Marketing Management - 1Assignment on LOREAL

Nisha Agrawal15DM027

IntroductionThe L'Oreal Group is a French cosmetics and beauty company, headquartered in Clichy,

Hauts-de-Seine. It is the world's largest cosmetics company, and has a registered office in Paris. It has developed activities in the field of cosmetics, concentrating on hair color, skin care, sun protection, make-up, perfumes and hair care, the company is active in the dermatology, toxicology, tissue engineering, and biopharmaceutical research fields and is the top nanotechnology patent-holder in the United States.

Scope

The scope of the report is to get the overall knowledge about the company and its strategy.

My study is about L'Oreal which is the market leader of cosmetic industry. It mainly focuses on the market analysis and competitor strategies which gives the

marketers an idea to sustain in the market.

History

1909-1956 : The first steps, constructing a model 1957-1983 : "On the road to the Grand L'Oreal" 1984-2000 : Become number one in the beauty industry 2001 - Present day : Diversity of Beauty worldwide

MissionEveryone aspires to beauty. L'Oreal's mission is to help men and women around the

world realize that aspiration, and express their individual personalities to the full. This is what gives meaning and value to their business, and to the working lives of their employee.

L'Oreal operates through 4 divisions: Consumer product division

- L'Oreal Paris, Garnier, Maybelline NY. Professional product division

- L'Oreal Professional, Matrix, Kerastase. Active cosmetic division

- Vichy. Luxury product division

- Lancome, Biotherm, Giorgio Armani, Ralph Lauren

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Four key aspects of our beauty business model Universal- at L’Oreal the operations, HR, marketing and sales approaches are designed

to support universalization. While we maintain global brand equity across countries, we are able to foster local developments and adapt to local distribution.

Innovative- Innovation is in the DNA of the company. For example, creation of regional hubs in key markets for Research & Innovation, Marketing Development and Operations to facilitate local innovation and inspire global innovation.

Nimble- At L'Oreal we are always on the lookout for new opportunities: new products, categories, markets, distribution, and e-business.

Entrepreneurial- Each business unit is autonomous and operates with a different business model and with its own specific profitability logic.

KSF (Industry Key Success Factor)

●Unique ProductHold the thinking of "Differences not important" L'Oreal respect those differences of

everyone. Differences give you the unique and you’re characteristic. So, they have the ideas for their new products. To give a suitable products for their customers, because L'Oreal products are worth you.

●Stay close with customer The strategy of L'Oreal product such as Hair, Treatment, Hair dye etc. Because all of these could penetrate the market. It could go to your house, everywhere. So, L'Oreal could be close to the customers.

●Represent slogan by the celebrities or famous movie starsWe have the well-known slogan "Because, You're Worth It!" And, we're very please to

give you feel like our slogan with our respectfully and we hold that our work is your happiness. Moreover, we present this slogan by the celebrities or famous movie stars. Like Indian celebrity (Brand Ambassador Aishwarya ray of L’OREAL Parish) they could persuade our customers too.

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●Product segmentationL'Oreal has many brands and many lines include Consumer products, Professional

products and Luxury products. So, our consumers and customers could choose our products with the high quality that we guarantee by L'Oreal standard.

●Affordable price with high qualityWe also estimate many brands, many lines with the meticulous by our chemist,

researchers in L’Oreal Lab. For guarantee the high technology, High quality. So, it could give you confident with us. And, everyone could reach L'Oreal products with the suitable price and high quality.

●Given discount to attract consumerWe have "L'Oreal Mega Sale" in the department store every year. Its Midyear sale for

"Thank you" our consumers. You would get the discount in high brands of our lines.

●Category product base on age and genderMoreover, we have the strategy to penetrate the market of MEN. Such as the products

of Skincare, Hair care etc. We would like all consumers feel like "We can reach it" However, you have the different age or gender.

●Promoting collaborative innovationAs a creator of value for L’Oreal, innovation is one of the key factors in the success of

the group. Mastering the development process for new products is based on close cooperation between L’Oreal and its suppliers.

●L’Oreal Cherry Pack, packaging innovation incubatorOne of the top priorities of the group is to offer consumers innovative products...

L’Oreal establishes an open dialog that stimulates and accelerates innovation for the benefit of consumers. This fruitful process of co development is systematically supported and encouraged by L’Oreal, as demonstrated by the "Cherry Pack" in the packaging sector.

SWOT AnalysisStrengths

Strong brand portfolio - Its brand lineup includes Body Shop, Garnier, Maybelline, Kerastase and Redken, all of which are recognized globally.

Diversified geographic presence - The company, currently has operations in over 130 countries across five continents.

Strong R&D capability- L'Oreal has strong research and development (R&D) capability, focused on cosmetology and dermatology.

Weaknesses Weak performance in North America- Slow revenue growth

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Opportunities A demographic trend in the US- Growing beauty consciousness especially among the

aging baby boomers is an important trend for all cosmetics companies. Cosmetics market in emerging nations- rise for cosmetics companies due to increasing

popularity of beauty contests and increasing disposable incomes. Acquisition and alliances- L’Oreal signed a licensing agreement with Diesel in 2006,

enabling L'Oreal to build up a powerful fragrance business.

Threats Growing popularity of cosmetic surgery Intense competition- The Company competes in selected product categories against a

number of multinational manufacturers. Counterfeiting- Counterfeit products not only deprive the company of revenues, but

also dilute its brand image.

PESTLE AnalysisPolitical The political challenge is that L'Oreal should conform to all the different government

leadership styles in various countries it operates within. L'Oreal is obligated to produce safe products that do not contain any harmful

substances. L'Oreal has to follow the rules set by Advertising Standards Authority. For

example, advertisements cannot be misleading that over-exaggerating the functions of a product.

Economical L’Oreal’s main consumer products categories are all highly sensitive to global economies

of scale and scope. L'Oreal should adapt to all the different economic environments and

problems in all countries it operates in. For example in 2004, L'Oreal was affected by the continued weakness of the dollar and other currencies.

Social The culture of a country consists of the values, attitudes and beliefs of its

people. For example, with modern standard of living continues to improve and the level education get higher and higher, the social increasingly recognize the external image, and people are increasingly focusing on the image appearance, the demand of quality and effectiveness of cosmetic and related skin care products become higher and higher.

L’Oreal Recognized by Foundation for Social Change as a "Leader of Change" Recognized for approach to sustainable, responsible and inclusive growth and for

creating positive social impacts while reducing environmental footprint.

Technological

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Scientific knowledge of the skin and hair accumulated by L'Oreal for over a century has opened the way to great innovations.

Active ingredients, formulation procedures, evaluation technologies.

Legal L'Oreal's legal teams make a vital contribution and shed expert light on legal decisions. Their missions consist mainly in making L'Oreal's business operations legally secure.

Environmental Environmental concern is L’Oreal use natural ingredients mostly which is environment

friendly. L’Oreal manage a programmed of internal audits and establish indicators for measuring

and reporting on group performance in terms of the environment.

Porter's five force model Bargaining Power of Suppliers

Large number of substitute inputs. Low cost of switching suppliers. High competition among suppliers. Volume is critical to suppliers.

Bargaining Power of Customer Product is important to customer. Large number of customers.

Intensity of Existing Rivalry Fast industry growth rate Large industry size.

Threat of Substitutes Substitute product is inferior. Substantial product differentiation.

Threat of New Competitors Strong distribution network required. High capital requirements. Advanced technologies are required. Geographic factors limit competition. Patents limit new competition. Entry barriers are high.

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Competitive Profile Matrix The following table presents the Competitive Profile Matrix for Estee Lauder

Companies, and two of its main competitor Procter and Gamble and L’Oreal.

CPM Matrix

Estee

LauderProctor & Gamble

L’Oreal Group

Critical Success Factors W R

W.Sc R

W.Sc R

W.Sc

Brand loyalty10% 4 0.4 3 0.3 4 0.4

Brand value10% 4 0.4 3 0.3 4 0.4

Advertising10% 4 0.4 4 0.4 4 0.4

Product quality

10% 3 0.3 3 0.3 4 0.4

Price10% 3 0.3 4 0.4 4 0.4

Management

5% 30.1

5 4 0.2 30.1

5

Financial position

5% 2 0.1 30.1

5 4 0.2

Market share

10% 2 0.2 3 0.3 3 0.3

R&D10% 3 0.3 4 0.4 4 0.4

CSR10% 3 0.3 2 0.2 4 0.4

Global markets

10% 3 0.3 4 0.4 3 0.3

100

% 3.15 3.35 3.75The CPM analysis and the above depicted Matrix provides that the L’Oreal Group is dominating on the

critical success factors with a total weighted score of 3.75 which is very good.

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SMART Model

Specific:L’Oreal’s ambition is for the coming years to win over another one billion consumers

around the world by creating the cosmetic products that meet the infinite diversity of their beauty needs and desires.

Measurable:L’Oreal has set itself the mission to achieve goal by offering all women and men

worldwide the best of cosmetics innovation in terms of quality, efficacy and safety.

Achievable: Based on a comparable structure and identical exchange rates, the sales growth of the

L’Oreal group was+5.4% and the net impact of changes in consolidation was +1.0%.

Realistic:Maximum recognition for L’Oreal is given by The French magazine indicates overall

champions: L’Oreal, and pharmaceutical laboratory Sanofi Synthélabo (in which L’Oreal detains about 19.5% of its capital), which tie for the number one ranking.

Time: L’Oreal adventure from its creation more than 100 years ago.

1909-1956 : The first steps, constructing a model 1957-1983 : "On the road to the Grand L'Oreal" 1984-2000 : Become number one in the beauty industry 2001 - Present day : Diversity of Beauty worldwide

Financial Analysis Profitability

Return on assets 7.47%Return on equity 12.89%Return on capital 9.94%Gross Margin 71.13%EBITDA Margin 20.57%

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EfficiencyTotal assets turnover 8.74%Fixed assets turnover 0.71%

LiquidityCurrent ratio 0.95Quick ratio 0.70Cash ratio 0.23

Capital Structure

Total debt to total assets 8.07Total debt to total capital 11.37Total debt to total equity 12.82

First quarter 2015 sales

Like-for-like, i.e. based on a comparable structure and identical exchange rates, the sales growth of the L'Oreal group was +4.0%.

The net impact of changes in consolidation was +1.2%.

Currency fluctuations had an impact of +8.9%.

Growth at constant exchange rates was +5.2%. If end of March current exchange rates (€1 at $1.076) are extrapolated up to December 31, the impact of currency fluctuations would be +9.3% for the whole of 2015.

Based on reported figures, the Group's sales at March 31, 2015 amounted to 6.44 billion euros, an increase of +14.1%

Sales by operational division and geographic zone QUATERLY SALES GROWTH

€ MILLION1ST

QUARTER 2014

1ST QUARTER

2015

LIKE-FOR-LIKE

REPORTED

BY OPERATIONAL DIVISION

Professional Products 735.2 852.6 3.5% 16.0%

Consumer Products 2,758.9 3,078.3 1.7% 11.6%

L'Oreal Luxe 1,460.8 1,753.7 7.5% 20.1%

Active Cosmetics 507.4 559.2 7.6% 10.2%

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Cosmetics Divisions total 5,462.2 6,243.9 4.0% 14.3%

BY GEOGRAPHIC ZONE

Western Europe 2,019.9 2,100.4 1.3% 4.0%

North America 1,295.2 1,622.0 2.4% 25.2%

New Markets, of which: 2,147.2 2,521.5 7.5% 17.4%

- Asia, Pacific 1,166.4 1,476.1 5.8% 26.6%

- Latin America 410.9 460.2 10.0% 12.0%

- Eastern Europe 426.8 396.6 9.2% -7.1%

- Africa, Middle East 143.1 188.7 11.3% 31.8%

Cosmetics Divisions total 5,462.2 6,243.9 4.0% 14.3%

The Body Shop 176.4 192.4 4.2% 9.1%

Group total 5,638.6 6,436.3 4.0% 14.1%

CSR(Corporate Social Responsibility)

Responsible packaging managementThis approach is aimed at reducing the weight and volume of packaging and

improving the environmental impact. For example, for the past 5 years L'Oreal has followed a strict policy of forest certification of its packaging, which allows it to certify that more than 90% of its cardboard packaging, is certified, with over half being certified by the FSC (Forest Stewardship Council).

Responsible management of raw materialsUpstream, the selection of raw materials is based on a CSR qualification system

which allows them to be evaluated according to sustainability criteria such as adherence to biodiversity, user safety and long term availability.

Joint efforts to reduce co2

Since 2003, L'Oreal has been a member of the Carbon Disclosure Project (CDP), an independent NGO with the objective of measuring the efforts made by companies to reduce the emission of greenhouse gases. In 2007, L'Oreal joined the Supply Chain Program of the CDP to encourage its suppliers to measure and manage their emission of Co2.

Favoring local suppliers

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One of the components of L'Oreal's purchasing policy has been to select suppliers at the production and development sites of the group, especially in developing countries. Over 80% of its purchases associated with production (packaging, raw materials, and subcontracts) are thus made from local suppliers.

Conclusion

After the extensive market research and studying market analysis ranging from pestle, SWOT, BCG, SMART, etc of cosmetic sector, we can conclude that L'Oreal is the market leader in cosmetic industry with annual revenue of €22.98 billion and profit of €2.96 billion.

In 2014, L'Oreal was listed 61st among 1200 of India's most trusted brands according to the Brand Trust Report 2014, a study conducted by Trust Research Advisory, a brand analytics company.

Overall the company is at its maturity stage, performing well and has customer loyalty. Its innovation strategy gives a scope for greater market share and penetration.

Reference

www.wikipedia.com www.euromonitor.com www.datamonitor.com www.slideshare.net www.loreal.com

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