International Strategic Management - L'Oreal

Résumé du document

Owing to the saturation of domestic markets and the intensification of competition, companies are forced to internationalize their operations by exploiting new markets not just to survive but also to grow (Souvik Dhar, 2006). Different strategies have to be adopted according to the consumer. Many authors claim that if a company wants to be successful during the twenty-first century, it will have to be a competitive force in the global market (Hax, 1989).

Furthermore, Cavusgil and Zou (1994) argued that a good global strategy leads to good performance in the global market. In this essay, we will discuss about L'Oreal's international strategic management. Hence, this paper will focus on the following question: What are the factors leading L'Oreal to its success?

We will first conduct an overview of L'Oreal, following which we will analyze its industry, environment and global strategy. We will conclude with recommendations on how it can improve its strategy.

L'Oreal, world leader of the cosmetics market, was created in 1909 by Eugene Schueller, a chemist, who originally sold his own formulations to Parisian hairdressing salons. Today, L'Oreal is one of the biggest companies of cosmetics in the world. It is present in over 130 countries where it produces and sells make-up, perfume, hair and skin care products under 23 global brands. Its products are divided into three branches: cosmetics, body care and dermatology. In 1999, its turnover was 10,751 million euros and increased by 62% over 10 years to reach 17,473 million euros in 2009. Nevertheless, we can notice that the group's turnover decreased by 1% from 2008 to 2009. Its two major markets are Western Europe and North America which accounts for 66.7 % of the global turnover.

L'Oreal's industry is that of perfumes and cosmetics which belongs to the consumer goods category. This industry is very lucrative and the company revenues in the world cosmetics industry have doubled in 15 years reaching 124 billion dollars in 2006 (Bleu Lavande, 2007). In 2006, the cosmetic market increased by 4.8 %. This industry is marketing intensive and competitive and is growing quickly and constantly because it is not influenced by the economic cycles.

Nevertheless, this growth is not homogeneous and the emergent markets like Asia, Eastern Europe and Latin American have contributed to 60% of the world growth whereas traditional markets have slowed down (L'Oreal Finance, 2007).Despite this slowing down, we can notice that Unilever, Procter&Gamble, Estee Lauder and Colgate-Palmolive have managed to increase their turnover from 8 to 13% (Le Monde, 2010).

According to Yip (1995, p.27), it is possible to identify the globalization drivers of an industry with four drivers because they compose the "underlying conditions in each industry that create the potential for using global strategy". These competitive drivers are markets, costs and government.

The market drivers include customers, distribution channels, marketing techniques and presence in leading countries. We can notice that in the cosmetics market, L'Oreal sells nearly the same products in each country because it buys a local company and launches it internationally and so there are global consumers with the same needs. This shows that culture and environment do not really influence the customer for this industry as it pertains to consumer goods.

Tags: L'Oreal international strategy, globalization,expansion strategy, brand portfolio

Extraits

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[...] L'Oréal has the will to innovate in order to stay the best too. COMPETITORS Here are the main competitors of the cosmetics market with their different brands, price policies and their level of diversification RECOMMENDATIONS The L'Oréal group can increase it's competitively by focusing on three on three main points: The first is developing the senior and men segments on the mature markets; indeed, if L'Oréal wants to stay competitive on the mature markets, it has to adapt to the new trends which are men products; that could permit L'Oréal to gain market shares. [...]

[...] In the cosmetics market, companies have to deal with high Research and development costs and so try to make scale economies to maximize their profits and being more competitive. The government drivers also influence globalisation; indeed, some governments want their companies to expand in new countries by a regulation or a policy which will help the firm to penetrate a new market. A government can also protect its country from globalisation by implementing new regulations or barriers. The competitive drivers lead a company to the globalization because it saturates a market; indeed, if the competition is too high in a country, firms will try to penetrate another country where there is less competition. [...]

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