Diversification of L'Oreal

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Diversification of L'Oreal

  1. 1. Key Facts and Figures1st cosmetic group worldwide1 century of expertise in cosmetics23 international brands19.5 billion euros of sales in 2010130 countries66,600 employees612 patents registered in 2010
  2. 2. DIVERSIFICATION STRATEGY“Closely-related” DermatologyEntering three kinds of industry:Cosmetics The Body Shop
  3. 3. COSMETICS INDUSTRYOffering different product lines through four market lines:Professional Products
  4. 4. COSMETICS INDUSTRYConsumer Products
  5. 5. COSMETICS INDUSTRYLuxury Products
  6. 6. COSMETICS INDUSTRYActive Cosmetics
  7. 7. 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.
  8. 8. DERMATOLOGY Galderma Laboratories: a joint venture with Nestle. It boasts three of the top 25 best-selling drugs. It specializes in skin diseases and skin infections.
  9. 9. REASONS OF DIVERSIFICATION1 Part of L’Oreal Long Term Strategy 2 Exploiting Relevant Economies of ScopeStrengthening External Growth 3 Meet Consumer Needs
  10. 10. STRATEGIC CHOICEInternal ExternalGrowth Growth Resources Diversification (M & A) Asset Alliances
  11. 11. GROWTH STRATEGY“Merger and Acquisition” Objectives:Reaching a critical size for exploitingeconomies of scale.Satisfying local needs.Creating a portfolio of distinctive butcomplementary products and brands.Quickly acquiring new resources andtechnologies.Overcoming the entry barriers.
  12. 12. CHARACTERISTICS OF COMPANIES ACQUIRED Operating in different geographical markets from those in which L’oreal is already operating. The Body Shop: Enters India Easily Offering products that complete the L’oreal portfolio brands or products. ROGER&GALLET: Produces Pharmacy Fragrance
  13. 13. 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 competences related with L’oreal products. Vichy: Advanced Skincare Technology
  14. 14. ACQUISITION PREPARATION FLOWCHART Preparation (Gather information) Decision Similarities(Implementation) with L’oreal Characteristics Final What is the Preparation Objectives?
  15. 15. IMPLEMENTATIONL’Oreal has acquired more than 25 brands with differentmarket segments (see acquisition timeline).Each brands contributes a different advantage forL’Oreal long term strategies.The Body Shop makes L’Oreal distribution broader.
  16. 16. ACQUISITION TIMELINE 1990 1995 2000 2005 2010ProfessionalProductsConsumerProductsLuxuryProductsActiveCosmeticsThe BodyShop
  17. 17. RISK MITIGATION STRATEGY Increasing patent rights on its inventions.Innovation and Patent Rebuild the products to get customers’ attention. Patents, R&D Expenditures and Employees at L’Oreal 2001 2003 2005 2007 2009 Registered 493 515 529 576 674 patents R&D 432 480 496 560 609 expenditures (mill. Euros) R&D employees 2,743 2,921 2,903 3,095 3,313
  18. 18. MARKETING MITIGATION Market different product with different target market.Develop a clear positioning statement as a current market leader.
  19. 19. MARKETING MITIGATIONTry to be the first mover – to gain more market share before other.
  20. 20. PRODUCTS STRATEGY Collaboration with Channel Partners LicenseeHair Salons Mass Market Retail Partners Market Research AgenciesDepartment Pharmacies, Stores, DermatologistsPerfumeries
  21. 21. ‘ALIGNING WITH NATURE’ STRATEGY Commitment to -50%Sustainable Development: GREENHOUSE GAS EMISSION Reducing impact on natural capital. Target for 2015 Responsible sourcing. -50% Eco-designing new ingredients. WASTE GENERATED PER Addressing controversy on ingredients. FINISHED PRODUCT Protecting the global system. Target for 2015 -50% WATER CONSUMPTION PER FINISHED Biomethanisation Unit at Libramont Plant: PRODUCT 100% Green Energy
  22. 22. NEWEST ACQUISITION:PACIFIC BIOSCIENCE LABORATORIES Date of Acquisition: Dec 15th , 2011. Intermediated by L’Oreal USA (the franchisee). Products: Sonic Skin Care Devices (Patented). Channels: Dermatologists and Prestige Retail. Main Market: US. Reasons behind Acquisition: Pacific Bioscience Laboratories’ Expertise in Devices.
  23. 23. QUESTIONS?Thank You for Your Attention

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