Diversification of L'Oreal

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  • 1. Key Facts and Figures1st cosmetic group worldwide1 century of expertise in cosmetics23 international brands19.5 billion euros of sales in 2010130 countries66,600 employees612 patents registered in 2010
  • 2. DIVERSIFICATION STRATEGYClosely-related DermatologyEntering three kinds of industry:Cosmetics The Body Shop
  • 3. COSMETICS INDUSTRYOffering different product lines through four market lines:Professional Products
  • 4. COSMETICS INDUSTRYConsumer Products
  • 5. COSMETICS INDUSTRYLuxury Products
  • 6. COSMETICS INDUSTRYActive Cosmetics
  • 7. THE BODY SHOP A chain of cosmetic stores specializing exclusively in hair and skin care products based on natural ingredients. Operated a total of 2,550 stores in 62 countries worldwide by the end of 2009.
  • 8. DERMATOLOGY Galderma Laboratories: a joint venture with Nestle. It boasts three of the top 25 best-selling drugs. It specializes in skin diseases and skin infections.
  • 9. REASONS OF DIVERSIFICATION1 Part of LOreal Long Term Strategy 2 Exploiting Relevant Economies of ScopeStrengthening External Growth 3 Meet Consumer Needs
  • 10. STRATEGIC CHOICEInternal ExternalGrowth Growth Resources Diversification (M & A) Asset Alliances
  • 11. GROWTH STRATEGYMerger and Acquisition Objectives:Reaching a critical size for exploitingeconomies of scale.Satisfying local needs.Creating a portfolio of distinctive butcomplementary products and brands.Quickly acquiring new resources andtechnologies.Overcoming the entry barriers.
  • 12. CHARACTERISTICS OF COMPANIES ACQUIRED Operating in different geographical markets from those in which Loreal is already operating. The Body Shop: Enters India Easily Offering products that complete the Loreal portfolio brands or products. ROGER&GALLET: Produces Pharmacy Fragrance
  • 13. CHARACTERISTICS OF COMPANIES ACQUIRED Operating in geographical markets in which Loreal intends to reach leadership position. Inneov: Number 1 in Spain Having high technology and competences related with Loreal products. Vichy: Advanced Skincare Technology
  • 14. ACQUISITION PREPARATION FLOWCHART Preparation (Gather information) Decision Similarities(Implementation) with Loreal Characteristics Final What is the Preparation Objectives?
  • 15. IMPLEMENTATIONLOreal has acquired more than 25 brands with differentmarket segments (see acquisition timeline).Each brands contributes a different advantage forLOreal long term strategies.The Body Shop makes LOreal distribution broader.
  • 16. ACQUISITION TIMELINE 1990 1995 2000 2005 2010ProfessionalProductsConsumerProductsLuxuryProductsActiveCosmeticsThe BodyShop
  • 17. RISK MITIGATION STRATEGY Increasing patent rights on its inventions.Innovation and Patent Rebuild the products to get customers attention. Patents, R&D Expenditures and Employees at LOreal 2001 2003 2005 2007 2009 Registered 493 515 529 576 674 patents R&D 432 480 496 560 609 expenditures (mill. Euros) R&D employees 2,743 2,921 2,903 3,095 3,313
  • 18. MARKETING MITIGATION Market different product with different target market.Develop a clear positioning statement as a current market leader.
  • 19. MARKETING MITIGATIONTry to be the first mover to gain more market share before other.
  • 20. PRODUCTS STRATEGY Collaboration with Channel Partners LicenseeHair Salons Mass Market Retail Partners Market Research AgenciesDepartment Pharmacies, Stores, DermatologistsPerfumeries
  • 21. ALIGNING WITH NATURE STRATEGY Commitment to -50%Sustainable Development: GREENHOUSE GAS EMISSION Reducing impact on natural capital. Target for 2015 Responsible sourcing. -50% Eco-designing new ingredients. WASTE GENERATED PER Addressing controversy on ingredients. FINISHED PRODUCT Protecting the global system. Target for 2015 -50% WATER CONSUMPTION PER FINISHED Biomethanisation Unit at Libramont Plant: PRODUCT 100% Green Energy
  • 22. NEWEST ACQUISITION:PACIFIC BIOSCIENCE LABORATORIES Date of Acquisition: Dec 15th , 2011. Intermediated by LOreal USA (the franchisee). Products: Sonic Skin Care Devices (Patented). Channels: Dermatologists and Prestige Retail. Main Market: US. Reasons behind Acquisition: Pacific Bioscience Laboratories Expertise in Devices.
  • 23. QUESTIONS?Thank You for Your Attention