IMM GROUP ASSIGNMENT

Group : 2Gurvinder Kaur ( Roll no 12)Rakesh Kumar (Roll no 48)

EPGDIB – VSAT BATCH 8

Pick an International cosmetic company with presence in India and study the adaptation / modification or standardization

practice in respect of their communication across the countries of their presence.

School of International Business Management

Indian Institute of Foreign Trade

L’OREAL GROUP

Introduction

L’Oreal is a cosmetic company, which makes some of the world's biggest beauty products. L'Oreal's success story begins in 1907. It has been the market leader in the cosmetics and toiletries market since 2001 (Euromonitor 2005). Their products are sold in about 130 countries worldwide.

L'Oreal is divided into four categories –

1. Consumer products

2. Professional products

3. Luxury products,

4. Active cosmetics.

They mainly focus on skin care, make-up, hair care and fragrance. L'Oreal includes some important brands such as Lancôme Paris, Garnier, Mabelline, Softsheen Carson, Matrix, and Biotherm. L'Oreal invests heavily into its research and development which gives them competitive advantage over its competitors.  

The Mission Statement of L’oreal Group

Beauty for all

For more than a century, L’Oreal 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.

Beauty is a science.

Providing access to products that enhance well-being, mobilising its innovative strength to preserve the beauty of the planet and supporting local communities are

exacting challenges, which are a source of inspiration and creativity for L’Oréal.

Beauty is a commitment.

By drawing on the diversity of its teams, and the richness and the complementarily of its brand portfolio, L’Oréal has made the universalisation of beauty its project for the

years to come.

L’Oréal, offering beauty for all.

As a Business

L’Oreal strategy for leadership is based on continuous investment in rigorous scientific

research and development. This enables their brands to deliver products which are

innovative, highly effective, practical and pleasant to use, and which are manufactured to

the most demanding standards of quality and safety. L’Oreal aims for excellence, and

constantly challenges itself and its methods. They place great value on honesty and clarity:

their consumer advertising is based on proven performance and scientific data. They are

committed to building strong and lasting relationships with their customers and their

suppliers, founded on trust and mutual benefit. L’Oreal does business with integrity: they

respect the laws of the countries in which they operate and adhere to good corporate

governance practices. L’Oreal maintains high standards in accounting and reporting, and

support the fight against corruption. They deliver long-term, sustained shareholder value

by protecting and making the most effective use of company assets.

As an Employer

L’Oreal aims to make a great place in which to work. L’Oreal knows that their employees

are their greatest assets. They are entitled to a safe and healthy working environment: one

in which personal talent and merit are recognized, diversity is valued, privacy is respected,

and the balance between professional and personal life is taken into account. L’Oreal

believes in offering their employees a stimulating environment, exciting personal

opportunities and a chance to make a difference. They encourage an atmosphere of

openness, courage, generosity and respect, so that all their employees feel free to come

forward with their questions, ideas and concerns.

As a Responsible Corporate Citizen

L’Oreal plays a part in creating a world of beauty and fairness. They are mindful of their

impact on the natural environment, including biodiversity, and constantly seek to reduce it:

they are determined to avoid compromising tomorrow for the sake of today. L’Oreal makes

a positive contribution to the countries and communities in which they are present, and

respect local cultures and sensitivities. They are committed to the respect of human rights.

They want to help end the exploitation of children in the workplace and the use of forced

labour. L’Oreal is against animal testing in their industry, and they are always keen to

contribute to the development and acceptance of alternative methods...

This is the spirit in which they operate: the L'ORÉAL SPIRIT

Distinctive competencies

First, L'Oreal has a portfolio of brands from different countries, covering different level of

classes and different customer segments. The French company is a worldwide company. It

is a strong and an innovative company. Actually, L'Oreal was and is able to increase

continuously its market share thanks to its global branding strategy. This strategy allows

the company, to gain market share when the competition does not meet the demand or the

clients' needs. In fact, L'Oreal invests heavily in research and development, so it can create

continuously innovative products. Thereafter, the company detects and follows easily

customers' desires and needs, while offering a high quality products and responding on

time to market trends.

Second, L'Oreal has a multicultural hiring strategy. Its human resources are diversified and

have different sex, age, identity and come from different cultures. They offer a rich panel of

innovation, creativity, inspiration, talent and idea. Those elements allow the company to

response better and to adapt faster to different consumers' type. Research and innovation

are the main factors in L'Oreal expansion. In few decades they created a large line of brands

and a variety of products and were able to cover different segments reach different niches

and meet the demand of wide range of classes.

Trends or conditions enabling the company

Cosmetic Market Trends: Products for Ethnic Consumers

The U.S. Census Bureau predicts that by the year 2040, minorities will be the majority. This

means products and services that target these niches will become increasingly more

popular.

According to Us Census by the year 2040 product and service made for ethnics consumers

will enlarge and become more important in the market. As L'Oreal Opened already their

research center for African American in Chicago, they can also provide the suitable product

Hispanics and Asians also.

The existence of various ethnic groups require an assortment of products and service that

respond the dissimilarity in hair types, skin tone and care habits.

Cosmetic Market Trends: Baby Boomers

Baby Boomers; define as those born in the United States between 1946 and 1964 are one of

the most populous groups in America today. As they age, they will require cosmetics that

address their particular needs.

Today, Baby boomers groups is emerging more and more in America. This Group involves a

focused care and research. It's the greatest moment to enhance their existing anti aging

product and brand, to develop and create new ones as well. Investing in this market can

provide high return. Thus, baby boomers are not hazardless wealthier than any other

group. They are capable of spending money in their personal care. Moreover they

dedicated their time choosing the highest quality product regardless of their price

Organization objectives and their accomplishments

THE CEO of L'Oreal stated three different long term targets.

The first is the environmental targets which are the reduction by 50% green house

gas emission, the water used per unit of finished goods and the waste generated per

unit of finished product.

Second is the R&D, the company sustains innovation and wants to develop its

natural and organic cosmetics.

Third, human resources, in fact, the company wants, in the long term, to achieve a

0% rate of accident in its factories and warehouses.

The Organization’s SBU

The organization's SBU L'Oreal encompasses 5 core businesses with strong technological

added value: hair color, hair-care, skin-care, make-up and perfume.

Those core businesses include all kind brands that are classified as following:

BCG Matrix

Market Growth

Star

*Lancome

Question

*YSL

Cashcow

*Maybelline

Dog

*BodyShop

Market Share

L'Oreal has done two major

acquisition operations. The fist one is

related to Ysaint Laurent beauty

product and the other one is the

leader of natural product the body

shop. The company generates good

return for YSL investment. However,

the bodies shop result decreased

after the operation and moving

Consumer Brands:

* L'ORÉAL Paris

* Garnier

* SoftSheen-Carson

* Maybelline New York

* Le Club de Createurs

Professional Products:

* Kérastase

* L'ORÉAL Professional

* Matrix

*Redken

*Pureology

*Shu Uemura Art of hair

*Mizani

*Essie

Luxury Products:

* Biotherm

* Helena Rubinstein

* Kiehl's Since 1851

* Lancôme

* ShuUemura

*Giorgio Armani

*YSL

*Ralph Lauren

*Cacharel

*Helena Rubinstein

*Clarisonic

*Diesel

*Viktor and Rolf

*Yue Sai

*Stella McCartney

*Urban Decay

*Maison Martin Margiela

* Designer Fragrances

Active Cosmetics:

* La Roche-Posay

* Vichy

* Innéov

*Skin Ceuticals

*Roger and Gallet

* Sanoflore

toward becoming a dog joining other declining product. One of the most important stars is

Lancôme which provide a high profit to the group, have a large market share between

luxury products. Furthermore, Maybelline still providing cash to the group and permit it to

invest in more research and development.

Organizational Strategy for Growth

L'Oréal uses brand segmentation to drive growth

Premium

L'Oréal operates strict brand segmentation across its portfolio to retain its exclusive brand identity. For each of its brands L'Oréal maintains distinct retailing channels to keep its brand image intact. Its premium ranges Lancôme and Yves Saint Laurent are marketed through department stores. Its mid- and lower-tier mass brands L'Oréal Paris and Garnier share the same retailing space in Western markets but the distinctions are made on the basis of price and product offerings.

Mid-tier

Cutting edge formulations are found more under L'Oréal Paris than Garnier. L'Oréal also sells its premium range formulations under L'Oréal Paris when demand in the premium range slows down. L'Oréal uses Garnier to penetrate low-income consumers in emerging markets whereas L'Oréal Paris is reserved for urban consumers.

Mass

The economic downturn necessitated L'Oréal to use its brand portfolio carefully to exploit any growth potential. For example, hair care launches were made under L'Oréal Paris as it was originally a hair care brand, while for colour cosmetics the mass brand Maybelline was used to drive growth. L'Oréal used Lancôme to appeal to a wider global consumer base, whereas Yves Saint Laurent was used to appeal to Western European consumers. For premium and mid-tier brands, it launched more targeted products whereas for mass brands such as Garnier the focus has been on multi-functionality.

Market penetration

L'Oreal gained over of 15.8% market share all over the world. Instead of rely on creating

new product and brand, L'Oreal aim to take profit from the growing middle class and the

merging market. The latest researches are focusing on emerging market for example Asia,

Eastern Europe and Latin America. Furthermore, L'Oreal penetrated two profitable

markets, the men older population that is increasingly showing more intention to products

such as skin care for men and anti aging.

Product development

Research and development are the major factor of L'Oreal success. Continuously, the

company is attentive to the market trend and the consumers need in order to meet their

expectation and provide their satisfaction. Each year, there are more than 5000 formulas

created, tested and 500 product launched each year. For example, Feria range was

specifically innovated for Japanese people and Soft Sheen Carson for African.

As a result, L'Oreal achieves their target by offering them the newest product with

innovative feature which are marketable and generate an important turnover in diverse

segments of the international market.

Market development

L'Oreal continues to diversify its portfolio integrating new brands and product. Thus,

permit the company to gain new area of development and new lines of growth. In the other

hand, L'Oreal try to adapt their product to the potential market for instance R & D center

was established in Shanghai to improve the competitiveness of their products and make it

more appropriate for Chinese customers. Even if their product are existing in over 130

country, the group is trying to create more demand and increase market share of its brand

in news countries.

Diversification

As we can noticed, although their multiple and various product and brand, L'Oreal keep working and cosmetics and personal care product. We cannot find L'Oreal in other domain or activities like clothing, food or any domain not related to cosmetics.

However, the group has taken the first step toward diversification which is the acquisition

of The Body shop.

Sales Volume and market Share

Millions of Euros 2009 2010 2011 2012

sales MILLIANS OF EUROS 14533 15790 17063 17542

decrease increase MILLIONS OF EUROS 1257 1273 479

% 9% 8% 3%

From the last three years financial statement of L'Oreal, since 2010, we notice, sales have

been increasing for the last three years. In fact, its sales increased by 1 257 million of Euro

(ME) in 2010, 1 273 ME in 2011, and 479 ME in 2012. However, we can notice that the

growth rate of L’oreal sales has been increasing from 9% in 2010 to 8% in 2011 and to 3%

in 2012. The worldwide economical trends has been affecting L'Oreal's growth as it lost 1

point in 2007 and 5 point since then.

Elements of Marketing Strategy

Customer Satisfaction (Product; Price)

L'Oreal priority is to meet customer expectation by providing the right product, with

highest quality and innovative features. Through intensive research, the company aim to

provide plenty of new products and to improve the current product. As result customers is

offered a wide variety of brand and product from whom he can choose according to their

need and budget. L'Oreal study different market, with different culture, habits and needs

and try to satisfy them using the information collected to create the suitable product for

each task, age and budget. L'Oreal consumers can stay updated and follow the newest trend

just by buying the newest product. Simply the company adapts their product to the latest

trends and even more; set the trend in the market.

L'Oreal portfolio is for all types of consumers. As well as we can find luxurious brand, there

is also mass market product. However, for L'Oreal each brand and product necessity a deep

research to provide the best quality. The diversity of the portfolio allow the company to

adapt different pricing politic because each brand can cover and finance other in case of

decrease in sell. For luxurious product

Worldwide Marketing (Place of Distribution; Promotion)

With 290 subsidiaries, more than 100 distributor's off-group and 42 plants, all spread out

in about 130 countries, L'Oreal is a worldwide company in the cosmetic industry. L'Oreal

group's strategic plan involves spreading their products and brands all over the continent.

The aim of this strategy is to reach the spirit of customers regardless of where they are

coming from. First of all, L'Oreal start with the commercialization of professional shampoos

to hair-dressers via distributors in near Europe (Spain, Italy, Great Britain, Germany and

Poland) and in the Americas - "first landing"1. After that, local firms were taken over for

example in the USA (Redken 1993, Maybelline 1996 etc.), in Argentina (Miss Ylang 2000) -

"go native". Finally, subsidiaries (production, research and development) are directly

created (Greenfield investment) without any first passage via distribution. It is the case in

Asia (Japan and Hong Kong) - "globalization".

Moreover, the Melting Pot human resources permit creating the suitable product working

on all cultural aspect and divergence between customers. Their research and development

efforts allow the group to market their product worldwide and to get a positive feedback

from different country. Thus, the group received Diversity Best Practices 2004 Global

Leadership Award for struggling against discrimination in its recruitment, which allow the

company to have a mixture of employee and variety of consumers as well.

Geographic presence and economic and political environment

L’Oreal has subsidiaries in 69 countries, with 64% of its sales being generated outside Western Europe. Global growth in the cosmetics markets has led L’Oreal to develop its

activities in countries of the “New Markets” Z one, which represent over 39% of its cosmetic sales in 2012.

However, its global presence helps to maintain a balance in sales and enables results to be offset between countries and geographic regions. In periods of major economic slowdown or in sovereign debt crisis situations in certain countries, growth in the Group’s sales may however be affected.

Distribution network

To sell its products, L’Oreal uses independent distribution channels, except for a limited number of stores which are owned by the Company. The concentration or disappearance of distribution chains and changes in the regulations with regard to selective distribution could have an impact on the development of the Group’s brands in the country or countries concerned. The presence of the Group’s brands in all types of distribution networks helps to attenuate any potential negative effect.

Branches and Divisions

The Cosmetics Branch, which represents most of the Group’s activities (nearly 93% of its consolidated sales in 2012), is made up of 4 Operational Divisions which each correspond to a specific marketing channel:

The Professional Products Division markets products used but also sold in hair salons. Privileged partner of hairdressers all around the world, it supports them in every facet of their development and offers them high-level training. Its portfolio of differentiated brands meets the needs of all types of salon. Professional Products Division brands: L’Oreal Professional, Redken, Kérastase and Matrix;

The Consumer Products Division offers the best in cosmetic innovations at accessible prices in all mass-market retail channels (hypermarkets, supermarkets, drugstores and traditional stores) on every continent. Consumer Products Division brands: L’Oreal Paris, Garnier, Maybelline, Softsheen Carson and Essie;

L’Oreal Luxury brings together a unique set of prestigious brands. These brands are sold through selective distribution, broken down between department stores, perfumeries, travel retail outlets, but also its own stores and through e-commerce websites. L’Oreal Luxury Division brands: Lancôme, Giorgio Armani, Yves Saint Laurent, Biotherm, Kiehl’s, Ralph Lauren, Shu Uemura, Cacharel, Helena Rubinstein, Diesel, Clarisonic and Viktor & Rolf;

The Active Cosmetics Division distributes its products worldwide in healthcare products distribution channels, primarily through pharmacies, drugstores,

medispas and, in some countries, dermatologists. Its unique portfolio of brands, which meets all the needs of consumers in terms of health-beauty, and its privileged partnership with healthcare professionals have made this Division the world’s No. 1 in dermocosmetics. Active Cosmetics Division brands: Vichy, La Roche-Posay, SkinCeuticals, Innéov and Roger & Gallet.

The Body Shop Branch represents approximately 4% of consolidated sales in 2012. Founded in 1976 in the United Kingdom by Dame Anita Roddick, The Body Shop is known for its ethical commitment and its products with natural ingredients. More than 87 % of its products contain ingredients from its Community Fair Trade programme. With a presence in 65 countries, the brand distributes its products and expresses its values through a network of exclusive stores but also complementary distribution channels: Internet sales and airport shops.

Excellent Advertising and Promotion

In all L'Oreal publicity there is a different style of models with different ages, personalities

and appearances. Thus, shows the vision of the company. This strategy allows the company

to realize high return on their investment on advertising because each woman relates their

image to the model and try to look like here using L'Oreal product.

L’oreal Masters in Multiculturalism

The French cosmetics giant L’Oreal simplifies global-local tension.

It has built a portfolio of brands from many cultures -

1. French, of course (L’Oreal Paris, Garnier, Lancôme)

2. American (Maybelline, Kiehl’s, SoftSheen-Carson)

3. British (The Body Shop)

4. Italian (Giorgio Armani), and

5. Japanese (Shu Uemura).

In 2012, sales grew in the Asia Pacific region by 18.4% and in Africa and the Middle East by 17.6%, without significant acquisitions. Despite the financial crises in Europe and North

America, L’Oreal has been growing and gaining market share, mostly at the expense of its competitors. It is the uncontested world leader in skin care, makeup, and hair color and a close second to P&G in hair care worldwide. Since 2004 L’Oreal’s revenue has increased by half and its profits have almost doubled, with an increase in net profits of 17.6% in 2012 alone.

Yet this remarkable global success was built largely by a management team strongly rooted in its home culture. Traditionally employees became part of management over many years, weaving a dense network of relationships through which knowledge about products, cultures, and how to work together was internalized. As its global-local tensions have mounted, L’Oreal has managed them by deploying professionals with multicultural backgrounds in new-product development, the company’s most critical source of competitive advantage. That strategy, according to top management, is the main reason for L’Oreal’s impressive success in emerging markets. As the company has transformed itself from a very French beauty products business to a global leader, multicultural executives have come to play a critical role in product development not just in Paris but also in New York, Tokyo, Shanghai, Rio, and Mumbai.

Achieving Global-Local Balance

L’Oreal’s main consumer-products categories are all highly sensitive to global economies of scale and scope, yet to win customers they must also be responsive to local preferences. This tension is perhaps most critical in the L’Oreal Paris brand, which is sold in mass markets worldwide and accounts for half the sales of the consumer products division.

Elements of Marketing Plan

Internal analysis

Strength

L'Oreal efficient research and development are the keys of their success and continual

growth. The permanent research and the want to satisfy all consumer taste allow the

company to strength their industry and to Exceed their competitor.

All L'Oreal director, manager and employer work in team to achieve the best result. The

diversity in their employee enables the company to benefit from the multicultural,

innovative and colorful talent of their member.

The main strength of L'Oreal is that she divided their research and activities according to

their major market, to globalize and concentrate their effort in each Group. There are 5

divisions that Focus in each line of products. The first one is the consumer product division

which includes all the products and brand distributed though the mass market, those

should attend the highest number of consumers. The second one is the luxury products

division distributed through perfumeries, department stores and travel retail. The third

one is the professional products division which are used and sold by professional, hair

salon, personal care stores and by individual who received a training and certificate in

those specific products. Conversely, the products sold through pharmacies, Para

pharmacies and health centre belong to the active cosmetics division. Moreover the

pharmaceutical activities are also taken by Sanofi-Aventis.

This organization allows L'Oreal to insure the highest quality and care, to produce what

exactly the consumers is looking for.

In Addition to that, L'Oreal invests intensively in communication, publicity and

advertisement to maintain their position in consumers mind. The advertisement strategy

enables the company to gain more market share and to be one of the most recognized

brands in the global market. The intensive research to adapt to different culture and to

produce the suitable advertisement to each country and culture plays an important part in

the company growth. This adaptation to different market gives the company the

opportunity to have a global coverage and to diversify their source of income

Weaknesses

L'Oreal is organized in multiple division, department, and responsibility center. The aim of

this decentralized organizational structure was a best control of the nearest part of the

consumer. However, it has downside which is a hard control to the global company. Thus ,

L'Oreal face a long time processes between the head and the employee, the flow of

information , validation and communication can be slow which can open the production

processes and the decision time .Also , the spending in advertising and marketing reduce

the Marge of profit .as a result, L'Oreal realize less benefit net than the smaller competitors.

Significant Presence in Top Markets: is a strong company that has a strong position in the

world's markets in terms of its upscale and luxury.

External Analysis

Opportunities

Nowadays, there is more and more demand on personal care product. The globalization

and the massive advertisement permit the developing country to follow beauty pattern and

to take care of their appearance. In Addition to that, the demand for cosmetics products in

Asian and Emerging country is increasing due to the improvement in their political and

economical situation. Furthermore, Consumers awareness increased, they become more

selective for the product and are more considered about quality than price.

Threats

The American market is the biggest part in L'Oreal profit. However, due to the American

crises the demand of beauty product could decrease and also the demand of luxury product

maybe hurt. Euro becomes stronger which made French product expensive and difficult to

adapt a good pricing strategy. Some of their competitors become stronger as Clarins for

skin care and also other specialized rival who are dedicated to a line of product and are

gaining more market share.

To conclude, L'Oreal group is classified as the first supplier of cosmetic and hair-color

products. In fact, although the worldwide market knows many changes, first, due to the

increasing interest of consumer on their appearance the market knew many new entrants;

competition and cosmetic brands increased. Second, the last economical crisis affected the

buying power of customers;

In fact, they are more reluctant in investing in secondary products and thus spend less in

beauty. But, still the less affected company is L'Oreal and it is still maintaining its position

as the leader in the market.

L’Oreal Factory by Category

Factory Locations

North 10 factories:

America Canada 2, US 8Europe 20 factories: France 14, Spain 2, Italy 1, Germany 1, Poland 1, Belgium 1Brazil 2Israel 1Japan 1Indonesia 1India 1China 1Russia 1Turkey 1

L'Oréal Factory Locations by Category

Division Number of factories LocationNumber of

factories(ftys) Location

Consumer Products 22

France ( 4 ftys), Belgium (1 fty) , Italy (1 fty), Germany(1 fty), Poland (1 fty), US (4 ftys), Mexico (1 fty), Brazil ( 2 ftys),

South Africa (1 fty) , India (1 fty), Israel (1 fty), Turkey (1 fty), Indonesia (1 fty), China (2 ftys)

Luxury Products 5 France (3 ftys), US (1 fty) , Japan (1 fty)Professional Products 3 Canada (1 fty), US (1 fty), Spain(1 fty)Active Cosmetics 2 France(2 ftys)Dermatology 2 France(1 fty) , Canada (1 fty)Raw Materials 4 France (3 ftys) , Spain (1 fty)

REFERENCES:

1. L'Oreal Annual Report-Consolidated sales by geographic zone.

3. http://www.loreal-finance.com/eng/company-overview

4. Male Grooming on the Rise

5. Anonymous (2004) L'Oreal Receives Diversity Best Practices 2004 Global CEO

Leadership Award;

6. L'Oreal First-Ever Global Company Named. Available online

7. (http://www.diversitybestpractices.com/) Accessed on (01/04/2005)

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