Loreal report

Marketing Management - 1
Assignment on LOREAL
Nisha Agrawal
15DM027

NISHA AGRAWAL Page 2
Introduction
The 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
Mission
Everyone 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

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 Product
Hold 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 stars
We 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.

●Product segmentation
L'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 quality
We 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 consumer
We 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 gender
Moreover, 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 innovation
As 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 incubator
One 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 Analysis
Strengths
 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

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 Analysis
Political
 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

 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.

Competitive Profile Matrix
The following table presents the Competitive Profile Matrix for Estee LauderCompanies, and two
of its main competitor Procterand Gamble and L’Oreal.
CPM Matrix
Estee
Lauder
Proctor &
Gamble L’Oreal Group
Critical
Success
Factors W R W.Sc R W.Sc R W.Sc
Brand loyalty
10% 4 0.4 3 0.3 4 0.4
Brand value
10% 4 0.4 3 0.3 4 0.4
Advertising
10% 4 0.4 4 0.4 4 0.4
Product
quality
10% 3 0.3 3 0.3 4 0.4
Price
10% 3 0.3 4 0.4 4 0.4
Management
5% 3 0.15 4 0.2 3 0.15
Financial
position
5% 2 0.1 3 0.15 4 0.2
Market share
10% 2 0.2 3 0.3 3 0.3
R&D
10% 3 0.3 4 0.4 4 0.4
CSR
10% 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 3.75
The CPM analysisand the above depicted Matrix provides that the L’Oreal Group is dominatingon the
critical success factorswith a total weighted scoreof 3.75 which is very good.

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%

Efficiency
Total assets turnover 8.74%
Fixed assets turnover 0.71%
Liquidity
Current ratio 0.95
Quick ratio 0.70
Cash ratio 0.23
Capital Structure
Total debt to total assets 8.07
Total debt to total capital 11.37
Total debt to total equity 12.82
First quarter 2015 sales
 Like-for-like, i.e. based on a comparablestructureand identical exchangerates, 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 impactof +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 impactof currency fluctuations would be +9.3% for the whole of
2015.
 Based on reported figures, the Group's sales atMarch 31, 2015 amounted to 6.44 billion euros,an
increaseof +14.1%
Sales by operational division and geographic zone
QUATERLY SALES GROWTH
€ MILLION
1ST
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%
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 management
This 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 materials
Upstream, 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
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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