Strategic Business Management L’oreal Final Report
Table of Contents
This is the beginning
Objectives for the Future
Advantages of comparison
This is the beginning.
L’Oreal is the world’s largest cosmetics and beauty product brand. Its strategy has helped it remain at the top of its industry. This multinational cosmetic company invests, develops new products and markets them to its customers by using its strategies. L’Oreal’s CSR, or Corporate Social Responsibility (Corporate Social Responsibility), strategy is its most significant investment. This strategy seeks to double its customer base by 2020 to nearly 2 billion. It is possible to identify and analyse the company’s business units by looking at high growth prospects, and then analyze the different strategies that were used in order achieve this. The brand’s development has been documented through the years by studying its journey. This is clearly the firm’s competitive advantage. L’Oreal, a company with a high turnover and profit margin, uses its profits for R&D to encourage innovation. It also makes large quantities according to customer demand. L’Oreal’s global footprint is made possible by vertical integration, horizontal integration and strategic alliances. This report examines the strategies of L’Oreal, including their ability to formulate and implement them. It also includes a discussion on the theories that underpin strategic business management.
General Environment and Trend: L’Oreal’s macroenvironment is analyzed using pestle analysis. Political and Legal Forces. The government has made laws and regulations about the recruitment and employment of multiracial professionals to L’Oreal. L’Oreal products are approved by the FDA to ensure that they do not cause harm directly or indirectly. L’Oreal must list all ingredients in the preparation on their product labels under the regulation.
Economic Forces: L’oreal’s Paris headquarters is France. Since 2016, it has contributed to an increase in GDP. It has contributed to a consistent increase in GDP since 2016.
Social Forces: People are becoming more conscious about their health and prefer organic products that don’t cause skin irritations. This is an important concern for cosmetic brands.
Technological forces: Convergence (which refers to a mixed cosmetic solution from technology-based chemicals) is now a popular trend at L’Oreal. Several Korean cosmetics brands already use this technique.
Demographics Play a Significant Role in Firm’s Capabilities. The beauty concerns of women have changed over the years to be more focused on men. They place more emphasis on personal appearances than women.
L’Oreal’s Specific Environment team is currently developing an enhanced tool that provides a detailed overview of the products and allows consumers to analyze their choices. L’Oreal’s supply chain can have an impact on all stakeholders. The R&D team has done extensive research to create a sustainable product optimization tool (SPOT) model. This model allows the firm’s R&D department to test various designs of new products with potential impacts on the society and environment. This makes the impact of products tangible and helps to minimize the negative effects. This tool was used to analyze every product from L’Oreal before it was released onto the market in 2017.
L’Oreal, a top cosmetic brand, is facing fierce competition from various brands. Below is a summary of L’Oreal’s competitors.
End Goal Planning
Corporate StrategyIn this section, Loreal will show you how they create their own competitive advantage. Loreal can also have two additional types of competitive advantages. These are differential and comparative advantages.
The ability to produce goods and services at a lower cost than one’s competitors.
L’oreal’s unique strategy of universalization strategy. L’oreal is convinced there won’t exist a single model for beauty. It’s a vast array of beauty models that can be adapted to different times, cultures and histories. L’oreal’s strategy refers to universalization, which is globalization that recognizes differences. There are three types of differences: needs, desires, and traditions. Their belief is that product innovation should meet cultural expectation. It has successfully adapted to cultural differences in beauty and culture all over the globe. L’oreal currently maintains six global research and development centres, three in France, one in America, and one in Japan. L’oreal also established one R & D facility in Shanghai, China in 2005. The final R & D facility is located in India. A hybrid differentiation strategy is used by L’Oreal to reduce costs or create a competitive advantage. It is focused on reducing costs, which allows it to lower the price when needed while increasing perceived value. L’Oreal’s high level of technical capability and capital makes it able to produce on large scale. However, the company’s strong research and development team allows for innovation. L’Oreal’s efficiency in production and distribution across a range of channels makes it possible to reduce costs. L’Oreal’s efforts to create an emotional connection and not just highlight its products shows its differentiation strategy. L’Oreal’s consolidation has been focused on developing a strong branding strategy. It is well known and respected by customers. L’Oreal has become a respected leader in the beauty and cosmetics market through the use of all these strategies.
Corporate Strategy Growth through acquisition L’oreal’s strategy for growth has included both internal development, and the acquisition of companies currently operating in cosmetics. L’oreal’s longterm strategy focuses on external growth via acquisition. It has an annual goal of 10% growth. The group’s liquidity has made this possible, as well as its low debts. L’oreal’s acquisition of additional companies allows them to grow their market share and expand their geographic reach. The 25 most prestigious brands in the portfolio are the result of several years-old acquisitions. Global Strategy L’oreal has a global presence. French cosmetics manufacturer SFTIC, established over 100 years ago, is now a multinational organization with more that 88900 employees in 140 countries. Globally, 32 brands from around the world are part of its product portfolio, which controls 19.9% of the global cosmetics market. Because they are a trusted brand and have been around since the beginning, they have a well-known image. They have a professional segment (Keratase Redkin and L’Oreal Professional) which is trusted by salons worldwide.
L’Oreal Laboratories has pioneered innovations like the first shampoo without soap and the first fast-bleaching agent. It also first highlighted the enhanced enhancement shampoo. L’Oreal Laboratories promotes beauty for all, regardless of age, gender or ethnicity. L’oreal has chosen a unique strategy: its popularity. This is about understanding, capturing and respecting differences.
It all comes down to desire, need, and tradition.
Business level strategies focus on providing value to customers. They also aim to gain competitive advantages by exploiting core competencies in certain product and service markets. Business-level strategies are concerned with creating differences in the position of firms and their competitors within an industry. The firms must determine whether they should do different things or perform other activities than their competitors to establish their position. Two types of competitive advantage can be found in business-level strategy. The first is low cost. The second is uniqueness (or differentiation). It is important for firms to determine which competitive advantage creates more value. Before you can do this, define the market scope in which firms would like to compete.
Next, business strategy requires that generic strategies be decided at business level. As illustrated in figure 1, there are five general strategies. The target market can be anywhere. Our reports will be more precise and clearer if we analyze one brand of L’Oreal Paris. L’Oreal Paris was chosen because it belongs to L’Oreal Consumer Product divisions.
L’Oreal’s Consumer divisions are very sensitive to global economies. As such, they not only reach customers’ needs but also meet their expectations. L’Oreal’s global to local balance is maintained and sales increase each year. L’Oreal’s multi-cultural diversification strategy is now visible. The divisions of consumer products will be applying this strategy to a wide market. L’oreal continues to be the number one beauty company in the world due to its success in the past, reputation and presence in clusters of brands. But it is not an easy story. France’s competition is high, and it shows in their standards. Many companies are located in different areas of country and have different strategies. L’oreal’s Marketing Strategy is Empowerment. L’oreal is more than a cosmetic company. It also promotes itself as a source for consumer power and confidence.
L’oreal keeps its licensees informed and maintains a positive brand image. L’Oreal has been a highly successful company in the cosmetics sector, using a variety of tools. L’Oreal’s corporate strategy of globalization is the primary direction for business and functional strategies. With low bargaining strength of consumers and suppliers, L’Oreal is in a highly competitive industry. However, the company has a high level of profitability with very low potential for sub stitutes. COTY is the main competitor.
These five big competitors have a dominating market share in the cosmetics industry, which has led to high levels of intensity. L’Oreal however has its own strategy for being the #1 cosmetics company worldwide. It creates valuable resources that allow it to be a competitive advantage. L’Oreal has benefited greatly from its vertical integration and has not relied heavily on outsourcing. L’Oreal’s business units have five divisions that play different roles. L’Oreal Consumer Products makes a steady income and can be used to finance L’Oreal Active and Professionals unit investments. L’Oreal Luxe, the star unit, has a high relative market share and has high potential for growth in the future.
The company’s differentiation strategy is used to diversify the company’s portfolio in order to maximize its profits from global markets. L’Oreal started with hair dyes and has since expanded its product lines to include body care, skin care, and fragrances. Its market reach extends beyond France (where it was founded) to include other countries such as the U.S.A., Latin America, Japan and China. L’Ore is a French beauty product brand that has enjoyed a high demand.
Al has created its business in order to satisfy the beauty needs of other countries. To increase its competitiveness and maintain its position as a leader in global cosmetics, it also sought out suppliers and factors endowments.