SWOT Analysis L'Oreal

posted on 05 Aug 2008 17:43 by loreal

 Introductio

        
        Many cosmetic brands are popping up recently, perhaps, due  to  the increasing consumers of products that beautify and enhance the physical appearance of a person. Even though the market is already full of the said cosmetic brands, the company L’Oreal Groups could still be considered as the leading supplier of cosmetics and hair-color. This studyis a brief overview of the marketing concepts and strategy of the said company. The company profile will be presented to be able to give a clearview of the market to which the company belongs to. An internal and external (SWOT) analysis of the company will also be provided inthis paper. Another area will bespecificallydevoted to the implementation of the marketing strategy of the company as well as the ethicalissues raised by these marketing strategies

 

Company Profile

          Before the facial cosmetics, L’Oreal was known as a hair-colorformula developed by French chemist Eugene Schueller in 1907. It was then known as"Aureole". Schueller formulated and manufactured his own productswhich were sold to Parisian hairdressers. It was only in 1909 that Schuellerregistered his company as "Societe Francaise de Teintures Inoffensives pour Cheveus,"the future L’Oreal. Scheuller began exporting his products, which was then limited to hair-coloring 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 L’Oreal Group is present worldwide through its subsidiaries and agents. L’Oreal started to expand its products from hair-color to other cleansing and beauty products. The L’Oreal Group today markets over 500 brands and more than 2,000 products in the various sectors of the beauty business. Such includes hair colors, permanents, styling aids, body and skincare, cleansers and fragrances. Indeed, the L’Oreal Group have reached the peak that all cosmetic brands sought after. Many factors contribute to the success of the Company. These will be discussed further in the proceeding parts of this study.

 

L’Oreal SWOT Analysis

 

A. Internal Analysis

1. Strengths 
          The ongoing success of the L’Oreal Group is without if not for the ingenuity of the concept of their vision as a team. L’Oreal Chairman and CEO Lindsay Owen-Jones considers 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 L’Oreal 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.

          Another strength of the L’Oreal Groups is the developed activities in the field of cosmetics as well as in the dermatological and pharmaceutical fields in order to put more concentration in their particular activities. The cosmetics activities of L’Oreal are divided to five groups. First is the Consumer Product Division which encompasses all the brands distributed through mass-market channels, ensuring that L’Oreal quality is available to the maximum number of 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 haircare 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 L’Oreal Group’s dermatological activities are linked with Galderma, which is basically a dermatological firm that contributes to the innovation of the L’Oreal Group’s products. The pharmaceutical activities of L’Oreal are also handled by Sanofi-Aventis. These divisions and subdivisions ensure the quality that the L’Oreal Group offers to its customers. To further add to the enumerated strengths of the company, L’Oreal’s 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 L’Oreal products within reach of other women from different parts of the world.

2. Weaknesses

         Perhaps one of the weaknesses that a big company faces is the decentralized organizational structure. This is also part of the difficulties that L’Oreal is facing. Due to the many subdivisions of the Company, there is also the difficulty in the control of L’Oreal. 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. L’Oreal will also have a difficulty in finding out what division is accountable for the possible pitfalls of the Company. Another weakness that L’Oreal faces is their profit. The profit margin of L’Oreal is comparably low than that of the other smaller rivals. While L’Oreal 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. Finally, the coordination and the control of the activities and image in the worldwide market are also viewed as a weakness in the part of L’Oreal. Due to its worldwide marketing strategy, there are also dissimilarities brought about in the campaign of L’Oreal products as to what image they are to project.

 

B. External Analysis

1. Opportunities
          The L’Oreal Company concentrates on cosmetic products that enhance women of all ages. The growing demand for beauty products gives L’Oreal the opportunity to focus in their field of specialization, particularly on hair styling and color, 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 L’Oreal 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.

2. Threats

        A threat to the L’Oreal group is also the growing competition within the field of cosmetic brands. Due to the ongoing addition to the field of cosmetics, there is still the danger that other brands could surpass the profit of L’Oreal. 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 L’Oreal are within the reach of the citizens of developed countries, but L’Oreal may have problems reaching out even to the average people from the underdeveloped countries. Also a threat to the L’Oreal Group is the spending habits of consumer and the economic crunch that most countries are experiencing as of present. While the L’Oreal 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 L’Oreal products. However, with the growth of the market, the damage could be far from taking place.

 

Company Marketing Strategies

 A. Customer Satisfaction (Product; Price)

          The L’Oreal Group is known for their continuous innovation in order to improve the quality of their products and the services they have to offer to their consumers. Part of their strategic plan is to cater to the best interest of their costumers, in other words, costumer satisfaction. Through giving a wide variety of products, consumers have a whole gamut of products and services that they can choose from and which best serves their preference. The range of their prices caters to the demands of women, from the younger ones to the aging, from the affluent to those with lower budget for cosmetic products. Through constant research and passion for innovation, the L’Oreal Group best caters to the demands of women of different cultures. The Company also sees to it that they know the latest trend, or better yet, set the trend in the market as to attract more consumers.

B. Control of the Company
     A very vital aspect in the success of a company is how their leaders handle and run the business. In fact, the L’Oreal Group is very particular in the governance of the Company. The Board directors and the Board members are well aware of all of their duties required by their respective functions and of their collective mission, for it is in their hands that the Company’s future depends on. The Board members are also obliged to act with due care and attention to their duties in order to carry out their responsibilities. Also expected from the Board is the strategic orientation of the control and correct running of the Company. Any transaction of the Board Members may directly affect the L’Oreal groups and so they are expected to act according to what’s expected of them.

C. Worldwide Marketing (Place of Distribution; Promotion)

          Part of the L’Oreal Group’s strategic plan is the marketing of their products worldwide. From the bloom of L’Oreal during its primary stage, the Company already catered to the demands of women worldwide. In line with this, they are also well aware of the diversities of women around the world. Part of this strategy is to formulate products that suit other women from other parts of the world. Through research and development of their products, the L’Oreal group has already covered most parts of the globe and still got high approval ratings from their clients. Just recently, the L’Oreal Groups received the Diversity Best Practices 2004 Global Leadership Award for embracing diversity, not only in their employees, but also in their consumers (Anonymous, 2004). The Company’s taking consideration of women of color is especially appreciated by its consumers for they are also being given the chance to enhance their features and embrace their diversity without having to conform with the traditional concept of beauty, particularly that of the white Caucasian women. The L’Oreal Group also has employees who are considered minorities, such as the women and people of color. Valuing of the people’s culture and ideas is important to the L’Oreal Group, in order to best serve the interest of the consumers, the employees and the Company.

D. Impeccable Advertising (Promotion)

          During the early days of advertising, L’Oreal commissioned promotional posters from various graphic artists to publicize the Company’s products. The 1950s brought about a new advertising medium, particularly the movies. L’Oreal made its on-screen debut during this period and in 1953 won an award advertising Oscar, the first in a long series of awards. Today, L’Oreal takes on actresses or different personalities of all ages that best exudes the vision of the Company. Famous personalities enable average individuals to relate to their personal lives, that they can look as good, and so ensures higher sales.

 

Ethical Issues
     There are two ethical issues that will be the particular concern of this analysis. The first to be addressed is the advertisements and promotion of the L’Oreal Group using the image of the traditionally beautiful women. The issue here is whether or not the advertisements of L’Oreal groups, while it does attract many consumers, affect the purchaser’s view of beauty and what he/she must do to achieve this level of beauty. Blair (1994) stated that in the context of advertising, the female viewer is continually forced to look at herself through traditionally male eyes, to fit her personal history and her body into that money-making construct known as "woman." An analysis of advertisements for and about women shows that femininity continues to be one of consumer capitalism's most marketable commodities, selling as well as cars, cigarettes, and alcohol, though certainly the image of the female body is used to sell these products as well. The more beautiful the woman is, the more people will respond to the ad. There is greater possibility that a female consumer will respond to an ad with an attractive model because, as mentioned earlier, the belief that at some point she will achieve the same glowing skin or flawless complexion just like the celebrity or model in the ad. The ad then serves as an image of the positive response to her beauty, most especially by the opposite sex. Through achieving a beautiful physical appearance, just like the advertisement, women will gain more love, respect and power. This poses as a possible problem for the L’Oreal Group. While it is inevitable that the Company use the concept of the beautiful women, they should also start thinking about being more ethically responsible for what they are coming up with. Perhaps, this is shown in one of their ads where they depicted women of all age to pose for their products. From this view,L’Oreal could be said to be making effort in defying the concept of beauty as young, instead conceptualizing beauty as ageless. It would thus be helpful to quote Moore (2004) as a reminder to advertisers: "Advertising is not just about the things we buy. It’s how we feel about things, including ourselves. That’s what makes it interesting." Also, L’Oreal makes an effort to avoid common view on women by awarding women in the field of science. Five women were awarded by L’Oreal-UNESCO for Women in Science Awards whose distinguished careers in the material sciences have contributed greatly to advancing our understanding of the world and how it works. L’Oreal’s shot on giving women more place in the field dominated by men is clearly an effort on their part to change the image of women as more than objects of beauty. Another ethical issue that may be raised is on animal testing. Despite high regard for quality, L’Oreal is the fifth to cosmetics company that has decided to halt animal experimentation. It ceased this practice in October 1993 (Emert, 1994). L'Oreal abandoned animal testing after four years of letter-writing, demonstrations and advertisements aimed at the company. People for Ethical Treatment of Animals (PETA) is locked in quiet negotiations with a number of companies that may be rethinking their testing policies since Paris-based cosmetics giant L'Oreal agreed to an animal test ban in October. This shows the influence of L’Oreal on the ethical decision of other companies. Also, the L’Oreal Group’s decision would uplift their image and even attract more consumers. Perhaps, L’Oreal has indeed been a successful company. There are a few fall backs that have been mentioned such as the low profit margins, a decentralized organizational structure and even the growing competition in the cosmetic market. L’Oreal must then place more effort in being able to reach out to their consumers. The Company has shown endurance and perhaps it would be risky but rewarding to try a more diverse approach in their advertising, showing real women in their promotions. Also, it would be helpful to widen their advocacies for the minorities and oppressed group of people.

 

Reference

Aftalion, Fred (1991) A History of the International Chemical Industry. Philadelphia: University of           Pennsylvania Press.

Anonymous (2004) L'Oreal Receives Diversity Best Practices 2004 Global CEO Leadership Award;           L'Oreal First-Ever Global Company Named. Available online           (http://www.diversitybestpractices.com/) Accessed on (01/04/2005)

Blair, Kristine (1994) Selling the Self: Women and the Feminine Seduction of Advertising. Women and           Language, 17 (1), 20+.

Emert, Carol (1994) PETA gets second wind in its battle with beauty (People for The Ethical           Treatment of Animals) (Power Surge Supplement) WWD, 4 March 1994.

Moore, Chris (2004) Ethics in Advertising. Available online (http://www.aef.com)

Moskowitz, Howard and Barbara Itty (2003) Jumpstarting Product Development: Competitive Analysis           and Conjoint Measurement in the Cosmetic Industry. Journal of Advertising Research, 43. (1),           62+.

Sang, James (2003) European Shares Close Mostly Lower After Weak U.S. Data. Available online           (http://www.thomsonfinancialcarson.com.) Accessed on (01/04/2005)

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