And the globalization of the American beauty

Group 9

Industry Personal Care

Founded 1909

Headquarters Clichy, Hauts-de-Seine

Products Cosmetics

Promoter Eugène Schueller

Revenue € 25.257 billion (2015)

Employees 78,600 people (2014)

FACTS of the company

Case SummaryL’Oréal is the largest beauty company in the world and it has expanded, and supplied to 130 countries with offices in 58 different countries.

1907, the beginning of L’Oréal. The superior leadership of a guy named Eugene Schueller started this strategic company with basic products such as hair care and also the first man-made hair color product.

In 1934 Eugene invented the first mass market of soap less shampoo and this led the success of L’Oréal in the country of Europe.

L’Oréal realized they needed to expand in other fields of the beauty market and target markets in order to stay alive and successful.

In the 1980s they started by acquiring new companies that would form the cosmetics that we know today.

The main strategy was to adopt new companies and expand it from within believing that the brand could be taken globally and benefit their overall brand portfolio. The main role of acquisitions was to increase and lengthen the internal growth rate.

L’Oréal started acquiring companies from the beginning of their name. They started with the basics of their own brands such as L’Oréal Professional, L’Oréal Paris, Kerastase, and Club des Createurs de Beaute.

In the 1960s L’Oréal consumed some other companies such as Garnier, Lancome Paris, and Biotherm.

In the 1980s L’Oréal took full possession of two companies, Ralph Lauren Fragrances and Helena Rubinstein which was a cosmetic maker that distributed internationally. Maybelline is another brand that L’Oréal consumed

L’Oréal made its biggest acquisition by purchasing Redken which allowed them to reassess the whole hair care division.

Redken was well known for its extensive network of salon educators. L’Oréal soon realized that Redken had global potential as an American brand of American origin.

The last acquisition that stands out above all the others is the purchase of Kiehl’s. They are a New York based specialty store that sells high end cosmetics which gives L’Oréal a new advantage into another market of the luxury division with the goal of selling in higher end stores.

STRENGTHS

1. The primary strength of the Company is the continuing research and innovation in the interest of beauty which assures that the L’Oréal Cosmetics offers the best to their consumers.

2. L’Oréal Groups is the developed activities in the field of cosmetics as well as in the dermatological and pharmaceutical fields in order to put more concentration in their particular activities.

3. L’Oréal’s advertising strategy also plays a major part to its growth. Through adapting to the culture of their target market as the main tool of their advertisement, the Company brought L’Oréal products within reach of other women from different parts of the world.

WEAKNESSES4. The company has a decentralized organizational structure. 5. Due to the many subdivisions of the Company, there is also the

difficulty in the control of L’Oréal. 6. The profit margin of L’Oréal is comparably low than that of the

other smaller rivals. 7. Due to its worldwide marketing strategy, there are also

dissimilarities brought about in the campaign of L’Oréal products as to what image they are to project.

SWOT ANALYSIS – L’Oréal

OPPORTUNITIES

1. The growing demand for beauty products gives L’Oréal the opportunity to focus in their field of specialization, particularly on hair styling and color, skincare, cosmetics and perfumeries.  

2. The market is growing that ranges from the affluent, the aging and also the masses of the developed countries.

3. It has greater market share because of the numerous patents registered by the Company. This enables them to have the top of the line products only to their name.

THREATS

4. Due to the ongoing addition to the field of cosmetics, there is still the danger that other brands could surpass the profit of L’Oréal.

5. The economic downturn that is quite evident in other countries. Such could thus hurt the possibility of higher profit for the company.

6. While the L’Oréal Group may be producing the best of its line, people may find that their products are not of their basic needs and would skip buying L’Oréal products.

On Beauty IndustryWhat is a beauty product

Beauty Products or cosmetic products as they are more popularly known as are products that help to enhance one’s outer appearance. They are, essentially preparations externally applied to change or enhance the beauty of skin, hair, nails, lips, and eyes.

what are people buying?

Today the usage of beauty products varies from one geographic region to another as well as from one to gender to another as well as within genders. It also varies from product type and range to another. Let us look at some of the trends of usage in global cosmetics industry scenario:

By Product Category:

The purchase behavior of people in cosmetics by product category has shifted more towards "all ‐ natural products“.

Though the organic or natural sun and skin care products continue to flourish. There is a trend of using different shampoos, conditioners, oil, spray, masks and serum for hair treatment

The mainstreaming of Europe’s cosmetic products has resulted in increased industry segmentation.

New brands as well as existing suppliers are making products for particular customer segments and product sales channel. Increased customer interest in non ‐ toxic products has also resulted in investments on concept stores.

With increasing pulsation innovative makeups are incepted in Asia ‐Pacific, which often make their way to the West. For instance, BB cream, hair masks, whitening products all have Asian origin.

By Geographies:

When it comes to makeup, lipstick, powders, moisturizers and so on women of color can now select from a wide range. Products that are vitamin ‐enriched, holistic, alcohol free, less toxic etc. are preferred by men and women alike. Women across the world have become open to using new products, which helps them preserve a youthful look. The use of such products is preeminently growing among working woman.

Nonetheless, the recent upsurge within male grooming industry is phenomenon, extending across regions like North America, LAMEA, Asia ‐Pacific and Europe.

By Gender:

Acquisition Strategy in the United StatesPART I

1. The case describes L’Oréal growth in the US in part through acquisitions of a succession of companies- Redken, Maybelline, Matrix, Soft Sheen, Kiehl's. What did L’Oréal buy when it bought these businesses?

L’Oréal’s competitive strategy was to be a top contender in each of the various beauty divisions.

By acquiring brands like Redken, Matrix, Maybelline, Ralph Lauren, and Kiehl’s, L’Oréal filled in the different beauty divisions.

 Having brands that met the consumer needs in each beauty division wasn’t enough for L’Oréal; they wanted to make sure that they had significant sales for each brand in each division.

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

2. L’Oréal managers distinguish between tactical acquisitions, which generally nourish existing core brands, and strategic acquisitions that have global potential. How do they know what has global potential?

L’Oréal always focused on acquiring companies or brands with a good market share

Apart from acquiring these big brands, L’Oréal also focused on acquiring few local brands, but in that case as well these local brands had good distribution channels which would have been difficult to access by L’Oréal otherwise. Thus, it did an analysis on the brands before acquiring, by finding out the brands strengths and if there a failure story attached to it, tried to find why brand lost its focus and how it can be revived upon collaborating with L’Oréal.

Hence, looking at the past success stories of these brands and finding out the failure reason, analyzing the strengths and weaknesses of each acquisition it was possible for L’Oréal to know the global potential of each acquisition decisions it made

L’Oréal’s Organization and Competitive Advantage

PART II

1. Let us turn to globalization of all these brands. Clearly this company has both bureaucratic and entrepreneurial characteristics. Which is the most important?

Actually, a mix of both is necessary. For example, bureaucratic characteristics are required to manage this behemoth effectively and efficiently with allowing its brands to go on an ego trip. Entrepreneurial characteristics are required or revitalizing and rejuvenating the various brands that are acquired. Ex Maybelline changed to Maybelline New York

2. How can L’Oréal be so big and yet still move so quickly?

The multicultural L’Oréal has been able to grow and sustain itself in the cut throat world of cosmetics manufacturing in the following manner:1. The primary strength of the Company is the continuing research and innovation in the interest of beauty which assures that the L’Oréal Cosmetics offers the best to their consumers.

2. L’Oréal Groups is the developed activities in the field of cosmetics as well as in the dermatological and pharmaceutical fields in order to put more concentration in their particular activities.

3. L’Oréal’s advertising strategy also plays a major part to its growth. Through adapting to the culture of their target market as the main tool of their advertisement, the Company brought L’Oréal products within reach of other women from different parts of the world.

Kiehl’s & the globalization of a luxury Brand

PART III

1. Does it make sense to globalize Kiehl's?

In 2001, as part of its US acquisition strategy, L’Oréal bought Kiehl’s, a small family owned cosmetic company based in New York which was then included in its luxury brand portfolio

Kiehl’s reached a cult status by essentially applying a business model opposite to that of L’Oréal. Kiehl’s business was in fact small-scale (their products were notably hard to find), local (mainly centered around their NYC shop, and few other high-end retailers) and based on the creation of strong ties with the local community of customers rather than on advertising

This approach to business, together with the high-quality, natural-origin and effectiveness of their products earned Kiehl’s a strong reputation as a cult brand. Four years after the acquisition, in 2004, the question that arises is how L’Oréal can preserve the status, the integrity and the cult following of the brand while at the same time making it grow and taking it worldwide.

2. How global is the appeal of Kiehl's brand?

The global appeal of Kiehl was increasing gradually as the company had open few stores across the globe, created websites, expanded business several times before been acquired by L’Oréal. Moreover, the global appeal of Kiehl’s brand was its luxurious status which it carried across the globe. It was known for its authenticity and sincerity across the globe and the main globalization strategy for Kiehl’s was to reproduce the original New York store, hence all the stores across the globe had the same hardware. Also across the globe Kiehl tried to connect with all its customers through is mission statement which focused on identity and importance of individuality and quality

3. What are the future challenges and opportunities?

Challenges:

1. To be able to sustain its integrity while expanding the brand globally.

2. How far it can be expanded globally

 

L’Oréal 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 L’Oréal’s 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, L’Oréal will further its position as the global cosmetics leader.

CONCLUSION

Because you are worth it