L’oréal : strategy

L’Oréal

Number one for many decades in the highly competitive cosmetic industry, L’Oréal which in a way manages to be everywhere and that everybody knows, is able to keep in the shadow the ingredients of its success.
How this small familial French company managed to attain this leadership? What are the key elements of its strategy? We will discover that thanks to what some called their “Ninjamentality”, very focused, very strategic, no wasted efforts, and a to strong and unique managerial and marketing capabilities combined to a dedication to innovation, the glamorous company is likely to keep being envied.

COmpany Profile
L’Oréal’s story starts in 1909 with the production of the first synthetic hair dyes by the French chemist Eugène Schueller. But the company soon expanded itsproduct range and operations to many other countries to finally become a France-based international cosmetics giant operating in 130 countries with more than 23 brands.

We will try to get and understanding of the strategy of L’Oréal based on the 4 elements that composes it, using its mission and vision as a good starting point.

MISSION : « To make beauty universal »

VISION :L’Oréal believes in a complete overturn of the cosmetic market towards the
emerging countries in the following years.

GOAL : L’Oréal is willing to double its number of customers within the next 10 years.
(Cf. Official statement by Jean Paul Agon in February 2010)

SCOPE : To accomplish such a long-term goal it will strive « to offer populations all over the world products attuned totheir needs, their cultures and their aspirations »
Indeed L’Oréal comprises three business segments:

Cosmetics segment (93.3% of the total revenues in 2008) it includes :
Professional products : Hair care products to hairdressers, using or selling these products in their salons. It comprises four brands: L’Oreal Professionnel, Kerastase, Redken, Matrix and Mizani
Consumer products : soldthrough mass-market retailing channels, they include includes hair care, skin care, make-up and perfume products. The leading brands are L’Oreal Paris, Garnier, Maybelline New York, and Softsheen-Carson.
Luxury products : premium products and services sold through select retail outlets, including skincare, make-up and fragrances. The leading brands are Lancôme, Helena Rubinstein, Biotherm, ShuUemura, and Kiehl’s but also perfume brands such as Giorgio Armani, Ralph Lauren, Cacharel,…
Active cosmetics : dermo-cosmetic skin care products sold through pharmacies and specialist retailers. The leading brands are Vichy, La Roche-Posay, Inneov and Skinceuticals.

Body Shop segment operates a chain of cosmetic stores specialized in skin and hair care products made from natural ingredients.(2,550 stores in 62 countries worldwide)

dermatology segment including dermatological and pharmaceutical activities.
Galderma Laboratories, a joint venture with Nestle, specializes in skin diseases and infections (Gaderma has 3 of the top 25 best selling drugs in dermatology)

To understand the 3rd element of the strategy of L’Oréal, its competitive advantage, we need to first understand thefirm’s context in which it is rooted.
EXTERNAL CONTEXT

In order to understand the external context of L’Oréal, we will look at the elements that shape the PIE of the Personal care industry, and how it is divided.
We will then integrate L’Oréal in this context, explaining its particular value chain, and the part of the overall PIE it can capture.

Dynamics of the PIE

Industry demand :DEMOGRAPHY : Obviously the continuous increase in world population led to an increase in demand. Moreover demand of some specific products has been rising due to some demographic trends : anti-aging skin care due to the aging of the baby-boomer generation.

GDP : An increase in GDP and in purchasing power led to an increase in demand.
It seems that in times of economic distress women…