Loreal Strategic Analysis

Topics: Marketing, Strategic management, Management Pages: 5 (1690 words) Published: September 29, 2008
Key Issues Facing L’oreal

Core Competencies
L’Oréal has created several core competencies that have created value and served to gives L’oreal a competitive advantage over it’s competitors. Loreal’s first core competency is seen through it’s product innovation. L’oreal is fully dedicated to creating new and innovative products at it’s advanced dermatological research facilities. L’oreal invests heavily in research and development and aims to introduce one or two new products each year, every year in each of it’s world-wide markets. In fact, L’oreal annually invests 3 percent of its sales for research and new product creation. L’Oréal then regains this investment through the sales of its new globally launched products. This core competency is cstly for competitors to imitate and adds a lot of value. This focus on innovation ensures growth and helps L’oreal to have a huge competitive edge over its domestic rivals. Another part of Loreal’s core competencies can be seen in L’oreal’s marketing campaign. By using high profile celebrities in it’s ad campaigns, L’oreal is able to greatly enhance its global image and is able to differentiate it’s products and brand name through the use of a celebrity face. This marketing technique gives L’oreal high brand esteem and gives L’oreal a valuable advantage over it;s competitors. Exclusive contracts with these celebrities gives L’oreal a non-substitutable competitive advantage. In addition, L’oreal uses web-enabled information and customization sites which further adds to it’s portfolio. At the heart of L’Oréal’s core competencies is the level of diversification of it’s products. By offering several product lines including makeup, perfume, hair and skin products, L’oreal has created a big global brand name, which in turn, helps L’oreal to have superior brand recognition and esteem over competitors. L’Oréal’s strategy is to create unique products that catered to the beauty needs of different ethnic groups and to each gender. This allows L’oreal to diversify it’s product selection and reduced the risk to the company in that it did not have to rely on a small group of products for success. These core competencies allowed the L’Oréal group the capacity to offer over 500 brands, consisting of over 2,000 products, permitting them to market to more potential customers over a larger range of income levels and cultures than any other competitor in the world.

Competitive Advantage

They cater to the beauty needs of many different ethnic groups all over the world. Different cultures have different beauty needs. Their products differ from county to country, catering to the specific needs of the people in the geographic location they are sell in. “L’Oreal sees the world as a mosaic of different cultures” (L’Oreal Bus. Strat. Case). This strategy is why their products are very popular and sell well all over the world. Many other cosmetic companies focus on a much smaller market segment, such as just the United States.

They currently have the highest market share in the cosmetic industry. This allows them to spend more money on research and development than its competitors. L’Oreal tries to introduce 1 to 2 new products to each one of its worldwide markets every year. Other companies cannot afford to spend the high amounts of money that L’Oreal does on R&D to do things like this.

L’Oreal has 4 different product categories: 1) Consumer 2) Luxury 3) Professional 4) Active. These four categories allow L’Oreal to sell to any market it chooses. Most other companies focus on just one of these categories. Since L’Oreal is able to make quality products in all four, they have the best selling potential. Recommended Future Mission Statement

“To promote an approach to beauty that is fun, affordable, and fulfilling for the global marketplace. To further the cause of beauty through the progress and discoveries of our research laboratories and to expand and diversify our brand...
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