Loreal Analysis

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Strengths:

Through direction from Owen Jones and his hard-charging American management style, L’Oreal has gone through a transformation from a European based cosmetics company to a world leader in the cosmetics industry. L’Oreal’s particular skill is to buy local cosmetics brands, give them a facelift, and export them around to world. Their good brand management is about hitting the right audience with the right product, through a very carefully crafted portfolio. Each brand is precisely positioned to fill a certain market or product niche.

The L'Oreal name will always be linked to Parisian sophistication, but now the more modern L'Oreal is only French when it wants to be, and the company is eager to represent all nationalities. L'Oreal is aware that in the global market you have to be diverse and flexible, especially in ad campaigns, a danger for many cosmetic companies in the global market is to try to "impose one type of Western beauty on the world," says Owen Jones. This attitude is reflected in many of L'Oreal's advertisements. L'Oreal has made concentrated efforts to create new markets through their Soft-Sheen/Carson African hair-care line. They have made a strategic alliance with the Japanese Shu Uemura in an attempt to gain a foothold in the rapidly expanding Asian market.

Another of L'Oreal's greatest strengths is that they are a "scientific" beauty company, spending 3% of their revenue on research, compared to the industry standard of less than 2%. They are always looking for niche markets, as shown by their opening of a research laboratory in Chicago to study the properties of African hair. They are quite aware in today's economy that with even small technological improvements you have to get it out there to sell it, and the easiest way to own a market is to be the only source for a new product.

Weaknesses:

Thanks to L'Oreal's global expansion, even if business is down in one area, they can still expect revenue from another. Right now the company's biggest weakness is the forthcoming retirement of CEO Owen Jones in 2006: many investors see Owen Jones as "central to L'Oreal's current valuation," says Sandhya Raju, a cosmetics industry analyst at Merrill Lynch in London.

L'Oreal has had some trouble expanding into the Japanese market; in an attempt to find products more slanted to the Asian psyche they have bought a 35% interest in Shu Uemura. They are considering a friendly takeover in the near future.

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