Marketing Strategy of L’Oréal: A Comprehensive Analysis

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MARKETING STRATEGY OF L’OREAL
MARKETING STRATEGY OF L’OREAL
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Table of Contents
Introduction......................................................................................................................................1
LO1: Impact and influence of macro environment on L’Oreal and their business strategy (P1,
M1)..................................................................................................................................................1
LO2: Internal environment and capabilities of L’Oreal (P2, M2)...................................................4
LO3: Outcomes of L’Oreal business sector (P3, M3).....................................................................7
LO4: Apply models, theories, and concepts to assist with the understanding and interpretation of
strategic directions available to an organization (P4).....................................................................7
Conclusion.....................................................................................................................................10
References......................................................................................................................................11

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Introduction
L’Oreal is one of the renowned cosmetics and personal care companies of the world with their
head quarter based in Paris, France. Being the largest cosmetics company of the world, L’Oreal
have about €35.339 billion as their total annual asset in 2017- 2018 and €3.586 billion as net
income in the same fiscal year. The company has almost 40 brands in their portfolio and they sell
their products in almost 130 countries of the world. The product line of the company has a
combination of consumer products that can be found everywhere and L'Oreal luxe category
products. In order to have a better business strategy and successful outcome from the company
needs to analyse their internal and external environment and therefore the microenvironment
analysis and macro environment analysis are needed to be conducted. Therefore, a SWOT
analysis and a PESTLE analysis have been conducted concerning the mentioned company
L'Oreal.
LO1: Impact and influence of macro environment on L’Oreal and their business strategy
(P1, M1)
In order to understand the impact and influence of macro environment on L’Oreal and their
business strategy, the PESTLE analysis will be beneficial. Although the company is generating
and developing the business in more than 130 countries of the world, the head quarter and
business base is situated in Paris, France (Steward et al. 2016). Therefore, it is needed that the
PESTLE analysis will be conducted in concern to the business of the company that has been
developed in Paris. The factors that has been analysed through the PESTLE analysis has been
influencing and impacting on the result of business strategy developed by L’Oreal in direct and
indirect ways. Therefore, it is expected that the pestle analysis will help to understand these
factors properly.
Political factors: As the company working as a manufacturer and retailer in the cosmetic and
consumer products in different countries of the world, it is required that the political laws and
regulations should comply with the business. Although, the headquarters of the company is
situated in Paris, the political factors and government policies in France has been influencing the

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business of the company mostly. It is evident that France has a number of import policies, which
have influenced the business of the organisation, and at the same time, the advent of
globalisation played a positive role into the business (Seo and Lee, 2019). Although, it is one of
the countries that follows capitalism, much profits and benefits has not been seen in the
economic and political situation of the country. Some political and economic reforms have been
developed in to the country in order to manage the rights of people into the different parts of the
political agendas. These reforms have both the positive and negative impacts in the business
sectors of the multinational companies like L’Oreal.
Economic factors: One of the major economic factors that the organisation have faced in order
to develop their business in France is that the exchange rate with other currencies of the world.
Moreover, from 2008 the country is also facing the problems regarding the great recession. In the
span of 4 years, Paris and the other parts of the country have seen two great recessions, which
have influenced the business of the Global, companies like L'Oreal (Dobscha et al. 2015). Apart
from that, the heavy tax rate in the country has influenced the business negatively and the
unemployment as the result of recession has affected the company. The problems of recession
and unemployment, but also the problems regarding a bankruptcy like any other European
country have also affected the economy of France and as well as the business of L'Oreal like any
other global brands. However, strong governmental intervention can be found in the banking and
financial sectors of the country which have taken into account for having a positive effect. The
high Human Development Index of the country has also reflected in the better business of
cosmetics and consumer products companies like L'Oreal in France. Apart from that, the growth
in the GDP of the country has been influencing positively for developing the business of luxury
brands like L'Oreal (Aithal, 2016).
Social factors: Technical Trend is the most happening and major social factors which is
affecting the business of cosmetics companies and consumer products companies like L'Oreal in
France and in the other countries of the world. The contemporary technical Trends have been
affecting the ever-changing fashion trends and L'Oreal is trying to incorporate those changes in
their product portfolio according to the demands of their potential and existing customers in all
over the world. However, the economical impacts on the social classes in France and the
growing crime rate in the country have affected their business socially and ethically. Due to the

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reducing in income, not only the crime rate has been increased but also the productivity of the
organisation has been reduced which affected their business as well (Cunha, 2017). Certain
ethical issues such as using some ingredients in the product have affected negatively into the
production issue of the organisation in the different parts of the world. Apart from this, other
social and ethical issues have also played a prominent role into the business of L'Oreal in the
different parts of the world including France.
Technological factors: The technological ramifications has been seen in the different sectors of
life and in the business of the Global companies like L'Oreal it is a very much expected that the
technological innovation have played a prominent role. In the research and development of
products including the cosmetics and consumer products, France has invested a huge amount of
money over the years, L’Oreal has been a part of this research, and development projects
conducted in France (Sinha and Sheth, 2018). Innovation and fashion trends have been played a
great role in to the business of the organisation and the technological innovations such as the
extensive use of internet has been helpful in this regard. Moreover, for having a better business
strategy and to market the products properly and in the various countries of the world the internet
have helped the Global market as well as the Global companies like L’Oreal.
Environmental factors: A number of global environment safety laws must be abiding by the
Global standards and it is encompassed in the environmental factors for an organisation that
deals in the Global Business market. As the world has been taken vows to make this world
beautiful and pollution free, a number of global companies and international brands have been
supporting this cause according to their perspectives from the corporate social responsibilities
(Hamschmidt. 2017). On the other hand, it can also be stated that the mentioned company,
L’Oreal has also taken part in these activities and they have taken a number of steps in order to
reduce water pollution rate in France. Moreover, the company has taken vows in order to reduce
the industrial carbon dioxide so that they can also increase their rate of ethical sustainability.
Legal factors: As the mentioned company L'Oreal has a number of competitors in the concerned
market, in order to compete in the market environment and to maintain their graph of success
along with the ethical business environment, L'Oreal has taken help from their legal factors by
fulfilling them properly. On the other hand, the import and export laws in France are quite strong
and the rules and regulations regarding the business are to be maintained ethically by the

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organisations that are developing their business in the country (Dollet et al. 2017). It is evident
that L'Oreal has been abiding them properly as they have not been charged of violating any law
until now.
LO2: Internal environment and capabilities of L’Oreal (P2, M2)
L'Oreal has been considered as one of the top most brands in the cosmetic industry of the world.
The company has produced a number of cosmetic brands such as The Body Shop, Garnier and
Maybelline, which consists of the everyday consumer products as well as the luxury consumer
products for different target markets. In order to understand their market strategy and internal
environment, SWOT analysis is necessary and it will help to understand the capabilities of the
company to develop their business in all over the world.
Strength:
Largest beauty and cosmetic company: L'Oreal has been considered the largest cosmetics and
beauty companies of the world and the reason of the phenomenal success of the organisation is
that they have completely concentrated on the cosmetic lines (Santos et al. 2018). On the
contrary, the other brands all companies that have a single product line have concentrated on
cosmetics or beauty products.
Continuous research and development: As the organisation deals with cosmetics and beauty,
they do not concentrate only on the manufacturing but also they have examined the other factors
of cosmetics such as cosmetology, Dermatology, hair care, skin care, sun protection and the
other Sciences related to it. This continuous implementation of research and development has
ensured that the organisation provides safety to their customers and the skincare regime of the
customers can be maintained accordingly to their skin type (Vasudevan, 2015). As the company
has not only developed their business in the European countries but also in the Asian and African
countries, they have developed a large market share of the cosmetics industry. In order to
convince the buyers according to their skin type and climatic changes, they have invested the
large amount in the continuous research and development, which ensures their success in the
business sector.

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Strong brand portfolio and excellent product: If the brand portfolio and the products of the
organisation can be examined it can be stated that the product lines that are included within the
brands of L'Oreal can compete with each other in terms of quality and effectiveness. As for
example, it can be cited that Garnier has been focused on the personal care and skin care whereas
Maybelline has been focusing on the beautification of a skin and makeup range (De Mooij,
2018). The organisation has ensured that all the brands launched by them should focus on their
core strength, so that they can compete successfully with the other competitors in the concerned
market.
Strong and integrated market communication: The Integrated Marketing Communication is one
of the strengths of L'Oreal in order to develop their portfolio and their business market in the
concerned field. It can be stated that they have developed the line marketing campaign and at the
same time, they have ensured the point of purchase marketing successfully.
Stars in brand portfolio: According to the Cash Cow of the organisation, Maybelline, Garnier
and L’Oreal Paris, can be considered as the starts in the brand portfolio of the organisation. They
have been considered as the bottom line of the organisation and the other brands are surviving
and helping through them (Wolff, 2016). Moreover, these three stars in the organisation have
earned the amount of investment that the organisation is investing in the other sectors.
Weakness:
Multiple subdivisions: As the company deals with the number of subdivisions at they have
handled a large operational management, it is always problematic to handle all of them together.
Due to the number of subdivisions it has, the organisation is known as bulky and slow in nature.
Employee management is another issue that can be considered as a problematic thing in L’Oreal
as almost 60,000 employees are working for them. Therefore, human capital expenditure of the
organisation has been increased to a huge level.
Lower profit margin: In comparison with the other competitors in the concern market L'Oreal
has been going through the lower profit margins as a higher investment in research and
development, organic processes and massive distribution expenses can be categorized as the
reason of it (Mark-Herbert and Holmsten-Carrizo, 2017.). However, this massive investment in
research and development has made them as one of the top brands in the beauty segment.

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De-growing segments: A lot of competition can be identified in the different segments such as
Hair Care, which have affected the profit margin and productivity of the organisation negatively.
In this specific segment Garnier has been experienced a lower profit gainer as it has to compete
with the competitors like HUL and P&G (Zhang and Guan, 2017).
Opportunities:
Product mix expansion: The complete product mix expansion of the organisation, L’Oreal can
be achieved by expanding their product lines that an existing and as well as introduce new
products in the concerned market. The organisation should concentrate on this expansion as it
can help them to develop their business into a better level (Ramli, 2017).
Demand of organic cosmetics: In the recent time, the demand for the organic cosmetics is in the
Rise due to the different sustainability issues and the intervention of the organisations like PETA
has contributed in it. It helps the organisation to develop their business as they are investing into
the organic cosmetics since the beginning of their journey.
Market potential: The demand of beautification and cosmetics products as well as the personal
products is developing day by day. On The other hand, the newer market development can be
expanded into the newly emerging economy of newly developed and developing countries. Thus,
it can be expected that L’Oreal can expand their market into this new emerging market
successfully (Dobscha et al. 2015).
Threats
Dynamic nature of the cosmetics and personal Care industry: It has been seen that the constant
updating is needed for the survival of an organisation into the personal care and cosmetics
industry. However, it is needed to invest on huge amount of money to keeping up with time and
ongoing fashion trend. At times, it seems difficult to compete with all the problems and survive
into the industry and L’Oreal have experience this problem (Wolff, 2016). Moreover, the
increasing competition in the mentioned sector has been considered as one of the threats for it.
Economical problem: As L’Oreal has been divided into a number of sub divisions, it is often
considered that the division of money is problematic for the management. The overall cash flow

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as well as the working capital management can be difficult if cash inflow from any country
stopped due to any political or economical issue.
LO3: Outcomes of L’Oreal business sector (P3, M3)
The five forces model by Porter can be utilised in order to examine the outcome that has been
examined by the SWOT and pestle analysis of L'Oreal business sector. The market evaluation of
the organisation can also be conducted through this model.
Bargaining power of buyers: The buyers can bargain the price of the product, as there are a
number of other companies that provide almost same product into a lower price. Therefore, the
buyers can go for them instead of buying products provided by L'Oreal.
Rivalry among competitors: The competitive advantage has been focused by all the competitors
including L'Oreal. Moreover, a number of high competing firms have been found that can
compete as a business rival of L'Oreal by selling similar products. A low barrier can be found to
enter the cosmetic market in all over the world, which also contributed into this rivalry among
the competitors of L'Oreal (Mark-Herbert and Holmsten-Carrizo, 2017.).
Entry of new competitors: Due to the low barrier in the market, new competitors can enter into
the market of L'Oreal anytime. In order to overcome the barrier, along with quality and pricing
marketing can also help. High quality Products and lower prices along with substantial marketing
can be ensured by the new companies. Competitors such as Avon, Oriflame, and Revlon can be
identified as well as the local competitors.
Substitute products: Substitute products into the hair care skin care and sun protection can be
found in to the market in all over the world that can be substitute of the L'Oreal products. Many
local and international brands are producing and investing into the products that are
internationally acclaimed and competing with the L'Oreal products as well (Wolff, 2016).
Bargaining power of the suppliers: L'Oreal has to depend on their suppliers in regards to raw
materials, Packaging, Point of sales and equipment. Therefore, it is can be considered that the
bargaining powers of the suppliers are evident in the market production of the company.

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LO4: Apply models, theories, and concepts to assist with the understanding and
interpretation of strategic directions available to an organization (P4)
Cost leadership strategy
As stated by Johnston et al., (2016) cost leadership is one of the important business strategies,
which are being used by an organization for gaining competitive advantage in the market. This
will enable L’Oreal to have a better cost structure and to reduce irrelevant spending on some
items, which reduces the profit margin. This helps L'Oreal to set the price of the products in an
effective manner so that a stable revenue count can be generated. Cost leadership often drives the
company’s efficiency for a better learning curve through which market needs can be easily
understood. As stated by Habibovic, (2017) with the help of cost leadership, L’Oreal can lower
the cost of their production process and increase the price of the product, which shall enable
them to earn a higher profit. Apart from all this, the standards of the product can be increased
when the revenue increases. This is mainly because of the fact that more advanced technology
can be used in the production process, which increases the quality of the product effectively.
Price leadership strategy
Price leadership has a greater impact on various products, which tend to offer very little
differentiation. In this strategy, the market leader sets the price of the product for the demand
created by the consumers for a particular product (Annarelli and Nonino, 2016). Hence, L'Oreal
is no exception to it. They have different pricing strategy and set prices of products according to
the demands made by the consumers for a particular product (Noble and Nwanekezie, 2017). For
instance, the price of shampoo in China is much lesser than the same shampoo bottle, which the
American consumers buy. This is the result of price leadership strategy so that pricing disciplines
are being maintained well. Apart from this, L’Oreal being a large corporation and operating in
different countries needs to adapt to a better price leadership strategy for enduring the various
market forces.
Differentiation strategy
As stated by Kablov, (2015) this type of strategy is being used by an organization to differentiate
their products from their rivals so that the customers may develop a unique idea about their

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product offerings. Therefore, with the help of this strategy, L’Oreal can modify their product
offerings. For instance, products made without the use of harmful chemical hazards, using
natural ingredients and various other things can create a huge difference in the mindset of the
consumers. Thus, it helps in complying with the various needs of the consumers and enable
L’Oreal to gain a competitive advantage in the market. As opined by Johnston et al., (2016)
when the difference is created, the existing market share of the company is increased, as a
number of customers tend to buy products, which are unique in nature and offer different uses.
Focus strategy
This a special strategy, which a company gets, indulges into for focusing on a particular segment
of their customer base. This helps to satisfy the needs and fulfill the customers need in the most
effective way (Cook and Cook, 2018). Hence, with this strategy, L’Oreal can target a specific
market of the consumers, which will help them to design their products according to their needs
and preference. For instance, if they are targeting the lower income groups, then they will keep a
low price for their products so that everyone can easily afford to buy those products. Further,
keeping a low price will increase the sales and competitive advantage over their rivals.
Hybrid strategy
As opined by Johnston et al., (2016) this is a new strategy, which organizations adopt for a better
competitive advantage. It tends to describe a blend between the differentiation and low-cost
strategy so that organizations could use this strategy for increasing brand awareness among the
consumers (Hill et al., 2017). Therefore, L’Oreal could easily use this strategy for offering
unique products in the market at a very low cost. This shall help any consumer to buy products
when the price is low particularly for the lower earning customers so that L’Oreal can gain a
huge competitive advantage in the market.
Strategic formulation
It can be noted that, from the above strategies, L'Oreal can use cost leadership, differentiation,
and focus and hybrid strategy for gaining competitive advantage in the market of their operation.
Use of this strategy will further help in meeting the needs of the consumers and satisfy them by
offering high-quality products at a lower rate. Further, the use of these strategies would be very

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much appealing to the consumers, as it will make L'Oreal to develop customer-centric
approaches (Johnston et al., 2016). Thus, the main aspect that will benefit L’Oreal after
implementing these strategies is that their sales will increase which, will ultimately increase the
profit for them and help in gaining a competitive advantage.
Conclusion
To sum up the study, it can be stated that L'Oreal have been considered as the largest cosmetics
and personal care companies of the world and they have been developed their position into the
different developed and developing countries through a number of years. By examining the
external and internal environment of the organisation, it can be stated that the organisation is
doing great into their concerned business. However, a number of problems can be found in to
their business that can restrict the growth and expansion of the organisation in the future. By
evaluating the external and internal environment, this problem has been found and the generation
of problem mitigation strategy should be considered and introduced by the organisation to
overcome this problem and expand their business into the ever-expandable cosmetics industry of
the world