A Management Report On L Oreal Marketing Essay

INTRODUCTION

The Management report that I am presenting here reflects a complete analysis of L’Oreal With some very significant aspect of the company’s profile including company’s overview and history. Also a brief idea about its products, and their brands. No business in this planet is free from weaknesses, which actually comes within the organisation and threats that acts as the external factors as a result of the business environment where it operates. We all know that SWOT analysis is actually an important instrument or an ideal measuring parameter of any organisation to determine its present value in the competitive business environment. Moreover to plan a strategic move in order to deal with any incompetence’s of the business. Therefore it becomes utmost important for this report to spill the beans on the internal strengths and weaknesses of the organisation followed by the external growth opportunity, and their rivals which is a threat for the organisation. In short we have to apply SWOT analysis in order to get a transparent and true picture of the L’Oreal. Which I have attempted to present in a form of an ideal Management Report, as much as possible.http://3.bp.blogspot.com/__2ZwmFSAw_g/SkN_8Wng-mI/AAAAAAAAB6A/nl93ef3r1KY/s320/logo_l_oreal.jpg

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The business world today is far more dynamic than we can ever think of; hence it calls for the evaluation of all the factors of the business, be it internal or external, technical or social. All these important aspects of the business need to be evaluated at frequent intervals. Therefore the dynamic nature of the business and the requirement of this report have made it compulsory to critical analysis the decision making factors and strategic policies in the wake of the globalisation and redefined business paradigm. Nevertheless in response to the present culture the feedback of L’Oreal has been given an equal importance in this report. In order to determine and deal with the effectiveness of response, in terms of current business scenario.

The scope of any improvement in the responses from L’Oreal are dealt with great care and understanding. And this area of the report forms the recommendation and suggestion part. In addition it winds-up with the conclusion of the entire Management Report as a whole.

http://www.researchandmarkets.com/reportinfo.asp?report_id=334974&t=d&cat_id=

L’OREAL’S OVERVIEW & HISTORY

The name says it all; L’Oreal is the world’s renowned and biggest cosmetics and beauty Product Company. The company was founded by “Eugene Schueller” in year 1909. But now the company is controlled by the founder’s daughter Lilliane and in year 2009 L’Oreal has celebrated its 100 years of relentless service to the mass. Initially the company was registered as “Societe Francaise de Teintures Inoffensives pourCheveus,” in year 1909 in the days of it formation, but years later it was then named as L’Oreal. The company has four strong pillars of their entire business portfolio, namely Consumer Products, Luxury Products, Professional Products and Active Cosmetics. L’Oreal operates in some 130 countries with a complete range of 27 beauty products, in different segments of their business. To help L’Oreal achieve their goals and objective a dedicated strong team of 67,662 employees are engaged in the project of attaining the desired mission of L’Oreal. A century of expertise in the field of beauty care products is completely driven with innovation. That is reason why L’Oreal invests some 1/3 rd of their revenue is devoted to their R&D department. L’Oreal holds a stake of 19.5 % in Sanofi/Synthelabo. Apart from this, a holding company “Gesparal” has 51% of L’Oreal share and the food giant from Switzerland “Nestle” hold the balance 49% of the “Gesparal”

The success of L’Oreal’ stands on the strong foundation of 5 key area of expertise, Hair care, Hair colour, Skin care, Make-up and Fragrances. The revenue generated from L’Oreal is estimated to be more than 50% from outside of Europe. Acquiring other brands is one of the vital activities, in which L’Oreal is focusing to a great extent. L’Oreal has been a great platform for the young breeding talents through their global recruitment strategy. L’Oreal follows an equal opportunity program, therefore as a result of that its employee are from 110 nationalities, a classic example of cosmopolitan environment & diversity Management. 97% of the L’Oreal factories are ISO approved. And L’Oreal operates 38 factories all over the world, manufacturing some 4.9 billions units in 2009. L’Oreal has the list following brands which includes

Internal Analysis

Strengths

Unique vision

The company was with a passion and a quest to transcending the border to make the world beautiful. The credit of outstanding success of the L’Oreal as a company goes without doubt to the vision of the concept of working as a team, which operates under the truly outstanding Director Lindsay Owen-Jones.

World’s prestigious Brand

This French company has brought a revolution in the beauty product industry. A giant in manufacturing of some world class cosmetic for example Lancôme, Vichy and the brand for the mass like The body shop, Laboratories Garnier and Maybelline. The other brand includes Ralph Lauren Fragrances, Gemey Maybelline, Sanofi/Synthelabo Giorgio Armani Parfums, Soft Sheen-Carson, Galderma, and many more

Strong R&D Department

The biggest asset or strength of the company is their relentless effort in R&D department, which keeps a continuous effort toward finding new and innovative products in the field of beauty and cosmetics market. This contributes a great deal in the competitive market like beauty product industry, in not just making new customer but retaining old customer as well by offering a brand new product to their customer at frequent intervals at a global platform.

Multiple product range

L’Oreal has a strong product collection presence in the beauty product industry. Starting from hair care to skin care and from fragrances to styling products. The company’s multiple product division like Consumer Products, Luxury Products, Professional Products and Active Cosmetics has made it unique in the global scenario.

Dermatological & Pharmaceuticals advancement

The next great strength of the L’Oreal group is advance level of activity in the dermatological and Pharmaceuticals sectors, giving them a position of nano-technology patent holder in United States.

Sound distribution channel

Apart from this L’Oreal has a sound distribution channel and logistic department which helps a proper and smooth supply of its products, ensuring that the products are available to the maximum customers. The most expensive products and luxury items are distributed through duty-free shops and the department stores. And the hair care products are sold maximum from the hair salons. And the active cosmetics department sale their product via multiple beauty outlets and from pharmacies as well.

Advance Advertisement strategy

The strong advertisement strategy from L’Oreal puts the company miles ahead from its competitors. By understanding the requirement of the customer it succeeds it bringing to their customer the right product, through the deadly combination of marketing & advertisement strategy.

Weaknesses

Organisational structure

The company has grown enormously big, and there are various division and sub-division of the organisation, this has made the organisational sector a bit decentralised one, owing to its gigantic size. At times it becomes impossible to find out the exact division responsible for the pitfalls of the company.

Low profit margin

The company has got a numerous rivals, and to compete in the challenging market, the product pricing is considerably low compare to the other companies, and many times the profit does not meet the expectation of their own margin. To a great extent advertising and marketing of a high-end nature is highly a reason to a low return.

Lack of control.

The co-ordination and the control of L’Oreal is somewhat lacking due to its gigantic size. This is again observed as a negative point and as a setback.

External Analysis

Opportunities

Infinite field

The main fields of expertise of L’Oreal is the product of beauty care which truly provides an edge and a never ending opportunity to concentrate and keep developing and specialising in the various aspect of beauty care like hair colouring & styling, skin care cosmetics and fragrances as well.

Brand image

The name of L’Oreal is more than enough for its consumers, because it’s been a leading brand in the fields of beauty for ages. The brand name itself gives L’Oreal a great opportunity to develop its business abundantly.

Patent Rights

Another great advantage is the chunk of their market share in this particular industry in which they operate. It gives them advantage to have the world class brands and various patent registered in their names. This gives them an edge over their rivals because the customer cannot get the same cosmetics in other brands.

Threats

Growing Competition

The field of beauty product industry is vast; therefore everyday a new organisation is born. This raises the bar of growing competition for L’Oreal

Economic turmoil

The economics downturn is been witnessed very often in many countries for example USA, and Britain, this could possible be a great threat to the business opportunity and profit margin of L’Oreal. Many of the L’Oreal products are in the top line, which the basic customer will find it expensive especially in the times of credit crunch and recession.

http://loreal.exteen.com/20080805/swot-analysis-l-oreal

http://www.oppapers.com/essays/Loreal-Swot/149358

The impact of globalisation on L’Oreal

Global expansion is at the heart of L’Oreal growth strategy. This French cosmetics and toiletries giant have experienced unmatched growth and success in the sector with an unparallel global expansion into new beauty-product markets. And these plans are executed under the sharp and judicious direction of Owen Jones, the chairman of the company.

The business goes global because of its strategic vision, some 16 years back L’Oreal used to pocket 75% of the revenue from the sales of Europe, major from France, but by 2004, a total of 85% of its revenue generated, were outside France, we can cite this as a classic example of ideal globalisation. L’Oreal is a real global leader in every segment of its industry. Globalisation means inviting tougher rivalry with the international player at a global level. Therefore it has to be backed up with a mastermind global strategy that will give a cutting edge at a worldwide level, and a brand image of the organisation. But in order to internationalise, a business has to initiate lot of innovative and latest business tactics, at regular intervals for instance global entry strategy, proper marketing mix, standardisation, or adaptation of international policy and procedure etc.

Let us analyse the global strategy that has put L’Oreal miles ahead of its rivals in the beauty industry. From the research and findings I have realize certain strategic decision making and policies formation of L’Oreal which can be said as the influence of globalisation.

Acquisition strategy.

To dream L’Oreal beyond the French borders is the milestone, as told to the fortune audience, and was considered to be his smartest move as CEO. As he told the Fortune audience, “The defining moment for me was when I decided L’Oreal must become a world company and not just a French one.” (Chairman – L’Oreal)

In the battle to reign global beauty market, L’Oreal has developed a winning formula, “Consolidation” which is considered as a lethal weapon to support their competitive strategy. The mastermind strategy of Owen Jones to buy local cosmetic brands, give it a facelift, and sell it in the international market has helped L’Oreal to gain a good market share in the beauty industry. Let’s take a brief look at all the acquisition of L’Oreal.

Maybelline

L’Oreal makes a risky investment of $758 millions to acquire Maybelline in 1996, it head quarters were shifted to New York. The product line like nail polish and lipstick were given a complete transformation and launched with exciting new colours. The sales figure reflects a big rise in 2003, where 56% of total sales came from outside US. In Japan it become the hottest selling beauty products amongst teens, the products like curls mascara and volume express line were in growing popularity all over.

Soft-Sheen- Carson

A leader in hair care industry soft sheen was acquired by the giant L’Oreal in year 1998, and later on it went to acquire Carson product an ethnic manufacturer in hair and skin care. The mastermind Owen then merged two companies to form soft sheen- Carson in august 1998. The potential market of hair care product was targeted by L’Oreal. This was a global move to cover half of total African market, and currently L’Oreal control 41% of South African market.

Kiehl

Jones went further to buy Kiehl, a small cosmetics firm exactly going in contrast with the regular L’Oreal brand and products. Jones find it extremely interesting that the firm is doing exceptionally good. It main emphasis is on product quality, for the rest L’Oreal gives a bouncing life to the product by giving it a new look and proper product placement makes it well presentable in the international market at selected European stores. And these are done without ads or promotions.

Shu Uemura

To get a strong foot hold in Japan, L’Oreal went on further to takeover Shu Uemura as a part of strategic alliance with Japanese Shu Uemura, a cosmetic company rapidly stretching its presence in China and other Asian countries.

The Body Shop

L’Oreal gave a shocking surprise by gobbling up “The Body shop” in year 2005, such a small port folio. But it was strategic decision for going global and increasing its brand port folio when the company decided to go for a £ 650m purchase of the ethical beauty retailer. This has a strong presence with 2550 outlets all over UK. Indeed a very smart move by the by acquiring this port folio, L’Oreal has built its ethical image in the market at a global level. And to book an image that the company is going natural and minimise its carbon footprints.

Others

Mininurse & Yue-Sai are two small organisations that were respectively bought in 2003 & 2004 by L’Oreal as a strategy of global expansion, but now are performing excellent in the local cosmetic markets. Canan a specialist in hair care was a recent acquisition from Turkey in late 2007. In the recent past L’Oreal has been concentrating on higher end port folio. As a result to push its salon market, three more acquisition has been witnessed, Columbia Beauty Supply, Beauty Alliance and Maly’s. The purchase of YSL Beauté is a step to give weight to its Luxury division. While to earn some brownie point on the dermatology market CollaGenex was acquired as well. Looking into the market latest trends for natural beauty remedy In a hunt to increase it footprints in natural and organic arena. Sanoflore was the next deal to freeze, which will give L’Oreal an additional brand in its Active Cosmetic Division. Therefore Sanoflore will join its group with Dermablend, La RochePosay, Ombrelle and SkinCeuticals. But as the competition intensify, the company is looking ahead to have more acquisition in Asia market as well and make a strong presence in the world of beauty market by the instrument of this acquisition policy and growing as well in the port folio management. And in future it will continue to seek more acquisition targets in the emerging market.

http://www.scf-online.com/english/24_e/international_24_e.htm

http://www.fortune.com/fortune/ceo/articles/0,15114,372136-1,00.html

Strong logistics efficiency

In the run to support the global recognition and other manufacturing strategies, the company has to depend on the strong logistic effiency. The availablity of the product to the end user is extremely vital to any organisation, L’Oreal is no exception, and therefore ensuring the product available to the outlets for everlasting satisfaction of the customer is one of the major goal of L’Oreal. It an has got an extremely strong distribution channel and logistic department, maintained by centrex the centre of supply chain management. L’Oreal partner group is developed with the supplier and the for the smooth supply of raw-material, container or packaging , equipments, point of sale or promotional items L’Oreal depends on its suppliers for all its plants, factories and warehousing supplies. L’Oreal continuous try to maximise the performance the supply chain management in order to improve time limit, imroving responsiveness etc. Centrex monitors all procurement orders and deals with it. In order to assure that the required level of service is achieved logistic department and the supply chain management has received special attention to suport the compamys strategic vision.

Strength of R & D

L’Oreal has one of the most strong Research and development team in the field of beauty product development. It attract some 3400 expertise in 30 different discipline from multiple nationalities to build a strong R&D team. The company have invested 625 million dollars in just dermatological research and cosmetic department, in year 2009. A total of 18 research centers worldwide and 13 evaluation centres operates to achieve the long tern growth. Some 500 scientist worked day and night to discover 5000 formulas each year. L’Oreal has filed 647 patent in year 2009, and 35,000 patents are active worldwide. It has amlost 1000 active allaince with leading academic research institution L’Oreal invest 1/3rd of its budget to the advanced research projects which is 3% of it revenue generated goes to the Research and Development department. The company owns the product development centres at New York, Paris, Dubai, Rio-de-Janeiro and shanghai. Therefore L’Oreal exploiting its research department quickly capitalise on latest consumer trends worldwide. In short the R&D department has contributed to a great extent in making this company where it is today, in terms of global recognition and acceptance.

Branding strategy

L’Oreal branding strategy has given a gaint leap in support of the globalisation, and has helped to spread the business not only in Europe but worldwide. The company has a global presence over 150 countries which is possible only because it hold a very good brand image. The company follows a powerful and efficient branding strategy, which makes it possible to generate a steady flow of revenue year after year. As a result of the global branding strategy the L’Oreal achieved the impossible dream of becoming the largest cosmetic in the world. Whilst the global economy was in a downturn mode still the company made successful sales both in Asia and Latin America. It would not be wrong to say that the company has succeeded reaching across the French boundaries due to it brand reputation.

Global portfolio management.

L’Oreal holds some of the best names of the prestigious brands portfolios for their varied range of beauty products under one roof. Some renowned names include Lancôme, Maybelline, The Body Shop, Vichy Laboratories, Matrix Ralph Lauren Fragrances and so on and so forth. L’Oreal is very careful with brand portfolio Management like the quantum of water mixing to the moisturising cream. With the world of brands under its roof the port- folio management team has to be extremely cautious and judicious to place each brand in the right segment so that it does not affect its other brand market. This is hitting the right audience with the right product.

http://finance.mapsofworld.com/brand/value/loreal.html

L’Oreal response

With respect to various challenges posed by the global business environment, L’Oreal has always come up with a solution, to stay ahead in the international market. Let us analyse the effectiveness of L’Oreal responses with regards to national and international issues of the business world.

Table showing the responses to the situation

L’Oreal response

Pros

Cons

1. Acquire Shu Uemura

To achieve a place in Asian industry, and a bigger sales graph

Fails to cater the Japanese market

2. Purchasing of Nivea

Mid-segments market is filled up.

Expose to Biersdorf.

3. Generate opportunity in dermatological and cosmetic field

More sale and new customer

Risk of losing if there is no strong market for dermo-cosmetic area.

4 Introducing new products for gaining more mileage.

Increase revenue by opening up a new market for all brands.

Inviting rivalry and more competition.

5. Diversify into clothes and accessories

Using similar technique to gain competitive advantg.

High risk in the new field and global player to deal with.

6. Form a brand new line of L’Oreal cosmetic stores.

Brand products to be easily available

Loss of capital if the stores does not work out as per planned and fail to generate increased sales figure.

7. Keep a got stock of all the products to tackle supply issues.

A happy customer, not loosing sales, and retaining customers.

Stock loss due to expiry date. Additional holding and shipping cost.

Recommendations and suggestion

The recommendation for the L’Oreal is that they should design more products to suit the Japanese market, and even selling the same products to Americans as the American market are more in more requirement of the ethnic Asian touch trends, by giving the products a brand new look with its latest packaging tools to make it look more authentic.

A large section of American market is untouched; L’Oreal should plan to consider tapping those markets as well launching a similar strategy as in the African expansion. So far the South American market is largely untapped. By taking a similar approach perhaps even designing products for South American ethnicities.

Since diversity management is at the heart of L’Oreal it should take a plunge and diversify into clothing and accessories, with the wealth of rich experience similar to the beauty product industry. A step into dermo-cosmetics lines must be beneficial in towards the progress of the company because there is a massive demand for such product which is an alternative for plastic surgery. L’Oreal’s should take advantage of its research and develop related products which will lead them ahead of their rivals.

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Chain stores of L’Oreal must be there to generate more sales and to bring confidence to their customer when they see the L’Oreal store rather than buying the L’Oreal’s products from other retail outlet. This in actually an untapped niche for big chain of cosmetic stores, for the L’Oreal products, would be ideally to fill this gap for the niche market.

CONCLUSION

L’Oreal in spite of the growing competition has become a giant in its domain. It success rest on the four pillars of their entire business portfolio, namely Consumer Products, Luxury Products, Professional Products and Active Cosmetics. And the main reason of it success are strength of R&D team, effective organization structure, strong distribution channels, Brand portfolio management, Acquisitions & Branding strategy. L’Oreal has a number of rivals like Estee Lauder is the main threat. Proctor & Gamble, Unilever and Revlon in hair care segment. Avon a hardcore competitors in Russia, and Nivea control the mid segment market. L’Oreal need to concentrate a bit more towards Men care items, and avoid too much rivalry.