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Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
Loreal diversification strategic management
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Loreal diversification strategic management

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    • 1.  A corporate growth strategy in which a firm expands its operation by moving into a different industry  Many reasons or motives for diversification  Two major types of diversification ◦ Related (concentric) diversification ◦ Unrelated (conglomerate) diversification
    • 2.  Risk reduction and/or spreading  To make use of surplus cash flows  To build shareholder value  To Grow  To more fully utilize existing resources and capabilities
    • 3. Diversification implies two levels of strategy 1. Business-Level Capabilities/resources to create competitive advantage within each business -low cost - differentiation -focused low cost - focused differentiation - integrated low cost/differentiation 2. Corporate-Level Capabilities/resources needed to create value across businesses 4
    • 4.  Related Diversification ◦ share activities ◦ transfer core competencies ◦ Eg. Kraft foods  Unrelated Diversification ◦ More efficiently allocate internal capital ◦ restructure 5
    • 5. Key Facts and Figures 1st cosmetic group worldwide 1century of expertise in cosmetics 23international brands 19.5billion euros of sales in 2010 130countries 66,600employees 612patents registered in 2010
    • 6. DIVERSIFICATION STRATEGY “Clo s e ly -re la te d ” De rm a to lo g y Entering three kinds of industry: Co s m e tic s The Bo d y Sho p
    • 7. COSMETICS INDUSTRY Offering different product lines through four market lines: Pro fe s s io na l Pro d uc ts
    • 8. COSMETICS INDUSTRY Co ns um e r Pro d uc ts
    • 9. COSMETICS INDUSTRY Lux ury Pro d uc ts
    • 10. COSMETICS INDUSTRY A tiv e Co s m e tic s c
    • 11. THE BODY SHOP A chain of cosmetic stores specializing exclusively in hair and skin care products based on natural ingredients. Operated a total of 2,550 stores in 62 countries worldwide by the end of 2009.
    • 12. DERMATOLOGY Galderm L a aboratories: a joint venture with Nestle. It boasts three of the top 25 best-selling drugs. It specializes in skin diseases and skin infections.
    • 13. REASONS OF DIVERSIFICATION 1 Part of L’Oreal Long Term Strategy 2 Exploiting Relevant Economies of Scope S trengthening E xternal Growth 3 Meet Consumer Needs
    • 14. STRATEGIC CHOICE Internal Growth Resources E xternal Growth Diversification (M & A) Asset Alliances
    • 15. GROWTH STRATEGY “M erger and Acquisition” Objectives: Reaching a critical size for exploiting econom of scale. ies Satisfying local needs. Creating a portfolio of distinctive but complementary products and brands. Quickly acquiring new resources and technologies. Overcoming the entry barriers.
    • 16. CHARACTERISTICS OF COMPANIES ACQUIRED Operating in different geographical m arkets from those in which L’oreal is already operating. The Body Shop: Enters India Easily Offering products that com plete the L ’oreal portfolio brands or products. ROGER&GALLET: Produces Pharmacy Fragrance
    • 17. CHARACTERISTICS OF COMPANIES ACQUIRED Operating in geographical markets in which L’oreal intends to reach leadership position. Inneov: Number 1 in Spain Having high technology and com pet L’oreal products. h Vichy: Advanced Skincare Technology
    • 18. ACQUISITION PREPARATION FLOWCHART Preparation (Gather information) Decision (Implementation) Final Preparation Similarities with L’oreal Characteristics What is the Objectives?
    • 19. IMPLEMENTATION L’Oreal has acquired m ore than 25 brands with different market segments (see acquisition timeline). Each brands contributes a different advantage for L’Oreal long term strategies. The Body Shop makes L ’Oreal distribution broader.
    • 20. ACQUISITION TIMELINE 1990 1995 2000 Professional Products Consumer Products Luxury Products Active Cosmetics The Body Shop 2005 2010
    • 21. RISK MITIGATION STRATEGY Increasing patent rights on its inventions. Innovation and P atent Rebuild the products to get customers’ attention. P atents, R &D E xpenditures and E ployees at L m ’Oreal 2001 2003 2005 2007 2009 Registered patents 493 515 529 576 674 R&D expenditures (mill. Euros) 432 480 496 560 609 2,743 2,921 2,903 3,095 3,313 R&D employees
    • 22. MARKETING MITIGATION Market different product with different target m arke Develop a clear positioning statem ent as a current market leader.
    • 23. MARKETING MITIGATION Try to be the first m over - to gain more market share before other.
    • 24. PRODUCTS STRATEGY Collaboration with Channel P artners Licensee Hair Salons Mass Market Retail Partners Stores, Department Perfumeries Market Research Agencies Pharmacies, Dermatologists
    • 25. ALIGNING WITH NATURE’ STRATEGY Com itm to m ent S ustainable Developm ent: R educing im pact on natural capital. R esponsible sourcing. E co-designing new ingredients. Addressing controversy on ingredients. P rotecting the global system. Biomethanisation Unit at Libramont Plant: 100% Green Energy -50% GREENHOUS E GAS EMISSION Target for 2015 -50% WASTE GENERATED PER FINISHED PRODUCT Target for 2015 -50% WATER CONSUMPTION PER FINISHED PRODUCT
    • 26. NEWEST ACQUISITION: PACIFIC BIOSCIENCE LABORATORIES Date of Acquisition: Dec 15 , 2011 th . Intermediated by L ’Oreal US (the A franchisee). Products: S onic S Care Devices kin (Patented). Channels: Derm atologists and P restige R etail. Main Market: US . Reasons behind Acquisition: P acific B ioscience L aboratories’ E xpertise in Devices.
    • 27.  Size alone does not guarantee firms an advantage. ◦ Coordination required to exploit economies of scale and scope is not without cost. ◦ Size creates additional challenges and difficulties, including problems of communication and coordination.  Higher levels of diversification are not incompatible with high performance -- nor do they necessarily imply that firms will suffer lower performance levels.
    • 28.  Critical factor in determining success is the level of management expertise in formulating and implementing corporate strategy. ◦ More difficult for diversified firms. ◦ Managers of large diversified firms possess a variety of welldeveloped mental models that provide them with powerful understandings of how to manage their firms.

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