Loreal Strategic Analysis free essay sample

L’Oreal then regains this investment through the sales of its new globally launched products. This core competency is cstly for competitors to imitate and adds a lot of value. This focus on innovation ensures growth and helps L’oreal to have a huge competitive edge over its domestic rivals. Another part of Loreal’s core competencies can be seen in L’oreal’s marketing campaign. By using high profile celebrities in it’s ad campaigns, L’oreal is able to greatly enhance its global image and is able to differentiate it’s products and brand name through the use of a celebrity face. This marketing technique gives L’oreal high brand esteem and gives L’oreal a valuable advantage over it;s competitors. Exclusive contracts with these celebrities gives L’oreal a non-substitutable competitive advantage. In addition, L’oreal uses web-enabled information and customization sites which further adds to it’s portfolio. We will write a custom essay sample on Loreal Strategic Analysis or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page At the heart of L’Oreal’s core competencies is the level of diversification of it’s products. By offering several product lines including makeup, perfume, hair and skin products, L’oreal has created a big global brand name, which in turn, helps L’oreal to have superior brand recognition and esteem over competitors. L’Oreal’s strategy is to create unique products that catered to the beauty needs of different ethnic groups and to each gender. This allows L’oreal to diversify it’s product selection and reduced the risk to the company in that it did not have to rely on a small group of products for success. These core competencies allowed the L’Oreal group the capacity to offer over 500 brands, consisting of over 2,000 products, permitting them to market to more potential customers over a larger range of income levels and cultures than any other competitor in the world. Competitive Advantage †¢They cater to the beauty needs of many different ethnic groups all over the world. Different cultures have different beauty needs. Their products differ from county to country, catering to the specific needs of the people in the geographic location they are sell in. â€Å"L’Oreal sees the world as a mosaic of different cultures† (L’Oreal Bus. Strat. Case). This strategy is why their products are very popular and sell well all over the world. Many other cosmetic companies focus on a much smaller market segment, such as just the United States. They currently have the highest market share in the cosmetic industry. This allows them to spend more money on research and development than its competitors. L’Oreal tries to introduce 1 to 2 new products to each one of its worldwide markets every year. Other companies cannot afford to spend the high amounts of money that L’Oreal does on RD to do things like this. †¢L’Ore al has 4 different product categories: 1) Consumer 2) Luxury 3) Professional 4) Active. These four categories allow L’Oreal to sell to any market it chooses. Most other companies focus on just one of these categories. Since L’Oreal is able to make quality products in all four, they have the best selling potential. Recommended Future Mission Statement â€Å"To promote an approach to beauty that is fun, affordable, and fulfilling for the global marketplace. To further the cause of beauty through the progress and discoveries of our research laboratories and to expand and diversify our brand portfolio to satisfy all consumer needs, with additional efforts to cut costs and re-direct our innovation efforts on consumer products, where most of our growth is presently occurring. We aim to give our customers the right to be beautiful day after day: because they’re worth it. † Recommendations for the Future Business Strategy Diversification is one of the great successes in Loreals business strategy, but it must shift its focus on improving its current companies. The focus on innovation should be the critical success factor. L’Oreal should rid itself of the trickle down technology and develop a more direct approach. The direct approach will make innovations more available to lower income consumers and will broaden their segmentation of the population. Presently, consumer products make up 54. 8%, which seems to under-represent this sector of the population. The direct approach will increase the percentage of consumer products sold, which better represents the consumer products sector and demonstrates an increase in growth. L’Oreal should also develop a new business strategy that will give them more of a competitive advantage against companies such as Estee Lauder, Proctor Gamble and Nivea’s face cream. One way that they can do this is by catering to a further range of ethnic groups. In addition to specific product lines for African-American and Asian-Americans, Loreal should look into product lines and marketing for the huge Hispanic population in the U. S, which is virtually untapped. L’Oreal may be able to apply some of the differentiation strategy they used for the African American market, considering that they have similarities in skin care with the Hispanic market. They could create a testing facility in Los Angeles where there is a large population of Hispanic people as they did with the African-American Research Laboratory in Chicago. There are many stores in Los Angeles such as La Curacao, a Hispanic pharmacy, which could help test some of the new Hispanic products to be integrated into the national market at some point in the future. L’Oreal could improve its marketing strategy and improve products for males as well. Research shows men are becoming increasingly concerned with their appearance and mens skin care product sales are growing. Loreal should capitalize on this growing interest by creating a new line of mens skin care products. They could differentiate themselves further by conducting research in order to develop male skin care products that tailor to certain ethnic groups. This would fit into the company’s culture of seeing the world as a mosaic of cultures and gender. Organizational Strategy Loreal’s organizational strategy has been the key to its international growth and success. With operations in over 130 countries and different products offered in each country, the structure and strategy of the Loreal group is what will determine their future. Carrying forward, the Loreal group should set up their organizational structure so that there is a good deal of control over the different product brands in different countries. Each brand name should have its own organizational head and strategy. For example, Maybelline and Garnier should continue to operate as separate business units. In addition, large regions and/or countries should be analyzed as separate business units. The purpose for such divisions is not to put these groups in competition with one another, but rather to monitor and control performance of the company as a whole. Communication channels and regular meetings should be implemented to foster communication and the sharing of resources and ideas. Centralized research and development sites in key cities will be responsible for new products and the marketing departments will decide which mix of products to carry in each market. The most important part of Loreal’s organizational strategy into the future will be to continue the growth that Loreal has experienced in previous years. This is done by setting up organizational strategies and structures that foster innovation, learn consumer trends, successfully market products and earn substantial profits. This growth can be fueled by setting up separate business units that can be monitored and controlled by upper management and the board of directors. The monitoring and effective controls implemented by top management will bring Loreal’s previous and present successes into the future. Information Strategy L’Oreal’s Business Strategy is built on innovation and diversifying strategies. This stance allows L’oreal to be successful throughout the world. The objective of Information Strategy is to develop a plan for implementing business systems to support business needs. For this company to tay successful in the future, they have to take specific actions that will improve and benefit the company. First, we believe L’Oreal needs to increase the awareness of management about new upcoming technology and developments. Consistent meetings between management, research laboratories and marketing could foster product ideas and lead to greater innovation. Such mee tings should occur at regional, national, and international levels several times throughout the year. Also, it is important to constantly survey competitors in the cosmetic market in order to be aware of upcoming trends and fads. This will give the company the upper hand on what new innovations or products can be developed next in order to gain an advantage over competition. Secondly, the company will have to improve communications within the organization about the effective use of information technology. Implementing some sort of customer relationship management program will help to consolidate and efficiently use customer data. This will allow the organization to collect useful data and ultimately, it will help L’oreal to become more efficient in order to satisfy customer needs and expectations. In addition, improving communication from within should improve work flow among employees. Lastly, we believe L’Oreal needs to continue to evaluate and monitor the effectiveness of its existing systems along with it’s competitors. L’Oreal should make changes and improvements, but also needs to continue assessing it’s past while observing its competitors in order to stay on top of the cosmetic market. We believe that if L’Oreal successfully implements these three strategies in the future they will continue to be the finest and most well known company in the cosmetic world.