Anika Patel

AVP Consultant Group, LLC

 Presentation Outline
I. Introduction V. Strategy Formulation
II. Mission/Vision a. SWOT
III. Internal Assessment b. SPACE
a. Financial Ratios c. BCG
b. Organizational Chart
c. Market Positioning Map d. IE
d. Marketing Strategy e. GSM
e. Value of the Firm f. QSPM
f. Strengths/Weaknesses g. Recommendations
g. IFE
VI. Strategy Implementation
IV. External Assessment
a. Competitor Analysis a. EPS/EBIT Analysis
b. CPM b. Projected Statements and
c. Opportunities/Threats Ratios
d. EFE
VII. Conclusion
 COMPANY OVERVIEW
 HISTORY OF L’Oreal:
- L’Oreal was founded in France in 1909.
- One century of expertise in cosmetics.

 Group Profile:
- $ 26.2 billion consolidated sales in 2011
- 27 global brands
- 613 patents filed in 2011
- Present in 130 countries in 5 continents.
 COMPANY OVERVIEW

 Headquarters: Clichy, Hauts-de-Seine, France

 Chairman and Chief Executive Officer:
Jean-Paul Agon
 Employees: 68,900
 Operational Groups: 6 Divisions
 Non-executive Director & Major Shareholder:
Natalia Streignard
 Area Served: Worldwide
 PRODUCTS and SERVICES
In $ millions except percentages

 Consumer Products ($12,687.4, 48%)

 Luxury Products ($ 6,192.1, 24%)
 Professional Products ($ 3,629.4, 14%)
 Active Cosmetics ($ 1,833.9, 7%)
 Dermatology Branch ($ 909.1, 3%)
 The Body Shop ($ 990.2, 4%)
Total ($26,242.6, 100%)
Products and Services
 2011 Revenues by Geo Divisions
In $ millions except percentages

 Western Europe $ 9,348.1 (36%)

 North America $ 5,683.9 (22%)
 New Markets: $ 9,311.3 (35%)
Asia-Pacific ($ 4,669.2, 18%)
Latin America ($ 2,168.4, 8%)
Eastern Europe ($ 1,724.6, 6%)
Africa, Middle East ($ 749.1, 3%)
 Dermatology Branch $ 909.1 (3%)
 The Body Shop $ 990.2 (4%)
Total Revenues $ 26,242.6(100%)
 2011 Sales by Division ($ Millions)

Dermatology
Eastern Europe, Africa & Middle
Branch,
$1,724.60 East, $749.10
$909.10

Latin America,
$2,168.40 The Body Shop,
$990.20

Asia-Pacific, Western
$4,669.20 Europe,
$9,348.10
North
America,
$5,683.90

Total 2011 Sales = $26,242.6 million

 Current Vision & Mission Statement:
BEAUTY FOR ALL
For more than a century, L’Oréal has devoted itself solely to one business: beauty (2). It is a
business rich in meaning, as it enables all individuals (1) to express their personalities, gain self-
confidence and open up to others (7).
Beauty is a language. (6).
L’Oréal has set itself the mission of offering all women and men worldwide (3) the best of
cosmetics (2) innovation (4) in terms of quality, efficacy and safety (8). It pursues this goal by
meeting the infinite diversity of beauty needs and desires all over the world (3).
Beauty is universal. (6)
Since its creation by a researcher (4) the group has been pushing back the frontiers (7) of
knowledge (4). 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 (6).
Beauty is a science. (6)
Providing access to products that enhance well-being, mobilizing its innovative strength (4) to
preserve the beauty of the planet and supporting local communities (8). These are exacting
challenges, which are a source of inspiration and creativity for L’Oréal.
Beauty is a commitment. (6)
By drawing on the diversity of its teams (9), and the richness and the complementarity of its brand
portfolio (2), L’Oréal has made the universalization of beauty its project for the years to come.
L’Oréal, offering beauty for all. (6)
Improved Vision & Mission Statement:

At L’Oreal, we believe beauty is language,

science, commitment, universal, and
permeates all (6). Our mission is to
empower our highly creative team of
researchers to design innovative (4, 7),
healthy products (2), and our attentive
employees (9) to remain responsive to the
diverse tastes of our radiant customers (1)
who confidently express their inner and
outer beauty in our continuously expanding
markets around the world (3, 5). Our
shareholders can take pride in their
investment knowing they contribute to one
of the most socially responsible (8) and
profitable (5) providers of magnificence (7).
Beauty for all.
Competitor’s Vision & Mission Statement:

Revlon Inc. mission is to emerge

as the leader (5) in cosmetic and
personal care (2) throughout the
world (3). Revlon takes pride (7)
in manufacturing (4) the top skin
care (2) and strives to please
young and older women (1)
alike.
Revlon Inc. Vision is to satisfy
the needs of their customers (1)
with glamour and excitement (7)
that they provide at an affordable
price (8).
Internal Assessment
 Financial Ratio Analysis:
Revenues in $ millions except per share data

(2011) L’Oreal Revlon Industry

Growth Rate (2010-2011) % 0.0435 0.0454 0.044
Revenues $ 26,242.6 1,381.4 202,535

Gross Profit Margin % 0.7124 0.6434 0.4931

OPS Profit Margin % 0.1704 0.1472 0.1368
Net Profit Margin % 0.1200 0.0387 0.1067

Current Ratio % 1.0831 1.5469 0.52

Quick Ratio % 0.7953 1.2161 0.40
Return on Assets % 0.0909 0.0461 0.0185
 Financial Ratio Analysis:
Revenues in $ millions except per share data

(2011) L’Oreal Revlon Industry

Debt-to-Equity Ratio % 0.1185 (1.7518) 0.5980
Return on SH Equity % 0.1384 (0.0771) 0.3180
Price/Earnings Ratio % 0.1268 0.1800 0.5934
Earnings per share $ 9.64 81.26 14.40

Inventory Turnover % 9.900 12.4 1.19

Total Asset Turnover % 0.800 1.2 0.28
Accounts Receivable % 6.7896 6.5160 3.16
Turnover
Average Collection Period days 53.8 56.0 -
Current Organizational Chart:
Chairman of
the Board &
CEO

Managing Managing
Managing
Managing EVP Director Director of
EVP, Admin Director of
Director Research & Strategic Corporate
& Finance Human
Operations Innovation Marketing Communications,
Resources
Department Sustainable
Development&
Public Affairs

Managing Managing General

President,
Director of Director of Manager of
Consumer
Luxury Active Professional
Products
Products Cosmetics Products
Division
Division Division Division

Managing Managing Managing Managing

Director of Director of Director of Director
Asia – Latin North Africa, Middle
Pacific Zone America America East Zone
Problems with Current
Organizational Chart
 CEO and Chairperson titles assigned to
same person.
 There is no Chief Operating Officer (COO)
instead has Managing Director of
Operations.
 Executive Vice President of Administration &
Finance titles assigned to same person.
 Managing Director of Corporate
Communications, sustainable Development
and Public Affairs title is ambiguous.
 Recommended Organizational Chart
Chairman of the Board

CEO

Chief Chief Chief Chief Chief Chief

Chief Info Chief R&D
Finance Marketing Human Operating Legal Technology
Officer Officer
Officer Officer Resources Officer Officer Officer

President President President President President

President President
North Latin Africa & Asia- Derma
Europe Body Shop
America America Middle Pacific Branch
East
VP of Consumer
Products

VP of L’Oreal
Luxury

VP of Active
Cosmetics

VP of
Professional
Products
By Geographic Regions
Organizational Chart
Improvements
 Added Chief Legal Officer, Chief
Information Officer, Chief Technology
Officer.
 Presidents report to COO.
 Gave officers only one title.
 Divisional Vice Presidents report to their
respecting Geographic Zone President.
 Assign Presidents to The Body Shop and
The Dermatology Branch.
Countries of Operation
MARKET POSITIONING MAP
Higher Breadth
of Products

L’Oreal
Higher Revlon Lower
Quality Quality
Avon

Lower Breadth
of Products
 MARKET REPOSITIONING STRATEGIES

Higher
Breadth
of Products

L’Oreal

Higher Revlon Lower

Quality Quality
Avon

Lower
Breadth
of Products
 CURRENT MARKETING STRATEGIES

 L’Oreal has nearly 1 billion consumers

globally (representing around 15% of
population), and plans to conquer a billion
new consumers over next 10 to 15 years.
 L’Oreal has 41 production plants across
current market and invested to add new
sites in Mexico, Indonesia, and Egypt.
 L’Oreal has presence in 130 countries and
plans to expand in other developing
markets.
 CURRENT OPERATIONS

$1,724.7
$9,348.6
$5,683.7
$4,668.5
$749.5

$2,168.5

L’Oreal Sales 2011 by Zone ($mil)

 CURRENT OPERATIONS

$1,724.7
$74.7 $9,348.6
$5,683.7 $208.7
$757.4 $4,668.5
$749.5 $233.4
$107.2
$2,168.5

L’Oreal Sales 2011 by Zone ($millions)

Revlon Sales 2011 by Zone ($millions)
RESEARCH & EVALUATION CENTERS
WEB SITE AND eCOMMERCE
WEB SITE AND eCOMMERCE
STRENGTHS

 Uses attractive colors such as black where beauty glows

in dark
 Easy to maneuver through the site and straight forward
about their product offerings and company overview.

WEAKNESSES
 Fonts are too small to read and goes out of allotted area
(page).
Navigation doesn’t work properly - when selecting Country
didn’t take directly to the country instead shows page error
or didn’t load up at all
 Needs to add Face book Logo on main page of website
 WEB SITE AND eCOMMERCE

 Have to find L’Oreal on Facebook.

L’Oreal already had registered for Facebook application and is paying
for service.
L’Oreal must put Facebook logo on its website which directly
navigates customers to facebook to share their thoughts for L’Oreal.
WEB SITE AND eCOMMERCE
WEB SITE AND eCOMMERCE

STRENGTHS
 Enclose Face book and Twitter Logo on its main page
 Big screen grabs one’s attention and encourage to
have a look at their product offerings
 Good navigation as it directly takes you to where you
want to in couple seconds
 Logo is big

WEAKNESSES
 None
 VALUE OF THE FIRM ANALYSIS
In millions of $US except for per share data
(using a 1.29 dollar/euro exchange rate)

Shareholder’s Equity 11,549

Net Income x 5 years 15,744
(Stock Price/EPS) x Net Income 39,938
# of Shares Outstanding x Stock Price 73,727
Four Method Average: $35,239.5 million
$ Goodwill/$ Total Assets 0.23
L’OREAL’S STRENGTHS AND WEAKNESSES
 INTERNAL FACTOR EVALUATION (IFE) MATRIX

Strengths
Wei Rating Wtd
ght Score

1 27 international brands distributed in over 130 countries. L’Oreal has 5 regional hubs 0.04 3 0.12
worldwide.
2 The Body Shops total sales were $990.204 million (4% total sales). The Body Shop has 0.05 3 0.15
over 70 brands in 60 countries (presence in global travel retail outlets across 44
markets).
3 L’Oreal has $930 million invested in R&D. 3,676 researchers throughout 19 research and 0.06 4 0.24
16 evaluation centers filed 613 patents in 2011.
4 L’Oreal achieved 9.5% sales growth in New Markets ($9,311.3 million in sales; 35% total 0.14 4 0.56
sales; $1,713.12 million ops profit); added 4 subsidiaries in Africa and Middle East.
5 L’Oreal achieved 0.6% sales growth in Western Europe ($9,348.1 million; 36% total sales; 0.06 3 0.18
$1,951.8 million ops profits); acquired Sanaflore in France.
6 L’Oreal has positioned 41 production plants across current markets including a new 0.08 4 0.32
one in Russia; opening new sites in Mexico, Indonesia and Egypt.
7 L’Oreal’s achieved 5.5% sales growth in North America (ops profit = $1,044.9 million). 0.07 3 0.21
L’Oreal acquired Maybelline and Essie.
8 Global predictive center (Lyon) reconstructs 130,000 units of biological tissues for 0.03 4 0.12
predictive evaluation of ingredients and products. 9 reconstructive skin and cornea
models developed. Reduces time to market.
9 The Dermatology Branch (Galderma) total sales were $909.13 million (Western Europe; 0.04 3 0.12
$242.8 million; North America: $450.8 million; New Markets: $215.55 million).
10 L’Oreal conducts in-house packaging of products at their plants through the Wall-to- 0.02 3 0.06
wall program; reduces transportation costs and waste generation.

Sub-Total for Strengths 0.59 2.08

 INTERNAL FACTOR EVALUATION (IFE) MATRIX

Weaknesses
Weight Rating Wtd
Score

1 L’Oreal suffered -2.8% sales loss in its Eastern European Market in 2011, 0.08 2 0.16
despite a 3.9% market growth (Ops profit: -$734.79 million)
2 L’Oreal lacks a Beauty Tools division which its chief competitor, Revlon, 0.05 2 0.10
does have.
3 L'Oreal's organizational structure limits its ability to create integrated 0.03 1 0.03
brand promotion strategies for its distinctive SBU’s.
4 L’Oreal has a limited number of perfume, bath, and baby products in 0.02 1 0.02
its portfolio compared to competitors.
5 L’Oreal lacks energy efficient production facilities in North America 0.02 1 0.02
similar to ones in Belgium, Spain, India and France.
6 L’Oreal does not practice direct selling strategies in their marketing 0.06 2 0.12
initiatives as compared to competitors (Avon and Mary Kay).
7 L’Oreal has consolidated key market segments under “New Markets”; 0.06 2 0.12
limits managerial response to changes in major geographic SBU’s.
8 L’Oreal’s Total Asset Turnover ratio (0.8) is lower than its chief 0.02 1 0.02
competitor, Revlon’s (1.2).
9 L’Oreal’s cost of operations (55.05%) is higher than its chief competitor, 0.03 1 0.03
Revlon’s (49.42%).
10 When selecting different country options, L’Oreal’s website has 0.04 2 0.08
defective or nonexistent navigation and translation capabilities.

Sub-Total for Weaknesses 0.41 0.70

Total IFE Score 1.00 2.78

EXTERNAL ASSESSMENT
MAJOR COMPETITORS IN THE INDUSTRY

COMPANY SALES ($Mil) NET INCOME ($Mil)

Procter & Gamble 82,559 11,797
Unilever 64,701 6,437
L’Oreal 28,263 3,399
Kimberly-Clark 20,846 1,591
Colgate-Palmolive 16,734 2,431
Kao 14,273 562
Reckitt Benckiser 15,213 2,813
Avon 11,292 514
Estee Lauder 8,810 701
Shiseido 8,095 154
Clorox 5,231 545
Energizer Holdings 4,646 261
Church & Dwight 2,749 310
Revlon 1,381 53
 COMPETITIVE PROFILE MATRIX (CPM)
L’Oreal Revlon Avon

Critical Success Factor Weight Rating Score Rating Score Rating Score

Brand Recognition & Reputation 0.08 3 0.24 4 0.32 2 0.16

Price and Quality Perception 0.09 3 0.27 4 0.36 2 0.18

Breadth and Depth of Product 0.15 3 0.45 4 0.60 2 0.30

Lines
Market Share 0.12 4 0.48 2 0.24 3 0.36

Production Efficiency 0.08 4 0.32 3 0.24 2 0.16

Growth in Mature Markets 0.06 4 0.24 3 0.18 2 0.12

Growth in Emerging Markets 0.06 4 0.24 3 0.18 2 0.12

Product Innovation 0.07 4 0.28 3 0.21 2 0.14

Direct Sales 0.04 2 0.08 1 0.04 4 0.16

eCommerce & Web Marketing 0.08 4 0.32 2 0.16 3 0.24

Celebrity Spokes Models 0.12 3 0.36 4 0.48 1 0.12

Creative Packaging 0.05 3 0.15 4 0.20 2 0.10

Totals 1.00 3.43 3.21 2.16

KEY INDUSTRY TRENDS
 EXTERNAL FACTOR EVALUATION (EFE) MATRIX
Opportunities Weight Rating Wtd
Score
1 The worldwide cosmetics market grew 4.4% in 2011 representing $197.4 billion with 0.02 2 0.04
no devaluation, bannalization, or massificaation.
2 Major BRIMC and minor growth countries have several million middle class 0.08 2 0.16
inhabitants and are projected to account for 5 of the 10 largest economies by GDP
by 2020.
3 BCG reports the Chinese middle class is expected to increase from 150 million to 0.06 2 0.12
+400 million over the next decade. 340+ urban locations projected to increase to
550 million in 10 years.
4 Direct retail sales in the US increased 4.6% to $29.9 billion in 2011 of which 78% were 0.06 1 0.06
women and 89% worked part time.
5 Google Offers, Living Social, and Groupon have launched apps for Android phones 0.04 4 0.16
to alert consumers to deals through mobile devices.
6 91% of new products pacesetters were brand extensions that either expanded 0.05 4 0.20
effectiveness, new technologies, improved processes, new or unique formulas,
varieties, designs or patterns.
7 Federal Aviation Safety requirements restrict passengers from carrying more than 4 0.06 4 0.24
oz. of personal products aboard aircraft.
8 Latino and Asian population is expected to nearly triple (Hispanics, with the highest 0.08 4 0.32
consumption of personal care products in 2009, are expected to grow from 16.7% in
2012 to 21.2 in 2025.
9 29% of consumers made at least one consumer packaged good purchase online in 0.05 2 0.10
12 months. OTC drugs and health & beauty supplies ranked highest in respondents
buying the brand they want the most.
10 To reduce currency volatility, companies can hedge their exposure with futures 0.07 3 0.21
contracts (an 8.8% annual increase of dollar index).

Sub-Total for Opportunities 0.57 1.61

 EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Threats Weight Rating Wtd

Score
1 Federal Aviation Safety requirements restrict passengers from carrying more 0.03 4 0.12
than 4 oz. of personal products aboard aircraft.
2 Consumption of cosmetic products per inhabitant is 10 to 20 times lower in 0.05 2 0.10
immature countries than in mature BRIMC countries.
3 China’s GDP growth target is 7.5%, which is well below the range recorded in 0.05 2 0.10
5 years; India slowed growing 5.3% in 1st Qtr 2012.
4 Shiseido Co (Japanese cosmetics) acquired Bare Essentials (US) for $1.7 billion; 0.04 3 0.12
Coty agreed to acquire OPI Products (nail salon products) for $1 billion.
5 P&G is a global leader in personal and beauty care products 20% in Western 0.06 2 0.12
Europe; $14 billion net in restructuring, cost reduction, & marketing reduction
over next five years.
6 Avon markets Regenerist and Anew skin products to baby boomers; Johnson 0.03 2 0.06
& Johnson launched a line of E-Pulse, Skin-Electro-Stimulation technology (skin
rejuvenation/anti-aging)
7 54% of the female respondents in 2008 said they would “buy the brand they 0.04 3 0.12
want the most”’ (down to 45% in 2010 and 43% in 2011).
8 Avon sales in India increased 57.4: due to direct sales in 2011. 0.07 1 0.07
9 Due to weak US economic environment and higher pricing of green products, 0.04 2 0.08
consumers may be deterred from buying green products.

10 Avon and Revlon both offer perfume products in their portfolio. 0.02 1 0.02

Sub-Total for Threats 0.43 0.91

Total EFE Score 1.00 2.52

STRATEGY FORMULATION
 SWOT MATRIX
SO Strategies
SO Strategies
1 Establish JV with Parlain Co Ltd or Sa Sa Intl Holdings
Ltd (China); BK Corporation (Mumbai); Natura
and/or O Boticario (Brazil).
(S4, O2, O3)
2 Increase North American Sales by 15% over 3 years
through IBP, direct selling, and e/mMarketing by
targeting the growing population of Hispanic and
Asians .
(S7, O4, O8)
3 Increase sale of Body Shop, Dermatology Branch
products 12% over 3 years through m/eMarketing
and global travel retail outlets.
(S2, S9, S10, O5, O7, O9)
WO Strategies
WO Strategies
Decentralize by establishing separate geographic
profit centers to achieve 20% growth over 3 years in
New Markets and 6% in Eastern Europe over 3 years.
(W1, W3 W7, W8, O1)
Develop IBP marketing campaign with direct selling
to achieve 15% sales growth in the US, and 20% in
BRIMC.
(W3, W6, O2, O3, O4, O8)
Improve Web site design and e/mCommerce as part
of IPB marketing campaign to increase online sales
25% over 3 years.
(W10, O5, O9)
 SWOT MATRIX
ST Strategies WT Strategies
ST Strategies WT Strategies

1 Body Shop will increase sales 9% over 3 years in its

global travel retail outlets through 5 new perfume
and brand extensions of existing products.
(S2, T1, T10)
Develop 5 perfume, increase portfolio of affordable
bath and body products to introduce into all markets.
(W4, T10)

2 Achieve 20% sales growth in New Markets by

increasing production to 100% in 16 existing and 3
Invest $20 million to improve its Website design and
eCommerce capabilities to increase online sales 25%
new plants and incorporating direct sales methods over 3 years. (W10, T 8)
and acquiring/JV’s with three distributors.
(S4, S6, T2, T3, T8)

3 Increase sales of current products in North America

15% over 3 years by increasing production and
distribution to 100% at 9 existing facilities and a new
one in Mexico. (S6, S7, T4, T6, T7, T9)

4 Increase sales 15% over three years of more

affordable green and specialty products in all
markets using its efficiencies in R&D, production,
packaging to control costs. (S3, S6, S8, S10, T6, T9)

5 Increase sales 6% over 3 years in Western Europe

through sales of current products (Sanaflore).
(S5, S6, T5, T6)
 SPACE MATRIX
Financial Position (FP) Stability Position (SP)
Return on Investment 7 Technological Changes -5
Leverage 4 Rate of Inflation -3
Liquidity 3 Demand Variability -4
Working Capital 6 Price Range of Competing Products -5
Net Profit Margin 4 Barriers to Entry in Market -2
Inventory Turnover 5 Competitive Pressure -6
Return on Assets 6 Ease of Exit from Market -6
Price-Earnings Ratio 4 Price Elasticity of Demand -2
4.875 -4.125

Competitive Position (CP) Industry Position (IP)

Market Share -3 Growth Potential 5
Product Quality -4 Profit Potential 4
Product Life Cycle -3 Financial Stability 3
Customer Loyalty -4 Extent Leveraged 3
Capacity Utilization -2 Resource Utilization 4
Technological Know-how -1 Ease of Entry into Market 1
Control Over Suppliers & Distributors -3 Productivity, Capacity Utilization 4
-2.857 3.428
 SPACE MATRIX
FP (0.57, 0.75)
7
Conservative 6
Aggressive
5
4
3
2
1 1 2 3 4 5 6 7
CP -7 -6 -5 -4 -3 -2 -1 -1
IP
-2
-3
-4
Defensive Competitive
-5
-6
-7

SP
 BOSTON CONSULTING GROUP MATRIX

Geographic Sales ($) Sales Profits Profits RMSP ISGR

Division mil % ($) mil % %
1 North America 5,683.74 23.3 1,044.90 21.09 0.4002 + 2.7%

2 New Markets 9,311.22 38.3 1,713.12 34.59 0.6556 + 8.3%

3 Western Europe 9,348.63 38.4 1,951.77 39.42 0.6583 + 0.9%

4 The Body Shop 990.2 4.0 87.72 1.77 0.0697 + 1.7%

5 Dermatology 909.1 3.0 154.80 3.13 0.0640 + 17%

Branch
Total 26,242.6 100.0 4,952.31 100.0
 BOSTON CONSULTING GROUP MATRIX

Relative Market Share Position

High Medium Low

1.0 .50 0.0

Industry Sales Growth Rate (%)

+20
High

5
QUESTION
STARS 2 MARKS
II
I
3 1
4
Medium

CASH COWS DOGS

III IV
Low

-20
 INTERNAL-EXTERNAL (IE) MATRIX

Geographic Sales ($) Sales Profits Profits IFE EFE

Division mil % ($) mil % Score Score
1 North America 5,683.74 23.3 1,044.90 21.09 3.04 3.47

2 New Markets 9,311.22 38.3 1,713.12 34.59 2.76 3.29

3 Western Europe 9,348.63 38.4 1,951.77 39.42 3.19 3.24

4 The Body Shop 990.2 4.0 87.72 1.77 3.29 3.09

5 Dermatology 909.1 3.0 154.80 3.13 3.35 3.05

Branch
Total 26,242.6 100.0 4,952.31 100.0
 INTERNAL-EXTERNAL (IE) MATRIX

IFE TOTAL WEIGHTED SCORES

Strong Average Weak
3.0 to 4.0 2.0 to 2.99 1.0 to 1.99
4.0 3.0 2.0 1.0
EFE TOTAL WEIGHTED SCORES

4.0

High
3.0 to 4.0 I 1 II III
2
54 3
3.0

Medium
2.0 to 2.99 IV V VI

2.0

Low
1.0 to 1.99 VII VIII XI
1.0
 GRAND STRATEGY MATRIX (GSM)

Rapid Market Growth

Quadrant Quadrant
II I
L’Oreal
Weak Strong
Competitive Competitive
Position Position

Quadrant Quadrant
III IV

Slow Market Growth

 QUANTITATIVE STRATEGIC PLANNING MATRIX
(QPSM)
KEY EXTERNAL FACTORS Increase North Increase New
America Sales by Markets Sales by
15% over 3 years 20% over 3 years
Opportunities Wgt AS TAS AS TAS
The worldwide cosmetics market grew 4.4% in 2011 0.02 3 0.06 4 0.08
Major BRIMC and minor growth countries are projected to 0.08 2 0.16 4 0.32
account for 5 of the 10 largest economies by GDP by 2020.
BCG reports the Chinese middle class is expected to 0.06 2 0.12 4 0.24
increase from 150 million to +400 million over the next
decade.
Direct retail sales in the US increased 4.6% in 2011 0.06 - - - -
Google Offers, Living Social, and Groupon have launched 0.04 4 0.16 2 0.08
apps for Android phones to alert consumers to deals
through mobile devices.
91% of new products pacesetters were brand extensions 0.05 4 0.20 3 0.15
Federal Aviation Safety requirements restrict passengers 0.06 3 0.18 4 0.24
from carrying more than 4 oz. of personal products aboard
aircraft.
US Latino and Asian population is expected to nearly triple 0.08 - - - -
29% of consumers made at least one consumer packaged 0.05 4 0.20 2 0.10
good purchase online in 12 months.
To reduce currency volatility, companies can hedge their 0.07 2 0.14 4 0.28
exposure with futures contracts (an 8.8% annual increase of
dollar index).
 QUANTITATIVE STRATEGIC PLANNING MATRIX
(QPSM)
KEY EXTERNAL FACTORS Increase North Increase New
America Sales Markets Sales
Threats Wgt AS TAS AS TAS
Federal Aviation Safety requirements restrict passengers from 0.03 3 0.09 4 0.12
carrying more than 4 oz. of personal products aboard aircraft.
Consumption of cosmetic products per inhabitant is 10 to 20 0.05 2 0.10 4 0.20
times lower in immature BRIMC countries
China’s GDP growth target is 7.5%, which is well below the 0.05 1 0.05 4 0.20
range of 9.2% to 14.2% recorded in the past five years.
Shiseido Co (Japanese) acquired Bare Essentials (US) Coty 0.04 3 0.12 1 0.04
agreed to acquire OPI Products (nail salon products).
P&G is a global leader in personal and beauty care products 0.06 4 0.24 2 0.12
20% in Western Europe; $14 billion net in cost, restructuring, &
marketing reduction over next 5 years.
Avon markets Regenerist and Anew skin products to baby 0.03 - - - -
boomers; Johnson & Johnson launched a line of E-Pulse, Skin-
Electro-Stimulation technology
54% of female respondents (2008) said they would “buy brand 0.04 4 0.16 3 0.12
they want the most”’ (down to 45% (2010) & 43% in 2011).
Avon sales in India increased 57.4 (in direct sales in 2011). 0.07 - - - -
Due to weak US economic environment and higher pricing of 0.04 3 0.12 1 0.04
green products, consumers may be deterred from buying
green products.
Avon and Revlon both offer perfume products 0.02 3 0.06 4 0.08

1.00
 QUANTITATIVE STRATEGIC PLANNING MATRIX
(QPSM)
KEY INTERNAL FACTORS Increase North Increase New
America Sales Markets Sales
Strengths Wgt AS TAS AS TAS
27 international brands distributed in over 130 countries. 0.04 3 0.12 4 0.16
The Body Shops total sales were $990.204 million (4% total sales). 0.05 2 0.10 3 0.15
The Body Shop has over 70 brands in 60 countries
L’Oreal has invested $930 million in R&D in 2011. 3,676 researchers 0.06 2 0.12 3 0.18
throughout 35 research and evaluation centers filed 613 patents
L’Oreal achieved 9.5% sales growth in New Markets ($9,311.3 mil. in 0.14 - - - -
sales (35% total sales)); added 4 subsidiaries in Africa & Middle East.
L’Oreal achieved 0.6% sales growth in Western Europe ($9,348.1 0.06 - - - -
million; 36% total sales); acquired Sanaflore in France.
Positioned 41 plants across current markets including a new one in 0.08 2 0.16 4 0.32
Russia; opening new sites in Mexico, Indonesia and Egypt.
L’Oreal’s achieved 5.5% sales growth; 4.3% market growth in North 0.07 - - - -
America . L’Oreal acquired Maybelline and Essie.
Global predictive center (Lyon) reconstructs 130,000 units of 0.03 3 0.09 2 0.06
biological tissues for predictive evaluation of ingredients and
products. 9 reconstructive skin and cornea models developed.
Reduces time to market.
The Dermatology Branch (Galderma) total sales were $909.13 0.04 3 0.12 2 0.08
million (Western Europe; $242.8 million; North America: $450.8
million; New Markets: $215.55 million).
L’Oreal conducts in-house packaging of products at their plants 0.02 3 0.06 4 0.08
through the “Wall-to-Wall” program reduces transportation costs &
waste generation.
 QUANTITATIVE STRATEGIC PLANNING MATRIX
(QPSM)
KEY INTERNAL FACTORS Increase North Increase New
America Sales Markets Sales
Weaknesses Wgt AS TAS AS TAS
L’Oreal suffered -2.8% sales loss in its Eastern European Market in 0.08 - - - -
2011, despite a 3.9% market growth.
L’Oreal lacks a Beauty Tools division which its chief competitor, 0.05 3 0.15 4 0.20
Revlon, does have.
L'Oreal's organizational structure limits its ability to create 0.03 3 0.09 4 0.12
integrated brand promotion strategies for its distinctive SBU’s.
L’Oreal has a limited number of perfume, bath, and baby 0.02 4 0.08 3 0.06
products in its portfolio compared to competitors.
L’Oreal lacks energy efficient production facilities in North 0.02 - - - -
America similar to ones in Belgium, Spain, India and France.
L’Oreal does not practice direct selling strategies in their 0.06 2 0.12 4 0.24
marketing initiatives as compared to competitors .
L’Oreal has consolidated key market segments under “New 0.06 - - - -
Markets”; limits managerial response to changes in major
geographic SBU’s.
L’Oreal’s Total Asset Turnover ratio (0.8) is lower than its chief 0.02 2 0.04 4 0.08
competitor, Revlon’s (1.2).
L’Oreal’s cost of operations (55.05%) is higher than its chief 0.03 2 0.06 4 0.12
competitor, Revlon’s (49.42%).
When selecting different country options, L’Oreal’s website has 0.04 2 0.08 4 0.16
defective or nonexistent navigation and translation capabilities.

1.00 3.55 4.42

 EXISTING STRATEGIES TO BE CONTINUED

 1 billion new customers over next 10-15

years.

Sustainability initiatives (2005-2015):

 (1) reducing greenhouse gas emission by
50%.
 (2) reducing waste generated per finished
goods by 50%.
 (3) reducing water consumption per
finished goods by 50%.
 NEW STRATEGIES TO BE IMPLEMENTED

 Establish Joint Ventures with: ($2 Billion)

› Parlain Co. Ltd or Sa. Sa. Intl. Holdings Ltd (China);
› BK Corporation (India);
› Natura or O Boticario (Brazil).

 Hire key executives (CIO, CLO, CTO, Presidents) ($24 Million)

 Establish 10,000 direct sales force in BRIMC. ($225 Million)

 Improve website design & e/m Commerce. ($20 million)

 Initiate an Integrated Brand Promotion marketing campaign

to increase global sales over next 3 years. ($231 million)

Total Cost of New Strategies to be Implemented: ($2.5 Billion)

STRATEGY IMPLEMENTATION
 EPS/EBIT ANALYSIS
100% Debt 100% Stock
Recession Normal Boom Recession Normal Boom
EBIT ($) 2,500,000,000 4,500,000,000 6,500,000,000 2,500,000,000 4,500,000,000 6,500,000,000

Interest($) 39,750,000 39,750,000 39,750,000 0 0 0

EBT ($) 2,460,250,000 4,460,250,000 6,460,250,000 2,500,000,000 4,500,000,000 6,500,000,000

Taxes ($) 727,987,975 1,319,787,975 1,911,587,975 739,750,000 1,331,550,000 1,923,350,000

EAT ($) 1,732,262,025 3,140,462,025 4,548,662,025 1,760,250,000 3,168,450,000 4,576,650,000

# Shares 602,984,082 602,984,082 602,984,082 623,430,635 623,430,635 623,430,635

EPS ($) 2.87 5.21 7.54 2.82 5.08 7.34

Amount of Capital Needed: $2,500,000,000

Interest Rate: 3.25%
Tax Rate: 29.59%
Stock Price: $122.27
# of Shares Outstanding: 602,984,082
 EPS/EBIT ANALYSIS
Debt/Stock 30/70 Debt/Stock 70/30
Recession Normal Boom Recession Normal Boom
EBIT ($) 2,500,000000 4,500,000,000 6,500,000,000 2,500,000,000 4,500,000,000 6,500,000,000

Interest ($) 11,925,000 11,925,000 11,925,000 27,825,000 27,825,000 27,825,000

EBT ($) 2,488,075,000 4,488,075,000 6,488,075,000 2,472,175,000 4,472,175,000 6,472,175,000

Taxes ($) 736,221,393 1,328,021,393 1,919,821,393 731,516,583 1,323,316,583 1,915,116,583

EAT ($) 1,751,853,608 3,160,053,608 4,568,253,608 1,740,658,418 3,148,858,418 4,557,058,418

# Shares 617,296,669 617,296,669 617,296,669 609,118,048 609,118,048 609,118,048

EPS ($) 2.84 5.12 7.40 2.86 5.17 7.48

Amount of Capital Needed: $2,500,000,000

Interest Rate: 3.25%
Tax Rate: 29.59%
Stock Price: $122.27
# of Shares Outstanding: 602,984,082
 EPS/EBIT ANALYSIS
EPS-EBIT Chart
8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00
$2,500,000,000 $4,500,000,000 $6,500,000,000

Common Stock Financing Debt Financing

 PROJECTED INCOME STATEMENT
In $ millions % Sales 2011 2012 2013 2014 Note

Net Sales 100% 26,242.6 38,609.5 40,851.3 43,268.0 1

Cost of Sales (28.8%) (7,548.4) (11,786.5) (12,432.2) (13,128.2)
Gross Profit 71.2% 18,694.2 26,822.9 28,419.1 30,139.8
R&D (3.5%) (929.5) (1,351.3) (1,429.8) (1,514.4)
Adv/Promo (30.9%) (8,116.2) (12,014.0) (12,706.8) (13,453.5) 2
SGA (20.6%) (5,401.1) (8,036.6) (8,498.4) (8,996.2) 3
Ops Profit 16.2% 4,247.5 5,421.0 5,784.2 6,175.7
Other Income(Exp) ( 0.47%) (124.2) (86.9) (60.9) (51.1) 4
EBIT 15.73% 4,123.2 5,334.1 5,723.4 6,124.6
Interest (1.5%) (0.24%) (62.1) (131.4) (134.3) (137.7) 5
Capital Gain 0.14% 36.8 50.0 68.0 92.5 6
Net Finance Cost (0.1%) (25.3) (81.4) (66.3) (45.3)
Other Fin. income (exp) (0.03%) (7.2) (6.7) (6.2) (5.8) 7
Sanofi Dividends 1.45% 381.3 559.8 592.3 627.4
EBT 17.05% 4,472.0 5,805.9 6,243.1 6,700.9
Income Tax (5.04%) (1,323.3) (1,945.9) (2,058.9) (2,180.7)
Net Income 12.01% 3,148.8 3,859.9 4,184.2 4,520.2
 PROJECTED INCOME STATEMENT
 Dividend Payout (in $ millions)
(2011) - $ 1,521.17 million
(2012) - $ 1,864.74 million
(2013) - $ 2,021.40 million
(2014) - $ 2,183.71 million

 Retained Earnings (In $ millions)

(2011) - $ 1,627.59 million
(2012) - $ 1,995.21 million
(2013) - $ 2,162.82 million
(2014) - $ 2,336.48 million
 PROJECTED BALANCE SHEET
Assets (in $ mil) 2011 2012 2013 2014 Note

Noncurrent Assets 24,684.2 25,791.5 27,550.6 29,911.5

Goodwill 8,003.9 8,003.9 8,003.9 8,003.9
Intangibles 3,195.7 3,291.6 3,818.2 4,581.9 1
PPE 3,716.2 3,716.2 3,716.2 3,716.2
LT Assets 8,902.2 9,792.4 10,967.5 12,502.9
Deferred Tax Assets 866.1 987.4 1,044.7 1,106.5
Current Assets 9,962.2 15,428.8 19,346.1 22,732.8
Inventory 2,647.2 3,681.5 5,154.1 7,215.7 2
Acct Receive 3,865.1 7,721.9 8,170.3 8,653.6
Other Current Assets 1,166.3 1,306.2 1,489.1 1,727.4
Current Tax Assets 152.2 158.3 167.8 181.2
Cash and Cash 2,131.3 2,560.9 4,364.9 4,954.9 *
Equivalents
Total Assets 34,646.3 41,220.3 46,896.7 52,644.3
 PROJECTED BALANCE SHEET
In $ millions
Shareholders Equity 2011 2012 2013 2014 Note

Equity 22,752.4 26,115.1 29,010.7 32,205.0

Share capital 155.6 155.6 155.6 155.6
Additional PIC 1,640.1 1640.1 1640.1 1640.1
Other reserves 15,955.8 17,950.9 20,113.8 22,450.3 *
Direct equity 2,650.6 2,915.6 3,207.2 3,527.9
Cumulative Translation 32.1 48.2 72.3 108.4
Adjustments
Treasury Stocks (831.3) (581.9) (366.6) (201.6) 1
Net profit to Owners 3,145.5 3,982.5 4,184.2 4,520.2
SH Equity 22,748.4 26,111.1 29,006.5 32,200.8
Noncontrolling Interest 4.0 4.05 4.12 4.23
 PROJECTED BALANCE SHEET
Liabilities (in $ mil) 2011 2012 2013 2014 Note

Noncurrent Liabilities 2,696.4 4,114.7 5,656.9 7,234.6

Provs for Retirement Ben 1,456.3 1,531.3 1,606.3 1,681.3
Provs for Liabs & Charges 291.7 364.6 473.9 592.5
Deferred Tax Liabilities 874.2 1,311.4 1,835.9 2,386.7
Noncurrent borrow & debts 74.2 907.5 1,740.8 2,574.2 2
Current Liabilities 9,197.6 10,990.4 12,229.1 13,204.7
Trade Accts Payable 4,189.5 4,608.5 5,069.3 5,576.3
Provs for Liabs & Charges 645.9 658.8 672.0 685.4
Other Current Liabilities 2,666.0 2,905.9 3,167.5 3,452.6
Income Tax 288.9 424.9 449.7 476.3 3
Current Borrows & Debt 1,407.1 2,392.1 2,870.6 3,014.1

Total SH Equity & Liabilities 34,646.3 41,220.3 46,896.7 52,644.3

 Comparing Retained Earnings
In $ millions except per share data
2011 2012 2013 2014
Income Statement
Retained Earnings 1,627.6 1,995.2 2,162.8 2,336.5

+
2010 14,328.2 + + +
= = = =
Balance Sheet
Retained Earnings 15,955.8 17,950.9 20,113.8 22,450.3

Cash & Cash Equivalent 2,131.3 2,560.9 3,800.8 4,178.2

 PROJECTED FINANCIAL RATIOS:
Revenues in $ millions except per share data
L’Oreal 2011 2012 2013 2014
Growth Rate % 0.0435 0.47 0.05 0.05
Revenues $ 26,242.6 38,609.5 40,851.3 43,268.0

Gross Profit % 0.7124 0.6947 0.6957 0.6966

Margin
Net Profit Margin % 0.1200 0.1000 0.1024 0.1045

Current Ratio % 1.0831 1.4038 1.5820 1.7216

Quick Ratio % 0.7953 1.0689 1.1605 1.1751
Return on Assets % 0.0909 0.0936 0.0892 0.0859
 PROJECTED FINANCIAL RATIOS:
Revenues in $ millions except per share data

L’Oreal 2011 2012 2013 2014

Debt-to-Equity Ratio % 0.1 0.2 0.2 0.2
Return on SH Equity % 0.1 0.1 0.1 0.1
Inventory Turnover % 9.9 10.5 7.9 6.0
Total Asset Turnover % 0.8 0.9 0.9 0.8
Accounts Receivable % 6.8 5.0 5.0 5.0
Turnover
Average Collection Period days 53.8 73.0 73.0 73.0
STRATEGY EVALUATION
 BALANCED SCORECARD
Time Primary
# Area of Objective Measure / Target Expectation Responsibility
1 Hire key executives (CIO, CLO, Identify, recruit, and orient new By end of CEO, CHR
CTO, Presidents, Vice Presidents). executives into their respective 1st Qtr, 2012
positions.
2 Establish Joint Ventures with: Achieve annual sales growth of 2012 - 2014 CEO,
Parlain Co. Ltd or Sa. Sa. Intl. 20% : Divisional
Holdings Ltd(China); 9% in China, 6% in Brazil, and 5% Presidents
BK Corp. (India); in India.
Natura or O Boticario (Brazil).
3a Initiate an IBP marketing Achieve Annual Customer 2012 - 2014 CEO and
campaign to improve global increases of 7%-5%-3% in U.S.; CMO
sales in conjunction with direct Achieve 10%-6%-4% annual
sales in #3b. customer increase in BRIMCs.
3b Establish direct sales force of Recruit, train and orient 25% 2012 - 2014 CMO, CHR,
10,000 in BRIMC. direct sales representatives each Divisional
B = 600; R = 500; I = 3,700; quarter per country. Continue Presidents.
M = 400; C = 4,800. to recruit over 2 yrs.
4a Increase e/m Commerce Sales Develop and add two coupon 2012 - 2014 CMO, CIO,
Performance through coupon apps; increase annual online CTO
apps and CRM. sales 10%-8%-7%.
4b Improve website design by: Employ the latest software and 2012 - 2014 CMO, CIO,
Enhance fonts, ease of hardware to enhance web site. CTO
navigation; translate site into
Spanish, Chinese, & Hindi; link to
Facebook, Twitter, and YouTube.
 CONCLUSION
The strategies presented helps L’Oreal to achieve its long-term goal
of acquiring 1 billion new customers over the next 10-15 years.

L’Oreal is in an optimal position to build its reputation and brand

image by reaching new and diverse populations of beautiful people
in growing markets targeted in these strategies.

These strategies align L’Oreal’s distinctive competencies in R & D

and Sustainability, as well as demonstrates L’Oreal’s sense of Social
Responsibility by bringing economic growth opportunities into
developing economies.

Utilizing only 7% of L’Oreal’s assets, the supporting objectives are

clearly specified, obtainable, verifiable, measureable, timely and in
keeping with L’Oreal’s core vision and mission to provide…

BEAUTY FOR ALL!!!

QUESTIONS?

Anika Patel
AVP Consultant Group, LLC