UNIVERSITY OF NEW YORK IN PRAGUE

European Business Administration

Analysis of L'Oreal's International Marketing

Strategy

by

Soline Danger

2015/2016 Mentor: William Pattison

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I would like to express my sincere gratitude to my mentor William Pattison, for his

guidance, invaluable advices and suggestions. Thanks to his inspirational support in

the class of International marketing strategies, I had all the help that I needed to

create my thesis.

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Table of contents

I. The history of L’Oreal……………………………………………………..8

a. The beginning with Eugène Schueller………………………………...8

b. The pursuit of the dream……………………………………………..10

c. The expansion………………………………………………..………12

d. The challenge of nowadays…………………………………………..15

II. The external environment………………………………………….……..17

a. The market……………………………………………………………17

b. The different types of company……………………………………...18

i. The “players” ………………………….……………………..18

ii. The luxury group……………………..………………………21

iii. The diversified companies………………...…………………22

c. Porter’s five forces…………………………………………………...24

i. The intensity of the competition……………………………...25

ii. The threat of the new entrance…………………………….…25

iii. The pressure from the substitutes………………………….…26

iv. The power of the clients……………………………………...26

v. The power of suppliers…………………………………….…27

d. The different aspects…………………………………………………27

i. The legal aspect…………………………………………....…27

ii. The economic aspect…………………………………………28

iii. The cultural aspect…………………………………………...28

iv. The technological aspect……………………………………..28

v. The environmental aspect…………………………………….29

III. The internal environment……………………………...…………………30

a. The diversity of products………………………………………..……30

i. The consumer products………………………………………30

ii. The professional products……………………………………31

iii. The luxury products……………………………………….…32

iv. The active cosmetics…………………………………………33

v. The body shop………………………………………………..33

b. The culture……………………………………………………………34

i. According to the CEO………………………..………………34

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ii. The acquisitions………………………………………………34

iii. The social responsibility…………………………………...…35

c. The human resources…………………………………………………36

d. The financial resources……………………………………………….37

e. The risks……………………………………………………………...38

i. The communication……………………………..……………38

ii. The intellectual and industrial propriety…………..…………39

iii. The financial risk……………………………………………..40

IV. The marketing strategy………………………………………………...…41

a. Portfolio of brands……………………………………………………41

b. The performances in each country…………………………………...42

c. The organization……………………………………………………...44

d. The different geographic areas……………………………………….45

i. The mature market…………………………………………...45

ii. The emerging countries………………………………………46

iii. The new borders……………………………………………...50

iv. The 6th

continent……………………………………………...51

e. The different steps of the strategy……………………………………51

f. The universalization………………………………………………….52

V. The impact of the cosmetics brand……………………………………….54

a. The wants of consumers……………………………………………...54

b. The classification of the population……………………………….…55

c. The definition of the beauty……………………………………….…56

d. The universalization of the beauty…………………………...………59

e. The environmental consequences………………………………….…60

f. The future full of opportunities………………………………………62

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Abstract

The topic of the thesis is the analysis of the international marketing strategy of a

traditional beauty brand: “L’Oreal”.

The purpose of this paper is the analysis of an international marketing strategy

through an example of company. L’Oreal is the leader on the market and it is

interesting to discover the inside of the success. The tools and the organization

required in a developed group are interesting to learn for a future professional

experience. Indeed, the marketing is linked to any other field of the company. So, the

analysis regroups also the financial side or social resources, for example.

Firstly I will start with researches in order to be acquainted with the company.

Secondly I will focus on the history and the environment of the market to understand

the strategy and its impacts. Furthermore, I will interview a professional from the

marketing field in France. It will permit me to have more details about the strategy.

Finally, the survey will be the last work I have done, because it will bring me to

another side of the group. What are the impacts of the marketing strategy on the

consumers?

The thesis is concluded by the opportunities of the “beauty products” industry. It

shows the possibilities of the future for the company, which builds on new

technologies, the niche of consumers and the new developing countries.

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In France, everybody knows L’Oreal with its slogan “Parce que je le vaux

bien!” Today, it is one the most famous brand in the world. However, hundred years

ago, it was a Parisian start-up, which has consequently changed thanks to its creator.

So, what is making L’Oreal a successful company?

In a few words, there are two sides in the company. The simplest side is composed of

its vision, values and communication. Indeed, L’Oreal has a strong strategy, to

develop its expansion and strength. But the brand has also a complex side, in

grouping all the different parts to make it works.

L’Oreal defines its mission as beauty for everyone. They want to engage themselves

to conserve the beauties of the planet. They believe this is a universal concept,

because they offer quality products in the whole world. For the company, beauty is a

language to express in order to define a personality. They also trust the science side,

by increasing frequently their researches to innovate in order to match with the needs

and wants of the clients.

The strategy of the brand aims at having a durable and stable growth. Thus, L’Oreal

has a world presence where they incorporated fundamental laws. Firstly, the products

have a high quality. Secondly, the social implications are the same in each division of

the group. Thirdly, the production has to minimize the toxic waste, to protect the

environment. And finally, each brand of L’Oreal needs to be a part of the foundation

for HIV or cancers for examples.

L’Oreal is an international organization, with 6 different poles: North America, West

Europe, Latin America, Africa/Middle East, East Europe, and Asia/Pacific.

Because of the growth of globalization, many companies want to adopt international

strategies. Only a few know a great success like L’Oreal. The brand distinguishes

itself thanks to its communication and innovation. It also took the right opportunities,

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with the developing countries, for example. They want to maintain the brand image

including beauty and comfort.

In 2014, L’Oreal had a turnover of 22.531 billions euros, with an increase of 3.7%.

This growth can be seen in every geographic area where the brand is located. Thus,

the company is the first global cosmetic group, which is present in over than 130

different countries.

1 Financial report. (2014). L’Oreal. Retrieved, 2014, from www.loreal.fr/.

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I. The history of L’Oreal

a. The beginning with Eugène Schueller

The chemist Eugène Schueller created L’Oreal. Thanks to his entrepreneurial spirit,

the adventure started with one of the first hair dyes he invented. That is why, the

main objectives of the brand are still research and innovation for beauty. Eugène

Schueller graduated from Ecole Nationale Supérieure de Chimie of Paris in 1904.

After his engineering school, he had a new idea by creating his first hair dye with the

name L’Oreal. His creation was a real innovation at the time because it provided a

range of different colors. The company would later become L’Oreal, in 1909. His

determination and skill permitted him to sell his hair dye to Parisian hair stylists. He

also opened a hair coloring school in Paris to demonstrate his new ideas.

Finally, the war was over. So, the women worked and were more concerned about

themselves and their appearances. Indeed, hairstyles became fashionables. Thus, the

company appeared as a great success, even in Europe, United States, Canada, UK and

Brazil, in total: 17 countries. He believed his growth was based on research and

novelty.

In 1928, he started to manage the company Monsavon, it was the first move of

diversification for L’Oreal. He modernized, improved the quality and created an

advertising campaign of the brand. Later, the production site of Monsavon would

become the one of L’Oreal.

In 1931, competitors produced large containers with some risk of oxidization. In

contrary, L’Oreal innovated with the creation of individual doses. It was the best

solution for comfort and safety: targeting hair stylists and customers. The same year,

the company focused itself on promotional events and advertising campaign. For

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Eugène Schueller, there were two types of campaign depending on what you expected

to reach. On one hand there was “publicité d’attaque” to create an interest. On the

other hand there was “publicité de rendement” to increase the sales. The first idea was

to create a giant billboard on a Parisian building. Then, he used radio to sing its

commercial ad rather than speak. In order to attract more women to care products,

L’Oreal started a monthly magazine. “Votre beauté” was about women’s health and

beauty in order to develop a fresh approach.

Moreover, the company sold a real shampoo without soap named “Dopal”, still

known as “Dop” today. Eugène Schueller started a big campaign for hygiene. He

reminded to parents the importance of getting clean, that’s why he targeted children

through his ads. He was a man of trends, with Coco Chanel, he innovated the

practices of hair salon and came with a new lotion to create natural curls. Thanks to

all this modernization, the brand had the ability to reach new consumers.

In 1936, the introduction of the first paid holidays in the country allowed the company

to sell its new suntan lotion.

During the World War II, because of the strict rationing, cosmetics were used to boost

the moral of women. Even with the war, the company continued to grow. By the end

of this period, they were several chemists and distribution researchers inside L’Oreal

in UK, Argentina and Algeria. At the same time, the company hired François Dalle

and Charles Zviak from Monsavon. Those employees will play a key role in the

company.

In the 50’s, L’Oreal worked with Brigitte Bardot and Marilyn Monroe, as two blond

idols. This strategy had a huge impact: “the consumer boom”.

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Furthermore, the R&D group developed itself, and they worked on many innovative

products, like the coloring shampoo. The skin care products also interested the brand.

That is why they started to work with Vichy to finally acquiring it in 1980.

In 1953, Eugène Schueller received an Oscar in advertising, and then he died in 1957.

He decided to devise his business to his daughter Liliane Bettencourt and the

handover to François Dalle with who he worked for Monsavon. Thus, François Dalle

became the CEO of L’Oreal at only 39 years old.

b. The pursuit of the dream

François Dalle was contently thinking about the future of the group. As a visionary,

the only factor of progress for him was to acquire new brands in order to increase the

position on the markets and distribution channels. He also focused on the main force:

Research and Development (R&D), in the interest of the company to reach new

consumers, internationals as nationals; with a beauty more accessible.

The 60’s marked the cultural and commercial revolution. Music and fashion were

trendy for teenagers. To respond to this demand, boutiques and chain stores opened.

The company grew up its investment in R&D and we counted 300 researchers at the

time. To go on the approach of skin scare, the brand started to work on cosmetic and

bacteriological facilities. With the increase of sales of hair-product, L’Oreal decided

to sell Monsavon. Thus, the company could concentrate on its main business.

Simultaneously, L’Oreal bought Cadoricin, it is a hair-hygiene brand, Jacques Fath

perfumes then Lancôme, Laboratoires d’Anglas, André Courrèges and Garnier.

Thanks to these acquisitions, the group gained some parts of the market share in high-

quality skin-care, make-up, perfume and hair-product. Today in many of those

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markets, the brand is the leader. With those resources, L’Oreal had the opportunity to

create several successful products.

15 years after the World War II, the firm was also interested to implement itself in the

Japanese market. The first approach concluded with a new partnership with the brand

Kabaysashi Kose. The group opened an office in Tokyo and then this new market will

bring a lot to the knowledge of the company. Indeed, consumer’s sociology,

competitors, distribution channels, Japanese esthetics, beauty conception and the

particularity of ethnic’s skins are some of those points L’Oreal will learn. However, at

this time, the first results were less interesting than those in America or Europe.

In the 70’s, the population was focused on health and fitness. That’s why the group

decided to invest in research with Nestlé. It also established the International

Dermatological Research Centre, in order to develop the knowledge on skin aging

process. In the continuation of the researches, L’Oreal builds a new company,

Plénitude, to offer the best innovations and technologies also against the effects of

aging.

The group continued its strategy of collaboration, by obtaining the Ralph Lauren

license for fragrances. It improved its position in the Luxury Products and fragrance

businesses. The group decided to change its structure with new operational divisions.

Then, it started to export the brand in the world: New Zealand, Australia, Japan and

Hong Kong. The internalization of L’Oreal was helped by the alliance with Nestlé. At

the same time, the group was still acquiring new markets as Biotherm, Germey Ricils,

Jeanne Piaubert, Roja and diversifying itself through complementary fields as

magazines. They also decided to use a new distribution network such as mail-order

catalogues, for example: Les 3 Suisses. Thus, the group created a catalogue of beauty

products named Club of Beauty Creators.

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The 80’s were good for L’Oreal. Indeed, François Dalle became the vice-president in

the administrative council of Nestlé, he won the award of the man and manager of the

year in chemicals and cosmetics field. A little bit after, he stopped working as the

CEO of the group. With the management of François Dalle, L’Oreal had opened

international fields in perfumes and beauty, cosmetic actives and public products. He

industrialized the brand from artisanal to Taylorism. He also turned the administration

to the new technologies and introduced L’Oreal to the stock market in 1963. It

allowed the stakeholders to (issue bonds and shares if they needed money) earn

money if they needed it. It also permitted the group to grow. But, this entrance

obliged a strict management and development of the finance.

This is Charles Zviak who took his place as a CEO. Therefore, he had the same age as

François Dalle so he was a man of transition because he could not stay more than 5

years as CEO. Thus, to succeed to Charles Zviak the choice was made on Lindsay

Owen-Jones, the manager of the brand in North America. During this time, the brand

decided to change the organization. Indeed, the Perfumes and Beauty division was

divided into 3 others: Lancôme and Piaubert, perfumes and active cosmetics, in 5

different locations. Because of the big increase in the group, the finance control

needed to be centralized. This is how L’Oreal Finances was created.

c. The expansion

Then, in 1988, Lindsay Owen-Jones became the CEO of the company. The last

acquisition for the 80’s was the Laboratoires Roche Posay, which is specialized in

skin-care. However, in order to maintain the group in a main area of interest, L’Oreal

decided to sell some components, for example personal hygiene.

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The decade after, the market of cosmetics and the competition increased. Thanks to

the contract with Nestlé, the brand had an advantage, but it was still vulnerable in the

Western market. Thus, the new CEO had as objective to make L’Oreal a big

international company. She build a new organization, indeed she integrated a

worldwide team to adapt itself to each consumer. She also started to cross the brands

of the group and the divisions as for Lancôme Niosome. The innovation, the new

technologies were adapted to reach mass market. Therefore, the synergies allowed the

company to grow its profit. Moreover, even if US market represents 1/32 of the world

cosmetic market, the US dollar was weak. That’s why L’Oreal decided to target the

Japan and the Soviet Union. Thanks to a joint venture with the Russian, the brand was

one of the first to open a shop in this market. At this time, the organization stayed

stable to facilitate the 5 divisions to integrate many worldwide markets. It was a

decentralized group excluding R&D and management control fields.

In 1989, a new trend started for the protection of the environment. Thus, the

consumers put an important pressure on the group to delete some components and

stop the animals testing. The group was also fighting its main competitors

Proctor&Gamble and Unilever to keep its domination. For those reasons, L’Oreal

became environmentally friendly and increased its advertising budget. Then, the

company changed its products to make them more accessible.

One of the other moves to solidify its market position is the purchase of Maybelline

and two others drug companies. Maybelline allowed L’Oreal to have a great turnover

outside USA because the brand image of Maybelline relates to a modern and dynamic

woman. In order to integrate the US market, the firm introduced a new division of

products through Garnier, for example. These acquisitions represented the key

2 Collin, B., & Delplancke, J. (2015). L'Oréal: La beauté de la stratégie. Paris:

Dunod.

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element in the strategy of the group. Indeed, it permits to increase the knowledge and

the presence while buying local companies. So the group can reinforce its identity on

the market, and become more popular worldwide. As it always did, the group used the

hair-care products to enter in a new market. However, to develop its products in the

Japanese market, it used the growth of the country’s economy. Moreover, in order to

promote its brand as Studio Line, Elsève or Free Style, the firm utilized the European

woman more than Japanese.

In the 90’s, the group centralized its activities and research centers to create Nihon

L’Oreal, it sold top of the line products with a selective distribution.

In 1998, the famous advertising campaign “Because I’m worth it” was launched. With

the several series of acquisition, the company was a part of the top four brands in the

world.

The company also worked with charity association as UNESCO to recognize the

sciences work of women in the world. Therefore, it was the beginning of social

responsibility for the group.

To integrate the African market, the firm bought SoftSheen an American afro hair-

care brand. It was seen as one of the main opportunity to grow in the cosmetic

industry. The merger of this new purchase with Carson allowed L’Oreal to intensify

its presence on the African continent and to become the leader in the afro hair-care

products.

At the same time, the group was focused on the Asia and Eastern Europe markets and

the brand Maybelline worked well in China. However, during the 90’s, because of the

economic crisis in the Asia region, the group became interested in the Latin America

market. During 1999, the group recorded a great increase of products sold and one of

the biggest profits of the decade.

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In 2002, L’Oreal created the “Ethnic Hair and Skin Research” in Chicago. It was the

first research center for ethnic skins and hair-care products. Chicago was a key place

because it regrouped many different ethnics, it was also close to Howard and

Northwestern universities. Moreover, Cosmair turned into L’Oreal USA. This change

of name permitted to regroup all the activities and to incorporate US businesses as

part of the firm.

Still in 2002, L’Oreal was in the center of the news, its CEO, Lindsay Owen-Jones

was elected “Manager of the year”. All this exposure was due to one of the best

growth of the company. Indeed, the news related the capacity to be present on many

markets and distribution channels, the quality of research, the acquisitions, the

management, the weak indebtedness… The key tool of the strategy is the brand

management. It means to acquire many firms, which allow L’Oreal to be present

worldwide, and to increase the competitions without cannibalization. The turnover of

L’Oreal is divided 3 main areas: Europe represents 50%3, 30% for the North

American and 20% by the rest of the world.

d. The challenge of nowadays

Back in 2006, the new CEO was Jean-Paul Agon, he took the place of Lindsay Owen-

Jones. When he became the CEO, L’Oreal had a double crisis: the economic crisis

and the familial crisis. That’s why, he would define others visions, values in order to

adapt the company to those changes. Beauty was put in the center of the identity.

Indeed the main goal of the brand was to offer innovative cosmetics and quality

3 Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

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products while responding to ethnic needs. The brand adopted a universalization

strategy to accommodate itself to the diversity.

L’Oreal would have a conquest spirit to seduce new consumers and double the target

for 2022. The emerging countries like India, Brazil, or China allow this ambitious

goal. They have specific needs known and a new envy of beauty thanks to the

increase of the middle classes.

The firm would also be based on innovations. Indeed, the innovation is linked to the

science and marketing. Before started, the brand must know the habits, behaviors and

specific needs of the target consumers. Then, it will research through many partners

and relations in order to obtain a new adapted product.

Finally, L’Oreal would suit to any diversity. It corresponds to the social

responsibilities, like durable innovations, equity woman and man for example. Even

with many changes, the group keeps a clear vision and goal. The economic crisis was

hard, but surmountable, it was seen as a turn in the organization. Thus, L’Oreal

regroups identity and diversity. It has always been faithful to its values and respectful

to the diversity. (Appendix: Table 1)

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II. The external environment

The marketing environment regroups the actors and forces outside of the company

that have an impact on the relationships with the target consumers. It is divided

between the microenvironment and the macroenvironment.4 The microenvironment is

composed of the internal actors of a company, as the competitors for example. The

macroenvironment gathers the external forces as the political or technological, for

examples.

This section will define the macroenvironment of the company L’Oreal in order to

understand its opportunities and threats.

a. The market

L’Oreal is a brand in the cosmetic market. This sector groups all the set of products

and substances to beautify the body. Some of them are utilized for the hairs, the nails,

the skin, or as perfume and make-up. It is complex because there are many different

activities represented like laundry, fashion designer, or food. To define this market,

we use the words: “beauty products”. In the world market of the cosmetics, there are 5

distributions channels, which are retail, selective distribution, professional channel,

medical channel, and direct sale. The selective distribution is used for all the luxury

products but also the travel retail. The professional channel is utilized for the

professional products, like hairdressing salon, or spa. The medical channel involves

pharmacy, or doctors. The direct sale corresponds to the specialized shops, door-to-

4 Kotler, Armstrong, Saunders, & Wong. (2002). Principles of marketing (3rd ed.).

Upper Saddle River, NJ: Pearson Prentice Hall.

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door sale, and e-commerce. With its strategy, L’Oreal is present in the set of products

and distribution channels. It occupies a position of leader in cosmetics without expand

the brand to others sectors. Indeed, the market can also be divided into 3 different sets

of companies. (Appendix : Image 2.1)

b. The different types of company

i. The “players”

Firstly, the “players”, they use a limited distribution channels, for example: Estée

Lauder. They focus their divisions on perfumes and cosmetics, which represent 70%5

of their turnover. The companies in this group look alike in their strategy. To answer

to a new trend, they decided to produce some natural products, resulting in creating

new divisions or acquired new brands. Developing countries are one of the priorities

in their development. They also spend their budget in R&D to increase their capacity

of innovation. The main companies are situated in North America, Japan and Europe.

The 3 most important firms in North America are Avon, Estée Lauder then Coty.

Avon was created in 1886, this firm sells cosmetic products but also decoration,

cleaning and lingerie using private sell as distribution channel. For its cosmetic

products, the price positioning is middle and high end, which allows the brand to

realize more than 74%6 of its turnover in this field. The main turnover was made in

North America and today the brand try to integrate emerging countries. Even if, in

Brazil the company is dealing with some issues, it realizes great sells in other country

as in Russia. The major problems of the firm are firstly the local market, which is a

5 Collin, B., & Delplancke, J. (2015). L'Oréal: La beauté de la stratégie. Paris:

Dunod. 6 Annual Report. (2015). Avon. Retrieved, 2015, from

http://investor.avoncompany.com/GenPage.aspx?IID=3009091&GKP=210234.

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big competition and secondly its distribution channel. Indeed, Avon had to change it

for the Chinese market. The new model of distribution is hybrid, it combines shops

and direct sell. Moreover, in order to satisfy the local needs, the brand acquired new

products more natural.

At the opposite of Avon, Estée Lauder is using the selective distribution to gain some

market share. The group defines its goal as an answer to the consumer needs and its

evolution through investments. Indeed, the brand imposed itself thanks to several

acquisitions and the quality of its products. Its position is high end, they dispose of all

range of products and types of client. The group also developed some brands on

others distributions as retail and professional for hair and health. Today, the group is

focused on the travel sector in order to reach new countries. In fact, the firm is

situated principally in Europe, America then Asia. Like the previous competitor

Avon, Estée Lauder is targeting the developing countries, and the future markets as

Africa or Middle East. One of the main advantages of this competitor is its financial

stability too.

Finally, the third most important company in North America is Coty. Historically,

Coty was founded in France. It was bought by the pharmaceutical brand Pfizer then in

1992 it became the propriety of Benckiser, a German firm. Since then, the head office

is in New York. Today, the main objective is the acquisitions of firms and patents and

they already have more than 50 pharmaceutical businesses. Recently, they tried to buy

Avon, which was not successful. Coty is also developing its presence on the new

markets, which represent only 12%7 of its turnover.

In Japan, the most important firm is Shiseido. The turnover of the company, mainly

realizes in its own country, is situated between the one of Estée Lauder and Coty, far

7 Coty, factsheet. (2015). Coty. Retrieved, 2015, from

http://investors.coty.com/phoenix.zhtml?c=251569&p=irol-irhome.

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behind Avon. In Japan, the brand is selling with a retail distribution, however, it’s

using another strategy for its international business. It’s present in Europe and North

America with luxury products through its name. At the opposite in China the firm

works on retail with local brands. L’Oreal bought some of its acquisitions, because its

organization requires clarity.

In Europe, France has 3 main firms, aside L’Oreal, on the market of cosmetics.

The first one is Yves Rocher. It is a familial group, which is selling its products

through franchises. Almost the half of the turnover is made in France. The strategy of

the brand is to reinforce its position in natural products, as its competitors, they are

following the trend. Yves Rocher adapts its distribution to each country. Indeed, it is

using malls for India and private sells for Mexico, for example. The main force of the

brand is its position, which is solid.

The second business in France is Clarins. At the contrary of Yves Rocher, the brand

realizes 80% of its turnover outside France. The company is selling care products

mostly, then perfumes and makeup.

The third firm is L’Occitane en Provence. This group is specialized in natural

products, with a selective distribution. It has made 3 acquisitions in order to target the

French and European markets. The brand is also well present worldwide.

Then, the main competitor in Germany is Beiersdorf. Mostly present in the cosmetics,

the company own Nivea in retail. However, it is also specialized in the luxury

products and dermo-cosmetics. The group has a real success in developing countries,

even if the competition is hard. To compete it, Beiersdorf decided to focus its

products on face and body.

Finally, the last competitor is in Spain, the name of the brand is Puig. It’s a familial

group which is positioning on different markets as high end perfumes or makeup, for

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example. To develop more opportunities, Puig is investing in R&D. Because of the

economic crisis in Spain, the brand is working mostly with Latin America.

ii. The luxury group

Secondly, the luxury group, they are present on the luxury market, not only cosmetic,

like LVMH. The activities of this group are composed of jewelries, accessories,

leather goods, wines, alcohols, perfumes and cosmetics. The perfumes and the

cosmetics permit them to make their investments profitable. However, cosmetic

products get less benefit from the luxury image of these brands. Indeed, consumers

prefer the innovation and the scientist’s guaranty. The health of the company is based

on the strategy. In fact, it depends of the manager. Even if, perfumes allow L-Oreal to

have a great turnover, it is not the case for the luxury cosmetics. Fragrances benefit

from the image of the business. However, a group as LVMH can make profits from its

sector through important acquisitions, which is giving knowledge and presence in the

market. As for the “players”, the luxury group is targeting emerging countries, with

travel retail or local markets, in order to increase the turnover. The main competitors

are situated in France and Switzerland.

On one hand, in France there are LVMH and Hermès. LVMH is the leader on the

luxury market thanks to a good strategy of acquisitions. The main advantage of the

group is its presence in wine, spirits/Liquor sectors and in selective distribution. Thus,

LVMH has a great position on many sectors. On the market of cosmetics, there are 3

types of acquisitions. The first one is prestige with Dior, the second one is based on

trends as Fresh and the third one is cultural, it depends of the symbols as Loewe in

Spain. The half of its turnover is made in Europe, even if the group has a good

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international position. Like others competitors, the firm is targeting the developing

markets, through acquisitions in the travel retail and the development of the trendy

natural products.

At the opposite Hermes is a familial business and it is also present on many markets.

It diversifies thanks to the cook and design and leather goods. The image of the brand

is based on the perfumes, because it doesn’t produce any cosmetic.

On the other hand, there is Chanel, which is Swiss. The Wertheimer family manages

the group because one of the members of the family helped Coco Chanel to start her

business. In order to expand fields and knowledge, the brand acquired many products

in jewelries and accessories. The turnover is based on the perfumes and cosmetics,

mainly in Europe. It develops in emerging markets like China and Russia. The group

is dealing with some issues with the cosmetics, because it doesn’t answer to the actual

needs of the clients who are looking for innovative products.

iii. The diversified companies

Finally, the diversified companies work in the health beauty and also in the alimental,

as Johnson & Johnson. The companies in this group look alike due to their strength of

financial and commercial actions. But, the performances in this sector are mixed

between the brands. The medical channel gets more results than the companies in the

retail distribution. Indeed, the consumers are more attracted by pharmacy’s products,

because of their value for money and serious guaranties.

L’Oreal is not present in these groups. Indeed, each strategy, between the businesses,

is different in order to diversify them. There are the developed countries which

represent a mature geographic area, and the developing countries which are the most

23

attractive to increase the turnover of the company. Thus, this industry has many

competitors. It is hard to develop its business, that’s why the firms look alike.

Acquisition and innovation are the key competitive advantage. The main competitors

are situated in the United States, United Kingdom, Europe and Japan. The most

important are Procter&Gamble, Johnson&Johnson in USA, and Unilever in England.

Procter&Gamble is present one many different markets as house cleaning, food,

beauty products, baby care and health. The goal for the group is being more

specialized in cosmetics, to the detriment of the foods, in order to have a better

increase of the turnover. The strength of the company is built on its acquisitions and

its innovations through investments in R&D. The firm is not only targeting the

developing countries but also the new industrialized ones. It is an old company. In

fact, before it was the leader in advertising, today it seems to deal with some

innovation issues.

Then, Johnson&Johnsonn is the second most important American business in the

market. As Proter&Gamble, it is present on many sectors, mostly health and body

care. It is concentrated on the medical and natural products to target the developing

countries.

The third main competitor is Unilever, the British company. At the opposite, of the

previous businesses, Unilever is mostly present on 3 sectors: food, house cleaning and

body care. To reinforce its position in retail and others countries, the group made

some several acquisitions as Alberto Culver. The main force of the firm is its oldest

presence of the emerging countries, which now represent 58%8 of its turnover.

8 Strategic Report. (2015). Unilever. Retrieved, 2015, from

https://www.unilever.com/investor-relations/annual-report-and-accounts/#ara2015-

downloads.

24

Kao is the Japanese group in chemical and retail products. The beauty sector creates

18%9 of its turnover. The business adapts itself to each market. Indeed, in USA it’s

selling in retail however in Europe it produces luxury products.

At the opposite, Pierre Fabre, the main French competitor, is specialized in

pharmaceutical. Mostly present in Europe, it is targeting the developing countries.

To finish, Henkel is the main firm in Germany, essentially specializes in retail.

Thus, the market of cosmetics is oligopoly. Indeed, it is composed of a limited

numbers of big companies, which dominate the market. There are also some little

companies, which work locally.

This industry has many competitors worldwide. The rivalry from the competitors is

high. Indeed, the industry of cosmetics is in constant evolution, there are always some

new products. The market is mature in Europe, Japan and America. The competition

is based on the development of the firms worldwide. Thus, cosmetics are linked to

novelty, at the opposite luxury is used to promote, as an image, for the company in

order to gain the fidelity of the clients.

c. Porter’s five forces

“Porter’s five forces” is an analysis tool that defines the intensity of competition

inside a specific industry. In fact, for L’Oreal, it allows evaluating the competitive

position through its strengths or weaknesses.10

9 Annual Report. (2015). Kao. Retrieved, December 2015, from

http://www.kao.com/jp/en/corp_ir/reports.html. 10

Strategic Management Insight. (n.d.). Retrieved May 04, 2016, from

https://www.strategicmanagementinsight.com/tools/porters-five-forces.html

25

Even if, there is a strong competition, the industry stays attractive thanks to the

development of many fields. (Appendix: Table 2.2)

i. The intensity of the competition

There are many competitors in the cosmetics industry. Each of them differs by their

nationality and size. This oligopoly market is composed of multinational companies

and very small ones, which usually target a specific niche.

Moreover, there is a strong capacity of development thanks to the emerging countries,

on account of the new tendencies and the e-commerce. Thus, the competition is strong

in this industry.

ii. The threat of new entrance

The threat of new entrance determines the degree of difficulty to enter inside a

market. Indeed, this one is weak, because of the barriers to enter in the market.

Cosmetics industry has expensive prices related to high cost of production, marketing

or research. The market is mature, and consumers want a permanent progression of

the products. Thus, many firms are utilizing patents to block the access. The new

entrants could work if they differentiate themselves, but it will be very difficult

without a brand image and enough finance. It is a risky market because 80 to 90%11

of

the new companies disappear after 18 months.

11

Béatrice Collin. (2013, June). L’Oréal ou la construction d’un positionnement

unique et durable : Une étude empirique du secteur des cosmétiques. Retrieved from

http://www.strategie-aims.com/events/conferences/23-xxiieme-conference-de-l-

aims/communications/2938-loreal-ou-la-construction-dun-positionnement-unique-et-

durable-une-etude-empirique-du-secteur-des-cosmetiques/download

26

iii. The pressure from the substitutes

The pressure from the substitute products is not present on each sector. Indeed,

consumers have less quality needs for shampoo, for example, so most of them will

buy it in supermarkets. Besides, the “perfect” beauty can also be reach by the plastic

surgery, injection or others medicates. And moreover, the body care is able by the spa

and massages. Finally, the pleasure can be achieving through others products as

accessories. However, when the products require more technology, there is low

pressure because they depend on the brand image and its R&D. In general, there is no

decrease of the consumer needs for cosmetics.

iv. The power of the clients

For L’Oreal, there are 2 types of client: the distributors and the consumers. The

distributors are different on each division of the group. The sell can either be in the

shops and online. Moreover, they have a national presence compared to the company,

which is present worldwide. Thus, their power is weak.

However, the power of the clients is high for the industry. They call for good quality

products, because they are related to their health care. Even if, they like cheap price,

the most important criteria is the quality. The target is mostly feminine, generally it is

demanding for freshness. But, today, there is an increase of the demands from the

men and old persons, which the market has to adapt too. Because of this growth,

L’Oreal develops new range of products and reinforce its communication toward

these target audiences.

27

v. The power of suppliers

At the contrary the power of suppliers is low. Indeed, there are too many suppliers to

have an impact on the market. There are different types of suppliers for L’Oreal.

Firstly, the chemical substances manufacturer are scattered. Secondly, the packaging

producers have also a limited power. Finally, there are the communications agencies.

Thus, many of them depend of the cosmetics market, they are linked to the firms. The

changes from the suppliers could have disastrous impacts on the quality of the

product. However, it is little compared to the size of the groups.

d. The different aspects

The examination of the external forces shows how they affect the marketing strategy.

i. The legal aspect

The legal aspect represents the laws that have to been followed by the company to sell

its products. They differ in every country. For example, in Europe, the laws are

focused on the health care. The products have to be transparence about their

composition. Thus, the main groups of the market must be careful with the legislation.

It can also touch the productivity with work laws.

28

ii. The economic aspect

The economic aspect corresponds to the income, the inequality and the evolution of a

country. In France, for example, the cosmetics industry represents a important

advantage for the economy. Even during an economic crisis, the market is in

perpetual increase.

iii. The cultural aspect

The cultural aspect also based on social aspect. It is determined by the way of living,

the local tastes but also the demographic and the health. Indeed, in the world there is a

growth of oldest persons. The firms have to adapt and inform themselves to increase

the sells. In the industry, there is also a new demand from the man. Even if, the

companies need to be preoccupied by those changes, because cosmetics are also

influenced by others sectors, the businesses need to keep their identity with their

development.

iv. The technological aspect

The technological aspect is based on the evolution of the innovations, the investment

of a company and its R&D. Indeed, the growth of those is very high. In order to stay

competitive the innovations are required. The company needs to change the inside

organization to adapt to novelty. Thus, each level of the firm is concerned. It’s still a

29

main advantage, because others competitors have difficulties to catch the innovation.

This aspect also has some impacts on the chemical formulation of the products.

v. The environmental aspect

The environmental aspect concerns the consumption of the energy and the protection

of the environment. The cosmetic products have to take care of the body and the

environment of the consumers. There is much different legislation about this. Each

year, there is a new substance, which is deleted from the legal list of production.

Indeed, the groups are regularly controlled. Today, it can also be a marketing

advantage to have natural products. Moreover, the consumers are more and more

informed and concerned about the environment. (Appendix: Table 2.3)

30

III. The internal environment

The marketing objective is to create a customer satisfaction. In order to reach this

objective, the company has to build relationships inside its own departments. All

these actors might create advantages to increase the market shares, and thus the

turnover.

a. The diversity of products

The distribution channel is the process of making the goods or services available for

the consumer. Thus, this function consists to move the products or services from the

production area to the consumption of the client.12

Indeed, L’Oreal wants to be present everywhere. Therefore, it proposes to the

worldwide population, products according to their needs, cultures, and beliefs. In fact,

diversity is one of the main keys in the strategy of L’Oreal. To answer to this

diversity, the brand is separated in 5 divisions: Consumer products, professional

products, luxury products, active cosmetics, and the body shop. (Appendix: Table 3.1)

i. The consumer products

The consumer products are the one with accessible prices. They are targeting the most

important number of population. Thus, there are selling in the retail chains, and

supermarkets. This division is also using high technology to innovate and target

12

Armstrong, G., & Kotler, P. (2000). Marketing: An introduction. Upper Saddle

River, NJ: Prentice Hall.

31

middle classes population. It is composed of several brands: L’Oreal Paris, Garnier,

Maybelline New York, Softsheen-Carson, Margic, Essie and NYX. Today, there is a

little slowdown in this division since 2014. Makeup is the first category of this

division but hair and facial care are in the center of the growth especially in South

Asia. To counter this decrease, the brand made some acquisitions in the market.

Indeed, they acquired 3 new brands to reinforce the division in strategic countries.

These companies are Magic, NYX and NIELY. However, hair care made a strong

performance thanks to L’Oreal Paris and Garnier. In fact, these shampoos are having

a great expansion in developing countries but also in the United States and United

Kingdom. Withal, in Asia, there is a facial care, which is well working. Thanks to the

high quality products adapted to their needs, the general public is satisfied.

Moreover, this division is focused on the digital side. On one hand, the social media is

able to share the practices. On the other hand, it permits to communicate about the

products. The main turnover of the e-commerce side is made in China.

ii. The professional products

The professional products are for hair salons. There is much diversity, which

corresponds to specific demand from professional hairdressings. Indeed, the products

are selling in beauty salon professionals all over the world. This division contains

different acquisitions from L’Oreal: L’Oreal professional, Kérastase, Redken, Matrix,

Pureology, Decléor, Shu Uemura Art of hair, Essie, Carita and Mizani. Thanks to the

acquisition of Decléor and Carita, the division of professional products is now present

on every market. Indeed, those categories are: hair, skincare and nails beauty.

Consequently to this development, the brand needs to adapt itself according to the

32

geographic area. It must be dynamic and develop professional products in the new

markets. To build the expansion, L’Oreal is working on 3 different areas: the

education, the expansion of distribution channels and attractiveness. Indeed, the

education is the most important way to expand the market. It participates to the

training of the beauty professions.

The category with the main increase in 2014 was hair care. This was allowed by the

many innovations adapted to the women needs.

iii. The luxury products

The luxury products are divided in 3 parts: skin cares, makeups and perfumes. The

particularity of this division is it selects the distribution channel. Indeed, it has to be

coherent with the quality of the product, the price and the target consumers. That’s

why, it utilizes a selective distribution with an excellent service adapted to each type

of clients. This division is composed of different companies bought by L’Oreal:

Lancôme, Giorgio Armani, Kiehl’s, Yves Saint Lauren, Biotherm, Ralph Lauren,

Urban Decay, Clarisonic, Shu Uemura, Viktor&Rolf, Diesel, Cacharel, Helena

Rubinstein, Yue Sai, Guy Laroche, Paloma Picasso and Maison Martin Margiela.

Last year, the performance was great with a growth of 7.1 %13

in this market. There is

a different paradigm in the luxury sector, it corresponds to the new luxury. The new

luxury is more dynamic, indeed, it is using the new technologies. The digital side

allows being more interactive with the consumers. In this division L’Oreal knows a

good development, more particularly in Makeups and female perfumes. In fact,

L’Oreal is often at the beginning of new trends in those two sectors, thanks to its

13

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

33

capacity of innovation. The strategy, in the makeup category, is to express creativity

and modernity.

iv. The active cosmetics

The active cosmetics are the world number one dermo-cosmetics. This division is

targeting the health professional. Indeed, it corresponds to health and care products,

which are selling in drugstores and pharmacies. This division is composed of: Vichy,

La Roche-Posay, Skinceuticals, Roger&Gallet, and Sanoflore. This is a dynamic

market, which keeps growing with an augmentation of 8.7%. There is a real

investment that is made in scientific innovations. L’Oreal wants to adapt its

distribution model to the different markets. Indeed, the brand participates to the “skin-

alliance in demo-cosmetic science forum”. This forum permits to create some

exchanges between dermatologists and L’Oreal’s researchers for the evolution and

evaluation of the division. The company is also present on the digital market with e-

skin.com. The website proposes some advices and diagnostics on the health beauty

for the consumers.

v. The body shop

The Body Shop is made from natural ingredients, in the fair market. This brand has

been bough by L’Oreal to integrate the ethnic engagement. Moreover, it is selling its

product though exclusive boutiques. Thanks to this division, the brand has a unique

positioning which is complementary with the others categories. The turnover is

34

mostly made during the celebrations, like at the end of the year. In Christmas, the

brand creates a unique range, with the most successful gift boxes.

b. The culture

i. According to the CEO

The culture of the brand is based on the CEO decisions. Indeed, at the time of

Eugenie Schueller, the main objective was the innovation. He also integrated the

proportional salary and the importance of Research and development. Then, François

Dalle implemented the future vision, in order to always improve the company and

face the negative impacts. A little bit after, Lindsay Owen-Jones focused the strategy

on the international expansion to develop the markets and the position. Finally, Jean-

Paul Agon increased the corporate social responsibility while engaging the group in

human and environmental activities. It grows the good image of L’Oreal for the

clients and also the workers.

ii. The acquisitions

The acquisitions of many others firms increased the size of the group. Thus, the

employees need to be united to show the common values. Inside the company, the

organization develops freedom and autonomy for the workers. Thereby, they have the

capacity to imagine novelties. The brand is essentially composed of dynamic and

talented persons. In order to stay in this energetic culture, L’Oreal is working with

school. They created a business game in 2001 in which the students have to pretend to

be the manager of a cosmetic brand. Through the website, they are in competition

with the others. It’s a great opportunity for them to learn but also for the company as a

35

recruitment tool. Of course, Lindsay Owen-Jones particularly focuses on the women

position and responsibilities, to increase the diversity and equality. Moreover, the

management is also founded on competition between employees. Indeed, François

Dalle decided to create a confrontation before each strategic step. It could be in

advertising, marketing, or production. The workers had to promote their ideas in front

of different chiefs. Thus, in the culture of L’Oreal the competition is a key to

innovation and to create work of quality. However, the employees could be exposed

to a high pressure. Since the several acquisitions, it is more difficult for L’Oreal to

keep this cohesion inside its teams. The firm is dealing with many different countries

and their values. Thence the adaptation to each country’s behaviors is vital.

iii. The social responsibility

The sustainable development permits to reduce the impacts on the environment

through the production and the composition of the products. But also, it is integrated

to the R&D inside the activities. The group is member of the “World Business

Council for Sustainable Development” and “Pacte Mondiale” from the ONU. Thus,

L’Oreal engaged to respect principles for the earth and human being. In order to

decrease the gas emissions during the production, the firm is fixing itself some goals.

For example, in Belgium, on of the factory have no carbon emissions. The brand is

trying to raise the utilization of renewable energies, as in India, the company invested

in solar energy. Moreover, L’Oreal adopts a recycling politic in order to decrease the

waste through its packaging for example. Thanks to all of those progresses, the firm

had already been recognized as one of the most engaged for the global warning.

36

With the engagement for the environment, the group also did some changes in the

social resources. Indeed, the business created a foundation in 2007, the main goals are

the education and the researches. It has a big capital, which counts millions of euros.

A little bit after in 2009, L’Oreal launched the program “Beauté du Coeur”, this one

helps the persons touched by a disease or an accident. The group is working with

others French charity associations to extend the help. For the researches, there is the

program “Pour les femmes et la science” and for the education it is “Coiffeurs contre

le sida”. Thanks to the scientist’s evolution, the group developed some fake skins in

order to stop the tests on animals since 1989. Thus, the brand respects 3

responsibilities: the protection of humans, quality and environment.

c. The human resources

Inside the group of L’Oreal there are 70 000 employees. There is a diversity of works,

cultures and nationalities. (Appendix: Image 3.2)

The administrative council is composed of 15 administrators: the CEO, 5 of them are

from the shareholders, 7 are independents and 2 represent the employees. They decide

about the future of the group through opportunities and a strategic organization. The

communication is the key to elaborate a clear vision. The council has also for

responsibility to evaluate the work inside the company. To respect the ethic, imposed

by the firm, they signed the charter, which regroups the following values: integrity,

respect, courage and transparency. The policy is based on fundamental engagements

as conformity, innovation, and social responsibility and environmental.

The executive committee has the decision and authority power on the operational and

functional business divisions. They manage the activities worldwide. The committee

37

is composed of 16 members with the CEO. They are divided between the geographic

areas and the business divisions.

d. The financial resources

The cosmetic industry has known an increase of 3,9%14

in 2015. (Appendix: Image

3.3) The market counts about 203 billions euros, the growth is regular and allows by

the social networks and new trends. The main competitors are L’Oreal, Unilever and

Procter&Gamble. Indeed, L’Oreal had a turnover of 29.94 billions US dollars in

2014. The turnover of the industry is mainly made in Asia, and then in North

America. Skin and hair care are the most sold products, followed by makeup and

perfumes. The market of the cosmetics targets consumers who are looking for

innovation, and diversity in products to fulfill their desires. The trends of the year

2014 were about personalization and recommendation. Indeed, the consumers want to

be informed and connected with their brands. It also creates a new area: the digital

beauty. This is a great opportunity for the market, which permits to interact with the

clients but also touch new consumers.

In 2015, the new markets were India, South Africa and Turkey. In fact, these news

markets created 2/3 of the development of the industry. Inside the makeup division,

the trend is focused on the lips. Thanks to the expansion of the smartphones, the

“selfie” encourages the sale of beauty products. However, the most dynamic sector is

the luxury product. This strong energy is permitted by the e-commerce.

14

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

38

For the year 2015, the financial report registered an increase of the turnover of 12.1%.

The division with the most important turnover is the consumer products with 48.7%,

then the luxury products with 29.8% for 2015. The new markets represented 39.5% of

the turnover, it is composed of East Europe, Latina America, Africa and Asia.

However, the most important continent stays Western Europe.

The skin care made the most significantly increase. Indeed, it performed 29,6% of the

turnover, just before makeup and hair products. The e-commerce allowed this growth.

In fact, the field counts 1,3 billions euros.

The main profitability is made in active cosmetic. Thus, the company has 70%15

of its

asset as own funds. According to Christian Mulliez, the vice president of L’Oreal, the

growth is based on trust. Indeed, the group adopts a professional and ethical politic,

which permits to control the risks and the opportunities.

e. The risks

L’Oreal faces many risks because it evaluates in a dynamic industry. (Appendix,

Table 3.4)

i. The communication

Firstly, the activity is linked to the image forward the market. Indeed, the group has

many acquisitions, each one has a risk to face critics. This issue is intensified by the

development of the social networks. In order to reduce the impact, the brand created

software to watch the communication. The brand also takes care of the quality during

15

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

39

the production, the satisfaction of the clients and the respect of the laws. To increase

the loyalty of the consumers, the firm extols transparency. They are communicating

about the substances, the performances either as the quality. The activity depends of

the geographic area. In fact, some of the sales could decrease because of the weather,

or the economic situation. L’Oreal is present in 130 countries today and realized a

turnover of 64.5%16

outside West Europe, in 2014. Thereby, it deals with many locals

and internationals competitors. Innovation is the key to diversify beauty. Moreover,

some acquisitions may have a negative impact. Indeed, a brand could have some

issues to integrate the group. This is why they created an administration council,

which examines the potentials future acquisition.

ii. The intellectual and industrial propriety

Secondly, the legal risks regroup the intellectual and industrial propriety, and the

laws. L’Oreal has to protect its brands to fights against forgery. Through its many

innovations, the firm has to ensure the utilization. Some competitors could also

contest the industrial propriety.

Furthermore, there are many laws in all the countries where the group is present.

European regulation is one of the strongest. For example, in 2014, the European

cosmetics directive implemented the 7th

edition law for animals testing. In order to

prevent some risks, the companies of the cosmetics industry are often inspected.

16

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

40

iii. The financial risk

Finally, the financial risks are the issues on money and capital.

Because of all these acquisitions, L’Oreal has to do loans to pay the brands and the

funding depends on the rate. The company made some loans, and it reimburses

through a variable rate. In order to prevent any change, the group has a politic to

cover the risk of the interest rate.

With its international presence, the group needs to adapt itself to the changes of

currency. The change of the currency could have disastrous impact on the turnover.

Thus, the money chosen for the different brands is the one of the producer. All the

annual needs are calculated previously for each division. They are examined during

the year in order to have a general view of the flow. Even with all the precautions,

there is still some lost.

Moreover, the production of the cosmetics is made with raw materials. They are

present in the composition of the products. An increase of the substances could affect

the prices of sale. Thus, the company depends of their prices. As for the raw

materials, the price of the energy worldwide can impact the company too. Firstly, it

would increase the price of the products and secondly the sells. Finally, the turnover

would decrease. To avoid this situation, L’Oreal negotiate with its suppliers the index

of prices.

41

IV. The marketing strategy

“Marketing management is the art and science of choosing target markets and

building profitable relationships with them.” 17

Through a marketing concept, the

brand needs to answer the wants and needs of the target consumers in order to

compete the others companies of the same industry. The strategy must define its goals

to develop and maintain an adapted organization.

a. Portfolio of brands

L’Oreal has a portfolio of brands to reinforce the strategy on all territories. Indeed, in

2014, the company had new acquisitions. Those have been made to boost the

leadership and the market share, but also, to have a great position in key categories.

Thus, the strategy of the brand is unique, this is a globalization while respecting the

differences. The beauty is defined, as an answer to the specifics needs of each

consumer in various countries. In fact, this is the opposite of standardization. Indeed,

L’Oreal puts the consumer in the center of every research, to understand their needs

according to the geographic area. The strategy of innovation is based on accessibility

and adaptation. The products are adapted to the beauty habits of all men and women.

To develop this strategy, the world market has been separated in 8 homogeneous

districts. L’Oreal is present in this world, with a center based in France.

In the United States, L’Oreal bought the makeup brand NYX. NYX has a strong

growth in this country thanks to a digital communication. It reinforces the social

17

Kotler, P., & Armstrong, G. (2006). Principles of marketing. Upper Saddle River,

NJ: Pearson Prentice Hall.

42

networks side of the company and allows answering to a new trend of selling

professional makeup to people. L’Oreal also purchased Carol’s Daughter. This is a

multicultural brand with a tendency for natural beauty.

In Brazil, L’Oreal has taken Neily with Cor & Ton, for hair care and coloring. It

permits to the brand to development the consumer products, and touches middle

classes in Latin America.

In Europe, L’Oreal acquired Decléor and Carita. The main assets of those two

companies are the specializing on the market of professional skin care.

Finally, in China, the company Magic was bought to strengthen its position on the

second global market. This is a very popular brand for face care.

b. The performances in each country

L’Oreal has a growth in every country where the brand is located. Indeed, the

company is strengthening its position into the world, at the exception of the north of

America. The most important market is Europe, principally in the North, South and

West. There are strong performances, and a good growth. However, the first

geographic area is the new market since 2012. It allows the brand to increase its

market share, with a great dynamic. Even if, there is a little drop in Asia, more

particular in India, the development stays heavy.

In North America, L’Oreal realized a growth of 3,5 %18

owning to the slow down of

the consumer products.

In Latin America, the turnover increased of 4,6 % thanks to the expansion of the

consumer products.

18

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

43

In East Europe, the brand has 9,8 % of augmentation with the development of the

Luxury and professional divisions.

In West Europe, the augmentation is about 2.3 % allowed by all the divisions

especially in Germany, United Kingdom and Spain.

In Asia and Pacific, the development varied between 4.7 and 4.8 %, indeed for

Indonesia, Hong-Kong and Australia the growth is especially strong.

The Chinese market increased the need of supplicated products. Mostly in beauty and

skincare, there is a strong competition.

In Africa and Middle East, the company knows an increase of 12.1 %, which can be

seen in all kind of divisions.

Thus, L’Oreal is the leader of the beauty travel retail. This is a dynamic company,

which has for ambition to double its size the next 10 years. The brand is the only one

to cover all of the different divisions in the whole world. The travel retail is seen as

the sixth continent. Indeed, this is a market with a strong potential, as the construction

of new airports. Beauty is the center of this new category, in fact there is an evolution

of the multi-category stores in specific shops. The target of the travel retail is a

“global shopper”, this is someone who buy where he is. L’Oreal is actually studying

the most frequent destinations according to their nationalities. The brand wants to

create a personalized approach. Thereby, the travel retail permits to show the different

brands of L’Oreal and to maximize communication. It is a key to attract and win

loyalty from new consumers.

44

c. The organization

The geographic areas are divided in 5 parts: West Europe, America, Pacific/Asia, East

Europe and Africa/Middle East. These divisions are made to improve the knowledge

and innovation of local needs. Today, it is still based on a strategy of universalization.

The group is firstly focused on the emerged countries with ethnic minorities and then

develops L’Oreal in the emerging countries. As Africa or Middle East, this market

represents billions of new consumers. Inside the organization, the brand had set up a

strategy to increase the norms and practices for the new target countries.

Marketing has reinforced its comprehension of the consumers. It uses the

digitalization to develop the creativity and the communication through different

distribution.

Research and Innovation have worldwide and regional centers to be close to the local

markets in order to create the most adapted products for the clients.

Human resources are universalized. Indeed, the recruitment and formation of

managers are based on the values and the culture of L’Oreal.

Operations have to adapt the products and make them accessible for the target

markets. The firm developed production sites in the emerging countries to increase

the creation of products.

Communication is focused on face-to-face interactions. In fact, managers need to visit

the local markets to have a clear vision of the situation.

Thus, L’Oreal is almost present in all the countries. However, its international activity

is still focused on implementation. Indeed, the worldwide development was made on

client needs, beauty rituals and then on the distributions.

45

d. The different geographic areas

The strategy of the group has 4 high stakes: the mature markets, the emerging

countries, the new borders and the 6th

continent.

i. The mature market

The mature market is composed of West Europe, North America and Japan. This is

where L’Oreal has a great turnover despite the economic crises. The capacity of

innovation is able by many researches centers. Thus, those markets represent a

development for the ethnic products thanks to the minorities and the increase of

demands from man. There is an important competition, because all the main

competitors resulted from these markets. Moreover, the group made a lot of

acquisitions, which are some of the most important brands of the world today.

The West Europe is the main activity of L’Oreal. Indeed, it represents 1/319

of the

turnover of the group. Even if, the turnover is decreased in this geographic area, it

allows increasing the one in the emerging markets. The brand faces the aging of the

population, it offers a new type of consumers. Thus, there is an increase of skin

products.

The North America is targeted through L’Oreal USA which counts 10 000 employees.

There were many competitors, and the French quality was not working. At the time of

François Dalle, he decided to create the slogan “Because you’re worth it” in order to

optimize the brand image. It worked because the turnover increased and the quality of

the products had a great reputation. But, it was with the development of the luxury

19

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

46

division that the brand grown its presence. Thanks to Lancôme, the group could

compete with two main competitors, which still are Estée Lauder and Revlon. Thus,

to enter on the country North America, L’Oreal has to acquire local businesses as

Ralph Lauren, for example.

The Japan is the second market of cosmetics after the USA. This country is difficult

to enter because the consumers prefer the national brands. Indeed, the Japanese firms

have the most important position. The success didn’t start at the beginning of the

entrance on the market, but with the creation of Nihon L’Oreal KK. The group also

decided to put some research centers to adapt the products to the local needs, and to

acquire Shu Uemura a Japanese brand. This expansion respects the strategy of

universalization and the value of beauty for everyone.

ii. The emerging countries

The emerging countries regroup Asia, Latina America, Russia and East Europe.

L’Oreal realizes 1/3 of its turnover on this market. Indeed, these countries have an

important potential thanks to the increase of the middle class and, of the beauty and

appearances. They differentiate themselves from the mature countries with their types

of skin, cultures and environments. Those changes allow innovations.

China creates the 3rd

most important turnover of L’Oreal, even if the market is leaded

by Procter&Gamble. The group is present on the retail distribution with Maybelline

and L’Oreal Paris, and on the luxury distribution with Lancôme, mostly. The

development in China was hard because of the industrial and commercial laws. It

started with the hair care products and the cosmetics came after. Indeed, there was a

cultural revolution that increases the sale of makeups. That’s why, the firm is

47

targeting urban woman between 20 and 35 years old. Because there are still living

with their parents, they have a great purchasing power: 20%20

of their salary in spent

in cosmetics products. The main issue was to teach to the target client how to use the

beauty products. The Chinese market see the makeup products as superficial, indeed

only 15% of the beauty products are sold. The culture of the country is based on the

traditional medicine because there is an interest for the old traditions. However, with

the increase of the Chinese tourism, the group decided to distribute its products in

airports through the travel retail. Moreover, because of the rapid growth of the

country, many cities were destroyed and the air pollution increased a lot. Thus, the

citizens need to protect their skin from this environment, so there is a new demand for

the natural products. Today, there are also personalized advices and services in the

shops. Moreover, L’Oreal made the choice to use the e-commerce to touch most of

the population. In fact, thanks to this distribution the turnover grown of 10%21

. The

distribution channels chosen are the beauty store chains and department shops. There

are new distribution channels as the TV direct selling and the e-commerce because

more than 500 000 000 of Chinese have Internet now.

L’Oreal implemented itself in China in 2004 through the acquisition of the brand Yue

Sai, and Mininurse, the same year. Those acquisitions gave a great potential to the

group, indeed it allowed a strong position in the market, older consumers, and a

developed R&D. L’Oreal launched many new products and inspired itself from the

ads campaign in France. In fact, the brand used different models to promote the

products. In 2006, the sells decreased, thus, the group introduced the luxury division.

20

L’Oréal in China : Marketing Strategies for Turning Around Chinese Luxury

Cosmetic Brand Yue Sai. (2013). Insead, The Business School for the World.

Retrieved November, 2015, from cases. insead. edu. 21

Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

48

It determined a clear vision and a new role inside the market. The advertising was

focused on new lifestyle though the supermodel Du Juan, which represented the

modern Chinese woman.

L’Oreal is present in Brazil for 50 years, it allows the entrance inside the all continent.

Because, there is a big diversity of skins, the firm had to implement a research center

to innovate the products. In Brazil, the culture is also based on the appearances of the

body and the beauty. Moreover, the population is spending a lot of money in the hair

care products and the market is really preoccupied by the natural compositions. For

the retails, L’Oreal has two brands, which are Colorama and Maybelline. The division

is well working in active cosmetics because the sector is adapted to the local needs.

The development of professional products is based on the creation of institutes. The

luxury products of the group are the leader in this country, they are targeting the

Brazilian travellers through the travel retail.

The country of India is still moderate today. It has an important potential, because it’s

dynamic and attractive. The population is attached to the old customs, so the natural

substances too. The distribution is made in hypermarket and traditional shops:

kiranas. This market is at the opposite of the others. Indeed, L’Oreal had to adapt the

products to the tradition and the humid weather. The packaging had to be changed, for

example they created only one dose of shampoo. The competition is important, there

are many national as regional competitors present on many distributions. Indeed, the

Indian brands have some trouble to take some market shares. They have only 9%22

of

them against 31 % for the main competitor Unilever. The beauty of this country

defines itself as a family business. Thus, L’Oreal implanted the group thanks to an

22

La stratégie de L’Oreal pour conqueror le marché Indien. (2014). Association Ege.

Retrieved November, 2015, from

http://bdc.aege.fr/public/Strategie_loreal_pour_conquerir_inde.pdf.

49

acquisition, then it introduced its own brands as Garnier and Body Shop and finally it

developed several divisions as luxury and professional. In 1990, the sector of the

professional products didn’t exist, so L’Oreal needed to develop it. In fact, the

company founded a school specialized in hair care in Mumbai. The strategy of the

brand is based on its communication. It utilized many ambassadors as Indian

supermodels and it sells the image of the French products. The target consumers are

the middle classes, so the ads campaign is translated in 8 different languages. Those

entire elements permit seducing and creating a relationship with the consumers. Thus,

L’Oreal sells innovative products in order to replace the traditional ones.

East Europe is a fragile market. With the end of the cold war, L’Oreal had the

opportunity to develop its presence. However, there was a dynamic and strong growth

of 21.1%23

in 2008. The professional division made the major success. This division

provided products for each type of salons: accessible to luxurious. Moreover, the

group educated more than 40 000 hairdressers the same year. It provided technical

skills for an adapted distribution channel. L’Oreal is using a selective distribution,

which is centered in Poland and Hungary. The firm is focused on the retail, because it

is accessible for the most of the population. Russia has a strong potential, the

population spend a lot of money in cosmetics. Even if, the firm is the leader in East

Europe, the situation stays fragile. Firstly, the politic and economic situation is

unstable and secondly the international competitors are stronger. Thus, l’Oreal is

reinforcing its position thanks to local acquisitions. The strategy is well working

because 9/10 women know the brand Lancôme. The company is using the French

image to sell its products and inspire the target audience. It is giving dreams to the

young Russian women mostly. Moreover, in order to reach more consumers, the

23

L'Oreal report. (2008). Easter Europe. Retrieved, 2009, from www.loreal.fr/.

50

group tripled its shops in only 3 years. At the opposite in Ukraine, the most appreciate

brand is Maybelline. It has a great success in the eastern countries because it is

adapted to the local needs. L’Oreal also meet its clients in universities as a beauty

advisor. Thus, the company has an important place the heart of the population.

iii. The new borders

The new borders are an interesting market because of the increase of the middle

classes. Firstly, as for any country, the group needs to adapt the varieties of culture

and beauties. Secondly, it represents a risk of investment because there is sometimes

unstable economic or political situation. The new borders are: America Latina with

Brazil and Mexico mainly, Asia which is composed of China and India, East Europe

and Africa/Middle East.

In Middle East is well present in this market. Managers came to the countries to

organize the strategy of implementation. Thus, L’Oreal has an important position. The

products had to be adapting to the weather, which is really warm. The group is using

the travel retail to touch the emirates and to differentiate itself from competitors.

Israel was more complicated to work with. Firstly, there were some politic issues, as

the German occupation in France during the World War II. Secondly, there was the

boycott of the acquisition of the group Helena Rubinstein. It is a symbol a Jewish

industry for the Arabic countries. At this time, L’Oreal stopped its business in Israel,

but changed its strategy and apologized to the community. Today, the firm is the

leader in this country. It has a great potential, because this is the market, which spends

the most important amount of money in cosmetic products.

51

In Africa, the group has a strong position thanks to its acquisitions. It is a complex

market with much diversity of skins and hairs. One of the main issues is the

purchasing power, which is poor, plus the political instabilities. However, there is a

good opportunity to invest in order to reach new consumers.

iv. The 6th

continent

The 6th

continent is the travel retail. It is hard to identify the clients, and the risk

counterfeiting is high. The distribution is made in the duty free and it is a mix of

products. However, the middle class increases inside the airports. Thus, this is a

potential market too.

The strategy of L’Oreal has no boundaries and none of this market is more important

than another.

e. The different steps of the strategy

There are 3 main phases in the strategy of the brand: Internationalization,

globalization and universalization.

In the 60’s, the group was focused on the international development. Firstly, the

company had to target the neighboring countries with the same cultures and a close

geographic position. Indeed, L’Oreal was concentrated on market with the same

characteristics. When the activities were well developed, the company started to

produce worldwide. Thus, the firm would work with distant nations. The growth is

slow but organized. The internationalization would be until the 80’s. With this phase,

52

the exportations increased a lot, the position was mainly in Europe and the luxury

market was created.

The change of phase was sudden because it was made as a dynamic transformation.

During the globalization, there is a transfer of competences. In fact, L’Oreal was

exporting its activities, organization and knowledge to the worldwide market. Thus,

the acquisitions were integrated to its core values in order to share the management

competences in each country. This is a process of co-creation, with the ability to take

common decisions.

The third phase was made with Jean-Paul Agon. He took the control of the firm when

it was dealing with many issues. The turnover was about 8%24

in 2007 and decreased

to 3,8% in 2008. The negative impact created some doubts about the capacity of the

company to face the problems. Thus, in 2009, there was general meeting to define the

basics and values of L’Oreal. The group decided to focus itself on the universalization

and to increase its presence on emerging countries. In fact, for the brand, the world

was divided in 3: emerged countries, BRICS and the “Next 12”. The universalization

is based on the knowledge on each culture and the adaption to the clients in order to

offer the most adjustable product to the right market. The main goal was to reach

billions of new consumers.

f. The universalization

The strategy of universalization is used for all the activities of the group.

The retails need to adapt their products to the local beauties and to utilize small

prices. Indeed, the quality also has to be above the competitors without being high

24

Collin, B., & Delplancke, J. (2015). L'Oréal: La beauté de la stratégie. Paris:

Dunod.

53

end. Each brand of this division differentiates itself thanks to its own advantages and

position on the market. The image of the brands is based on the slogan “Because I

worth it” and on the muses who represent the consumers.

The luxury products are targeting the rich population who has a huge diversity. They

distinguish themselves by the cultures and the prices. In order to increase the number

of clients, the group developed its position on different distributions as shops and e-

commerce.

The professional products offer an accessible range of skin cares. Those products

were created on the local needs. Thus, now, they can touch niche markets. Thanks to

the partnerships with hair salons, L’Oreal has the opportunity to conquer more clients

and acquire new divisions.

The active cosmetics are changing its own components to adapt themselves to the new

markets as Brazil.

The Body Shop is focused on the e-commerce to reach new consumers.

Thus, the main goal of each activity is to have more clients while sharing the same

knowledge and organization.

54

V. The impact of the cosmetics brand

a. The wants of consumers

According to the agency 79C, 45% of the consumers want products of quality.

Indeed, the functional characteristics are more needed. Then, they want a self-esteem

with a product which valorizes their ego. Finally, there is an emotional envy. The

consumers like the interaction with the company. They are buying for the story of the

brand and the dreams it creates.

An advertising campaign impacts the clients through the quality of the product, the

design and its promotion mostly. It has to make them dream and react according to a

story. 36% 25

of the woman is ready to buy thanks to an appropriate story.

In order to promote the brand, the most convenient places are the shops and the

showcases. They are showing the history of the firm. However, the clients are more

sensible to the online communication, as the telephone or social networks. Even if the

television is the most used to touch a larger population, the mobile devises and the

online communication allows the company to interact with the consumers.

The study shows the wants from the clients. Today, it is more focused on the

emotional side. As l’Occitane, one of the main competitors of L’Oreal in France, the

firm is showing the knowledge and the old values. Thanks to this story, the company

has a great turnover.

Because of the economy of many competitors, the clients have many choices. It

makes them more demanding and informed. In fact, the consumers are receptive when

25

Tungate, M. (2009). Le monde de la beauté. Dunod.

55

there is a novelty. Make them dream, create a connection, a story are some advantages

adapted to the needs.

b. The classification of the population

The classification of the population is based on 5 beauty archetypes. There are the

“powerful peacocks”, the “seductive foxes”, the “social butterflies”, the “graceful

swans” and finally the “confortable cats”.

Firstly, the “powerful peacocks” represent 15%26

of the population, they are really

dynamic, and looking for new experiences. For them the beauty is the power and the

success.

Secondly, the “seductive foxes” are the largest group, it counts 27% of the population.

The beauty is synonym of femininity, romantic and sexiness.

Thirdly, the “social butterflies” are composed of 16% of the population. They are

mostly present in Latin America. Beauty is a sharing experience. It inspired beautiful

woman. They buy a lot of products for their relationships as family and friends.

Then, the “graceful swans” include 23% of the population. Beauty is a confidence that

they like to improve it. There are mostly present in Europe and US.

Finally, the “comfortable cats” represent 19% of the population. They prefer the

natural products, or no one. They like their natural skins and they don’t hope for a

change with the utilization of the cosmetics. They are mostly present in Europe and

US. However, the population of the emerging countries is at the opposite of these

types of consumer.

26

The truth about beauty. McCann truth central from http://truthcentral.mccann.com.

56

The clients are becoming co-creators in the cosmetics market. For women, there are 4

steps to be beautiful. The steps are divided between “Looking beautiful”, it is

composed of the foundational beauty and the enhancement beauty and then “Feeling

beautiful” which is created of wellness beauty and emotional beauty.

The “Looking beautiful” are the basics in order to provide the foundation of the

beauty. It also integrates the different elements that women can change for events as

the hairs, for example.

The “Feeling beautiful” is the healthy way of life the woman adopts in order to have

the perfect skin and body. It is also about the behavior and attitude that show the

natural beauty inside a person.

c. The definition of the beauty

According a research by aufeminin.com, on 8 600 woman, 25% of them think the

makeup is essential. Indeed, they are influenced by the society. Our society represents

the “perfect” women everywhere. Because of the new technologies the ideal can

differ from the reality. The advertising is the image of the new tendency. It shows the

evolution of the social class and the actual norms.

According to the survey that I made, the women buy cosmetics for one main reason:

to feel and look pretty. (Appendix: Survey 5.1) This purchase depends on mainly the

price, the recommendation of the relatives and opinion leaders. However, 70% of

them think the perfect beauty is the natural one. Only 10% can go out without any

make up, and 98% need the cosmetics for their first date. Thus, the beauty products

help themselves to feel more confident. The days without any make up depend on the

skin issues, the situation, the time and the persons.

57

For 63% of them, the advertisings have an impact on the definition of the beauty,

mainly towards kids and teenagers. In fact, even if they recognize the models are

photoshopped and the image is unreal, 45% admitted they compare themselves to it,

consciously as unconsciously. But, none of them are thinking the product make them

reach the beauty of the ads.

To conclude, the ads permits thinking the cosmetic products will help them feel

attractive and prettier. However, they know the model image is a fake and the perfect

beauty doesn’t necessarily need cosmetics.

Today, there is a decrease of the politic and religious values. The corporations and

their communication make the power. This is a society of consumption where the

valuable speeches are the one inside the advertising. The consumers are spectators.

Their goal is to spend money to obtain the image conveyed by the brand. Everything

is based on the appearances and the research of the perfect identity.

The culture is a key factor of the “perfect” appearance. Indeed, today the overweight

persons are discriminate. However, during the XX century, the activity had a negative

image. The pleasure had to be immediate. The change was also made by the

evolution of the medicine. The introduction of the health and the diets were invented

in order to live much longer. So, the society imposes to respect our body and fight the

degradation over the time.

The medias are giving advises to bring beauty to each women in the world. The

products are supposed to help us to transform and obtain the right image. Because the

publicity offers a model of a young and thin woman as perfect, the consumers are

following this as an example.

One of the examples of the change made by the Medias is the hair removal. For

hygienic as esthetic reasons, the woman have to remove them. There are also the

58

products to avoid the sweat. Even if the deodorants contain a lot of aluminum, which

is bad for our health, we keep using them for our appearance.

But, the goal to show us these negatives images is to increase the sells. The perfect

tan is also recommended today. Doctors don’t accept this tendency, because a big

exposure could have bad consequences for our skin.

Moreover, mostly the woman frequently utilizes the diets. It seems the body is an

investment. Indeed, statistics show it helps to find a job or a relationship.

In order to reach an inaccessible body, the woman is ready to spend a lot of money

and put their physical and psychological health in danger. Indeed, they choose to have

an inappropriate alimentation. The perfect image reflects a low self-esteem for the

consumers, which could create a depression.

Everything is made to increase the turnover of the companies. The body is a goal that

can’t be achieve for the common woman. In fact, because it is sometimes impossible

to reach, consumers will never have it and keep buying the products to obtain it. Thus,

the turnover of the group as L’Oreal is still increasing. Younger and thinner are the

two main messages of the Medias. Indeed, if some woman doesn’t need to loose some

weight, everyone is getting older.

Moreover, the feminine body is used to sell, sometimes it doesn’t have any link with

the product. It is utilized to attract both man and woman, because it brings a “sexy”

touch.

For any types of promotion, the message conveyed is the same: magazines,

televisions and billboards.

Magazines are mostly utilized in France for example. It is full of retouched photos

and diet articles. These magazines are based on the appearances. In fact, this is what

the consumers want to see. In an Australian magazine, once the cover was made with

59

a girl less thin than normally, thus, the sell decreased and it received negatives

comments. As described previously, this inaccessible beauty changed over the time.

Before, the shapes were seen as attractive and today the models weight 23%27

less

high than the average.

Televisions also spread a wrong message to every woman. Actresses are used as

model but they respect the norms of the society: thin and young. The woman’s body

is discriminate and influenced to increase the sells. However, Dove, a brand of the

competitor Unilever, shows each type of woman into the world for its campaign. It

corresponds to a great change because it is using normal women.

The worsts are the billboards. None of the woman is real. The models or celebrities

have makeup, fake hairs and they are retouched too. The main difference with the

reality can be seen because there is often no expression on the face.

d. The universalization of the beauty

The universalization of the beauty is one of the objectives of L’Oreal. There are many

types of skins in the world, in order to implement the brand in each country, the

strategy of L’Oreal is to adapt itself. Indeed, the planet counts only 3% of white

persons, according to “Etudes nationales démographiques français”. The contradiction

into the cosmetic market is the brands need to adapt themselves to the consumers

however they are the ones that create the “perfect” beauty.

As in Japan, the universalization impacts the culture of the beauty. In fact, since 1868,

the traditional culture has been replaced by the esthetic of the occidental woman.

27

Question: What are the requirements for being a model? Is there a minimum or

maximum height, weight or other factor? (n.d.). Retrieved May 04, 2016, from

https://models.com/help/005-what_are_requirements.html

60

Before, the tendency was the black teeth and the total hair removal of the eyebrows,

today it is more based on the big eyes as the manga characters.

In Asia, the beauty ritual is composed of 10 steps compared to the occidental who is

less important. The woman is known for the time spent for the skin care. This is a

market more demanding for high quality products. The demand from the occidental

consumers is less strict too. A perfect skin doesn’t mean the same as in Asia. The

communication needs to be more important in order to inform the Asian clients of the

advantages.

Moreover, many products are inspired from the Asian market. According to the study

from “Euromonitor International”, this market will represent 80% of the turnover of

the industry in 2019. Even if the occidental market is the biggest one, the situation

will change in a couple of years. Indeed, the influence of Asia in the cosmetics field is

growing. Through many bloggers, the communication of the Asian products is easiest.

The tendencies from Japan, China and South Korea are well developed in the skin

care. Because, the Asian consumers are more concerned about the innovations and the

quality of the products, the companies invest more in the research and development.

Lancôme from L’Oreal is the only European brand to inspire itself from the Asian

industry. Many of the local firms are using the traditional ingredients from the oldest

culture. As the green tea or the Ginseng, those are the many substances that are

launched by the Asiatic market and used by the company Body Shop, for example.

e. The environmental consequences

L’Oreal is engaged for the environment. The group wants to innovate, produce, share

and consumer in an eco-friendly way. It has established its objectives for 2020.

61

In the innovation, L’Oreal wants all the novelty to create an advantage for the

environment. The substances have to use durable resources, the formula must not

leave any negative print. Moreover, the packaging and the product will not destroy the

planet. Today, the group is already working on this side, however the numbers are not

reached yet.

In the production, the factories will reduce the gas emission of 60%, according to the

advancement report from L’Oreal in 2014. The firm already diminished the half of

this emission since 2005. The water will be used more carefully, and 60% of the

utilization will be deleting, as for the wastes.

In the consumption, the consumers will be informed of the environmental profile of

the products. Each brand of L’Oreal will have to give a report of the progress made

for the environment. The clients will be co-creator in the development in order to be

greener.

The share is different between the employees, the suppliers, and the communities. The

employees will have a health assurance and financial protection in case of accident.

Indeed, L’Oreal created “Share & Care” in order to help its employees to feel

confortable in the working place. The suppliers are selected on the performances in

the environment and inside the society. The common green politic will be created and

all the suppliers will be formed to work as eco-friendly.

The community will integrate 100 000 persons from the program Solidarity Sourcing

and handicap groups.

All these engagements toward the planet are made to increase the turnover of the

company as well. During the COP21 in 2015, the group was still part of the

companies, which make a lot for the environment. L’Oreal is keeping high criterion in

order to have good performances too. This is an opportunity to reinforce the

62

productivity, the innovation and a transparency to the consumers and suppliers. The

social responsibility is based on the “Sharing beauty with all”. The company is also

organizing a citizen day with a worldwide engagement.

f. The future full of opportunities

There are a lot of opportunities for the brands in the cosmetics industry. Indeed, the

group is not only able to sell some products but also to help the consumers to find the

most adapted product and advice in order to feel beautiful.

The interaction is possible through Internet and the social media, which connect the

consumers to the company. In fact, the emerging markets are really attracted by this

link, it helps the clients to have more information. Moreover, between consumers,

they can share their advices and tips.

The novelty is possible thanks to the emerging markets. There is a new target

audience who really appreciates the utilization of tendency in cosmetic products.

There are many categorizes where a brand can evaluate. The firms are selling solution

for each step of our life. For example, for a first date or a bad break up. They are at

the creation of the beauty. It is like magic comes from the product in order to satisfy

the need of the consumers.

In any country, a company has to adapt itself. There are opportunities everywhere

because of the various types of skin and cultures are different.

The group can unable the connection between fantasy and reality. It inspires the

image of beauty for the clients. It develops in a business of pleasure, interactivity,

novelty and technology. The products can surprise in a positive way and help the

consumers to have a better self-esteem.

63

To conclude, L’Oreal created its strategy through its history. Each of the

president brought a new vision and new objectives. Thanks to a good management,

the success is still present today. For the future, the group engages itself to adapt to

other diversity in order to reach billion of consumers.

L’Oreal is working in the industry of “beauty products”. It is one of the main leader in

almost every country. However, they are many competitors and the firm needs to

innovate to have advantages.

There are many different types of company, but L’Oreal is the only one to be present

in all of them. Thanks to its position, the threats are low. On each aspect, there are

many opportunities to take. Indeed, the new technologies able the advancement of

novelties in cosmetics.

Moreover, the company has many types of product, which allow it to target each

culture worldwide. Everything started thanks to the chemist Eugene Schueller and its

entrance in the professional products. However, the tendency of today is centered on

the natural substances. It permits to Body Shop, one of the divisions of the group, to

have a great increase.

The firm is not only selling its products but also its culture. The expansion of L’Oreal

is based on its many acquisitions. The financial resources are good, it allows the

group to develop its social responsibility. However, there is a risk to scatter the

communication and the image. Thus, the company wants to be transparent.

Its performances and implementation on 130 countries in 5 countries are able by its

portfolio of brands. Since its creation, the strategy was focus on internationalization,

globalization then universalization. Today, the group adapts all its activities to the

local needs of the consumers. The organization is divided between the geographic

areas and the specific divisions.

64

However, because of this strategy, many of the brands in this industry are defining the

norms of the society. They are creating a certain image of beauty, which may have

some serious consequences on the clients. There are also some negatives impacts on

the environment as well.

The industry of the cosmetics stays full of resources. It offers many opportunities

through new markets and cultures. This is enabled by the evolution of the

technologies and the exchange of tendencies between different countries.

65

Appendix

Table 1: Summary of the CEO

Names Dates Photos Summary Sources

Eugène

Schueller 1909-1957

- Creation of

L’Oreal

- Creation and

innovation of the

main products

- Partnerships with

professionals

- Innovation of

advertising

campaign

Chimie, notre

jeunesse : Eugène

Schueller n° 71.

(Janvier 1958)

Retrieved from

http://www.patrons

defrance.fr/?q=sipp

af-actor-

record/21058

François

Dalle 1957-1984

- Development

R&D

- Industrialization

- Acquisition of

others brands

http://www.lavoixd

unord.fr/region/hes

din-francois-dalle-l-

homme-qui-a-fait-

de-l-oreal-

ia36b49156n23783

70

Charles

Zviak 1984-1988

- Retention of the

organization

http://www.loreal.fr

/groupe/histoire/198

4-2000

Lindsay

Owen

Jones

1988-2011

- Expansion to new

markets

- Accessible prices

- New acquisitions

- Social

responsibilities

http://www.journald

unet.com/economie/

dirigeants/retraites-

supplementaires-

complementaires-

patrons/1-lindsay-

owen-jones.shtml

Jean Paul

Agon 2011-Now

- Face the economic

issues

- Reach new

markets

- Target the middle

classes

http://www.loreal.c

om/group/governan

ce/executive-

committee/jean-

paul-agon

66

Image 2.1: Mapping of the competitors

Source: Collin, B., & Delplancke, J. (2015). L'Oréal: La beauté de la stratégie. Paris:

Dunod.

Table 2.2: The porter’s five forces

The threat of new entrance The pressure from substitutes

Weak Middle

The power of clients The power of suppliers

High Weak

Competitive rivalry

Oligopoly

Table 2.3: The different aspects

The legal The economic

- Depends on the country

- Transparent composition

- Income

- Inequality

67

- Evolution

The cultural The technological

- Social aspect

- Local tastes

- Way of living

- Evaluation of the innovations

- Investments in the R&D

The environment

- Consumption of energy

- Protection of the environment

Table 3.1: The diversity of products

Types

The

consumer

products

The

professional

products

The luxury

products

The active

cosmetic

The body

shop

Summary

- Accessible

prices

- For middle

classes

- High

technologies

- Hair

salons

- Dynamic

- Training

of the

beauty

professions

- 3 parts:

skin cares,

makeups and

perfumes

- Quality

- Innovation

- Modern

- Health

professional

- For

pharmacies

and

drugstores

- E-

commerce

- Natural

ingredients

- Specific

for

celebration

s

Brands

L’Oreal

Paris,

Garnier,

Maybelline

New,

SoftSheenCar

son, Essie…

Lancôme,

Giorgio

Armani,

Yves Saint

Laurent,

Cacharel,

Biotherm,

Kiehl’s,

Ralph

Lauren, Shu

Uemura…

L’Oreal

professional,

Kérastase,

Matrix,

Pureology,

Décléor,

Carita, Essie,

Redken…

Vichy, La

Roche

Posay,

SkinCeutica

ls,

Rocher&Gal

let,

Sanoflore…

The Body

Shop

68

Image 3.2: The structure of L’Oreal

Image 3.3: The financial resources, Turnover in millions of Euros/year

Source : Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

69

Table 3.4: SWOT

Strengths Weaknesses

- Leader of the market

- International presence

- Innovations

- R&D

- Activity on all types of product

- Activity on all distribution channels

- Dependency of the developed markets

- Adaptation of the acquisitions to the

group image and values

- Expensive investments

Opportunities Threats

- Increase of the man market

- E-commerce

- Social media

- Natural products

- New markets

- Many competitors

- Forgery

- The power of the clients

- Laws

70

Survey 5.1:

The 50 women, who answered to this survey, have between 19 and 50 years old. They

are coming from many different countries of the world.

Theimpactofthecosmeticsadsontheconsumers

Source:http://alf-img.com/show/l-oreal-makeup-ads.html

Aboutyou

Gender: Age:Country: Occupation:

YourdefinitionofbeautyWhatmakesyoubuycosmeticproducts?Definetheperfectbeautyaccordingtoyou.Areyouabletogooutwithoutanymakeup?Why?Ifyes,areyouabletogoonafirstdatewithoutanymakeup?Why?

TheimpactofthecosmeticsadsDoyouhaveanegativefeelingaboutyourappearancewhenyouseecosmeticsads?Ifyes,doyouthinktheproductwillhelpyoutoreducethisnegativefeeling?Doyoucompareyourselfwiththemodeloncosmeticsads?Ifyes,doyouwanttolooklikethemodeloncosmeticsads?Doyouthinkcosmeticsadsinfluence/createthedefinitionoftheperfectbeauty?

71

Bibliography

Books

• Béatrice Collin, Daniel Rouach (2009). Le modèle l'Oréal : les stratégies clés d'une

multinationale française. Pearson Education France.

• Cateora, P., & Graham, J. (2002). International Marketing (11th ed.). McGraw-Hill

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• Collin, B., & Delplancke, J. (2015). L'Oréal: La beauté de la stratégie. Paris:

Dunod.

• Dalle, F. (2001). L'aventure L'Oréal. Paris: Jacob.

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• Tungate, M. (2009). Le monde de la beauté. Dunod.

• Tungate, M. (2011). Branded beauty how marketing changed the way we look.

Philadelphia, PA: Kogan Page.

72

Articles

• From an aggregate to a brand network: a study of the brand portfolio at L’Oreal.

(2010). Journal of Marketing Management. Retrieved November, 2015, from

http://www.informaworld.com.

• KATI CHITRAKORN. (2015, July 8). The 'Asian-ification' of Beauty. Retrieved

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of-beauty

Case studies

• La stratégie de L’Oreal pour conqueror le marché Indien. (2014). Association Ege.

Retrieved November, 2015, from

http://bdc.aege.fr/public/Strategie_loreal_pour_conquerir_inde.pdf.

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Cosmetic Brand Yue Sai. (2013). Insead, The Business School for the World.

Retrieved November, 2015, from cases. insead. edu.

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November, 2015, from https://hbr.org/2013/06/loreal-masters-multiculturalism#.

• L’Oreal, l’analyse du secteur d’activité des cosmétiques (2012). Océane Fargeas,

Anne-Hélène Lozevis, Ophélie Piederrière. Retrieved 2012, from

http://fr.calameo.com/read/0031128245bb50bd20187.

• The truth about beauty. McCann truth central from http://truthcentral.mccann.com.

73

Reports

• Rapport d’activité. (2014). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

• Rapport d’avancement. (2014). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

• Rapport financier annuel. (2014). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

• Rapport financier annuel. (2015). L’Oreal. Retrieved November, 2015, from

www.loreal.fr/.

Websites

• "L'Oréal, Leader Mondial De La Beauté : Maquillage, Cosmétiques, Soins

Capillaires, Parfums - L'Oréal Groupe." L'Oréal, Leader Mondial De La Beauté :

Maquillage, Cosmétiques, Soins Capillaires, Parfums - L'Oréal Groupe. N.p., n.d.

Web. 04 May 2016.

• "L'Oréal SA - Company Profile, Information, Business Description, History,

Background Information on L'Oréal SA." L'Oréal SA - Company Profile, Information,

Business Description, History, Background Information on L'Oréal SA. N.p., n.d.

Web. 04 May 2016.

74

Video

• YouTube, DunodVideos - https://www.youtube.com/watch?v=VfunUpdQKB4