Introduction
L’Oréal is the company that I choose to be discussed. The reason why I choose this company is because they are the world leading cosmetic and beauty product’s company and they have a strong strategy for me to discuss on. L’Oréal is a cosmetics and beauty products’ company and it was founded at Clichy, France in 1909. Eugène Schueller is the founder of the company, who became an instructor at the Sorbonne after completed his study in the Institute for Applied Chemistry in Paris. L’Oréal was primarily named as Société Francaise des Teintures Inoffensives pour Cheveux which means French Society for Inoffensive Tincture of Hair. It is a French based company which headquartered in Paris. There are over 130 countries operating this company like South and North America, Africa and Middle East, Europe, Asia and others, with up to 25 international brands. The international brands under L’Oréal include L’Oréal Professional, Lancôme Paris, Kiehl’s, Shu Uemura, Kérastase and others.
Production and marketing is the main scopes that focus by the company beside the dermatological and pharmaceutical fields. They are more concentrate on hair colours, skin care, fragrances and perfumes, cosmetic products and styling products which are specially created for individual and professional customers. They also came out with kids’ products which are known as L’Oréal Kids. The research team of L’Oréal was first started with only 3 chemists but it is now expanded to nearly 2000 chemists. Now, there are five research and development centre of L’Oréal globally. L’Oréal have a slogan of “Because we’re worth it”, which is also their vision statement. The reason why they have this vision is because of building a good customer relationship is what the company priority concern.
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This is to provide consumers with more satisfied products by the company’s lifestyle and philosophy. L’Oréal believes that everyone aspires to beauty. This is where they come out with their mission statement and made the business more meaningful and valuable. They wish to help everyone in the world, no matter male or female, get knows to their own aspiration and fully acquit their personalities. L’Oréal is the world’s leading cosmetics and beauty products’ company. Previously, Procter & Gamble was at the top ranking in this industry.
By the substantive focus in L’Oréal, they are capable in targeting on more investment in Research and Development as well as advertising. Through the investment, it also enables the company become a powerful force within the industry. In additional, L’Oréal also became the world’s biggest supplier for cosmetic products which hold over 19% market shares. By contrast, the company that ranked second, which is the Estée Lauder was quite far distant from L’Oréal as it occupied only 8%. With the help of cutting-edge technology, L’Oréal also took a strong pace in the introduction of their skin care products.
Strategic Analysis
SWOT Analysis of L’Oréal
Strengths
The main strength of L’Oréal is to offer the best products to their customers by continually conducting strong and new research, innovation and development in the concept of beauty. They are also leading the beauty and cosmetic industry with this type of research strategy, even in the competition market. Besides, L’Oréal situated more consideration in their specific actions and events. Their actions and events basically will be divided into five groups and the consumer product division as the main. In consumer product division, all their scopes are published through a gigantic market. Secondly is their luxury product division that included international brands.
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These products can get it through perfumeries, department outlet and duty free outlets. The next is their expert hair care items utilized by the expert beauticians and market through hair salon. This has been categorized into the professional product division and this division helps to keep up the nature of L’oreal Group. Other than that, another ability of L’Oréal is about their advertising strategy that being the key element toward the growth of the company. Throughout accomplishing the nature of their target market promotes through advertisement is the most ideal way.
Weaknesses
Dispersible of the hierarchical structure within a company is the greatest shortcoming which is usually faced by most of the organization including L’Oréal. On account of the numerous subdivisions of L’Oréal make it harder to run and control by the company. Thus, as a result of this, the manufactures of organization become more inefficient. Another weakness which the organization confronts is that their profits. The margin between their cost price and offering cost is relatively lower than their other minor rivals. Thus, the profit they earn is different from their expectation. This is likewise happening in extensive advertisement and marketing. Last but not least, L’Oréal’s multinational promoting strategy is also their weakness. The reason why is become their shortcoming is mainly due to a few distinctions happened in the promotion and campaign of L’Oréal products, in the matter of what kind of image they are trying to present.
Opportunities
L’Oréal Group targeted on providing beauty and makeup products for different age levels of ladies. The constant market demand on these beauty products had allow L’Oréal to take the opportunity to focus on their areas of expertise, especially on their hair styling and colour, fragrance and perfume, cosmetics and skin cares. L’Oréal appeared with a famous and familiar image around the world even in those developing countries. This company acts as the pioneer brand in the industry as well. Another open door for the organization is that they obtained a lot of market share because of numerous registered patents by L’Oréal.
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Threats
For L’Oréal, the greatest threat they commonly meet is that they need to confront with competitions among the same industry. Because their products continue to increase with, and therefore this may cause other brands took L’Oréal advantage of their profits. Besides, different economic conditions can also pose a threat to L’Oréal. Since the greater parts of the products are just inside the range of the populace of developed nations yet in some way L’Oréal takes care of this issue. Moreover, they produce products for the populace of under developed nations. In this manner, although the public do not think that L’Oréal’s products are daily needs, and it may be accompanied rejection, but the company is still in the best production lines to produce their products.
Porter’s Five Force Model of L’Oréal
Rivalry among the competitive firms (High)
Various companies’ competitiveness, for example Proctor and Gamble, Avon, Estee Lauder and Shiseido push L’Oréal into the more elevated amount of rivalry in the current business of cosmetic and skin care products. These contenders attempt to increase more market shares by keeping implement various strategies. L’Oréal needs nonstop quality enhancements for every production line in order to guarantee survival of this company in the industry. They must enhance their marketing channels with the assistance of highest technology and innovation to obtain more market share and globally targeted their market.
Potential Entrants (Low)
It can be considered very low in the participation of potential entrants into this moderate industry. The market already exists with strong company like Estee Lauder, Avon, Olay, Proctor and Gamble, as well as L’Oréal. This is very obvious that, there will be no serious threat or maybe little threat from any beginner of the business. L’Oréal does not appear to have such a tremendous risk from any potential entrants.
Potential Developments of Substitutes (Low)
Aging is the main reason why people around the world need skin cares. As a leader in cosmetic and beauty sector, L’Oréal seem like does not disturb by any potential substitute that come into the market. In additional, there is less substitution in the anti-aging products and so, it brings less threat to the market.
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Bargaining Power of Suppliers (LOW)
L’Oréal in the profession is a giant, has the huge capacity that their production is exceeding 45 billion units every year, and therefore the supplier will have little opportunity to pose the enormous threat to L’Oréal. It is huge in world the quantity of supplier. Therefore the supplier has few or simply does not have the ability to bargain with L’Oréal. Therefore, L’Oréal not faced with too many threats from its supplier.
Bargaining Power of Customers (High)
The appearances of numerous powerful competitors like Procter & Gamble, Shiseido, Avon and other companies cause higher bargaining power of customer in the market. Because the usability of different company’s different products are high, the potential customer has the choice to go for other companies. Therefore, L’Oréal faced with threat of lack of customer. In this situation, L’Oréal must deal with this threat earnestly, as to maintain the market share of this company in profession.
