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- Assignment: RC TOM Challenge 2017
L’Oréal: A Gorgeous Supply Chain Makeover
L’Oréal, the world's largest cosmetics company, is a global leader in operational innovation and digitalization to serve their ever-evolving fashion customers worldwide.
L’Oréal, the world’s largest cosmetics company[1], remains an acclaimed winner on the annual Gartner’s Top 25 Supply Chains[2] ranking and a global leader in embracing operational innovation and digitalization. What you may ask, is the secret sauce to this beauty company’s story of supply chain success?
Understanding the Basics
L’Oréal’s operations are highly complex – with business across 140 countries, 150+ distribution centers, 42 factories, 34 brands, and 8 distribution channels (including hair salons, mass-market retailers, department stores, drugstores, e-commence, etc.)[3]. L’Oréal’s growth strategy requires a commitment to new product innovation (up to 50% of products refresh annually[4]) focused on new and emerging markets, expansion across e-commerce channels, and widened diversity of distribution. These unique challenges, present L’Oréal’s supply chain leaders with the need for great agility and adaptability to serve their ever-evolving customers worldwide. Leading industry transformation, L’Oréal has invested in cutting-edge technology solutions and supply chain automation.
Progress Through the Years
In 2014 Emmanuel Plazol, L’Oréal’s head of supply chain, told press “our current approach of segmenting by distribution channel needed to evolve”[5]. Therefore, L’Oréal re-designed supply chain capabilities and implemented a world-class integrated information system that provided collaborative compilation of volume forecasts across sales, marketing, supply chain, and finance teams, which were then shared worldwide with their factory and distribution centers[6].
The results[5], improved sales forecast accuracy rate of 60% to 71%, while logistics costs decreased, and shipments increased 40%+ over five years from 2009 to 2014. Intended to improve order precision and responsiveness across the supply chain, even L’Oréal customers at shelf noticed the more efficient stock management[7] and in 2016 retailer’s saw improved customer service levels by more than 2%, while holding inventory constant[4].
Emmanuel Plazol said, “We thought the transformation would come only if our supply chain was close to the markets and customers, and was end-to-end. And for this to happen our supply chain had to cover from the customer to the factories”[5].
Pathways to Just Digital Future
Beyond inventory management, L’Oréal has felt the significant operational impact of e-commerce and “change in order profiles” says Erik Rodriguez, director of supply chain for L’Oréal Americas. “The sheer volume of orders has increased, but the lines per order has decreased. Additionally, there’s pressure from our retail customers to reduce our lead times and improve our delivery times because they are running leaner inventories”[8].
To meet the needs of the dynamic market, L’Oréal leverages automation like robotics and slotting software to mechanize their distribution centers globally[8]. By implementing these new solutions, L’Oréal has stayed competitive in order fulfillment speed, reduced labor cost, continuous quality improvement, and meeting the surges during demand peaks. Now, what’s ahead for L’Oréal supply chain innovation?
Strategy Recommendations
Without a doubt, L’Oréal will continue to feel the pressure from the competitive landscape. L’Oréal’s 5%+ annual growth rate has caught the attention of small independent make-up labels piling into the market, noted in The New York Times[9]. Their supply chain transformation and digitalization most empower the company’s success!
As a power-house marketing company, L’Oréal must put the customers need at the center of their supply chain strategy. They must observe, analyze, and predict consumer trends so they can quickly monetize the beauty industry’s impulsiveness and spontaneity. I recommend:
1. L’Oréal should use scarcity to their advantage! If L’Oréal approached each product line as a test-and-learn model, for instance, launching only twenty thousand units of the exclusive Gigi Hadid Maybelline Mascara in USA Target stores; they could predict sales forecasts by region, consumer target, color palette, etc. before launching globally. This fast-fashion apparel business model[10] applied to the beauty industry means less inventory, more collections, and greater flexibility to react to the changing tastes of fashion consumers.
2. L’Oréal should improve their direct-to-consumer sales channel! Today, L’Oréal across its 34 brands, relies on the majority of sales to come from department stores, mass-market retailers, and drugstores. L’Oréal’s predominant e-commerce strategy has been sending consumers from their websites to Amazon.com, Walmart.com, or Target.com to purchase online – but as a result L’Oréal forfeits control of the consumer experience, potential of higher margin, and strategic data analytics. L’Oréal should make strides for a best-in-class e-commerce and omnichannel user experience, driving direct online sales for a stronger customer relationship and better data insights.
3. L’Oréal should build localized, entrepreneurial capabilities! The simple fact is Chinese beauty consumers demand something very different than Americans. L’Oréal must react to regional differences in consumer preferences, while using the same foundational supply chain capabilities. I believe, segmented innovation and regional agility must be at the core of L’Oréal’s organizational culture. Therefore, L’Oréal must build a supply chain for smaller production runs, quicker leadtimes, and more volatile demand cycles for localized market needs.
Key Outstanding Question
How do you manage costs and margins against the chase for customization, speed, and flexibility in L’Oréal’s global supply chain?
(Word Count 798)
[1] “L’Oréal – Statistics & Facts.” Statista Inc., The Statistics Portal, www.statista.com/topics/1544/loreal/. [2] “Gartner Announces Rankings of the 2017 Supply Chain Top 25.” The Supply Chain Top 25, Gartner, Inc., 25 May 2017, www.gartner.com/newsroom/id/3728919. [3] “L’Oréal Key Figures.” L’Oréal Group, www.loreal.com/group/our-activities/key-figures. [4] “The 2016 Supply Chain Top 25: Lessons from Leaders.” Supply Chain 24/7, 19 Sept. 2016, www.supplychain247.com/article/the_2016_supply_chain_top_25_lessons_from_leaders. [5] Marle, Gavin Van. “L’Oréal Completes Five-Year Supply Chain Transformation – ‘Because We’re Worth It’”. The Loadstar, 9 Oct. 2014, theloadstar.co.uk/loreal-supply-chain-transformation/. [6] “Improving Supply Chain Efficiency.” L’Oréal Group, www.loreal-finance.com/en/annual-report-2015/supply-chain. [7] “L’Oréal’s Supply Chain Make-Over.” PYMNTS, 15 Sept. 2014, www.pymnts.com/in-depth/2014/loreals-supply-chain-make-over/. [8] Trebilcock, Bob. “L’Oréal: To Automate or Not to Automate.” Supply Chain 24/7, 6 Oct. 2016, www.supplychain247.com/article/loreal_to_automate_or_not_to_automate/forte_industries. [9] “Luxury Cosmetics and Chinese Demand Drive Sales Bounce at L’Oréal.” The New York Times, 2 Nov. 2017, www.nytimes.com/reuters/2017/11/02/business/02reuters-loreal-results.html. [10] “Zara’s ‘Fast Fashion’ Business Model.” The Wharton School, The University of Pennsylvania, 18 Feb. 2016, kwhs.wharton.upenn.edu/2016/02/zaras-fast-fashion-business-model/.
Student comments on L’Oréal: A Gorgeous Supply Chain Makeover
This is great Darrin! Profitability and customer promise are usually trade-offs, especially in the short term!
I believe the giant beauty conglomerate L’Oréal is losing certain share to the small premium personal care brands boosted by digitization, such as Dollar Shave Club. To regain its share, as you wrote, L’Oréal must put consumer at the center of its supply chain strategy. Meanwhile, they must continue to invest on innovation and R&D. They must invest on building eCommerce as well – benefits include hugely valuable consumer data and higher margin. All these investments might hurt bottom-line in the short term, but it will bring sustainable growth in the long term, which L’Oréal must be able to convince its shareholders, bring them on board and ask for their patience. But this will be challenging undoubtedly.
Thanks for your write-up Darrin!
You touch on the core issue facing many of the traditional businesses, especially CPG companies. I looked up all of L’Oreal’s brands and was amazed at the breadth and diversity, from Giorgio Armani to Kiehl’s. I think the question is how to best position its suite of brands to face digitization. We saw in the Kiehl’s case that their online website provided the company with detailed information on its customers and allowed the company to better service them and earn a higher margin. Can this direct-to-consumer model also be achieved across the rest of the suite of products? Should it be?
When looking at planned scarcity, I am little doubtful that it can be done at the parent company level. I think it may work at the individual brand level and would require the buy-in of the brands’ management teams. I think L’Oreal needs to be careful that any marketing plan fits the vision and spirit of the brand. Additionally, I think that every brand may have different inventory days with the example of a high-end luxury retailer like Giorgio Armani vs. Kiehl’s.
To me, there are two things happening here. First is the impact of digitization on back-end operations. L’Oreal must leverage digital solutions to continually improve their supply chains. Based on the transformations you highlight (world-class information systems, automation in distribution centers, etc.), they are already making big investments here to stay competitive.
The second impact of digitization is more complex: the impact on consumer behavior and demand-side dynamics. Your strategic recommendations focus entirely on this second point, and rightly so. In today’s world, large incumbents like L’Oreal have to be two steps ahead to compete with tech-based, D2C small premium players like Dollar Shave Club, as Zoe mentions.
I’m not sure how I feel about the scarcity tactic. I agree with the prior comment, that this would need to be considered at the brand-level, as it best fits for higher-end brands but might isolate or frustrate core consumers of lower-end brands that should be focused on reliability and accessibility.
To your second suggestion – the importance of direct-to-consumer sales is paramount, I completely agree. There is enormous potential for margin capture, and more importantly, brand loyalty. Currently only a handful of their brands sell D2C on individual websites [1]. I wonder if there is potential for them to leverage the broader portfolio to create a single platform offering a differentiated customer experience and perhaps loyalty benefits, though. As you stated it, their mission should be to create “a stronger customer relationship.”
[1] https://consumergoods.com/loreal-grows-direct-consumer-channel )
Thanks for the article, Darrin! As its supply digitizes, L’Oréal seems to be facing a core tension around the large-scale implications of a digital supply chain and the small-scale implications of region-specific consumer demand. While L’Oréal has successfully used robotics and slotting software in global distribution centers, it seems challenging to apply these while also increasing the number of SKUs to account for different consumer demands. To some extent, L’Oréal might be motivated to train customers worldwide to have as similar tastes as much as possible, in order to reap the full benefits of digitization for its supply chain.
L’Oréal seems likely to face similar tensions as they develop their direct-to-consumer sales channels. Because their portfolio of brands runs the gamut from extreme luxury to a shampoo I can buy for ten dollars at CVS, they need to be wary of over-affiliating brands that should be kept segmenting. While they should certainly try to own the online consumer experience rather than sending customers to Amazon.com or Walmart.com, they will need to make sure to keep each brand experience individual and unique.
Very thoughtful arguments, Darrin. Thank you. I read it having little familiarity with L’Oreal or the broader cosmetics industry; please contextualize my comments as such.
There were two main points that struck me in your essay and in the comments it inspired. First, I very much agree with you, Zoe, and Lisa on the importance of investing in online direct-to-consumer sales. I appreciate Sarah’s caution about the danger of brand conflation, but I wonder if L’Oreal can mitigate that by investing in a basic e-commerce back-end template that allows them to have distinct consumer-facing experiences across all of their brand websites. Vox Media comes to mind; while not in the e-commerce space, they have basically adopted this approach to managing their complex, varied online footprint. Regardless of the specific solution, I do not think L’Oreal can afford to cede so much value to Amazon and others.
Second, I agree with Sarah’s instincts as they relate to increasing SKUs to accommodate regional tastes. I worry about complicating an improving supply chain system, and I wonder if we can achieve the same ends (happy, satisfied customers) by different means. Is L’Oreal’s brand strong enough that marketing could drive demand towards more consistent choices across geographies? I suspect the answer varies by brand; different brands might have different customer promises and, therefore, different pressures to customize regionally.
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Home — Essay Samples — Business — Company — L’oreal – the History of Success
L'oreal - The History of Success
- Categories: Business Success Company Success
About this sample
Words: 638 |
Published: Jan 8, 2020
Words: 638 | Page: 1 | 4 min read
Table of contents
Investigation of the l'oreal case, case solution.
- KM&M news (august 31, 2005), Refusal to Terminate an Employee Base on Her Looks Support Retaliation claim Under California law. Retrieved on 09/25/2018 From https://www.kmm.com/articles-345.html
- Carolyn G. Burnette (July 2 2003), Is instruction to fire employee because she is not “Hot Enough” Sex discrimination? Retrieved on 09/25/2018 From https://www.jacksonlewis.com/resources
- Harriet Agnew (June 29,2017) L’Oreal success story goes deep below the skin Retrieved on 09/25/2018 from https://www.ft.com/content/ad0ed0ca-5cae-11e7-9bc8-8055f264aa8b
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L’Oréal’s sustainability journey and the challenges it faces
On entering L’Oréal’s Benelux headquarters, located in Hoofddorp, the Netherlands, it is clear that going ‘green’ is definitely on the group’s mind. Among the strips of natural wood used throughout the building’s foundations, plants scale the interior leading down to a lobby where, on this occasion, various products from a selection of the company’s portfolio brands were suspended in large-scale ice cubes. The display was in reference to a presentation to the press held by the French cosmetics firm, which specifically centred around its relationship with water and what the substance had to do with its sustainability practices.
The topic of sustainability is not a new one to L’Oréal. The company, which owns the likes of Maybelline, Garnier and NYX Professional Makeup, has been tracking its CO2 emissions for over 20 years, most recently stating that it had reduced such emissions in its distribution centres by 91 percent since 2005. Now, the group is navigating some 17 commitments spanning biodiversity to raw materials to water consumption and, like other large conglomerates, reporting its achievements in various eco-targets annually. Its efforts have been drawn out in its ‘For the Future’ programme, launched in 2020 to address specific objectives, such as reducing all GHG emissions by 50 percent per product by 2030.
Water is also a central part of the strategy, and is woven into the fabric of all areas of the business, from the way it is used in the production process to how employees themselves consume it. During a presentation at the headquarters, Erik Troost, director of corporate communication, engagement and sustainability at L’Oréal, further emphasised the importance of reevaluating our relationship with H2O as a whole, while outlining a range of ways in which the group has done so itself. By 2030, for example, the company is aiming for 100 percent of the water used in its industrial process to be recycled and reused in a loop, while it is also striving for 100 percent of its strategic suppliers to use water sustainably where they operate.
L’Oréal views role as educational
Following the talk, FashionUnited sat down with Troost to get an insight into L’Oréal’s current position in integrating such practices and how he viewed its efforts so far. In his eyes, next to carrying out much of its initiatives among its own operations, Troost sees L’Oréal’s relationship with the consumer as a crucial element of how it does sustainable business. With shoppers, Troost views L’Oréal’s role as educational, where there is a particular emphasis on transparency and recognising the company’s responsibility to inform buyers on how to make more sustainable choices. His perception, and L’Oréal’s attempts to present its efforts more openly, reflects the increasing criticism placed on brands for not implementing enough eco-friendly values. At the same time. consumers' awareness of the differences between authentic communication and greenwashing – a term used to describe deceptive marketing practices when it comes to a company’s green claims – is becoming more evident, and many fashion brands have continued to come under scrutiny for their misleading practices.
Still, while commonly linked to the industry, greenwashing is not exclusive to fashion. It is also a continuing discussion in the beauty and cosmetics sector, and one that even L’Oréal has not been able to steer clear of. In June 2022, the company was among several beauty and personal care firms accused of committing greenwashing by the Changing Markets Foundation (CMF), after the organisation investigated various sustainability claims made on their products. According to CMF’s report, L’Oréal prominently featured the text “100 percent recycled plastic bottle” on an Elvive shampoo pack, despite the small print on the packaging stating that this statement only referenced the bottle and not the cap. Furthermore, the product itself was described as “more sustainable”, but CMF noted that there was no further information provided to support this claim, and therefore it was not a meaningful comparison to other products.
However, Troost purported that at L’Oréal there is an “ongoing development in communication” when it comes to sharing its sustainable policies with consumers. “We want to be transparent and tell our story in a legitimate way,” he noted. “We are showing progress, but sustainability is like a movie that constantly evolves.” Such evolution could be seen in its Garnier product line of no-rinse conditioners, which come in an Albéa-produced cardboard-based tube where detailed information on the product’s “eco-friendly” processes is displayed. Not only that, but the product itself is also designed to reduce consumers’ impact, with the leave-on factor estimated to save up to 100 litres of water per tube, according to L’Oréal. This also directly links into another goal in its ‘For the Future’ programme, in which it is looking to reduce consumers’ water consumption linked to the use of its products by 25 percent.
Sustainability’s complexity proves a challenge
While the move correlates with the company’s belief that consumers should be encouraged to take small steps in their own life, this principle is further extended to its expansive workforce. “More and more of our employees have sustainability as part of their jobs,” Troost said, adding that they are urged to consider this throughout their daily tasks and their personal lifestyle. “We want to engage our employees in this process and integrate these values into their job responsibilities, as well as in other areas of their life. Everyone has an impact and people have become curious about how they can contribute.”
Even with such a large conglomerate like L’Oréal, challenges surrounding the implementation of sustainable practices are still evident. In fact, the group’s vast scope, both in terms of region and portfolio, is often one of the hindrances when it comes to such moves. “Sustainability is complex,” Troost noted. “If you adjust one lever, such as water, it can possibly have an effect on another. There are a lot of factors to consider. We also need to consistently approach this area throughout the group so that all our brands follow through.”
One way L’Oréal is seemingly trying to overcome this obstacle is taking its efforts on a region-by-region basis. The company recently struck up a deal with China’s Alibaba through which the duo agreed to work together on promoting circularity in the country’s beauty industry. As part of the partnership, L’Oréal and Alibaba are looking to establish green and low-carbon standards to apply to new products and create measurable circular economy solutions that can be integrated into the market as a whole. The deal strives to cover various sectors, from logistics to marketing to consumer communications.
Another way the group has been attempting to overcome difficulties surrounding integration is through acquisitions and investments, an area that it has been leading in over recent months. L’Oréal has been snapping up manufacturers, distributors and brands, externally broadening its reach and extending its network in the area of sustainability. In March this year, the group became a founding investor in biotechnology firm Geno, which will provide L’Oréal brands with its platform to ferment plant sugars and produce sustainable surfactants for beauty products, taking it closer to its goal of offering 100 percent eco-designed formulas. A similar proposal was made when L’Oréal acquired a minority stake in Microphyt, a French firm developing low-carbon impact microalgae, a plant organism used in cosmetics.
Despite the struggles that may come with implementation, Troost remained positive about L’Oréal’s future when it comes to its eco-procedures, noting that despite difficulties, it would continue to invest in all aspects of sustainable development. “Being a commercial company allows us to develop, and as a big business we have a responsibility to do so,” Troost added. “We have an impact and we have to keep developing. Many often question this method and say that we as a society simply need to consume less, but I would argue that halts development. We need to address matters holistically, and produce products that contribute positively.”
- How fashion retailers are integrating beauty into their physical stores?
- Influencers can help people switch to sustainable living
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Example Of Essay On L’oréal Group
Type of paper: Essay
Topic: Business , Company , Products , Market , Customers , Brand , World , Development
Words: 2250
Published: 11/04/2021
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L’Oréal is one of the largest beauty and personal care manufacturing companies in the world. It was founded by Eugene Schueller in 1909 and grew into a well-known French public company that is a part of Euro Stoxx 50 market index. L’Oréal is headquartered in Clichy, Hauts-de-Seine and operates in more than 130 countries (L’Oréal Annual Report 2014). 78,600 people work at L’Oréal and the company owns 32 well-known brands and 501 patents (L’Oréal Annual Report 2014). According to the statistics portal Statista.com (2015), L’Oréal’s brand value equals to 23.36 billion US dollars. In 2014, L’Oréal’s sales equalled to 22.5 billion Euros. The sales can be divided in 4 categories: 7.7% - active cosmetics, 14.0% - professional products, 28.6% - L’Oréal Luxe and 49.7% - consumer products (L’Oréal Annual Report 2014). Some of the most famous brands that belong to L’Oréal include The Body Shop, Garnier, Maybelline, L’Oréal Paris, Vichy, Bioterm, Lancôme, etc (L’Oréal Annual Report 2014). Western Europe (35.5% of total sales) and Northern America (35.5%) are the key markets for the company. Asia and Pacific (24.9%), Latin America (21.1%), Eastern Europe 8.6%, Middle East (7.3%), and Africa (2.6%) are also important for L’Oréal (L’Oréal Annual Report 2014). The company is very pleased with the sales in the “new markets” that have been growing for several years in a row and in 2014 they equalled to 36.6% (L’Oréal Annual Report 2014). In general, L’Oréal operates in the market that is worth of $180 billion and with the annual growth rate of 3%. There are several strong companies such as Unilever (21.3% market share), Procter & Gamble (20.5%), Estee Lauder (10.4%) and Shiseido (7.77%). In 2014, L’Oréal was ahead of its rivals in terms of the market share that equalled to 30% (L’Oréal Annual Report 2014). The customer profile for L’Oréal’s products is difficult to define and depends on the business segment, the particular product and the geographic location. In general, L’Oréal targets the women that are 18-35 years old as the most important group of customers. There is also a wide range of products that is targeted at the people with middle and high incomes. What is more, the company always faces the global-local tension and therefore needs to build such a brand portfolio that would satisfy the customers in different regions of the world. For, example it has French (L’Oréal Paris, Lancôme), American (Maybelline, Kiehl’s), British (The Body Shop), Japanese brands (Shu Uemura), etc (Hong & Doz, 2013). The SWOT analysis of L’Oréal that will be presented further in this paper shows that L’Oréal has a very strong market position and is resilient to the changes in the global economy. There are a number of strengths that allow the company expand into the new foreign markets and react to the current market trends. At the same time, the company faces a number of challenges such as slower rates of economic growth, increased competition with the local companies, etc. that harm L’Oréal’s business operations and profitability. Strengths. L’Oréal has a relatively narrow portfolio of brands and focuses mainly in beauty and personal care in comparison with the key competitors Procter & Gamble and Unilever. A limited portfolio of brands allows the company to concentrate more on the innovation of the existing products. L’Oréal has a Research & Development team that develops the new products in order to stay atop of the market and attract the new customers (L’Oréal Annual Report 2014). Secondly, as it was written above L’Oréal operates in 130 countries. For that reason after adjusting its products to the local conditions and using the quality advertising, the company can attract the new customers and extend its market share. One of L’Oréal's key objectives is to boost its customer base up to 2 billion people by 2020-2025 (L’Oréal Annual Report 2014). In order to accomplish such an ambitious aim, the French company has been trying to boost sales first and foremost in the emerging countries. The new markets that include China and India are of the highest importance for the company. Thirdly, L’Oréal is strong in using the premium and mass brands for maximizing the profits. In addition, the company has a range of products with a large number of variations. For example, L’Oréal offers approximately 15 variations in the category of the shampoo, and conditioners. The existing range of products helps the company to build a large customer base and use the product differentiation for the profit maximization. Weaknesses. The cosmetic industry is extremely dynamic and competitive. Therefore the products need to be regularly upgraded or modified due to the changes in customer preferences. L’Oréal has to invest a lot into keeping their customers loyal and satisfied with the quality of the products. Moreover, there are a large number of competitors that are ready to turn away L’Oréal’s customers. In addition to the companies that were mentioned above, there are local and small international companies that offer their products at lower prices or that correspond better to the customers’ preferences. So, despite owning some well-known brands with strong identity, the competition is very fierce for L’Oréal. Opportunities. One of the biggest opportunities that L’Oréal would like to use in order to keep the profits at high levels is supply of the organic products. People are more conscious about their health and lifestyles then before. Therefore they pay attention to the quality of the cosmetic products that they would like to buy. L’Oréal has already acquired The Body Shop which is a brand that is well-known for its organic products and expects to outperform the competitors that sell similar products. Successful expansion thanks to the global brand recognition can help L’Oréal attract the new loyal customers around the world. This opportunity is especially important at the economically challenging times. Consumption in Africa, Middle East, Eastern Europe, Latin America and Asia, Pacific will be growing more actively than consumption in the countries of Western Europe and Northern America. L’Oréal has been observing the growth of the cosmetics market that is driven by the emergence of the middle classes in the new markets (L’Oréal Annual Report 2014). In the short-term and long-term L’Oréal will be paying more attention to the business operations in such countries as China, Brazil, India, etc. Threats. Economic development has slowed down in Europe, Brazil and China that are important markets for L’Oréal. Sales of cosmetic products usually depend on the purchasing power of the customers. Therefore if there is an economic and financial crisis, L’Oréal will fail to reach their strategic goals in various regions of the world. For example, when the global economic crisis occurred in 2008, the company was unable to maintain high levels of sales in the USA, France, Spain and other developed countries (L’Oréal Annual Report 2008). Another threat for L’Oréal is the changes in the consumer preferences that are difficult to predict. For example, by buying The Body Shop, L’Oréal damaged the brand’s credibility. There was much criticism about this deal and the French company had to invest a lot of resources into the promotion of The Body Shop in order to maintain and increase the customer base. So each strategic acquisition of the local brands or unique international brands represents a threat for L’Oréal. Challenges. From the above SWOT analysis it becomes clear that L’Oréal’s profitability depends on a large number of external factors. Nowadays L’Oréal is interested in selling its products in the countries that have positive economic growth. Therefore, such factors as political instability or social unrest may have a very negative influence on L’Oréal’s sales. What is more, L’Oréal needs to pay much attention to the cultural, social and psychological factors that influence the consumer behaviour in different parts of the world. The standards of beauty are different from country to country, and L’Oréal needs to conduct the market research on a regular basis to be familiar with the peculiarities of the consumer behaviour. For example, nails, hair, and body are the most important elements of beauty for the Brazilian women, and they are eager to spend much money on the cosmetic products. In turn, the Chinese women have different values and do not buy as many cosmetic products as the Brazilian women (L’Oréal, 2015). Another example is the use of hair gels and sprays. In Mexico, men prefer to buy hair gels and in fact they buy gels more often than women. On the contrary, in Germany, which has a very mature economy, men prefer to use hair sprays and use them in 12 different ways (L’Oréal, 2015). Nowadays one of the main challenges for L’Oréal is to adapt its products and business models to the local conditions. In order to be more effective, L’Oréal involves the employees with multicultural backgrounds. As the result, L’Oréal has become a global company where the multicultural executives are responsible for the accomplishment of the company’s goals (Hong & Doz, 2013). Finally, L’Oréal’s possible unethical practices are sometimes brought to the public and the company needs to prove the opposite. In the past years, the company denied testing its products on animals and using the misleading advertising. Moreover, every year L’Oréal publishes the Progress Report in which one can read about the company’s activity targeted at reduction of the environmental footprint and promotion of sustainable innovation and production. For instance, the company has been trying to reduce the use of palm oil in the production and to cut the CO2-emmisions by using renewable energy and optimizing transportation (Progress Report, 2014). Nevertheless, the business activity in accordance with the principles of sustainable development will certainly be a challenge for L’Oréal in the future, because the company has set up a goal of increasing the number of customers by one billion people by 2020-2025. In conclusion, L’Oréal is one of the best-known French companies in the world. This company is a market leader in the beauty and personal care industry and was able to implement a business strategy that led to the expansion overseas. In the developed countries with high incomes, L’Oréal relies on the value addition and launches of the new products across the broad pricing range. The USA and Europe remain to be the key markets for L’Oréal. In the developing markets, L’Oréal’s strategy is dependent on various market conditions. In most countries, including China, L’Oréal has been increasing sales in the premium and mass markets. The global brand recognition and the balanced brand portfolio help the French company to be successful in both developed and developing markets. However, there are some challenges that L’Oréal needs to address more actively. They include the company’s image, focusing on the cultural differences and being able to work in the volatile economic conditions.
Hong, H., Doz, Y. (June, 2013). L’Oréal Masters Multiculturalism. Harvard Business Review. [Online] Available from https://hbr.org/2013/06/loreal-masters- Multiculturalism [Accessed: 2 January 2016] L’Oréal. (2015). A World-wide Approach to Beauty Rituals. [Online] Available from http://www.loreal.com/research-and-innovation/when-the-diversity-of-types-of- beauty-inspires-science/a-world-wide-approach-to-beauty-rituals [Accessed: 2 L’Oréal. (2009). L’Oréal Annual Report 2008. [Online] Available from http://www.loreal- finance.com/_docs/fichiers_contenu/0000000466/2008_Oreal_full_year_results_1602 09.pdf [Accessed: 2 January 2016] L’Oréal. (2015). Progress Report 2014 – Sharing Beauty with All. [Online] Available from http://www.sharingbeautywithall.com/sites/default/files/cms/loreal-ra2014-en_03a.pdf [Accessed: 2 January 2016] L’Oréal. (2015). L’Oréal Annual Report 2014. [Online] Available from http://www.loreal- finance.com/_docs/0000000035/RA2014_Web_VGB_10042015_liens.pdf [Accessed: 2 January 2016] Statista Portal. (2015). Statistics and facts on L'Oréal. [Online] Available from http://www.statista.com/topics/1544/loreal/ [Accessed: 2 January 2016]
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