L'oréal case - Globalisation of AMerican Beauty HBR case study

1. And the globalization of the American
beauty

2. 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

3. L’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.

4. 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.

5. 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.
WEAKNESSES
1. The company has a decentralized organizational structure.
2. Due to the many subdivisions of the Company, there is also the
difficulty in the control of L’Oréal.
3. The profit margin of L’Oréal is comparably low than that of the
other smaller rivals.
4. 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.

6. 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
1. 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.
2. The economic downturn that is quite evident in other countries. Such
could thus hurt the possibility of higher profit for the company.
3. 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.

7. What 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:

8. 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:

9. 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:

10. Acquisition Strategy in the United States

11. 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

12. 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

13. L’Oréal’s Organization and Competitive
Advantage

14. 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

15. 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.

16. Kiehl’s & the globalization of a luxury
Brand

17. 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.

18. 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

19. 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

20. 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.

21. Because you are worth it