IMM GROUP ASSIGNMENT

Group : 2 Gurvinder Kaur ( Roll no 12) Rakesh Kumar (Roll no 48) EPGDIB VSAT BATCH 8

Pick an International cosmetic company with presence in India and study the adaptation / modification or standardization practice in respect of their communication across the countries of their presence.

School of International Business Management

Indian Institute of Foreign Trade

LOREAL GROUP
Introduction
LOreal is a cosmetic company, which makes some of the world's biggest beauty products. L'Oreal's success story begins in 1907. It has been the market leader in the cosmetics and toiletries market since 2001 (Euromonitor 2005). Their products are sold in about 130 countries worldwide. L'Oreal is divided into four categories 1. Consumer products 2. Professional products 3. Luxury products, 4. Active cosmetics. They mainly focus on skin care, make-up, hair care and fragrance. L'Oreal includes some important brands such as Lancme Paris, Garnier, Mabelline, Softsheen Carson, Matrix, and Biotherm. L'Oreal invests heavily into its research and development which gives them competitive advantage over its competitors.

The Mission Statement of Loreal Group

Beauty for all

For more than a century, LOreal has devoted itself solely to one business: beauty. It is a business rich in meaning, as it enables all individuals to express their personalities, gain self-confidence and open up to others.

Beauty is a language.
LOral has set itself the mission of offering all women and men worldwide the best of cosmetics innovation in terms of quality, efficacy and safety. It pursues this goal by meeting the infinite diversity of beauty needs and desires all over the world.

Beauty is universal.
Since its creation by a researcher, the Group has been pushing back the frontiers of knowledge. Its unique Research arm enables it to continually explore new territories and invent the products of the future, while drawing inspiration from beauty rituals the world over.

Beauty is a science.
Providing access to products that enhance well-being, mobilising its innovative strength to preserve the beauty of the planet and supporting local communities are exacting challenges, which are a source of inspiration and creativity for LOral.

Beauty is a commitment.
By drawing on the diversity of its teams, and the richness and the complementarily of its brand portfolio, LOral has made the universalisation of beauty its project for the years to come.

LOral, offering beauty for all. As a Business

LOreal strategy for leadership is based on continuous investment in rigorous scientific research and development. This enables their brands to deliver products which are innovative, highly effective, practical and pleasant to

use, and which are manufactured to the most demanding standards of quality and safety. LOreal aims for excellence, and constantly challenges itself and its methods. They place great value on honesty and clarity: their consumer advertising is based on proven performance and scientific data. They are committed to building strong and lasting relationships with their customers and their suppliers, founded on trust and mutual benefit. LOreal does business with integrity: they respect the laws of the countries in which they operate and adhere to good corporate governance practices. LOreal maintains high standards in accounting and reporting, and support the fight against corruption. They deliver long-term, sustained shareholder value by protecting and making the most effective use of company assets.

As an Employer
LOreal aims to make a great place in which to work. LOreal knows that their employees are their greatest assets. They are entitled to a safe and healthy working environment: one in which personal talent and merit are recognized, diversity is valued, privacy is respected, and the balance between professional and personal life is taken into account. LOreal believes in offering their employees a stimulating environment, exciting personal opportunities and a chance to make a difference. They encourage an atmosphere of openness, courage, generosity and respect, so that all their employees feel free to come forward with their questions, ideas and concerns.

As a Responsible Corporate Citizen

LOreal plays a part in creating a world of beauty and fairness. They are mindful of their impact on the natural environment, including biodiversity, and constantly seek to reduce it: they are determined to avoid compromising tomorrow for the sake of today. LOreal makes a positive contribution to the countries and communities in which they are present, and respect local cultures and sensitivities. They are committed to the respect of human rights. They want to help end the exploitation of children in the workplace and the use of forced labour. LOreal is against animal testing in their

industry, and they are always keen to contribute to the development and acceptance of alternative methods... This is the spirit in which they operate: the L'ORAL SPIRIT

Distinctive competencies

First, L'Oreal has a portfolio of brands from different countries, covering different level of classes and different customer segments. The French company is a worldwide company. It is a strong and an innovative company. Actually, L'Oreal was and is able to increase continuously its market share thanks to its global branding strategy. This strategy allows the company, to gain market share when the competition does not meet the demand or the clients' needs. In fact, L'Oreal invests heavily in research and development, so it can create continuously innovative products. Thereafter, the company detects and follows easily customers' desires and needs, while offering a high quality products and responding on time to market trends. Second, L'Oreal has a multicultural hiring strategy. Its human resources are diversified and have different sex, age, identity and come from different cultures. They offer a rich panel of innovation, creativity, inspiration, talent and idea. Those elements allow the company to response better and to adapt faster to different consumers' type. Research and innovation are the main factors in L'Oreal expansion. In few decades they created a large line of brands and a variety of products and were able to cover different segments reach different niches and meet the demand of wide range of classes.

Trends or conditions enabling the company Cosmetic Market Consumers Trends: Products for Ethnic

The U.S. Census Bureau predicts that by the year 2040, minorities will be the majority. This means products and services that target these niches will become increasingly more popular. According to Us Census by the year 2040 product and service made for ethnics consumers will enlarge and become more important in the market. As L'Oreal Opened already their research center for African American in Chicago, they can also provide the suitable product Hispanics and Asians also. The existence of various ethnic groups require an assortment of products and service that respond the dissimilarity in hair types, skin tone and care habits.

Cosmetic Market Trends: Baby Boomers

Baby Boomers; define as those born in the United States between 1946 and 1964 are one of the most populous groups in America today. As they age, they will require cosmetics that address their particular needs. Today, Baby boomers groups is emerging more and more in America. This Group involves a focused care and research. It's the greatest moment to enhance their existing anti aging product and brand, to develop and create new ones as well. Investing in this market can provide high return. Thus, baby boomers are not hazardless wealthier than any other group. They are capable of spending money in their personal care. Moreover they dedicated their time choosing the highest quality product regardless of their price

Organization objectives and their accomplishments

THE CEO of L'Oreal stated three different long term targets. The first is the environmental targets which are the reduction by 50% green house gas emission, the water used per unit of finished goods and the waste generated per unit of finished product.

Second is the R&D, the company sustains innovation and wants to develop its natural and organic cosmetics. Third, human resources, in fact, the company wants, in the long term, to achieve a 0% rate of accident in its factories and warehouses.

The Organizations SBU

The organization's SBU L'Oreal encompasses 5 core businesses with strong technological added value: hair color, hair-care, skin-care, make-up and perfume.

Those core businesses include all kind brands that are classified as following:

Professional Products: Consumer Brands: * Krastase * L'ORAL Paris * Garnier * SoftSheen-Carson * Maybelline York * Le Club Createurs New * L'ORAL Professional * Matrix *Redken *Pureology de *Shu Uemura Art of hair *Mizani *Essie Luxury Products: * Biotherm * Helena Rubinstein * Kiehl's Since 1851 * Lancme * ShuUemura *Giorgio Armani *YSL *Ralph Lauren *Cacharel *Helena Rubinstein *Clarisonic *Diesel *Viktor and Rolf *Yue Sai *Stella McCartney *Urban Decay *Maison Margiela Martin Active Cosmetics: * La Roche-Posay * Vichy * Innov *Skin Ceuticals *Roger and Gallet * Sanoflore

BCG Matrix
Market Growth
Star *Lancome Cashcow *Maybelline *YSL Dog *BodyShop Question

Market Share
L'Oreal has done two major acquisition operations. The fist one is related to Ysaint Laurent beauty product and the other one is the leader of natural product the body shop. The company generates good return for YSL investment. However, the bodies shop result decreased after the operation and moving toward becoming a dog joining other declining product. One of the most important stars is Lancme which provide a high profit to the group, have a large market share between luxury products. Furthermore, Maybelline still providing cash to the group and permit it to invest in more research and development.

Organizational Strategy for Growth L'Oral uses brand segmentation to drive growth
Premium
L'Oral operates strict brand segmentation across its portfolio to retain its exclusive brand identity. For each of its brands L'Oral maintains distinct retailing channels to keep its brand image intact. Its premium ranges Lancme and Yves Saint Laurent are marketed through department stores. Its mid- and lower-tier mass brands L'Oral Paris and Garnier share the same retailing space in Western markets but the distinctions are made on the basis of price and product offerings.

Mid-tier
Cutting edge formulations are found more under L'Oral Paris than Garnier. L'Oral also sells its premium range formulations under L'Oral Paris when demand in the premium range slows down. L'Oral uses Garnier to penetrate low-income consumers in emerging markets whereas L'Oral Paris is reserved for urban consumers.

Mass
The economic downturn necessitated L'Oral to use its brand portfolio carefully to exploit any growth potential. For example, hair care launches were made under L'Oral Paris as it was originally a hair care brand, while for colour cosmetics the mass brand Maybelline was used to drive growth. L'Oral used Lancme to appeal to a wider global consumer base, whereas Yves Saint Laurent was used to appeal to Western European consumers. For premium and mid-tier brands, it launched more targeted products whereas for mass brands such as Garnier the focus has been on multi-functionality.

Market penetration

L'Oreal gained over of 15.8% market share all over the world. Instead of rely on creating new product and brand, L'Oreal aim to take profit from the growing middle class and the merging market. The latest researches are focusing on emerging market for example Asia, Eastern Europe and Latin America. Furthermore, L'Oreal penetrated two profitable markets, the men older population that is increasingly showing more intention to products such as skin care for men and anti aging.

Product development
Research and development are the major factor of L'Oreal success. Continuously, the company is attentive to the market trend and the consumers need in order to meet their expectation and provide their satisfaction. Each year, there are more than 5000 formulas created, tested and 500 product launched each year. For example, Feria range was specifically innovated for Japanese people and Soft Sheen Carson for African. As a result, L'Oreal achieves their target by offering them the newest product with innovative feature which are marketable and generate an important turnover in diverse segments of the international market.

Market development
L'Oreal continues to diversify its portfolio integrating new brands and product. Thus, permit the company to gain new area of development and new lines of growth. In the other hand, L'Oreal try to adapt their product to the potential market for instance R & D center was established in Shanghai to improve the competitiveness of their products and make it more appropriate for Chinese customers. Even if their product are existing in over 130 country, the group is trying to create more demand and increase market share of its brand in news countries.

Diversification
As we can noticed, although their multiple and various product and brand, L'Oreal keep working and cosmetics and personal care product. We

cannot find L'Oreal in other domain or activities like clothing, food or any domain not related to cosmetics. However, the group has taken the first step toward diversification which is the acquisition of The Body shop.

Sales Volume and market Share

Millions of Euros sales MILLIANS OF EUROS decrease increase MILLIONS OF EUROS %

2009 2010 2011 2012 14533 15790 17063 17542

1257 1273 479

9%

8%

3%

From the last three years financial statement of L'Oreal, since 2010, we notice, sales have been increasing for the last three years. In fact, its sales increased by 1 257 million of Euro (ME) in 2010, 1 273 ME in 2011, and 479 ME in 2012. However, we can notice that the growth rate of Loreal sales has been increasing from 9% in 2010 to 8% in 2011 and to 3% in 2012. The worldwide economical trends has been affecting L'Oreal's growth as it lost 1 point in 2007 and 5 point since then.

Elements of Marketing Strategy Customer Satisfaction (Product; Price)

L'Oreal priority is to meet customer expectation by providing the right product, with highest quality and innovative features. Through intensive research, the company aim to provide plenty of new products and to improve the current product. As result customers is offered a wide variety of brand and product from whom he can choose according to their need and budget. L'Oreal study different market, with different culture, habits and needs and try to satisfy them using the information collected to create the suitable product for each task, age and budget. L'Oreal consumers can stay updated and follow the newest trend just by buying the newest product. Simply the company adapts their product to the latest trends and even more; set the trend in the market. L'Oreal portfolio is for all types of consumers. As well as we can find luxurious brand, there is also mass market product. However, for L'Oreal each brand and product necessity a deep research to provide the best quality. The diversity of the portfolio allow the company to adapt different pricing politic because each brand can cover and finance other in case of decrease in sell. For luxurious product

Worldwide Marketing (Place of Distribution; Promotion)

With 290 subsidiaries, more than 100 distributor's off-group and 42 plants, all spread out in about 130 countries, L'Oreal is a worldwide company in the cosmetic industry. L'Oreal group's strategic plan involves spreading their products and brands all over the continent. The aim of this strategy is to reach the spirit of customers regardless of where they are coming from. First of all, L'Oreal start with the commercialization of professional shampoos to hair-dressers via distributors in near Europe (Spain, Italy, Great Britain, Germany and Poland) and in the Americas - "first landing"1. After that, local firms were taken over for example in the USA (Redken 1993, Maybelline 1996 etc.), in Argentina (Miss Ylang 2000) - "go native". Finally, subsidiaries (production, research and development) are directly created (Greenfield investment) without any first passage via distribution. It is the case in Asia (Japan and Hong Kong) - "globalization". Moreover, the Melting Pot human resources permit creating the suitable product working on all cultural aspect and divergence between customers.

Their research and development efforts allow the group to market their product worldwide and to get a positive feedback from different country. Thus, the group received Diversity Best Practices 2004 Global Leadership Award for struggling against discrimination in its recruitment, which allow the company to have a mixture of employee and variety of consumers as well.

Geographic presence and economic and political environment

LOreal has subsidiaries in 69 countries, with 64% of its sales being generated outside Western Europe. Global growth in the cosmetics markets has led LOreal to develop its activities in countries of the New Markets Z one, which represent over 39% of its cosmetic sales in 2012. However, its global presence helps to maintain a balance in sales and enables results to be offset between countries and geographic regions. In periods of major economic slowdown or in sovereign debt crisis situations in certain countries, growth in the Groups sales may however be affected.

Distribution network
To sell its products, LOreal uses independent distribution channels, except for a limited number of stores which are owned by the Company. The concentration or disappearance of distribution chains and changes in the regulations with regard to selective distribution could have an impact on the development of the Groups brands in the country or countries concerned. The presence of the Groups brands in all types of distribution networks helps to attenuate any potential negative effect.

Branches and Divisions

The Cosmetics Branch, which represents most of the Groups activities (nearly 93% of its consolidated sales in 2012), is made up of 4 Operational Divisions which each correspond to a specific marketing channel: The Professional Products Division markets products used but also sold in hair salons. Privileged partner of hairdressers all around the world, it supports them in every facet of their development and offers them

high-level training. Its portfolio of differentiated brands meets the needs of all types of salon. Professional Products Division brands: LOreal Professional, Redken, Krastase and Matrix; The Consumer Products Division offers the best in cosmetic innovations at accessible prices in all mass-market retail channels (hypermarkets, supermarkets, drugstores and traditional stores) on every continent. Consumer Products Division brands: LOreal Paris, Garnier, Maybelline, Softsheen Carson and Essie; LOreal Luxury brings together a unique set of prestigious brands. These brands are sold through selective distribution, broken down between department stores, perfumeries, travel retail outlets, but also its own stores and through e-commerce websites. LOreal Luxury Division brands: Lancme, Giorgio Armani, Yves Saint Laurent, Biotherm, Kiehls, Ralph Lauren, Shu Uemura, Cacharel, Helena Rubinstein, Diesel, Clarisonic and Viktor & Rolf; The Active Cosmetics Division distributes its products worldwide in healthcare products distribution channels, primarily through pharmacies, drugstores, medispas and, in some countries, dermatologists. Its unique portfolio of brands, which meets all the needs of consumers in terms of health-beauty, and its privileged partnership with healthcare professionals have made this Division the worlds No. 1 in dermocosmetics. Active Cosmetics Division brands: Vichy, La Roche-Posay, SkinCeuticals, Innov and Roger & Gallet.

The Body Shop Branch represents approximately 4% of consolidated sales in 2012. Founded in 1976 in the United Kingdom by Dame Anita Roddick, The Body Shop is known for its ethical commitment and its products with natural ingredients. More than 87 % of its products contain ingredients from its Community Fair Trade programme. With a presence in 65 countries, the brand distributes its products and expresses its values through a network of exclusive stores but also complementary distribution channels: Internet sales and airport shops.

Excellent Advertising and Promotion

In all L'Oreal publicity there is a different style of models with different ages, personalities and appearances. Thus, shows the vision of the company. This strategy allows the company to realize high return on their investment on

advertising because each woman relates their image to the model and try to look like here using L'Oreal product.

Loreal Masters in Multiculturalism The French cosmetics giant LOreal simplifies global-local tension.
It has built a portfolio of brands from many cultures 1. French, of course (LOreal Paris, Garnier, Lancme) 2. American (Maybelline, Kiehls, SoftSheen-Carson) 3. British (The Body Shop) 4. Italian (Giorgio Armani), and 5. Japanese (Shu Uemura). In 2012, sales grew in the Asia Pacific region by 18.4% and in Africa and the Middle East by 17.6%, without significant acquisitions. Despite the financial crises in Europe and North America, LOreal has been growing and gaining market share, mostly at the expense of its competitors. It is the uncontested world leader in skin care, makeup, and hair color and a close second to P&G in hair care worldwide. Since 2004 LOreals revenue has increased by half and its profits have almost doubled, with an increase in net profits of 17.6% in 2012 alone. Yet this remarkable global success was built largely by a management team strongly rooted in its home culture. Traditionally employees became part of management over many years, weaving a dense network of relationships through which knowledge about products, cultures, and how to work together was internalized. As its global-local tensions have mounted, LOreal has managed them by deploying professionals with multicultural backgrounds in new-product development, the companys most critical source of competitive advantage. That strategy, according to top management, is the main reason for LOreals impressive success in emerging markets. As the company has transformed itself from a very

French beauty products business to a global leader, multicultural executives have come to play a critical role in product development not just in Paris but also in New York, Tokyo, Shanghai, Rio, and Mumbai.

Achieving Global-Local Balance

LOreals main consumer-products categories are all highly sensitive to global economies of scale and scope, yet to win customers they must also be responsive to local preferences. This tension is perhaps most critical in the LOreal Paris brand, which is sold in mass markets worldwide and accounts for half the sales of the consumer products division.

Elements of Marketing Plan

Internal analysis
Strength
L'Oreal efficient research and development are the keys of their success and continual growth. The permanent research and the want to satisfy all consumer taste allow the company to strength their industry and to Exceed their competitor. All L'Oreal director, manager and employer work in team to achieve the best result. The diversity in their employee enables the company to benefit from the multicultural, innovative and colorful talent of their member. The main strength of L'Oreal is that she divided their research and activities according to their major market, to globalize and concentrate their effort in each Group. There are 5 divisions that Focus in each line of products. The first one is the consumer product division which includes all the products and brand distributed though the mass market, those should attend the highest number of consumers. The second one is the luxury products division distributed through perfumeries, department stores and travel retail. The third one is the professional products division which are used and sold by

professional, hair salon, personal care stores and by individual who received a training and certificate in those specific products. Conversely, the products sold through pharmacies, Para pharmacies and health centre belong to the active cosmetics division. Moreover the pharmaceutical activities are also taken by Sanofi-Aventis. This organization allows L'Oreal to insure the highest quality and care, to produce what exactly the consumers is looking for. In Addition to that, L'Oreal invests intensively in communication, publicity and advertisement to maintain their position in consumers mind. The advertisement strategy enables the company to gain more market share and to be one of the most recognized brands in the global market. The intensive research to adapt to different culture and to produce the suitable advertisement to each country and culture plays an important part in the company growth. This adaptation to different market gives the company the opportunity to have a global coverage and to diversify their source of income

Weaknesses
L'Oreal is organized in multiple division, department, and responsibility center. The aim of this decentralized organizational structure was a best control of the nearest part of the consumer. However, it has downside which is a hard control to the global company. Thus , L'Oreal face a long time processes between the head and the employee, the flow of information , validation and communication can be slow which can open the production processes and the decision time .Also , the spending in advertising and marketing reduce the Marge of profit .as a result, L'Oreal realize less benefit net than the smaller competitors. Significant Presence in Top Markets: is a strong company that has a strong position in the world's markets in terms of its upscale and luxury.

External Analysis
Opportunities

Nowadays, there is more and more demand on personal care product. The globalization and the massive advertisement permit the developing country to follow beauty pattern and to take care of their appearance. In Addition to that, the demand for cosmetics products in Asian and Emerging country is increasing due to the improvement in their political and economical situation. Furthermore, Consumers awareness increased, they become more selective for the product and are more considered about quality than price.

Threats
The American market is the biggest part in L'Oreal profit. However, due to the American crises the demand of beauty product could decrease and also the demand of luxury product maybe hurt. Euro becomes stronger which made French product expensive and difficult to adapt a good pricing strategy. Some of their competitors become stronger as Clarins for skin care and also other specialized rival who are dedicated to a line of product and are gaining more market share. To conclude, L'Oreal group is classified as the first supplier of cosmetic and hair-color products. In fact, although the worldwide market knows many changes, first, due to the increasing interest of consumer on their appearance the market knew many new entrants; competition and cosmetic brands increased. Second, the last economical crisis affected the buying power of customers; In fact, they are more reluctant in investing in secondary products and thus spend less in beauty. But, still the less affected company is L'Oreal and it is still maintaining its position as the leader in the market.

LOreal Factory by Category

Factory Locations
North America 10 factories: Canada 2, US 8

Europe

Brazil Israel Japan Indonesia India China Russia Turkey

20 factories: France 14, Spain 2, Italy 1, Germany 1, Poland 1, Belgium 1 2 1 1 1 1 1 1 1

L'Oral Factory Locations by Category

Division Number of factories Location

Number of factories(ft ys)

Consumer Products

22

Location France ( 4 ftys), Belgium (1 fty) , Italy (1 fty), Germany(1 fty), Poland (1 fty), US (4 ftys), Mexico (1 fty), Brazil ( 2 ftys), South Africa (1 fty) , India (1 fty), Israel (1 fty), Turkey (1 fty), Indonesia (1 fty), China (2 ftys)

Luxury Products Professional Products Active Cosmetics Dermatology Raw Materials

5 3 2 2 4

France (3 ftys), US (1 fty) , Japan (1 fty) Canada (1 fty), US (1 fty), Spain(1 fty) France(2 ftys) France(1 fty) , Canada (1 fty) France (3 ftys) , Spain (1 fty)

REFERENCES:

1. L'Oreal Annual Report-Consolidated sales by geographic zone. 3. http://www.loreal-finance.com/eng/company-overview 4. Male Grooming on the Rise 5. Anonymous (2004) L'Oreal Receives Diversity Best Practices 2004 Global CEO Leadership Award; 6. L'Oreal First-Ever Global Company Named. Available online 7. (http://www.diversitybestpractices.com/) Accessed on (01/04/2005)

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