Bargaining Power Of Customers For Loreal Business Essay


LOreal is the worlds largest French based cosmetic company which is running successfully and globally in Northern America, Western Europe, Latin America, Eastern Europe, Asia, Africa, Orient, Pacific and some other countries for the marketing business. Later, in Africa. They also offer the best for all the consumer beauty in many distribution channels like ( In Hair Salons, In Mass Market Outlets, In Perfumes and Department Stores, Through Pharmacies and Dermatologistics and In The Body Shop Stores as well). Cosmetics group is being able to focus in prices, for all the lifestyle, in many different regions globally. They are wondering that what is going to happen to their products from the same company which might take a huge turn over to complete or compitet against them.

They also marked there 100 years would be defined with 100 different projects to give them a good support with their citizen projects and would involve the employers all over the world in a tangible and effective way. They also made a calculation reduction for their goals during (2005-2015). There Goals is to achieve "50% through the greenhouse gas emission" "50% with the waste generations per finished products" and "50% of water consumption per finished products.

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As L'Oreal is more considered into Making the World Beauty Universally for everyone in this whole world.


L'Oreal company was invented in (1907) by "Eugene Schueller" the young French Chemist, who took a first move by creating the first hair dyes and started his sales by selling them to the French hairdressers. This move made him focus and concentrate on researching, starting for his investment to achieve the beauty for consumers and to look forward with the name L'Oreal. L'Oreal is a listed company, as "Liliane Bettencourt" and the Swiss food company "Nestle" are the founders as each of them are controlling 30% (percent) of the shares.

In (1988-2000) the director and the chairman "Lindsay Owen-Jones" in (2006) started the company with the cosmetic marketing. Therefore today L'Oreal is the 1st Cosmetic group worldwide it has 27 International brands which is running globally in almost 130 Countries with €20.3 Billion Euros with more than 68,900 Employees. L'Oreal company has a setup of 5 key division and activities which is related with L'Oreal LUXE, CONSUMER Products, PROFESSIONAL Products, ACTIVE Cosmetics and The BODY SHOP. There are some products which contains the highest growth rates like Lancôme, Giorgio Armani, Kiehl's, Kerastase, Maybelline New York and La Roche-Posay contains a range of exceptionally high quality products that are globally recognized all over the world.

Therefore, this success accomplished under his leadership Sir "Lindsay" who have recognized to help the consumers individually by desiring them or getting them to be beautiful, his mission was to achieve to create the effective growth strategy for their brands in order for companies success.

PESTEL Analysis

It stands for "Political, Economic, Social, Technological, Environmental and Legal analysis". It is a part of the external analysis when conducting a strategic analysis or doing market research and gives a certain overview of the different macro environmental factors that the company has to take into consideration.

Political factors The political challenges is that L'Oreal must try to change all the political leadership styles in many different countries where they are operating it with. Or how and to what degree a government intervenes in the economy. Specifically, political factors include areas such as tax policy, labour law, environmental law, trade restrictions, tariffs, and political stability. Political factors may also include goods and services which the government wants to provide. Also, L'Oreal is getting effected by the legislation for advertising (demerit goods or merit bads). L'Oreal is producing almost all the safe products which doesn't contain any harmful substance or any kind of effectiveness. Furthermore, governments have great influence on the health, education, and infrastructure of a nation.

Economic factors include economic growth, interest rates, exchange rates and the inflation rate in all the countries which they are operating in. For example in (2004), L'Oreal was been affected by the continues weakness of the dollar and other currencies. These factors have major impacts on how businesses operate and make decisions. For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy.

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Social factors Because L'Oreal's business in exactly at the centre of the people all over. It is closely involved in the life of the communities where they are located and it also includes the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. Trends in social factors affect the demand for a company's products and how that company operates.

Technological factors It includes the ecological and environmental aspects, such as R&D activity, automation, technology incentives and the rate of technological change. (Eugene Schelleur) who founded the scientist researches. L'Oreal has embraced the technological innovation in many ways. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions. Furthermore, technological shifts can affect costs, quality, and lead to innovation.

Environmental factors The main factor includes weather, climate, and climate change, which is especially affects the industries such as tourism, farming, and insurance. Furthermore, growing awareness to climate change is affecting how companies operate and the products they offer--it is both creating new markets and diminishing or destroying existing ones.

Legal factors That include discrimination law, consumer law, antitrust law, employment law, and health and safety law. These factors can affect how a company operates, its costs, and the demand for its products.


It exists with the intensity of the following Rivalries, Threat of Substitutes, Threat of new competitors, Bargaining power of Suppliers, and Bargaining power of Customers. It is essential to understand the many different risk and rewards of an industry.

Bargaining Power of Suppliers (Internal)

Suppliers is the business that supply materials and other products into the industry .if suppliers have a high range of bargaining power then the company gets less attraction. It has a high power when many buyers and few dominators supply not differentiated. High valued products (Switching cost Substitute products are unavailable in the market place.

For Example: -

Raw Materials


Point of Sales


So that mean L'Oreal has many suppliers in producing their products. So therefore, their bargaining power is low.

Bargaining Power of Customers (Internal)

When buyers are less sensitive to prices, prices can increase and buyers will still buy the product. Inelastic demand positively affects L'Oreal Paris.

When there are large numbers of customers, no one customer tends to have bargaining leverage. Limited bargaining leverage helps L'Oreal Paris.

Intensity of Existing Rivalry (External)

Government policies and regulations can dictate the level of competition within the industry and will have a long term negative impact on this entity, which subtracts from the entity value.

Threat of Substitutes (External)

Threat for substitute products refer to produce in other industries. It exists when a product demand is affected by the price change of a substitute product there are number of chemicals in shampoo and other bath and body products which is frightening.

As essentially, whatever toxics to put or use in your mouth toxics on your skin as well.

Threat of New Competitors (External)

The important entry is for the Barriers quality, pricing and marketing which can overcome with the barriers in many different ways. Also new firms sometimes is easy to enter the industries because of high-quality products, lower price and substantial marketing resources. L'Oreal's main competitors are the cover girls, Avon, Revlon etc.

The main Threats for L'Oreal is their products are luxuries which could be hurt by an economic downturn however they are able to be global and act locally. Also it may affect their distribution system.

VIRIN Analysis

It stands for " Valuable, Rare, Inimitable and Non-substitutable"

L'Oreal corporate reputation is a type of retailing which enables a brand "KIELHS and THE BODY SHOP" which are the free standing store and developing. This is an invaluable way of getting the consumers by measuring the success of products and advertising them in a real time.

In L'Oreal rare is an auto regenerating flower which is known as Haberlea Rhodopensis which is global anti ageing skincare that produces to protect and revitalise the skin.

SWOT Analysis

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The word SWOT is an acronym meaning: -

S - Strengths

W - Weakness

O - Opportunities

T - Threats

The main act of SWOT analysis is that

The importance of performing a SWOT analysis is that, no business should take a high risk strategy if there are any significant weaknesses foreseen. Performing a SWOT analysis may consider in,

What are the weak/strong products, divisions, attitudes etc.?

Are there any gaps/opportunities?

Are we strong in the right way to exploit the opportunity?

Considering the above facts a SWOT analysis has taken place to mark the right opportunity.


Generally high profit margins

Well known worldwide

High R&D skills in Headquarters

Product Innovation

Consistent quality

Workplace safety and environmental concern (image)

Local product production and loyal customers

Online growth


Bad communication

High Failure rate of new cosmetics

Low profit margins may be subject to seasonal variations such as (Valentines, Mothers Day and Christmas).


Acquisitions natural product awareness.

High quality products will become prevalent.

Financial markets (raise money through debt, etc)

Emerging new market segments and expansion abroad.

Product and services expansion

Asian, African and South American markets are growing.


High competition from foreign brands.

Low cost of switching may encourage consumers to trail new products.

Economic downturn has a result in the reduction of spending on luxury goods.


Based on this analysis L'Oreal is trying to focus on the photonics to enhance the cosmetics colours, with the shop shelves where there are trying to show the world as the first cosmetic. L'Oreal sales margin in yearly bases is more than 4.6 billion individually as ever purchase of any consumers choice product like ( beauty salon ). This is the main reason why the consumer are satisfied and look forward to their products. L’Oreal seems to give it competitive advantage over its rivals. They are a dominant player in the market and probably the leading seller of the beauty products. They also have many opportunities to open them and they should also take advantage of their strengths in the market they operate with.

In short, the main fact behind their success is to reach out to the consumers with many different countries of the global by different cultural patterns and different income ranges. That is the main reason behind their success of brand L'Oreal.