Global industry

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Introduction:

Ancient times people didn't know how to take care of their body, skin and hair, they even didn't know their body, skin and hair need care. Day by day when world is developing, people realize that their skin and hair are very important part of the body and they need take care and this is important for daily life. Men and women both are wanted to look better to each other for that reason at that past time they used natural things for beauty. Day by day people know about technology and technology started to make cosmetics for both men and women to give them more confidence about their look, for that with the help of better technology some companies are taking responsibility for their beauty cosmetics, which products can give them confidence, good luck, good impression and good personality. In the 21st century now a day's many cosmetic brands are popping up. Because of increasing consumers of products the beauty and enhance the physical appearance of a person. Though the market is already full of the cosmetic brands, among them L'Oreal is one of the best and very high quality brand all of the world and one of the world's largest beauty firm. L'Oreal group is leading supplier of cosmetics and hair colour.

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Before going briefly to the report have to understand about global industry.

Global industry

A global industry can be defined as:

  • An industry in which firms must compete in all world markets of that product in order to survive.
  • An industry in which a firm's competitive advantage depends on economies of scale and economies of scope gained across markets.

Global markets are international markets where products are largely standardised.

Global industries: competition is global. The same firms compete with each other everywhere.

Multi-domestic industries: firms compete in each national market independently of other national markets.

In general businesses adopt a global strategy in global markets and a multi-local strategy in multi domestic markets.

History of L'Oreal:

There are some important years of L'Oreal history, according to Daily Telegraph newspaper which is published 12: 01 am GMT 20 Feb 2006,

1907: L'Oreal founder and French chemist Eugene Schueller develops a hair dye called Aureole and sells it to Paris hairdressers. Expands to sell shampoos and soaps. He was known to taste hair creams to ensure efficacy. Later, Schueller sympathises with French fascist group La Cagoule and hires members as executives after Second World War.

1953: L'Oreal forms licensee Cosmair to distribute in US, which becomes L'Oreal USA.

1957: Schueller dies and control passes to Francois Dalle. Dalle launches L'Oreal hair-care products in consumer market.

1963: Company goes public.

1980s: L'Oreal vaults to world's number one cosmetics company.

1995: Acquires tow generic drug companies, in Germany and France. Becomes the number two US cosmetics maker (behind Procter and Gamble) by buying Maybelline for $758m.

Internal and external influences to L'Oreal:

Every company or business industry has some external and internal influences. External and internal influences are in the management. It can be called strategic management. As L'Oreal is a global industry first need to know some strategy of global industry.

Global strategy:

Global strategy which involves:

  • Competing everywher
  • Appreciating that success demands a presence in almost every part of the world in order to compete effectivel
  • Making the product the same for each marke
  • Centralised contro
  • Taking advantage of customer needs and wants across international border
  • Locating their value adding activities where they can achieve the greatest competitive advantag
  • Integrating and co-ordinating activities across border
  • A global strategy is effective when differences between countries are small and competition is global. It has advantages in terms o
  • Economies of scal

Lower costs

Co-ordination of activities

Faster product development

Analysing those internal and external factors is very important for an organization. With the help of these factors an organization can understand their position to world and they can learn how they can improve better to reach top of the business industry in whole world. Internal and external factors can be called as SWOT analysis.

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SWOT is an abbreviation for S- Strengths

W- Weaknesses

O- Opportunities

T- Threats

SWOT analysis is an important tool for auditing the overall strategic position of a business and its environment. According to Johnson, Scholes and Whittington (2008), a SWOT analysis explores the relationship between the environmental influences and the strategic capabilities of an organization compared with its competitors. SWOT analysis should help focus discussion on future choices and the extent which an organization is capable of supporting these strategies. SWOT exercise can generate very long lists of apparent strengths, weaknesses, opportunities and threats, whereas what matters is to be clear about what is really important and what is less important. SWOT analysis is really only useful if it is comparative- if it examines strengths, weaknesses, opportunities and threats in relation to competitors."

  1. L'Oreal SWOT analysis: Like every company L'Oreal also have to do SWOT analysis.
    1. Internal influences: Strengths and weaknesses are the internal influences.
      1. Strengths: the ongoing success of L'Oreal group is the concept of their vision as a team. L'Oreal chairman and CEO Lindsay Owen-Jones considered passion as the key to the well-renowned accomplishment of the company. The primary strength of the company is the continuing research and innovation in the interest of beauty which assures that the L'Oreal cosmetics offers the best to their consumers. Their dedication to their continuous research makes them the leader in the growing cosmetics industry despite the competition in the market.
      2. Strength of L'Oreal groups is the developed activities in the field of the cosmetics as well as in the dermatological and pharmaceutical fields in order to put more concentration in their particular activities. L'Oreal cosmetics activities are divided in some groups.

        First is the consumer product division which encompasses all the brands distributed through mass market channels, ensuring that L'Oreal quality is available to the maximum number of consumers?

        The luxury products division includes the prestigious international brands selectively distributed through perfumeries, department stores and duty free shops.

        The professional products division offers specific hair care products for use by professional hairdressers and products sold exclusively through hair salons.

        The active cosmetics department creates and markets products for selective distribution through pharmacies and specialists health and beauty outlets. Another most important strength of the company is L'Oreal advertising strategy which plays a major part to its growth. Their advertisement is main tool of target market. L'Oreal's most popular advertising slogan is 'Because you're worth it."

      3. Weaknesses: one of the weaknesses that a big company faces is the decentralizes organizational structure. L'Oreal is also facing the part of the difficulties. There is the difficulty in the control of L'Oreal. This slow down the production of the company because of the need of giving reference to the other board members and directors of the company. L'Oreal also has a difficulty finding out what division is accountable for the possible pitfalls of the company. Another weakness that L'Oreal faces is their profits. The profit margin of L'Oreal is comparably lower than that of the other smaller rivals. Finally the coordination and the control of the activities and image in the world wide market are also viewed as a weakness in the part of L'Oreal.
    2. External influences: opportunities and threats are the external influences.
      1. Opportunities: The L'Oreal Company concentrates on cosmetic products that enhance women of all ages. The growing demand for beauty products gives L'Oreal the opportunity to focus in their field of specialization particularly on hair styling and colour, skin care, cosmetics and perfumes. The leading cosmetic brand gives them the edge for their well known image. Another opportunity that L'Oreal must take advantage of their greater market share because of the numerous patents registered by the company. Their successful advertising is one of the best opportunities. L'Oreal's strengths are its opportunity as well.
      2. Threats: A threat to the L'Oreal group is also the growing competition within the field of cosmetic brands. There is the danger that other brands could surpass the profit of L'Oreal. The economic downturn is another threat to the L'Oreal Company that is quite evident in other countries. For that reason the possibility of making higher profit can be harmed. L'Oreal's most products can reach within the developed countries but L'Oreal may have reaching problems to the average people from the underdeveloped countries. Economic crunch can be one of the threats of L'Oreal that in these days most countries are experiencing. L'Oreal groups are producing the best products but for economic crunch and for expensive life people may find L'Oreal products are not their basic needs and they can skip buying from L'Oreal products.
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        With the help of swot analysis L'Oreal can understand their position in the world and they also can have knowledge about their strengths, weaknesses, opportunities and threats. They can reduce their weaknesses and threats to analyse the swot. They can be benefitted by their strengths and opportunity.

Impact of globalization:

Globalization is the process where the world's people are connecting increasingly in all facets of their lives cultural, economic, political, technological and environmental. According to McGrew, Held (2007, page: 319), "globalization is a set of processes which embrace most of the globe or which operate worldwide the concept therefore has a spatial connotation. On other hand it also implies intensification in the levels of interaction, interconnectedness or interdependence between the states and societies which constitute the world community."

  1. Policy and decision making of L'Oreal:
  2. For international business globalization impact many ways. Globalization influences L'Oreal group in policies and decision making.

    1. Ethical issues: there are two ethical issues that help L'Oreal for making decision globally. The advertisements and the promotion of the L'Oreal group. While L'Oreal groups attract many customers affect the purchaser's view of beauty and what they must achieve this level of beauty. For advertising the female viewer is continually forced to look at herself through traditionally male eyes to fit her body into known as women. An analysis of advertisements about women shows that femininity that female body is used to sell L'Oreal products. The more beautiful women are the more people will response to that advertises.
    2. Another ethical issue that can be raise is on animal testing. For high regard for quality L'Oreal is the fifth to Cosmetics Company that has decided to halt animal experimentation. L'Oreal group's decisions would uplift their image and attract more customers.

    3. Product safety: At L'Oreal their mission is to make innovative products that enhance the beauty and well being of men and women around the world. They are providing superior beauty and personal care products to employees, consumers, professionals. Sustainable developments policies rigorous product safety tasting practices ensure that consumers can purchases and use products with complete confidence. L'Oreal's priority is to ensure that the use of products pose no threat to human health. Those are:
      • Evaluate the safety of our products before their launch according to the strictest regulations applicable and on the same universal basis no matter in which country the product is sold.
      • During safety evaluations take into account the most recent scientific studies available.
      • Continuously monitoring the safety of products on the market through their outstanding Post Marketing Surveillance" network.
    4. Control of the company:
    5. A very vital aspect in the success of a company is how their leaders handle and run the business. L'Oreal group is very particular in the governance of the company. The board directors and board members are well aware of all their duties duties because company's future depends on their hands.

      'Owen-Jones was the first senior manager to effectively promote the idea that L'Oreal could become the largest beauty products firms in the United States. Owen Jones success in the U.S. market, L'Oreal was a significant disadvantage competing against U.S. beauty makers. In the professional division, Clairol was the leading U.S. hair colour brand, with a 70% share of the U.S. market. Although hair colouring was L'Oreal's strength-it was the firm's original and most profitable product line." - Harvard business school. www.hbu.edu

    6. Availability of products: L'Oreal products are distributed through many different channels according to products type and nature, non selective distribution channels (the mass market), selective and exclusive distribution channels, franchise network, direct sales and lasting mail order and e commerce. L'Oreal believes that internet sales are a complementary channel to reach consumers, still in a relatively early stage of development.
    7. www.loreal.com
  3. Effectiveness of L'Oreal responses: Every business has thrier own strategy to reach their goal successfully. Even L'Oreal has also some strategy and effectiveness. L'Oreal focused on following effectiveness:
    1. Customers satisfaction (products and promotion): customer satisfaction is very important to an industry. L'Oreal group is known for their continuous innovation in order to improve the quality of their products and the services they have to offer to their consumers world wide. Their best interest of their strategic plan is customers in other words customers satisfaction. Through giving a wide variety of products customers have a whole gamut of products and services that they can choose from. Despite L'Oreal success at globalization they have done little to diversify to their product, they have focused on creating products in these four sectored: hair, skin, makeup and perjufume. Through constant research and passion for innovation. The L'Oreal group best caters to the demands of women of different cultures. It decided to implement a company wide customer relationship management (crm) system. The crm solution has helped boost customer loyalty and reduce churn.
    2. World wide marketing: worldwide marketing influences policies and decision making in L'Oreal. From the bloom of L'Oreal during its primary stage the company already created to the demands of women worldwide. They are also aware of the diversities of women around the world. They formulate products that suit other women from other parts of the world. Through research and development of their products the L'Oreal group has covered most part of the globe and still got high approval ratings from their clients. Recently the L'Oreal group received the Diversity Best Practices 2004 global leadership awarded for embracing diversity not only in their employees but also in their consumers. The company taking consideration of women of colour is especially appreciate by its consumers that they are also being given the chance to enhance their features and embrace their diversity without having to confirm with the traditional concept of beauty. The L'Oreal group also has employees who are considered minorities such as the women and people of colour. Valuing of the people's culture and ideas is important to the L'Oreal group in order to best serve the interest of the consumers, the employees and the company.
    3. Responsible advertising: L'Oreal is committed to advertising responsibly. L'Oreal's code of business ethics commits them to the following:
      • Ensure that all advertising and promotional material is based on proven performance and scientific data.
      • Give a fair and truthful description and visual representation of our products and their effects.
      • Endeavour to ensure that the purpose and correct usage of products are readily understandable by consumers.
      • Be sensitive to the possible reaction of religious, ethnic, cultural or social groups to their advertising.
      • TV or radio programs, magazines or digital media whose strategy for attracting an audience.
      • Take great care to ensure our actions are consistent with the L'Oreal spirit if they are envisaging advertising to children and young people.
      www.loreal.com
  4. Improvement in the response of L'Oreal:
  5. L'Oreal has improved customer brands loyalty benefitted from a significantly improved response rate and lower cost.

    1. Policy of sustainable progress: L'Oreal in 2008 provides an objectives appraisal of the situation with regard to sustainable development and the creation of value based on the non financial elements of its business. It is a step along the path of sustained progress which has always been an objective of L'Oreal and enables the group to measure an improve its performance in the future.
    2. Growth rate: L'Oreal considers internal growth to be the main focus of its development. The group ensures healthy long term geographic and sector based balance for its brands and increases the rate of its international expansion through a highly selective acquisition policy. L'Oreal also looks the growth of new market. However the group's growth is never achieved at the expense of a responsible attitude.
    3. Continuous improvements in product efficiency: L'Oreal has always based its development on cutting edge research. L'Oreal is determined to make sure that

    4. Consumers are completely satisfied with their products. That means products must fulfil their purpose. Consumers do not continue to buy products that let them down or fail to meet their needs. L'Oreal efficacy of every product and they are committed to launch those products that bring a real result that is perceptible by the consumer. The extensive L'Oreal marketing and R and D departments are designed not only to develop new and better products but to improve every product on a continuing basis. Through testing before launch is complemented by continued monitoring against a background of evolving marketing and scientific understanding.
    5. Health and safety policy to environment: L'Oreal is committed to reducing the environmental impact and resource use through absolute reductions. Their aim for greater eco-efficiency and use of more environmentally friendly approaches. 'L'Oreal is committed to the development, production, distribution and sale of innovative products of highest growth.
    6. www.loreal.com

Conclusion:

Finally, this report can be concluded that as L'Oreal is a world's largest company, they are leading the whole cosmetics market. L'Oreal has developed activities in the field of cosmetics. L'Oreal had tough competition with other cosmetics company. They are very innovative and invest a lot of money in research and development. Products are positioned in the high priced segment because of their high quality. They offer well coordinated products for different target groups. To keep their strength alive they have to observe their competitors. With the help of SWOT analysis every business organization can know their actual position and it is very important to analyse business strengths, weaknesses, opportunities and the threats. L'Oreal is now a global business, to analyse the global strategy L'Oreal can make their policy and decision. Now a day during the credit crunch may be it can affect Loral's profit but still is the leading company. L'Oreal's advertising is a best part for L'Oreal company which can attract people especially women. L'Oreal mission is the appearance and physical features of each person are unique with differences that include age, skin and hair type. L'Oreal is founded on respect for those differences and the capacity to match personal diversity of products and brands. L'Oreal's goal is perfection. They are determined to continue enhancing their portfolio with innovative products and to meet the most demanding standards of quality and product safety at all time.

References:

  • Held, D. and McGrew, A. (2007) Globalization/ Anti-Globalization: Beyond the great Devide, 2nd edition.
  • Daily Telegraph newspaper, published 12: 01 am GMT 20 Feb 2006,
  • Johnson, G, Scholes, K, and Whittington, R (2008), Exploring corporate strategy. 8th edition
  • 2008 sustainable development report (www.lorea.com)
  • Harvard business school. www.hbu.edu
  • www.how-to-start-a-business-guide.com

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