Allan - 1321404

Ashica - 1321245
Soham - 1321237
Stuti - 1321264
Sonali - 1321563
Introduction

Loreal began in 1907, by chemist Eugene Schueller in
France Worlds first synthetic hair color.
US Market was entered into in 1953 Formed Licensee
with Cosmair Inc. to distribute its products in beauty salons.
Faced weaknesses in USA Did not have much brand
presence and lost out to in-house competition in hair
color. Most revenues were from France and Europe.
Undertook several acquisitions in the following years.
Included brands like, Redken, Maybelline, SoftSheen,
Carson, Matrix and Kiehl.



Redken, focused primarily on salons and hairdressers, leading
to a reassessment of Loreals entire hair care division.
Maybelline Acquired due to its great potential but lack of
focus preventing it from succeeding. It was revamped and
given an image makeover, to cater to the interests of younger
and less affluent population.
SoftSheen and Carson appealed to the African American
population and were ethnic haircare product manufacturers, in
the extremely fragmented market.
Dealt with three major divisions Consumer Product
Division, Professional Product Division and Luxury Product
Division.



Matrix, targeted individuals with fine blond hair. Purchased it
from BMS which lost interest in the brand after the failure of a
clinical test. Loreal tried to associate the brand with a place and
person, like in the case of Redken.
Kiehls was a luxury product sold to Loreal, due to demand for
its product being too high against its supply. The strategies that
Kiehls employed was diagonally opposite to that of Loreal.
Several different sub-brands were also acquired under various
locations. The products and campaigns were seen to be
customized to the local needs.

CHALLENGES IN U.S. MARKET
Instead of national distributors, local middlemen used to deliver beauty
products to shops and LOreal had few relationship with such middlemen.
American hair salons were unfamiliar with LOreal brands and therefore,
resisted selling it.
French prestige was helpful in selling perfumes but was less helpful in
selling hair products.

BRAND ACQUISITION
Reason?????

Wanted to build its presence in different channels : -
Consumers self-service for easy access.
Professional advice from hair specialist in salons.
Highly trained beauty advisors in departmental stores
Medically trained advisors in pharmacies
Acquired various French brands such as Lancome and
Garnier.
ADVERTISING CAMPAIGN IN THE U.S.
Results???????

Established a reputation for quality among U.S. consumers.
Enabled firm to sell products at a higher price than its competitors.

Kiehl
Pre Acquisition
High end specialty store
Prestige products as they were not
available everywhere
Well known for its unique style
and neighborhood feel
Zero advertising
Focused as a New York luxury
product which would be hard to
replicate




Post Acquisition
In 2000 Kiehls became a part of
LOreal
No longer able to meet demand of
products, hence acquired by
L'Oreal

ACQUISITIONS
NAME OF THE COMPANY ACQUISITON YEAR REASON
Helena Rubinstein 1950 Good positioning in Europe,
Japan and Asia
Redken 1993 Extensive network of salon
educators (900 part time and full
time hairdressers)
Maybelline 1994 Access to drugstores,
supermarkets, cosmetic-
speciality stores. Contributes
87% of revenue from U.S.
market.
SoftSheen-Carson Between 1998 and 2000 Majority of U.S. market share
Matrix 2000 Leading U.S. Hair-care brand in
the professional market.
Kiehls 2000 Strong positioning in specialty
store high-end segment
VISION
To Be Number One in U.S.

in 2004
Double digit growth since 19 consecutive years.

Became internationally beauty products powerhouse and focused on
the manufacture, sales and development of 9 French, 6 American, 1
Italian, 1 Chinese and 1 Japanese brand.

Known as a fast-growing global personal-care market, valued at $160
Billion.
ORGANIZATION
Had a matrix organization structure, headquartered in Clichy, France.

3 Division chiefs responsible for guiding overall brand strategy, global brand
sales, profitability and marketing.

3 regional leaders (North America, Europe/Africa and Asia) responsible for sales
in their regions.

All the brand teams were located in the country of their respective brands.
(European brand team in Paris, American brand team in New York etc.)

Porters 5 Force Analysis
Bargaining Power of suppliers

Large number of substitute inputs.
There are large number of substitute inputs , this gives less
bargaining leverage for the suppliers over the producers.
Low cost of switching suppliers.
It is easier to switch suppliers because of their less bargaining
power. This is in favour of L'Oreal
Volume is critical to suppliers.
As in this industry the volume of the supplied materials is
very important for the suppliers, this again is in favour of
L'Oreal.
Bargaining Power of Buyers
High Brand Loyalty
The customers cherish L'Oreal products and are loyal to it thus
they end up paying premium for that product.
Huge Market
The customer base for the industry is huge, thus the customers
have less bargaining power.

Threat of new entrants
Strong distribution network required
For a company to enter into this industry very strong
distribution is required.
High Capital requirements
The initial capital expenditure required for the setting up of
facility is very high.
Requirements of superior R&D
Requirement of superior technical know-how makes it difficult
for the competitors to enter the industry.
Threat of Substitutes
Substitute product is inferior
The products of L'Oreal is superior quality, customers may find
it difficult to switch to other substitutes.

Degree of Rivalry
Large Industry Size
Customer base for the industry in which L'Oreal is placed is
very huge and fast growing, and the number of competitors
for L'Oreal are less considering such a huge customer base.




RESEARCH AND DEVELOPMENT
Provides comparative advantage over competitors.

LOreal spent around $600 million on research.

Scientists file around 500 patents a year, thereby providing the company
a portfolio of more than 20,000 international patents.

LOreal focused mainly on its internal growth, global marketing,
product innovation and strong presence in distribution channel of
each product across the world.
Did acquisitions to support internal growth rate.

Believe that local acquisitions sometimes offered access to
distribution channels that would not have been develop otherwise.
CULTURE
Shifted to a philosophy of growing our own talent.

Hire people and educate them about product categories, brands across the world.

Invest heavily in R&D and are driven by internal growth.

A high level trust enabled major decisions to be taken informally and quickly.

Great degree of continuity within the management (Strategies are well understood and
potential opportunities are evaluated efficiently.

LOreals widely recognized quality distinguished the company from competitors (P&G,
Revlon).
Problems Identified
To establish Kiehl as a global brand.
To establish Keihl, which was acquired by L'Oreal, as a global
brand instead of a New York brand
To maintain the same brand message for the L'Oreal
products globally.
One of the main challenges that LOreal is facing is to convey
a global message without too much of local adaptations, so
that there is uniformity in the message conveyed.



Suggestions
Focus on the location of the store and
maintaining similar ambience in the stores.
To capitalize on the distribution channels
which are already existing for LOreal premium
products
To convey the global message of LOreal
products by endorsing a celebrity who has a
global presence