Nova School of Business and Economics

International Business

LOral and the Globalization of American Beauty

Professor: Violetta Gerasymenko

Alessio Gennari Diana Henriques Ana Rita Amaral Jorge Duarte Alessandro Taddei Michele Gallo Grabriele Beccu

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Question 7. How did L'Oreal become the worlds largest beauty company?

a) What is the role o ac!uisitions in this process?

Question ". What are the international opportunities or #iehls?

a) $hould #iehls ollow a multi%domestic or a global strategy?

How did L'Oreal become the worlds largest beauty company?

L% real is a &renc! #ased multinational founded in '()* #y t!e c!emist +ugene Sc!ueller$ ,urrently, it is t!e world%s largest cosmetics and #eauty company$

Several successful, smart and well designed strategically steps transformed L real from t!e worlds first synt!etic !air"color producer, to its actual largest #eauty company condition$

How did L'Oreal become the worlds largest beauty company?

o &ast grow and success in +uropean -arket. o In '(/0 entered t!e 1$S$ market #y a licensee wit! ,osmair Inc$ o 1nlike t!e perfumes, &renc! prestige did not !elp selling !air"coloring products in t!e 1$S$ Initial roblems! - 2ifferent distri#ution c!annels t!at re3uire a relations!ip - 4esistance to t!e products due to t!e lack of #rand awareness

How did L'Oreal become the worlds largest beauty company?

Introduction of a ne" conce#t by $ran%ois &alle! Be present on several c!annels of distri#ution, eac! of w!ic! corresponded to different: +conomic levels Psyc!ograp!ic levels Psyc!ological levels Purc!asing !a#its

'eachin( and servin( effectively each of these mar)et "as necessary to (ain a si(nificant #resence on the mar)et*

How did L'Oreal become the worlds largest beauty company?

5o #uild its presence in t!ese c!annels: Ac+uisitions of several &renc! #rands Lanc6me 7'(89: Garnier 7'(89: P!armaceutical company " Synt!;la#o 7'(*0: " ma<ority stake 7/0=:

How did L'Oreal become the worlds largest beauty company?

Introduction of cam#ai(n!

,hrou(h the advertisin( cam#ai(n- L.Oreal created a re#utation of +uality amon( /*S* consumers- (ainin( the #ossibility to have hi(her mar(ins on its #roducts*

How did L'Oreal become the worlds largest beauty company?

Become no* 0 in the /S mar)et

L real managers agreed on t!e consideration t!at #ecoming t!e largest #eauty products firm in t!e 1nited States was a necessary step to #e internationally competitive$ Strate(y! Successful L reals +uropean #rands compete against esta#lis!ed >merican #rands$

How did L'Oreal become the worlds largest beauty company?

A series of "ell #lanned and strate(ically timed ac+uisitions!

How did L'Oreal become the worlds largest beauty company?

A series of "ell #lanned and strate(ically timed ac+uisitions!

How did L'Oreal become the worlds largest beauty company?

A series of "ell #lanned and strate(ically timed ac+uisitions! Between '((? and @))): SoftSheen12arsom & >t t!at time t!e leading 1$S$ producer of et!nic !air"care products. & >frican">merican well"known #rand & >frican >mericans 7'0= 1$S$ population: spent @ to 0 times more per capita on !air care t!an any ot!er 1$S$ et!nic group. & -any distri#ution c!annels. & 5!ere were no national c!ains t!at served t!is market. & It was very fragmented and difficult to serve market.

How did L'Oreal become the worlds largest beauty company?

A series of "ell #lanned and strate(ically timed ac+uisitions!

How did L'Oreal become the worlds largest beauty company?

In 3404- the com#any "as in 0st #lace in ran) of the 5orlds 04 lar(est 2osmetics 2om#anies

How did L'Oreal become the worlds largest beauty company?

'esearch and &evelo#ment L r;als continuous commitment to researc! and development is considered t!e firms most distinctive value, and a comparative advantage over competitors$ L r;al promoted close relations!ips #etween 4A2 and international #rand teams$

How did L'Oreal become the worlds largest beauty company?

5!e result was a company t!at covers all aspects of #eauty, and is a#le to reac! different needs and preferences #y its wide distri#utions c!annels and products$

Question 7. How did L'Oreal become the worlds largest beauty company?

a) What is the role o ac!uisitions in this process?

Question ". What are the international opportunities or #iehls?

a) $hould #iehls ollow a multi%domestic or a global strategy?

How did L'Oreal become the worlds largest beauty company?

a) What is the role of acquisitions in this process?

5!e eBpansion of L real !as #een c!aracteriCed #y mass ac3uisitions, t!e possi#ility of reac!ing new c!annels t!roug! gaining economies of scales and scopes, and #y t!e a#ility of learning ways of doing #usiness from t!e ac3uired companies$ &rom eac! company L real ac3uired, it gained : 5!e #rand value 7given #y #rand awareness, #rand recognition and #rand reputation:. 5!e c!annel positioning, and conse3uently t!e market s!are and penetration. 5!e organiCational, productive and selling skills 7peculiar of eac! company:.

How did L'Oreal become the worlds largest beauty company?

a) What is the role of acquisitions in this process?

& 2espite ac3uisitions !ave #een a key factor in L real eBpansion, #asically t!ey were only a strategic or tactical tool, re3uired <ust to satisfy stringent growt! and profita#ility re3uirements: " Strategic ac3uisitions !ad a glo#al potential. " 5actical ac3uisitions generally complemented product portfolios, it could #e local. & >c3uisitions !ave played a relevant role: t!e strategic a#ility of rolling up small local #rands into larger glo#al #rands wit!in t!e L r;als continuously eBpanding product portfolio.

How did L'Oreal become the worlds largest beauty company?

a) What is the role of acquisitions in this process?

Besides ac3uisitions, anot!er important succeeding, factor stated #y an >merican L real manager, is: D>t L real t!ere is a great degree of continuity wit!in t!e management$ 5!is means t!at t!e strategies are well understood and potential opportunities can #e evaluated efficiently$ Similarly, t!e teams eBecuting t!e transactions and integrating t!e ac3uired #rands are practiced and are t!erefore a#le to work 3uickly and communicate well toget!er$E

Question 7. How did L'Oreal become the worlds largest beauty company?
a) What is the role o ac!uisitions in this process?

Question ". What are the international opportunities or #iehls?

a) $hould #iehls ollow a multi%domestic or a global strategy?

What are the international opportunities for Kiehls?

& 5!roug! L r;als recognition and #rand name, Fie!ls can: Gave a #etter access to a wider num#er of customers. Improve t!eir #rand awareness. >c!ieve a larger volume of sales and, increase t!e num#er of visits on t!eir we#site.

& 5ake advantage of economies of scale, scope and learning. & Hit! L r;al #usiness Iknow !ow t!ey can easily eBpand to new markets. & Be a#le to meet increasing demand t!anks to L real supply possi#ilities, #ot! locally and internationally$

& Identify an appropriate location: first stores outside 1S opened in cities c!aracteriCed #y international"#ased culture 7eg$ London, Gong Fong:.

What are the international opportunities for Kiehls?

&

L real !as a matriB structure, w!ic! !ig!lig!ts also t!e differences among different markets in t!e world$ 5!e single regions will !ave an appropriate knowledge of local segmentation, and t!is can #e used to:
2ifferentiate it from ot!er luBury #rands, usually standardiCed around t!e world, t!anks to adaptive positioning in every region 7every store !as t!e same !ardware, #ut different software:, and #y focusing on t!e feeling communication 7w!ic! is uni3ue around t!e glo#e:. Initiate Fie!ls to advertising J may#e not t!roug! t!e mainstream, #ut using particular, region"specific tools, in order to reac! enoug! customer #ase wit!out diluting t!e #rand sense of ;lite.

&

Since Fie!ls is mostly #ased on owned stores, L real !as t!e cas! power to easily finance new stores opening 7even if we consider de#t financing, !uge companies !ave definitely #etter

What are the international opportunities for Kiehls?

roblems "ith Internationalization! & H!en associated to L real, Fie!ls may lose its status: ' People tend to associate L real wit! medium"low 3uality cosmetic products due to its strong presence in supermarkets and grocery stores. Gow is it possi#le to communicate t!e #rands simplicity and integrity if t!ese values c!ange around t!e worldK

' &

&ind a compromise #etween Fie!ls organiCational structure and !ow L real !as #een eBpanding #rands from previous ac3uisitions 7eg$ #y association to t!e -ay#elline #rand:

What are the international opportunities for Kiehls?

a) hould Kiehls follow a multi!domestic or a global strategy?

Global Strate(y DIs an organiCation%s strategic guide to glo#aliCation$ > glo#al strategy may #e appropriate in industries w!ere firms are faced wit! strong pressures for cost reduction #ut wit! weak pressures for local responsiveness$E

What are the international opportunities for Kiehls?

a) hould Kiehls follow a multi!domestic or a global strategic?

In order to DGlobalize American BeautyE, F!iels s!ould not c!ange too muc!$ 5!e goal s!ould #e to sell t!e #rand as " more t!an an >merican #rand " a Lew Morker one, t!us consumers would #e supposed to perceive t!e #rands identity t!is way$

&or t!is to !appen, a global strategy is more effective than a multidomestic one, since t!e local adaptations, in!erently to t!is last one, would make !arder for t!e consumers to perceive Fei!ls as a Lew Morker$

What are the international opportunities for Kiehls?

a) hould Kiehls follow a multi!domestic or a global strategic?

5hy (lobal strate(y6 & Products remain wit! t!e same composition, formula and packaging: differences #etween countries are not !uge, concerning t!e #eauty industry and its consumers needs, so it does not re3uire #ig transformations. & Stores resem#le t!e Lew Morks one in order to keep t!e #rands identity, only small differences are allowed in t!e stores environment according to eac! store location 7to connect wit! t!e local communities:. & Fie!ls !as glo#al competitors so a glo#al strategy will #e more efficient to compete in t!e market place.

What are the international opportunities for Kiehls?

a) hould Kiehls follow a multi!domestic or a global strategic?

A Global Strate(y as a "ay of ac+uirin( a com#etitive advanta(e! & 4eputation and #rand awareness on a worldwide scale 7also to L real:. & Learning opportunities in eac! market t!at can #e s!ared and applied uniformly t!roug!out t!e organiCation. & ,entraliCed control in t!e 1S #rings coordination advantages J little decision"making aut!ority on t!e local level assures t!at Fie!ls is t!e same everyw!ere and do not loose its Lew Mork personality. & ,ost advantages since t!ere is no need to duplication across countries and financial control. & +na#les faster product development t!an t!e multi"domestic strategy and a 3uicker entrance in t!e market since t!e w!ole adaptation is less.

What are the international opportunities for Kiehls?

a) hould Kiehls follow a multi!domestic or a global strategic?

roblems "ith Global Strate(y & Preservation of t!e #rands inte(rity w!en take it worldwide is !arder. & 2ifficulties in order to replicate t!e Igrass"roots neig!#or!ood culture at a glo#al level. & 4eproducing t!e essence of t!e Lew Mork store and at t!e same time creating a sense t!at is connected wit! stores location. & -ig!t lose its sincerity and authenticity;