income, are more conservative 2 0.06
6. Wars and conflicts in developing 0.02
countries: hard to approach these
markets 0.04
7. Increase government policies and
regulations on cosmetics: may incre 0.02
increase production price 0.02
2
0.09

TOWS Matrix

SO Strategies

1.Use worldwide brands and distribution to expand to other countries such as Korea
(O1,O6,S1,S4,S10)

2.Invest in development of environmentally friendly products (O10,O8,S2,S3,S7)

3.Invest in development of cosmetics for the aging population (O9,O3,O5,S8)

4. Use strong advertising to reach advertising to reach to male market

(O2,O4,O7,S5,S6,S9)

WO Strategies

1. Restructure company to better understand who is accountable for what, increase


communication between different divisions.
(W1,W5,O2,O3,O7,O8)

2. Target new market in developing countries

(W4,O1,O4,O5,O6,O10,O9)

3.Increase marketing in North America, especially to the aging, and population. (W3)

4. Reorganize authority of different division by geography to speed up production and decision


making (W2)

ST Strategies

1. Use strong advertising campaign against plastic surgery

(T2)

2. Acquire competitors (pharmaceutical companies) to increase Western market share are reduce
threat.

(T1,S4)

3. Develop products /cosmetic for natural look.

(T8,T4T3,S9,S7,S3,S2,S1)

4. Bring back some of the manufacturing domestically by acquiring domestic distribution/


manufactures

(T5,S1O,S6,S5)

5. Develop products that last longer, so customers feel like they get more for their
money(T7,T6,S8)

WT Strategies

1. Sell- off some brands that are less profitable

(T5)

2. Emphasize cost – reduce without losing quality economies of scale, domestic production, and
better management. (T8,T7,T4,T3,T1,W4,W3,W1)

3. Increase communication and combination of expertise of different brands to reduce


redundancy of some roles and costs (T6,T2,W5,W2)
IX. Recommendation
We recommend that the company penetrate more the market to be successful and stay in this
industry in the long run. Thus, also focus more on current products and current markets in order
to increase market share. And this involves strong execution in pricing, promotion, and
distribution. Also take aggressive action to greatly expand to generate a higher profit percentage.

Conclusion
The L'Oreal Company is known within its respective countries because it produces a wide range
of beauty products and many different products which became their competitive advantage
among other brands. It recognizes that beauty is not one-sided and incorporates products for
people of different color and texture, in return, it builds trust and unity with the company and its
audience.

Due to all these reasons, L'Oreal is a strong company that represents global beauty. But because
many brands are competitive and creative, they need to step up and be as competitive as possible
to remain on top. And this is through aggressively penetrating their current market by
implementing different strategies.