LOreal SWOT Analysis Essay

LOreal SWOT Analysis Essay Prior to the establishment facial cosmetics, LOreal can be identified as a hair-colour formula which has been introduced by a French chemist known as Eugene Schueller in 1907. At this time it was called Aureole. Schueller brought and idea of manufacturing it on its his own products which were later taken to Parisian markets hairdressers to be sold. It was only in 1909 that Schueller registered his company as Societal Franà §oise de Teintures Inoffensive pour Cheveus,the future LOreal. Scheuller started to export his products, which was then limited to hair-colouring products. There were 3 chemists employed in 1920. In 1950, the research teams increased to 100 and reached 1,000 by 1984. Today, research teams are numbered to 2,000 and are still expected to increase in the near future. Through agents and consignments, Scheuller further distributed his products in the United States of America, South America, Russia and the Far East. The LOreal Group is present worldwide through its subs idiaries and agents. LOreal started to expand its products from hair-colour to other cleansing and beauty products. The LOreal Group today markets over 500 brands and more than 2,000 products in the various sectors of the beauty business. Such includes hair colours, permanents, styling aids, body and skincare, cleansers and fragrances. Indeed, the LOreal Group have reached the peak that all cosmetic brands sought after and also identified many factors that can contribute to the success of the Company. In the early 1980s LOreal achieved high level of global of distribution which was barely in the sights of its senior managers. Since LOreal was known to be Frances leading beauty company, it was international presence was so limited that many believed and had a conception of Parisian beauty as being expensive and high culture. The image of LOreal brands at the time e.g. Lancà ´me in cosmetics and LOreal professional in hair care limited the company ability to expand into international markets. When a person is infected the infection could be coming from inside the body or outside, similar to the organization where by some of the decision/changes being made are being influenced by factors outside the company and sometimes its hard to resist them. Non exceptional LOreal is one of the organizations being subjected to these factors. The factors can be put in one word SWOT (Strengths, weakness, opportunities and threats factors) (http://loreal.exteen.com) Internal Influences (S)trengths The on going success of the LOreal Group is without if not for the ingenuity of the concept of their vision as a team. LOreal Chairman and CEO Lindsay Owen-Jones consider passion as the key to the well-renowned accomplishment of the said Company. The primary strength of the Company is the continuing research and innovation in the interest of beauty which assures that the LOreal Cosmetics offers the best to their consumers. Their dedication to their continuous research makes them the leader in the growing cosmetics industry despite the competition in the market. On the other hand the LOreal group also had of Strength of developing activities in the field of cosmetics as well as in the dermatological and pharmaceutical fields in order to enhance and put more concentration in their particular activities. The cosmetics activities of LOreal are divided in to three groups. First is the Consumer Product Division which encompasses all the brands distributed through mass-market channels, ensuring that LOreal quality is available to the maximum number of the consumers. The Luxury Products Division includes the prestigious international brands selectively distributed through perfumeries, department stores and duty-free shops. The Professional Products Division offers specific hair care products for use by professional hairdressers and products sold exclusively through hair salons. The Active Cosmetics Department creates and markets products for selective distribution through pharmacies and specialist health and beauty outlets. The LOreal Groups dermat ological activities are linked with Galderma, which is basically a dermatological firm that contributes to the innovation of the LOreal Groups products. The pharmaceutical activities of LOreal are also handled by Sanofi-Aventis. These divisions and subdivisions ensure the quality that the LOreal Group offers to its customers. To further add to the enumerated strengths of the company, LOreals advertising strategy also plays a major part to its growth. Through adapting to the culture of their target market as the main tool of their advertisement, the Company brought LOreal products within reach of other women from different parts of the world. (http://loreal.exteen.com) (W)eaknesses Perhaps one of the weaknesses that a big company faces is the decentralized organizational structure. This is also part of the difficulties that LOreal is facing. Due to the many subdivisions of the Company, there is also the difficulty in the control of LOreal. This slows down the production of the Company because of the need of giving reference to the other Board members and directors of the Company. LOreal will also have a difficulty in finding out what division is accountable for the possible pitfalls of the Company. Another weakness that LOreal faces is their profit. The profit margin of LOreal is comparably low than that of the other smaller rivals. While LOreal projects certain rise in digits as their profit, the result does not usually meet the expectations (Sang, 2003). Perhaps, this is also due to the high-end advertising and marketing as well as the width of the Company. Also the coordination and the control of the activities and image in the worldwide market are also view ed as a weakness in the part of LOreal. Due to its worldwide marketing strategy, there are also dissimilarities brought about in the campaign of LOreal products as to what iMac. (http://loreal.exteen.com) External Influences (O)pportunities The LOreal Company concentrates on cosmetic products that enhance women of all ages. The growing demand for beauty products gives LOreal the opportunity to focus in their field of specialization, particularly on hair styling and colour, skincare, cosmetics and perfumeries. Being the leading cosmetic brand gives them the edge for their well-known image. Opportunity also emanates from their growing market that ranges from the affluent, the aging and also the masses of the developed countries. Another opportunity that LOreal must take advantage of is their greater market share because of the numerous patents registered by the Company. This enables them to have the top of the line products only to their name and therefore would lead costumers only to them for they could not find any of the said cosmetics in other brands. (http://loreal.exteen.com) (T)hreat A threat to the LOreal group is also the growing competition within the field of cosmetic brands. Due to the on going addition to the field of cosmetics, there is still the danger that other brands could surpass the profit of LOreal. Another threat to the Company is the economic downturn that is quite evident in other countries. Such could thus hurt the possibility of higher profit for the company. Most products of LOreal are within the reach of the citizens of developed countries, but LOreal may have problems reaching out even to the average people from the underdeveloped countries. Also a threat to the LOreal Group is the spending habits of consumer and the economic crunch that most countries are experiencing as of present. While the LOreal Group may be producing the best of its line, people may find that their products are not of their basic needs and would skip buying LOreal products. However, with the growth of the market, the damage could be far from taking place. Another signi ficant threat that LOreal faced was competing against leading U.S beauty makers. In the professional division, Clairol was the leading U.S hair colour brand, with 70% share of the U.S market. Although hair colouring was LOreals strength, it was the firms original and most profitable product line. Hair colour was the really the business they were fighting to get in, but Clairol seemed unbeatable. (http://loreal.exteen.com) Task 2 How globalisation influences policies and decisions making in LOreal When the Red ken managers initially launched new products independently of LOreals corporate headquarters in New York city, several of these post acquisition launches were unsuccessful. The Red ken brand management was later relocated to LOreal U.S corporate headquarters in New York City where it was rebranded Red ken 5th Avenue NYC. The Red ken acquisition triggered a reassement of LOreal entire hair care division where the senior managers realized that they needed a division focused entirely on sales to salons and hairdressers because the U.S professional market was unlike the professional market in Europe where a mid luxury hair care products were sold in department stores. By contrast, most of the mid to luxury hair care sales products in the U.S were sold in salons and other American speciality beauty supply stores. Since Salon sales had a larger profit margin than mass market hair care products, the sales eventually in professional division made up a third of all LOreal hair ca re sales. And the managers realized that Red ken had a global potential as an American brand of American origin. Since every country has its own way of lifestyle on how they perceive things, the LOreal management team has to consider some issues on their policies before making their decisions. Like in the case above , the Red ken is American brand that has it own way of selling in the market unlike in Europe , the LOreal managers therefore , has to do how the products is perceived in making American market compared to European . Its here that we find how the senior managers changed their policy and make a decision to suit how the product is liked in that particular market. Evaluating the effectiveness of LOreal response to globalisation. While LOreal was enjoying its 19th consecutive year of double digit growth in 2004, it had become an international beauty products that was focusing almost exclusively on the manufacturing , developing and sale nine of French , six American one Italian ( Giorgio Armani perfume) , one Chinese( Yue-sai acquired in 2004) and one Japanese brand ( Shu Uemera acquired in 2001) . Its organizational structure, marketing, strategy, and culture were all oriented to the fast growing global personal care market. According to Owen Jones , LOreal s U.S brands were a significant component of the whole orientation and they recognized that they wanted to be a truly global company that they would like to promote around the world American brands because it was the other great alternative in the beauty industry. However , the did something that was basically unthinkable for most multinational companies since they didnt just stopped having local brands rather they tried to put their brand everywhere as s ell United States to Americans , the United States to Chinese, Italian elegance to the Japanese , French beauty to Africans , and Japanese chic to Brazilians and many others. At the time when the Maybelline was acquiring the market, it had lost the focus as many of the analysts and watchers said. Two years before the acquisition, Maybelline branched out into the lucrative anti-aging cosmetics market with its Revitalizing brand. Revlon quickly responded with aggressive and well capitalized advertising campaign for its age -defying brand, overwhelming Maybellines poorly preforming revitalizing. It is here that the brand managers decided to drop for a brief time one of Maybellines most famous tagline when they realized the Maybelline is losing focus again. During the research, they found that the other competing brands had unique positions within the market place but consumers were unable to define what Maybelline was. It was sort of sleepy almost a stale brand because it seems most the consumers get confused about the brand and start putting it and mentioning in a different way. Maybelline to some individuals meant mothers pink nail polish, since the mangers got some comments about pink and green Great Lash mascara which they wanted to point out that they were proud of that day because its leading mascara in the world. The international potential of Maybelline was perhaps just as compelling as its domestic potential which has incredibly powerful value as its an American brand which corresponded to the idea that in America girls are so well made up, and therefore, the idea of perfection coming from America. This had a big appeal with young people all over the world. LOreal promoted close relationship between Research and development and international brand teams when the Garnier managers decided that the brand needed a fruit based shampoo for the European consumer market and they worked closely with LOreal European scientists , who realized that fructose , a type of sugar common in fruit , strengthens hair Japans fast growing wet lipstick market . Not only these but also the Maybelline global brand team built on water shines success in Japan creating water shine Diamonds a lipstick that contained small microscopic glass beads coated with silver and the international brand teams were responsible for not only developing new products but also ensuring the integrity of a given brands positioning . With international brand teams based in the brands home country, the teams global product plans were skewed toward the needs of the country. In the U.S market are sometimes easily influenced by the fact that the U.S market is so large that the managers hav e to put some extra cautious to ensure that global plans are compatible wit other markets a cross the world and not just U.S but also when creating the plans of the other regional offices execute and by sustaining a consistent brand positioning in a far-flung markets was at times a challenge that they had a U.S brand in Japan that allowed to get away from the global marketing plan where the advertisement and promotions were oriented more to Japanese market rather than the brands global message which involved democracy, independence and freedom . They had too much local adaptation and maintaining the brand message in every country. LOreals strategy focused on internal growth, disciplined global marketing continuous product innovation, creating a strong presence in every distribution channel of each product division all over the world and acquiring an important role in expanding LOreals product portfolio and generating revenue growth.