bodyshop

Topics: Cosmetics, Hair coloring, Brand management Pages: 45 (5819 words) Published: February 25, 2014
KDI SCHOOL
WORKING PAPER SERIES

KDI SCHOOL WORKING PAPER SERIES

CASE STUDY OF L’ORÉAL:
INNOVATION AND GROWTH STRATEGY

Seung-Joo LEE
July 2005
Working Paper 05-06

This paper can be downloaded without charge at:
KDI School of Public Policy and Management Working Paper Series Index: http://www.kdischool.ac.kr/faculty/paper.asp

Case Study of L’Oreal: Innovation and Growth Strategy

Seung-Joo Lee
KDI School of Public Policy and Management
sjl@kdischool.ac.kr

Abstract

L’Oreal is the world leader in cosmetics and beauty products with revenues of $15.5 billion. The company has been able to grow twice as fast as the industry average and has reported double-digit profit growth for the 20th consecutive year in 2004. Its market leadership has been sustained through continuous product innovation, brand renewal and international expansion. This paper examines L’Oreal’s innovation and growth strategies in order to identify its key success factors and learn best practices in strategic innovation, brand management and globalization strategies

JEL classification: L63, M10
Key words: L’Oreal, innovation, growth strategy, cosmetics

1. Introduction
L’Oreal is the world leader in cosmetics and beauty products with revenues of $15.5 billion as of 2004. The company makes and sells over 500 brands and more than 2000 products in all sectors of the beauty business including hair color, permanents, styling aids, body and skin care, cleansers and fragrances. About 13% of all cosmetics purchases made around the world are L’Oréal brands. Its brand portfolio of 17 core brands hold leading positions in nearly every cosmetics subcategory and includes some of the most recognized brands such as Lancome, L’Oreal Paris, Maybelline, Garnier, Helena Rubenstein, Biotherm and Redken. Despite its French origin, more than 80% of company sales are generated outside of France.

Exhibit 1: The World’s Top 10 Beauty Companies in 2004
Company

1. L’Oreal
2. Proctor & Gamble

Beauty Products Revenue

$15.5 billions
13.0

3. Unilever

8.7

4. Shiseido

5.3

5. Estee Lauder

5.1

6. Avon Products

4.5

7. Beiersdorf

3.8

8. Johnson&Johnson

3.7

9. Alberto Culvo

2.8

10. Kao Corporation

2.8

L’Oreal has been able to grow twice as fast as the industry and has reported double-digit profit growth for the 20th consecutive year in 2004 (See Exhibit 2 and 3). According to Le Journal des Finances, L’Oréal was the highest performing share on the French stock market with its value worth 86.5 times what it was 25 years ago.

1

Exhibit 2: L’Oreal like for like sales growth versus industry average, 1995-2004

Growth
(%)

L’Oréal Growth
(Avg. 8.4%)
5.2

3.0

Market Growth
(Avg. 4.5%)

95

96

97

98

2000 2001 2002 2003 2004

99

Exhibit 3: Pre-tax profit growth, 1995-2004

Pre-tax
Profit
(€ millions)

2,063
1,870
1,698
1,502
1,339
1,183

1,322
1,125

1,011
897

95

96

97

98

99

2000

2001

2

2002

2003

2004

A survey by the Reputation Institute ranked L’Oreal first in the “reputation” quotient” among French companies. L’Oreal received the top marks in 4 of the 6 selection criteria---financial performance, appeal, vision and leadership, products and services. The Wall Street Journal Europe attributed L’Oreal’s excellent reputation to “highquality products, strong appeal, a true strategic vision, satisfactory financial results over the long-term” as well as “a diversified vision of beauty”, with products adapted to local needs and the use of representatives from different ethnic communities.

This paper examines L’Oreal’s innovation and growth strategy in order to identify its key success factors and learn best practices in strategic innovation, brand management and globalization strategies.

2. Company Background

L’Oreal was founded in 1907 by Eugene Schueller, a French chemist, who developed an innovative hair...

References: Dolan, Robert, “L’Oréal of Paris: Bringing “Class to Mass” with Plénitude,” Harvard
Business School Case, 1997
French, Josep and Neus Quintana, “L’Oréal(A): Fighting the Shampoo Battle,”
Community of European Management Schools, 2000
French, Josep and Neus Quintana, “L’Oréal(B): Locally Adapting Elseve’s Global
Strategy,” Community of European Management Schools, 2000
Rowell, Nicholas, “Parfums Cacharel de L’Oréal,” INSEAD, 2001
Sarvani, V., “L’Oréal—Building a Global Cosmetic Brand,” ICFAI Center for Management
Research, 2003
Singh, Neeraj Kumar, “L’Oréal’s Business Strategy,” ICFAI Business School Case
Development Center, 2004
The Economist, “Special Report: The Beauty Business,” May 24, 2003
Tomlinson, Richard, “L’Oréal’s Global Makeover,” Fortune, August 15, 2002
Tomlinson, Richard, “L’Oréal’s CEO on Managing Globally,” Fortune, July 12, 2004
UBS Investment Research, “L’Oréal: The End of an Era,” February, 2005
Vemuri, Kalyani, “Lindsay Owen-Jones: L’Oréal’s Global Makeover Strategist,” ICFAI
Business School Case Development Center, 2004
www.loreal.com, company news, beauty news, research, finance
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