L'Oreal was founded in 1907 by a French chemist Eugene Schueller. The latter developed a synthetic product, called Halo, for dyeing hair. He then created his own products, and manufactured and marketed them with Parisian hairdressers.In 1909, after filing the patents for future group L'Oreal products, he undertook research on beauty products in general. This research provided the foundation on which the group strategy developed: innovation and research in the service of beauty.
In 1912, the group went international. Indeed, besides France, the products were marketed in Holland, Austria and Italy. In 1920, the company only had three researchers on their payroll compared to 100 in 1950, 1000 in 1984, and 3000 today. During the 30s, L'Oreal substantially developed its range of products. The company now markets products for skin care as well as sun protection.
After the Second World War the company diversified its products and brands to include progressively all types of cosmetic products. Thus, little by little, the group focused on the overall health and beauty sector. Today, L'Oreal is present in all countries of the world and offers brands in all areas of beauty, hair color, makeup, skin care, perfumes, and hair products.
The group's activity is divided into two branches: the cosmetic and dermatology.
Cosmetics remain the main activity of the group accounting for 97.8% of sales in 2005.
The dermatological activity: This activity is exercised through the joint venture Galderma, created by L'Oreal and Nestle in 1981. The latter specializes in dermatology, and aims to develop innovative products that meet the needs of dermatologists and their patients. This is the world's No. 1 company in laboratory research, development and commercialization of dermatological products. This activity generated a turnover of 318 million Euros in 2005.
The cosmetic activity: Based on the observation that beauty was not uniform, L'Oreal has built a portfolio of brands that reflect cultural differences, and diverse and complementary backgrounds. For example, the SoftSheen-Carson brand specializes in hair care for women of African descent, and Lancome and L'Oreal Paris correspond to European culture.
In recent years, the market for Western Europe is slowing: the gains are modest, and represent almost half of the sales in the cosmetics group. However, the performance remains good in North America (+8.3%) which represents the second largest group, and reflects the sustained growth in emerging countries (+18.4%), particularly in countries of Eastern Europe (+34.3%). Regarding the two activities of the group, they are both on the rise: + 8.3% for dermatology and +6.5% for cosmetics.
The cosmetics industry is a concentrated sector: Indeed, 4 players (L'Oreal, Unilever, Procter & Gamble and Estee Lauder) held 50% market share in 2001. If we broaden our observation, we find that the first 20 groups represented 71% of the global market this year. In 2005, 5 companies (L'Oreal, Unilever, Procter & Gamble etc) concentrated 65% of the global market. However, if we compare, it is estimated that the market for cosmetics touches the entire human population aged over 15 years.
[...] They seek to compensate for the weakness of their market power and their level of internationalization, with a strategy of differentiation and positioning of their offerings in innovative niche markets. This is the case with the Turkish company Evyap, one of the only companies to do research and development for skincare and makeup, which is the leader in the market for soaps and shaving products. New manufacturers from emerging countries, including China, covering an area with high growth potential and with barriers to entry in their geographic market. [...]
[...] Thus it could continue its business strategy including: diversify even more to have an increasingly varied brand portfolio continue to expand into foreign markets continue its policy of innovation extend their differentiation strategy However this solution seems very relevant as its competitors (Procter & Gamble, Unilever, and LVMH) who follow the same business strategy and are catching up with the group in terms of market share which will not allow it to keep its leadership position. Policy Option 2 L'Oreal is losing its leading position to the competition Threat in the cosmetics sector and weakness of the L'Oreal group: Threats: Competition from large groups Weaknesses: L'Oreal is shown under certain growth markets and consumer products as losing ground. [...]
[...] is a shareholder of the group. As for Nestle, their participation in the group is due to the fact that both companies have made two partnerships: Galderma (cf.C.2 and Innéov. Nestle and Ms. Bettencourt, together form the holding company Gesparal. Profile of the CEO The management team is stable, with only four CEOs since the inception of the group. All these CEOs are products of L'Oreal, as they have spent their entire career within the group. Lindsay OWEN-JONES Lindsay Owen-Jones was the CEO of L'Oreal from 1988 to 2006. [...]
[...] In 2005, the Group achieved consolidated revenues of 4.7 billion Euros. The first branch to be established outside Germany, the French Beiersdorf employs over 600 employees and achieved a turnover of 457 million Euros in 2005. With expertise of over 120 years, Beiersdorf makes research a priority. The Hamburg laboratories are responsible for many innovations and development of new products that come regularly to enrich ranges. The performance of Beiersdorf is based on a unique international marketing strategy, adapted locally by its subsidiaries to be closer to the concerns and needs of consumers. [...]
[...] It also hosts the best international brands of perfumes like Giorgio Armani, Ralph Lauren, Cacharel, Paloma Picasso, and Guy Laroche. All these brands have allowed L'Oreal to become a leader in the cosmetics market. The group L'Oreal has a strong ability to integrate with local markets. Indeed, cultural diversity in products is obtained by acquiring local companies. One example is that of China: the company bought the Chinese brand of cosmetics Xiaohushi and Yue-Sai in 2003 and 2004 respectively. L'Oreal has established itself in the market of organic cosmetic products with the recent acquisition of The Body Shop and Sanoflore. [...]
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