LOREAL

L'Oreal; globalization

1. INTRODUCTION.

During the last years the organizations have been going through a process of expanding their barriers to reach new markets across the globe, this process in known as globalization, this describes the process by which societies, cultures, and economies happen to be integrated creating a massive market all over the world in which different companies can be part of.

The following report was made upon L'Oreal analyzing how every acquisition made by the company was a fundamental part to become the leader and biggest cosmetic company in the beauty industry, how did they enter the US market by acquiring the main US brands at that particular time, and finally it will analyze their implemented strategies and market challenges showing how new strategic partners can make possible growth through globalization.

The centre of attention of the report will be focused on the internal and external influences to L'Oreal, and how globalization could affect policies and decisions made by the company.

L'Oreal was created by Eugene Schueller in France 1907 and named after his first product L'Aureole, the aim of this French chemist was to create the first synthetic hair-color product ever made and then start selling it within France and perhaps some parts of Europe, however, as the time goes by, L'Oreal positioned as the leader in European hair color market and skin care, but this wasn't good enough for them, as they wanted to reach new markets as the American, and Asian, therefore, L'Oreal made certain acquisitions, as well as the implementation of new market strategies and corporate strategies to successfully reach their goals.

1.1 SWOT ANALYSIS THEORY.

Now the first part of the report will be focused on the primary internal and external influences that the company is subject to, to be able to analyze this influences, I would like to use the SWOT analysis which is a strategic planning method to identify the internal and external factors that are contributing or retaining the company to achieve their goals, The strengths and weaknesses refer to the company and its products

whereas the opportunities and threats are usually taken to be external factors over which the company has no control. SWOT analysis involves understanding and analysing the strengths and weaknesses and identifying threats to the business as well as opportunities in the marketplace. Once that is done, we can then attempt to exploit strengths, overcome the weaknesses, grasp the opportunities and defend the organization against threats. This is one of the most important parts of the planning process. SWOT analysis asks the questions that will enable you to decide whether your company and the product will really be able to fulfil your plan and what the constraints will be.[1]

1.2 STRENGTHS.

L'Oreal has gone through different types of management from their creator, to the CEO Owen Jones, Jones management style has brought to the company a revolution from a French based cosmetic company to a world leader in the cosmetic industry, L'Oreal main ability is to acquire local cosmetic brands (Ralph Lauren Fragrances, Helena Rubinstein)[2] re-arrange their operational strategy and finally place them in a better location among the competitors, their brand management has been a massive tool to position L'Oreal in the place they are, as every single product and brand they manage is aiming to an specific segment of the different markets, rather than placing their products indiscriminately as every market has a different demand to be supplied.

Another strength of L'Oreal that can be clearly identified is their patent desire to invest in Research and Development, with this we can assure that L'Oreal is an organization that is looking forward to implement the latest technology in all their products so that they can efficiently satisfy all their customer needs. They spent and average of 3% of their revenue in R & D, when the average of the industry is less than 2%[3], L'Oreal is aware that in the days we live in, any advance in technology represents a competitive advantage and subsequently that's the best manner to own a market.

L'Oreal has also shown their strength when it gets to marketing campaigns as they know that in order to be successful internationally you must be flexible and able to adapt to new environments, and to be more specific you must e able to produce exactly what a customer is demanding, which is the case of Savannah-Based Carson, which had a 35% share of the US ethnic hair care market and established presence in South Africa, this market has an estimated value of 1 billion dollars, according to L'Oreal's product

manager “You cant pretend to be No 1 in the world and forget about 1 billion consumers of African origin”[4]

1.3 WEAKNESSES.

Now to look at the weaknesses of the company, even with the success of the globalization impact, L'Oreal haven't done so much to diversify their products, rather than that, they have focused all their efforts in developing products for the main areas the work on (hair, skin, make up, and perfume).

With the US brands acquisition, L'Oreal split into 3 main product divisions, consumer, professional, and luxury, in his objective to be the world leader in the beauty industry, CEO Jones has focused his efforts on the consumer brands as they are easier to retail, and relatively less expensive therefore is not that hard to build up a reliable data base, however the other 2 areas are very important as well an eventually if they focused their efforts on improving either one or even both of them the response may be positive and subsequently they will be able to reach a bigger portion of the market.[5]

Another weakness of the company, and is commonly seen in this kind of organizations is the decentralized organizational structure, with this I am referring to the flow of information and control of the company due to many subdivision, this could affect the production level of the company because of the need of giving reference the other members of the board and directors of the company.

1.4 OPORTUNYTIES.

Due to the good performance of L'Oreal, they have had certain opportunities which they knew how to use, for example the market in Africa, as they had the vision to recognize the enormous potential of this market, now L'Oreal is the leader of this segment, which wasn't very attractive to the competitors, at the first stage because they didn't know that people in Africa may be interested in this sort of products which lead them to lose interest for this segment and as a consequence L'Oreal settle down as the leader of the industry by implementing their acquiring strategy along with specific marketing strategies, basically, L'Oreal realized that the main thing to take over Africa was to develop a product which completely satisfy the population , due to this, L'Oreal invest in a multi million dollar research and development facility in Chicago to focus exclusively on the hair and skin needs of the people of African-American descent.[6]

As stated before another big opportunity for L'Oreal to grow is to focus more on their line of dermocosmetics (anti-aging), as this area has a very small portion of the revenue and considering the research network they have, it would be interesting if the focused their efforts to create a new anti-aging product at affordable price and distributed through their channels to reach a bigger population.

L'Oreal being the world leader of the beauty industry could diversify trying to enter new markets such like the clothing taking advantage of their well known name as they already have a strong influence over the new trends of fashion in terms of make up, hair and skin care.

1.5 THREATS.

In relation to the threats and challenges, even that L'Oreal is the market world leader; there are some competitors in the industry and competitors for every single product division of L'Oreal (consumer - professional - luxury), competitors like Estee Lauder, Proctor & Gamble, Revlon, and Max Factor, specially for the Japan market, which is the market that L'Oreal is aiming to control.

L'Oreal is the world leader in the industry, however their competitors have been able to strategic place some of their products in the actual market, reason why L'Oreal is considering acquiring an other brand (Nivea) so that they can gain a better position in the European market.

1.6 SWOT MATRIX STRENGHTS

* The ability to acquire new brands and transform then into new market leaders

WEAKNESSES

* Lack of diversity on their product catalogue

OPPORTUNITIES