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SWOT Analysis L'Oreal

Posted on 05 Aug 2008 17:43 by LOreal

Introduction

Many cosmetic brands are popping up recently, perhaps, due to the


increasing consumers of products that beautify and enhance the physical
appearance of a person. Even though the market is already full of the said
cosmetic brands, the company LOreal Groups could still be considered as
the leading supplier of cosmetics and hair-color. This study is a brief
overview of the marketing concepts and strategy of the said company. The
company profile will be presented to be able to give a clear view of the
market to which the company belongs to. An internal and external (SWOT)
analysis of the company will also be provided in this paper. Another area
will be specifically devoted to the implementation of the marketing strategy
of the company as well as the ethical issues raised by these marketing
strategiesy.

LOreal SWOT Analysis

A. Internal Analysis

1. Strengths
The ongoing success of the LOreal Group is without if not for the
ingenuity of the concept of their vision as a team. LOreal Chairman and
CEO Lindsay Owen-Jones considers passion as the key to the well-
renowned accomplishment of the said Company. The primary strength of
the Company is the continuing research and innovation in the interest of
beauty which assures that the LOreal Cosmetics offers the best to their
consumers. Their dedication to their continuous research makes them the
leader in the growing cosmetics industry despite the competition in the
market.

Another strength of the LOreal Groups is the developed activities in


the field of cosmetics as well as in the dermatological and pharmaceutical
fields in order to put more concentration in their particular activities. The
cosmetics activities of LOreal are divided to five groups. First is the
Consumer Product Division which encompasses all the brands distributed
through mass-market channels, ensuring that LOreal quality is available to
the maximum number of consumers. The Luxury Products Division
includes the prestigious international brands selectively distributed through
perfumeries, department stores and duty-free shops. The Professional
Products Division offers specific hair care products for use by professional
hairdressers and products sold exclusively through hair salons. The Active
Cosmetics Department creates and markets products for selective
distribution through pharmacies and specialist health and beauty outlets.
The LOreal Groups dermatological activities are linked with Galderma,
which is basically a dermatological firm that contributes to the innovation of
the LOreal Groups products. The pharmaceutical activities of LOreal are
also handled by Sanofi-Aventis. These divisions and subdivisions ensure
the quality that the LOreal Group offers to its customers. To further add to
the enumerated strengths of the company, LOreals advertising strategy
also plays a major part to its growth. Through adapting to the culture of
their target market as the main tool of their advertisement, the Company
brought LOreal products within reach of other women from different parts
of the world.

2. Weaknesses

Perhaps one of the weaknesses that a big company faces is the


decentralized organizational structure. This is also part of the difficulties
that LOreal is facing. Due to the many subdivisions of the Company, there
is also the difficulty in the control of LOreal. This slows down the production
of the Company because of the need of giving reference to the other Board
members and directors of the Company. LOreal will also have a difficulty in
finding out what division is accountable for the possible pitfalls of the
Company. Another weakness that LOreal faces is their profit. The profit
margin of LOreal is comparably low than that of the other smaller rivals.
While LOreal projects certain rise in digits as their profit, the result does not
usually meet the expectations (Sang, 2003). Perhaps, this is also due to
the high-end advertising and marketing as well as the width of the
Company. Finally, the coordination and the control of the activities and
image in the worldwide market are also viewed as a weakness in the part
of LOreal. Due to its worldwide marketing strategy, there are also
dissimilarities brought about in the campaign of LOreal products as to what
image they are to project.
B. External Analysis

1. Opportunities
The LOreal Company concentrates on cosmetic products that
enhance women of all ages. The growing demand for beauty products
gives LOreal the opportunity to focus in their field of specialization,
particularly on hair styling and color, skincare, cosmetics and perfumeries.
Being the leading cosmetic brand gives them the edge for their well-known
image. Opportunity also emanates from their growing market that ranges
from the affluent, the aging and also the masses of the developed
countries. Another opportunity that LOreal must take advantage of is their
greater market share because of the numerous patents registered by the
Company. This enables them to have the top of the line products only to
their name and therefore would lead costumers only to them for they could
not find any of the said cosmetics in other brands.

2. Threats

A threat to the LOreal group is also the growing competition within the
field of cosmetic brands. Due to the ongoing addition to the field of
cosmetics, there is still the danger that other brands could surpass the
profit of LOreal. Another threat to the Company is the economic downturn
that is quite evident in other countries. Such could thus hurt the possibility
of higher profit for the company. Most products of LOreal are within the
reach of the citizens of developed countries, but LOreal may have
problems reaching out even to the average people from the
underdeveloped countries. Also a threat to the LOreal Group is the
spending habits of consumer and the economic crunch that most countries
are experiencing as of present. While the LOreal Group may be producing
the best of its line, people may find that their products are not of their basic
needs and would skip buying LOreal products. However, with the growth of
the market, the damage could be far from taking place.

Company Marketing Strategies

A. Customer Satisfaction (Product; Price)


The LOreal Group is known for their continuous innovation in order
to improve the quality of their products and the services they have to offer
to their consumers. Part of their strategic plan is to cater to the best interest
of their costumers, in other words, customer satisfaction. Through giving a
wide variety of products, consumers have a whole gamut of products and
services that they can choose from and which best serves their preference.
The range of their prices caters to the demands of women, from the
younger ones to the aging, from the affluent to those with lower budget for
cosmetic products. Through constant research and passion for innovation,
the LOreal Group best caters to the demands of women of different
cultures. The Company also sees to it that they know the latest trend, or
better yet, set the trend in the market as to attract more consumers.

B. Control of the Company


A very vital aspect in the success of a company is how their leaders
handle and run the business. In fact, the LOreal Group is very particular in
the governance of the Company. The Board directors and the Board
members are well aware of all of their duties required by their respective
functions and of their collective mission, for it is in their hands that the
Companys future depends on. The Board members are also obliged to act
with due care and attention to their duties in order to carry out their
responsibilities. Also expected from the Board is the strategic orientation of
the control and correct running of the Company. Any transaction of the
Board Members may directly affect the LOreal groups and so they are
expected to act according to whats expected of them.

C. Worldwide Marketing (Place of Distribution; Promotion)

Part of the LOreal Groups strategic plan is the marketing of their


products worldwide. From the bloom of LOreal during its primary stage, the
Company already catered to the demands of women worldwide. In line with
this, they are also well aware of the diversities of women around the world.
Part of this strategy is to formulate products that suit other women from
other parts of the world. Through research and development of their
products, the LOreal group has already covered most parts of the globe
and still got high approval ratings from their clients. Just recently, the
LOreal Groups received the Diversity Best Practices 2004 Global
Leadership Award for embracing diversity, not only in their employees, but
also in their consumers (Anonymous, 2004). The Companys taking
consideration of women of color is especially appreciated by its consumers
for they are also being given the chance to enhance their features and
embrace their diversity without having to conform with the traditional
concept of beauty, particularly that of the white Caucasian women. The
LOreal Group also has employees who are considered minorities, such as
the women and people of color. Valuing of the peoples culture and ideas is
important to the LOreal Group, in order to best serve the interest of the
consumers, the employees and the Company.

D. Impeccable Advertising (Promotion)

During the early days of advertising, LOreal commissioned


promotional posters from various graphic artists to publicize the Companys
products. The 1950s brought about a new advertising medium, particularly
the movies. LOreal made its on-screen debut during this period and in
1953 won an award advertising Oscar, the first in a long series of awards.
Today, LOreal takes on actresses or different personalities of all ages that
best exudes the vision of the Company. Famous personalities enable
average individuals to relate to their personal lives, that they can look as
good, and so ensures higher sales.

Ethical Issues
There are two ethical issues that will be the particular concern of this
analysis. The first to be addressed is the advertisements and promotion of
the LOreal Group using the image of the traditionally beautiful women. The
issue here is whether or not the advertisements of LOreal groups, while it
does attract many consumers, affect the purchasers view of beauty and
what he/she must do to achieve this level of beauty. Blair (1994) stated that
in the context of advertising, the female viewer is continually forced to look
at herself through traditionally male eyes, to fit her personal history and her
body into that money-making construct known as "woman." An analysis of
advertisements for and about women shows that femininity continues to be
one of consumer capitalism's most marketable commodities, selling as well
as cars, cigarettes, and alcohol, though certainly the image of the female
body is used to sell these products as well. The more beautiful the woman
is, the more people will respond to the ad. There is greater possibility that a
female consumer will respond to an ad with an attractive model because,
as mentioned earlier, the belief that at some point she will achieve the
same glowing skin or flawless complexion just like the celebrity or model in
the ad. The ad then serves as an image of the positive response to her
beauty, most especially by the opposite sex. Through achieving a beautiful
physical appearance, just like the advertisement, women will gain more
love, respect and power. This poses as a possible problem for the LOreal
Group. While it is inevitable that the Company use the concept of the
beautiful women, they should also start thinking about being more ethically
responsible for what they are coming up with. Perhaps, this is shown in one
of their ads where they depicted women of all age to pose for their
products. From this view, LOreal could be said to be making effort in
defying the concept of beauty as young, instead conceptualizing beauty as
ageless. It would thus be helpful to quote Moore (2004) as a reminder to
advertisers: "Advertising is not just about the things we buy. Its how we feel
about things, including ourselves. Thats what makes it interesting." Also,
LOreal makes an effort to avoid common view on women by awarding
women in the field of science. Five women were awarded by LOreal-
UNESCO for Women in Science Awards whose distinguished careers in
the material sciences have contributed greatly to advancing our
understanding of the world and how it works. LOreals shot on giving
women more place in the field dominated by men is clearly an effort on
their part to change the image of women as more than objects of beauty.
Another ethical issue that may be raised is on animal testing. Despite high
regard for quality, LOreal is the fifth cosmetics company that has decided
to halt animal experimentation. It ceased this practice in October 1993
(Emert, 1994). L'Oreal abandoned animal testing after four years of letter-
writing, demonstrations and advertisements aimed at the company. People
for Ethical Treatment of Animals (PETA) is locked in quiet negotiations with
a number of companies that may be rethinking their testing policies since
Paris-based cosmetics giant L'Oreal agreed to an animal test ban in
October. This shows the influence of LOreal on the ethical decision of other
companies. Also, the LOreal Groups decision would uplift their image and
even attract more consumers. Perhaps, LOreal has indeed been a
successful company. There are a few fall backs that have been mentioned
such as the low profit margins, a decentralized organizational structure and
even the growing competition in the cosmetic market. LOreal must then
place more effort in being able to reach out to their consumers. The
Company has shown endurance and perhaps it would be risky but
rewarding to try a more diverse approach in their advertising, showing real
women in their promotions. Also, it would be helpful to widen their
advocacies for the minorities and oppressed group of people.
Reference

Aftalion, Fred (1991) A History of the International Chemical Industry.


Philadelphia: University of Pennsylvania Press.

Anonymous (2004) L'Oreal Receives Diversity Best Practices 2004 Global


CEO Leadership Award; L'Oreal First-Ever Global Company Named.
Available online (http://www.diversitybestpractices.com/) Accessed
on (01/04/2005)

Blair, Kristine (1994) Selling the Self: Women and the Feminine Seduction
of Advertising. Women and Language, 17 (1), 20+.

Emert, Carol (1994) PETA gets second wind in its battle with beauty
(People for The Ethical Treatment of Animals) (Power Surge
Supplement) WWD, 4 March 1994.

Moore, Chris (2004) Ethics in Advertising. Available online


(http://www.aef.com)

Moskowitz, Howard and Barbara Itty (2003) Jumpstarting Product


Development: Competitive Analysis and Conjoint Measurement in
the Cosmetic Industry. Journal of Advertising Research, 43. (1), 62+.

Sang, James (2003) European Shares Close Mostly Lower After Weak
U.S. Data. Available online (http://www.thomsonfinancialcarson.com.)
Accessed on (01/04/2005)

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