BUSN 6031: L'Oreal and the Globalization of American Beauty Case Study

This case study analyzes L'Oreal's journey to becoming the world's largest beauty company, focusing on its globalization strategy, particularly the acquisition of American brands like Kiehl's. The study examines how L'Oreal expanded its market presence beyond France, targeting the United States as a key market and leveraging acquisitions to diversify its product portfolio and gain market share. The analysis explores L'Oreal's market positioning, including its premium branding and retail strategies, and how it has adapted to changing consumer preferences. It also discusses the challenges and limitations L'Oreal faces in maintaining its global leadership, particularly in adapting to diverse cultural contexts and evolving market trends. The case study provides insights into L'Oreal's approach to brand management, distribution networks, and its ability to create strong connections with local communities, providing a comprehensive overview of L'Oreal's global business strategies and their effectiveness.

Running head: INTERNATIONAL BUSINESS
International business
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Question: 1
According to the current global cosmetic industry, L’Oreal is the biggest beauty company
in the world. They are having their operations across the world with diversified product portfolio.
According to the given case, it is identified that after the Second World War, L’Oreal initiated
the global market expansion strategy in order to have their presence beyond their home country.
It is stated that prior to the Second World War, L’Oreal was having their presence only in the
French market, which caused limited brand identity and market opportunities for them. In the
later stage, the rapid market expansion helped L’Oreal in gaining more global market share. In
addition, in the initial stage of the market expansion strategy, L’Oreal targeted the United States,
which at that time was the biggest market for the beauty products. Hence, from the initial stage
of the global operation of L’Oreal, they gained the most potential customer bases in the market.
This should also be noted that United States are also the home of the most affluent customer
segments, which is also beneficial for L’Oreal for selling their premium sets of products. This
can be concluded that selection of the right market is one of the major reasons behind L’Oreal
becoming the biggest beauty brand in the world. Positioning in the market also contributed in the
gaining of the market leadership status of L’Oreal. This is due to the reason that they designed
their physical evidences such as the retail stores and the artifacts in line to the premium
positioning. For example, the retail stores of L’Oreal are located in the high streets.
In becoming the market leader in the global market, acquisitions are having huge role in
the process. This is due to the reason that according to the case given, there are number of
acquisitions being made by L’Oreal in their industry to gain the foothold in different markets.
For instance, they acquired Kiehl’s in 2000, which was the leading beauty brand in the United
States that time. Thus with the acquisitions of Kiehl’s, L’Oreal gained the extensive foothold in

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the United States along with the existing customer base. On the other hand, acquisition strategy
of L’Oreal also helped them in creating diversified product portfolio, which further helped in
meeting the different requirements of different customer segments. For example, they have
acquired Ralf Lauren with the help of which, L’Oreal gained the market share in the premium
fragrance segment. Hence, they gained the advantages of catering to different customer
segments. The current market scenario, where L’Oreal is having their presence across different
segments of the cosmetic industry is mainly due to their acquisitions of different firms. Other
major advantages that are being gained by L’Oreal from the initiation of acquisitions are existing
target customers base, positive brand value and global brand expertise. Each of the acquired
firms is having different level of expertise that is being gained by L’Oreal. They have
successfully leveraged the brand value of the acquired firms in gaining competitive advantages
in the global market, which in turn lead to the market leadership status of L’Oreal.
Question: 2
As per information gathered from the given case, the current product portfolio of L’Oreal
is consisting of the premium products that are mainly acceptable among the premium and higher
end customer segments. In this case, their French and American concepts are successful because
these countries are developed economies with more number of affluent customers. As of now,
L’Oreal is following French and American concepts in their business operations. For example,
Harley Davidson bikes are there in the retail stores of L’Oreal, which denotes their all American
culture in their business. This is having multiple advantages for L’Oreal with one of them is
leveraging on the cultural imperialism. This is due to the reason that with the help of the cultural
imperialism and globalization, customers from across the world are getting attracted by the
dominant western cultures. Hence, the American and French cultures being followed by L’Oreal

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will be beneficial for them in increasing their business along with generating more revenues from
across the world. However, on the other hand, there are number of limitations will also being
faced by L’Oreal in their global operation. This is due to the reason that uniformity being
maintained by L’Oreal in their retail store formats might not be effective in attracting customers
across the world. For example, the attraction being possessed by the Harley Davidson bikes in
the American market is not the same in other countries such as Japan and China. In these
countries, other home grown bike brands might have more popularity compared to Harley
Davidson. Hence, this strategy of putting Harley bikes in the stores of L’Oreal will also be
effective in catering customers in the other markets majorly in the Asian countries.
This should also be noted that with the initiation of globalization, developing countries
are first emerging in the global scenario newer trends are getting in place. Hence, the extent to
which the customers from the developing countries accepted the foreign trends over their
indigenous cultures is getting reduced with these countries becoming dominant. Thus, it is
important for L’Oreal to initiate the market adaptable approach in more extensive manner to
have the penetration across the global market. In the case study, it is also identified that L’Oreal
is not selling the products only from their retail stores; rather they are selling experience to their
premium customers. Moreover, the American and French concepts of L’Oreal denote the
premium and luxury quotient. However, as per the recent market trends, customers are preferring
no frills experience across all the industries with higher inclination towards the utility. Thus, the
existing strategy of L’Oreal will not be able to cope up with these changes in the global market.
Lastly, it can be concluded that the American and French concepts being followed by L’Oreal
will be certain limitations and will not be effective for attracting new customers. They will stay
as the niche brand with their existing strategy not a volume player.

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Question 3
Kiehl’s was bought by L’Oreal in the year 2001, as one of the major parts of its US
acquisition strategy. Kiehl’s is a very small family owned cosmetic company that is located in
New York. The company reached a cult status by means of applying a business model that is
completely in contrast to that of L’Oreal’s. Instead of advertising, it was based on creating strong
ties with the local customers’ community. This approach earned a strong brand image for Kiehl’s
as a cult brand. The appeal for Kiehl’s globally was rapidly increasing with the opening of new
stores all over the world and creating websites for expanding the business before it was acquired
by L’Oreal.
Some of the key global opportunities for Kiehl’s are its distribution network, the
excellent brand image and reputation that it holds, its high numbers of younger customers as well
as its strong connections with the local communities. It is to note that the distribution network of
Kiehl’s include the upscale stores like the Saks Fifth, Neiman Marcus and Bergdorf Goodman.
Kiehl’s is very popular among its distribution network and they regard it as one of the fastest
growing and fabulous businesses that has excellent brand name among the younger and the
highly nature-oriented customers. With the same, it is also to note that the continued
development and success of the brand relied on the potential of the new stores for making strong
connections with the surrounding local communities where they exist. At New York, the Kiehl’s
investment of an impressive amount of wall space was all devoted for such community
connections events and activities. An entire long wall was devoted for pictures of the children of
their customers. Apart from these, it is also to mention that Kiehl’s also ensured that the newly
opened store, be it in any part of the world, effectively reproduce the essence of the original New
York while creating a neighborhood culture or feel that effectively connected the location of the

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store. Moreover, the success of Kiehl’s is dependent on its nature of authenticity and sincerity. It
is no frills but is all about the product, the formula with which they are made as well as the
natural ingredients that are used for preparing them. For all its educated and conscious customers
who ask all types of questions, Kiehl’s have highly trained staffs and sales executives who could
effectively explain them. These are the elements on which the company is built on and all these
makes altogether creates some effective global opportunities for the brand. However, there are
certain limitations that could prevail in the process and they are- the shortage of resources that
the company might face and the inadequate capacity of production. Both these limitations are
interconnected with each other. Lack of resources can limit down the production capacity, which
would further limit down the supply of products to the global customers.