L'OREAL BUSINESS POLICY AND STRATEGY

L'Oreal Business Policy and Strategy



L'OREAL - BUSINESS POLICY AND STRATEGY

Introduction

L'Oréal is a France-based global cosmetics company, engaged in the production and marketing of a range of perfume, make-up, hair and skin care products. The company operates in over 130 countries. It markets 25 global brands through three business divisions: cosmetics (comprising of its skincare, haircare, make-up, hair colorants, perfumes and other products). L'Oréal operates through three business divisions: cosmetics, the Body Shop, and dermatology. The cosmetics division of L'Oréal functions through four operating segments: professional products, consumer products, luxury products and active cosmetics. The cosmetics division comprises skincare, hair care products, make-up, hair colorants, perfumes, and other products. The professional products segment markets hair care products to professional hairdressers, who use or sell these products in their hair salons (L'Oreal Website, 2009).

PART 1- L'OREAL'S CURRENT STRATEGY

Competitive Landscape in UK facial care Industry

The UK facial care market is dominated by L'Oréal, which holds significant market share compared to other players operating in the market (L'Oréal (UK) Ltd, 2009). Such leading players are formidable incumbents for potential new entrants, because of their global reach, and mass-produced, widely recognized brands. Substitutes, although possible, are unlikely to pose substantial threat, as they may be either unpredictable (in the case of homemade facial products), or carry greater risk and expense (in the case of cosmetic surgery). Rivalry is moderate, with leading players being relatively diversified, reducing their reliance on the facial care market ('Hope In a Jar', 2002).

The facial care market will be analyzed taking manufacturers as market players, and distributors of facial care products, such as retailers, as buyers. More specifically the key distribution channels (in order of most significant) for the UK facial care market include: supermarkets/hypermarkets, specialist retailers, and pharmacies/drugstores. Branding is an important way of maintaining end-user loyalty, and as a result retailers are required to stock the more popular brands, which reduces their bargaining strength and buyer power.

However, switching costs aren't particularly high, which allows retailers to be more selective, which increases buyer power. Furthermore, for larger retailers, such as supermarkets/hypermarkets, facial care products are just one of many products sold, which reduces the reliance upon sales of these items, and increases buyer power. Some players have integrated forwards with retail operations of their own - for example, L'Oréal acquired UK retailer Body Shop in 2006 - further weakening competing retailers's power, although this is not a very common strategy. Overall, buyer power is moderate.

The main inputs for market players are the ingredients used in making facial care products, including oils, fragrances, and other fine/specialty chemicals, and packaging. Specific ingredients vary between the principal market segments (antiagers, night creams, creams and gels, toner, face masks and so on). Chemicals used in these products must be of a standard suitable for manufacturing consumer products, and for some ingredients there are no substitutes, which increases supplier power.

The production of chemicals used in the manufacture of facial care products is by nature a ...