Table of contents

Introduction
General description of the company
Organizational purposes: vision, mission, values, objectives.
Diagnosing of the strategic capability within company
Limitations in managing strategic capabilities within company
Strategy development within company
Methods of pursuing strategies within company
Strategy evaluation
Conclusions
References

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Introduction
Because youre worth it is the motto which led those from LOreal to an outstanding success
and made their name known in every country of the world. To innovate and offer top performing
products at great prices to the greatest number of consumers possible is the philosophy that
guided LOreal in pursuing excellence. Getting its start in the hair-color business, the worlds

largest cosmetics and beauty company today is sculpting the future of beauty for women and
men.
But the question that we asked ourselves is whether LOreal can continue as the market leader
forever, when there are so many cosmetic brands are popping up nowadays? What are the
different decisions and actions that can be undertaken by the company to maintain its top spot?

General description of the company

Before the facial cosmetics, LOreal was known as Aureole, a hair-color formula developed by
French chemist Eugene Schueller in 19071. From his work, the entire hair dye industry was born.
Schueller formulated and manufactured his own products which were sold to Parisian
hairdressers. It was only in 1909 that Schueller registered his company as Societe Francaise de
Teintures Inoffensives pour Cheveus, the future LOreal. Scheuller began exporting his
products, which was then limited to hair-coloring products. There were 3 chemists employed in
1920. In 1950, the research teams increased to 100 and reached 1,000 by 1984. Today, research
teams are numbered to 2,000 and are still expected to increase in the near future. Through agents
and consignments, Scheuller further distributed his products in the United States of America,
South America, Russia and the Far East. The LOreal Group is present worldwide through its
subsidiaries and agents. LOreal started to expand its products from hair-color to other cleansing
and beauty products. The LOreal Group today markets over 500 brands and more than 2,000
products in the various sectors of the beauty business. Such includes hair colors, permanents,
styling aids, body and skincare, cleansers and fragrances. Indeed, the LOreal Group has reached
the peak that all cosmetic brands sought after. The company's products are found in a wide
variety of distribution channels, from hair salons and perfumeries to hyper - and supermarkets,
health/beauty outlets, pharmacies and direct mail.
LOreal has its brands divided into five divisions:

Consumer products: L`Oreal Paris, Garnier, Maybelline New York, Softsheen-Carson,

Club des Crateurs de Beaut
Professional products : L`Oreal Professionnel, RedKen, Kerastase, Matrix, Pureology,
Shu Uemura Art of Hair, Mizani, Keraskin Esthetics
Luxury products: Lancme, Giorgio Armani, Yves Saint Laurent, Biotherm, Kiehl`s,
Ralph Lauren, Shu Uemura, Cacharel, Helena Rubinstein, Diesel, Viktor & Rolf, Maison
Martin Margiela, Stella McCartney
Active Cosmetics: Vichy, La Roche Posay, SkinCeuticals, Inneov, Sanoflore,
Roger&Gallet
The Body Shop2

LOreal in Romania
The company began doing business in Romania in 19973 through LOreal Romania, a wholly
owned subsidiary of the LOreal Group and in 2004, added a new division, LOreal Professional.
1 http://www.herbatint.co.uk/herbatint/features/herbatint-article.php?id=28
2 http://www.loreal.com/_en/_ww/index.aspx?direct1=00003&direct2=00003/00006
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The latter aims to offer to the best hair salons everything they need to pursue excellence. The
companys capital is made up by 51% private owned shares and 49% stock-exchange shares. The
capital allocated for research represents 30% of the net profit.
One of the directions for the future is represented by educating the women through the
promotion of public products, quality products which are addressed to the largest category of
consumers. The company adopts marketing strategies such as testing the market, testing the
consumers, educating them and maintaining their interest with the help of advertisements, free
samples, banners and flyers offering information regarding the products for body care.
As foreign investor, LOreal Paris decided to chose Romania as a market because of the fact that
it is the first market with potential, after Poland and Hungary, increasing constantly with 4.7%
yearly. The most important competitors is Beiersdorf, the manufacturer of Nivea products,
followed by Procter&Gamble with Pantene, the pharmaceutical products Wich and Wella, with
Wellaton,offering hair care and hair dye.4
In 2008, the Romanian subsidiary ranked second among the European subsidiaries in what
concerns the growth rate, growth due to the business development but also to an increase in the
customers exigencies and in the culture that consumers have towards cosmetics5.
The cosmetics market in Romania raises up to 500 million Euro 6, out of which 60-70 million
Euro are for luxury cosmetics7 and 5.5 million Euro come from the sale of natural cosmetics 8.
These figures are relevant because LOreal offers products from all these types, being an the
important player on the natural cosmetics market The Body Shop, surpassing Sabon, LOccitane
and Lush, and on the luxury cosmetics market next to Dior, Chanel and Givenchy.
Strategic groups and dynamics of the industry
The cosmetics industry is divided according to the product segment as follows: on the hair-dye
products the main competitors are LOreal, Wella, Henkel, Schwarzopf and Londa, on the
segment of skin care LOreal competes against Nivea, and the make-up market is shared with
Avon and Max Factor.
3 According to the registration no J40/6064/1997 at the Registry of Commerce
4 http://freq.3x.ro/pages/despre.html
5 http://www.zf.ro/profesii/alina-perrin-hr-manager-la-l-oreal-romania-poti-sa-ajungicountry-manager-la-27-de-ani-3051445/
6 http://www.curierulnational.ro/Actualitate%20Companii/2011-0204/Coty+Romania+estimeaza+afaceri+de+20+mil.+dolari+in+anul+fiscal+curent
7 http://www.fin.ro/articol_60990/piata-de-cosmetice-de-lux-va-creste-usor-in-2011-conditionata-de-extinderea-retailerilor.html
8 http://www.wall-street.ro/articol/Companii/90426/Cosmeticele-naturale-o-piata-de5-5-mil-euro-in-Romania.html
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The cosmetics industry is one of the industries that registered growth in 2009, despite the
recession. The value was 10% increase, compared to 2008. The explanation is that, as a
difference from the other industries, the cosmetics market is not so exposed to changes in this
period. People use shampoo and care for their skin; women are still paying attention to their
physical appearance, so makeup and hair dye are still used in the same proportion as before.
Among the tendencies observed on the market, it was observed that people are more oriented
towards more accessible brands, as a drawback for the top brands, and their openness towards
promotions. Richard Matalon, the country managing direct at LOreal Romania declared that the
market in Romania is increasing, and that this is a good news for their portfolio of brands.
Buying in hyper and supermarkets is still dynamic, thanks to new locations opened and
promotions.9 LOreal blames the very good results in the first half of 2009 on the innovation
and promotion of their products. For example, on the hair care market, the consumer products
market division of LOreal Romania had registered a dynamic growth of over 30%. For the
professional division, the Kerastase brand, based on advanced technology, increased by 10%. As
for the active cosmetics, Roche-Posay, skin care products, recommended worldwide by
dermatologists, has registered an increase of 25%. Also, Farmec Cluj-Napoca, the biggest local
cosmetics producer, had registered an increase of 13% on the market.
As for 2011, it was estimated that Romanians will buy cosmetics in value of over 1 billion Euro,
3% more than in 2010. According to a study, the most wanted products are the ones for mass
consumption. Considerable growth is expected in children care products and premium cosmetics,
but also for perfumes, accounting for 196 million Euro.10
So only one conclusion can be drafted after studying these figures. The dynamics of the
cosmetics industry is very obvious, increasing from one year to another, despite the condition of
the economy. More and more people start to use, even from adolescence, products for skin care,
offering to the producers the possibility to increase their market share.

Organizational purposes
Vision
LOreals vision is to become the first choice of people who wish to feel beautiful by
continuously offering high quality products, by exploring new opportunities, by formulating
organic products, by continuous technological innovations and by valuing the stakeholders.
Mission
L`Oreal`s mission is Beauty for everyone. It tries to push back the boundaries of science to
invent beauty and meet the aspirations of millions of women and men. Its vocation is universal:
to offer everyone, all over the world, the best of cosmetics in terms of quality, efficiency and
safety, to give everyone access to beauty by offering products in harmony with their needs,
9 http://www.wall-street.ro/top/Companii/69673/Top-6-industrii-care-au-crescut-petimp-de-criza/3/Cosmeticele-10.html#slide_title
10 http://ideideafaceri.manager.ro/articole/afacerea-zilei/afacerea-zilei:-piataromaneasca-de-cosmetice-creste-fabulos-pana-la-un-miliard-de-euro-1806.html
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culture and expectations.11 With the opening up of the emerging markets, L`Oreal`s mission is
broadening in response to the vast diversity of populations. The whole company is focused on
this new horizon: teams enriched by their culture diversity, a portfolio of international brands
present in the different distribution channels and research that is capable of grasping in the
world`s complexity.
Values
L`Oreal has been built around fundamental values which have guided us throughout the life of
our company, and continue to do so today. Our values have shaped our culture, and they underpin
our reputation12.
Reflect the consumers diversity or origins within teams at every level
Be committed to sustainable, responsible and shared growth
Promote gender equity with the teams
Encourage the employment people with disabilities
Valorize work experience
Develop an inclusive managerial culture13
Diversity represents a priority for LOreal, and the values shared within the company are
enforced by the fact that they respect their standards of excellence, attract candidates from
outside their usual talent sources and identify profiles that will bring new perspectives, promote
the emergence of a diversified ecosystem by inviting partners to join their actions, and by
participating in innovative collective initiatives and measure and report the progress.
Objectives
The main objective of the company is the economic success and sustained development and
growth of the company. In terms of image, L`Oreal`s objective is to ensure that as a company, it
is seen as a global citizen , and it is the world`s leading beauty company it needs to be an
authentic example in terms of sustainable development.

Diagnosing of the strategic capability within company

According to Johnson, Scholes and Whittington (2008), there are several methods that make
possible the strategic capabilities diagnosis. First of all, the value chain and value networks are
concepts which help the managers in a company understand which activities create value for the
customers. The value chain describes the categories of activities within and around an
organization, which together create a product or service and is composed of primary activities

11 http://www.loreal.com/_en/_ww/html/our-company/mission.aspx?
12 Jean-Paul AGON, Chairman & Chief Executive Officer

13 http://www.loreal.com/_en/_ww/html/our-company/our-policy/our-ambitions.aspx?
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and support activities (Johnson, Scholes & Whittington, 2008:110). For LOreal, primary
activities consist of:

Inbound logistics: the activities concerned with receiving, storing and distributing inputs
to the product. These are the ingredients used by LOreal, whose portfolio comprises
man-made chemicals created in the laboratory and materials that are found in nature.
Moreover, 40% of the ingredients used are materials of renewable plant origin.
Operations transform these inputs into the final product: packaging, testing. LOreal has
38 industrial sites on five continents, and 85.9% of the production output is made in
LOreal factories. Part of brand identity, LOreals packaging is innovative and includes
eco-design, weight and volume reduction, new materials and technologies, recycled
content and lifecycle evaluation. The approach that the company is based on is respect for
consumers, nature and biodiversity, reduce packaging and volume and replace renewable
resources and recycled materials.
Outbound logistics collect, store and distribute the product to customers, and here we can
find activities such as warehousing, materials handling, distribution. LOreal optimizes its
global production on a regional basis, placing operations teams as close as possible to the
markets they serve, such that each production site to be more responsive and more
efficient in terms of logistics and transport.
Marketing and sales provide the means through which the customers are made aware of
the products and are able to purchase them. Sales administration, advertising, selling, all
these make sure that the consumers can find the desired products on the shelf. At LOreal
marketing is right the heart of their strategy, and builds awareness of the products
designed to captivate consumers across the world, anticipating fashion trends and
transforming them into a source of beauty and well-being.
Service to enhance or maintain the value of the product: LOreal offers in-salon
treatments, but also on-location using online training bank to reveal different styling
techniques.

The effectiveness or efficiency of these primary activities is improved by the support activities.

Procurement. LOreal is committed to building strong and sustainable relationships with

its suppliers, based on trust, mutual benefits and high standards, giving loser attention to
the issue of fair procurement. In order for the products to be manufactured, these require
a wide range of raw materials that make up the specific formula. LOreal directly partners
with suppliers that specialize in various technical groups, such as: polymers, fats, natural
products, perfumes, sunscreens, vitamins etc.
Technology development. The technology in LOreal is vital to the operational and
strategic performance. New technologies and innovative solutions are a must in this
industry. In this matter, LOreal has worldwide Research and Innovation laboratories,
where specialists from different fields develop new formulas, which are marketed
internationally.
Human resource management. The culture in LOreal is rich in talent and diversity,
encouraging people to contribute with creativity and enthusiasm. In order to achieve its
objectives, LOreal recruits the best people through university partnerships and
innovative business games, tailors personal and professional development opportunities
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to individual needs, uses diversity to drive business success, motivates its people through
their global development system, as well as remuneration policy and profit-sharing
programs and maintains active dialogue in order to understand the peoples perspective.
Infrastructure. The infrastructure of LOreal is comprised of its organizational culture, the
ways of doing things and the routines accumulated over time.

It is not possible for a company alone to create value. Porters value chain theory regards value
activities as linear chains. But more and more scholars argue that the forms and structures of
value activities cannot be explained by linear thinking (Christensen & Rosenbloom, 1955;
Duncan & Moriarty, 1997). This means that between the company and its customers and
suppliers, there is not only a one way value chain, starting from suppliers and ending at
customers, but also reverse or transverse value chains from customers to the company or to
suppliers, or from the company to the suppliers. These linkages of value chains constitute a value
network (Bovet & Martha, 2000). Alongside the internal production of their products, LOreal
collaborates with a broad range of subcontractor companies, outsourcing operations like:

Packaging of finishing finished products

Manufacturing specific finished products (pencils, cloths, etc.)
Logistics

The SWOT analysis summarizes the key issues from the business environment and the strategic
capability of an organization (Johnson, Scholes & Whittington, 2008).
Brand image - World No. 1
- R&d - 586 patents
- Range of portfolio - producct diversity
- Global brand
- High quality of components
- Culturally diverse company

- Growing cosmetics market

- Acquisition of local brands
- Target groups with growth potential (men
and children)

SWOT

- Brand confusion
- No local production center
- No local laboratories
- Different perception of the company
compared to the Group

- Counterfeit products
- New competitors
- Change in spending patterns of consumers
- Anti-makeup campaigns
- Incresed Taxes

Limitations in managing strategic capabilities within

company
Strategic capability are the resources and competences of an organization needed for it to survive
and prosper. Together with the assets that can be measured, the intangible assets, such as a
particular technology, accumulated consumer information, brand name, reputation, and corporate
culture are invaluable to the firms competitive power. In fact, these invisible assets are often the
only real source of competitive edge that can be sustained over time. The organizational
capabilities represent a firms capacity to deploy resources for a desired end result (Helfat &
Lieberman, 2002) and can be classified as:

Different circumstances may lead to limitation in managing strategic capabilities (Johnson et al,
2008):

Competences are valued but not understood. Managers may know that there are activities
in their organization that have a positive impact and may value them, but may not
understand just how such positive impact arises.
Competences are not valued. Managers may know that activities and processes exist in
the organization but not recognize their positive impact or value such activities.
Competences are recognized, valued and understood. Managers may be able to nurture
and further develop such competences, for example by ensuring that overall company
policies support and enhance them. The danger can be that top management may seek to
preserve such capabilities by over-formalizing or codifying them such that they become
set in stone.
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A limitation is represented by LOreals problems with racial discrimination, being declared

guilty by the highest court in France. This can tarnish the companys image and lead to a loss in
the market share.
Another problem that the company confronted with was its policy to test the products on
animals. Starting with 1989, LOreal has invested significantly in alternative methods for
chemical safety testing, so no animal testing for finished products has taken place since.

Strategy development within company

The strategy development processes of an organization is a very complex process which involves
the existence of both intended strategies and emergent strategies, the final result being a mixture
of the intended and the emergent. Intended strategies are the product of formal strategic planning
and decision making, but the strategy that is actually pursued is typically somewhat emergent,
including bottom-up initiatives, rapid responses to unanticipated opportunities and threats, and
sheer chance. (Johnson et al, 2008).
LOreal is included in the sector of manufacturing and services organizations and in Romania the
cosmetics market is best described as a growing market. Thus the strategy development process
that characterizes LOreal is Planning Incrementalism Process having as characteristics
standardized planning procedures, constant environment scanning, ongoing adjustment of
strategy and step-by-step and small-scale change.
In Romania, the intended development strategy that LOreal aims at is reaching a 25% market
share in the next 5 years, penetration in the markets that it already exists, but also new markets
development. Due to the complex environment in which the company develops its business,
Matalon, Country Manager has to adapt to external environment, and now in crises situation he
considers that stopping the investment is just a short term survival method and that he will invest
a lot in promotion and advertising. If until now LOreal could invest permanently in all the
categories, now they will have to lower the costs and they cant afford to invest in those
segments that are not very profitable or those that are not very good sold.
The speed at which fashion markets change is very high, with very short product life cycles.
Many fashion items have product cycles as short as half a year, or even a few weeks. Consumers
preferences depend on the season, on the social and cultural environment and on the effects of
previous marketing communication for fashion items or substitute products (Mintel, 2005).
Responding in a timely way to these changing demands is thus vital for success and LOreal
Group is aware of this changing environment thats way they are launching strategies that are
with a step in front of the other companies.
By strategy we understand the direction and scope of an organization over the long term, which
achieves advantage in a changing environment through its configuration of resources and
competences with the aim of fulfilling stakeholder expectations. (Johnson et al, 2008 ) Strategies
exist at a number of levels in an organization as it follows: corporate-level strategy , business
level strategy and strategic business unit.
*Corporate level strategies
Corporate level strategies are concerned with the overall scope of an organization and how value
will be added to the different parts of the organization. In 2011 LOreal is focused on a three
pronged strategy for future growth that aims to transform the business and remains on top.
These 3 strategic changes are as follows: the broadening of consumer base until reaching a

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billion new customers, a transformation of the company in order to make it stronger and more
flexible and an increase in research and development in order to accelerate growth. 14
1. Broadening the consumer base will be realized by offering innovative products at accessible
prices, specifically at right prices (the price that the customer is willing to pay for the right
product). And also part of this strategy will imply a focus on niche and smaller categories of the
market
2. The second part of the strategy involves fundamental changes to the way the company
operates, changes that have been focused on streamlining, focusing and simplifying and making
the business more efficient. This strategy will be realized through continual industrial reengineering of the business, elimination of the inefficient facilities, a more centralized
purchasing process, an improvement in the utilization of equipment and more advances in
productivity.15
3. The third part of the strategy involves an increase in Research & Development investments
because it contributes invaluably to the innovation efficacy, quality and safety of our products
that will enable us to stand out from our competitors. Investments are also done in the
Promotion & Advertising department in order to sustain the sales growth for the companys
brands and products (Agon, 2010).
Strategic directions
Market penetration refers to a strategy by which an organization takes increased share of its
existing markets with its existing product range. Regarding this type of strategy, the CEO Of
LOreal Group sustained the fact that the company will focus on attracting new customers in new
markets by developing a product portfolio that will aim at keeping every type of consumer
involved.
Market development refers to a strategy by which an organization offers existing products to
new markets.
Agon declared that in addition to traditional developing markets like Russia, China, Brazil and
India they will focus on markets like Thailand, South Africa, Korea, Ukraine, Indonesia,
Philippines and Turkey at which he added Vietnam, Egypt, Pakistan and Kazakhstan. The reason
of his decision is the fact that the growth in new market zones has been spectacular and the
value of those markets is expected to overtake that of Europe in the next two to three yearsand
in less than ten years new markets will account for 50 percent of the companys total sales 16. If
previously LOreal Group was interested in increasing penetration in existing leading markets,
now they are taking into account this type of strategy because they could observe the fact that the
sales volume in new markets has doubled every decade since 1990 and because they are reducing
the dependence on the developed markets where growth potential remains limited.
14 http://www.cosmeticsdesign-europe.com/Business-Financial/L-Oreal-unveilsthree-pronged-strategy-for-future-growth
15 http://www.cosmeticsdesign-europe.com/Business-Financial/L-Oreal-unveilsthree-pronged-strategy-for-future-growth
16 Annual Report 2010
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Product development - refers to a strategy by which an organization delivers modified or new

products to existing markets. LOreal Group strategy will focus on extending their brands to
include new product categories. This strategy will be achieved mainly on the men and old
peoples market. Observing an increasing trend of the number of old people, LOreal plans to
develop new cosmetics, especially anti-aging skin care and other age related products 17. The
strategy regarding the creation of new products for men has two very important reasons. The first
is the fact that , the mens cosmetics market is not as saturated as it is the womens market and
men have proven to be more loyal to specific products than women.
*Business level strategy
Business level strategy refers to how the various businesses included in the corporate strategy
should compete in their particular markets. This typically concerns issues such as pricing
strategy, innovation or differentiation, for instance by better quality or a distinctive distribution
channel. (Johnson et al, 2008)
LOreal stands in front of the cosmetics industry due to its differentiation strategy. Through
differentiation strategy we understand that type of strategy under which a
firm aims to develop and market unique products for different customer segments. Usually
employed where a firm has clear competitive advantages, and can sustain an
expensive advertising campaign. LOreal based its activity on continuous investment in rigorous
scientific research and development which enables their brands to deliver products that are
innovative, highly effective and which are manufactured to the most demanding standards of
quality and safety. The strategic business units compete in different product and geographic
markets, but focus on less price sensitive segments, and thus pursue Porters premium-pricing
differentiation strategy in each segment18.
In terms of marketing strategy there a several aspects worth to be mentioned and one of them is
the fact that LOreal is embracing diversity and not just in terms of cultural mix of employees,
but also in terms of their consumers. LOreals products address to women worldwide, specific
products being developed for certain women like Asian women, Women of color, Caucasian
women, so on so forth. In terms of promotion, the company uses actresses or different
personalities of all ages that best emphasize the vision and the Company with whom the average
individuals identify with, and gives them the feeling that they can look as good as the imagine of
the company.
LOreal has not only followed a comprehensive, long term R&D strategy but it has also tried to
address and maintain its balance between R&D-marketing interface. Moreover, the company
follows a three pillars strategy for producing commercially viable products. The three structured
strategy includes LOreals advanced research, applied research and product development, each
stage having its own unique functions to perform in order to create successful innovations19.
17
18 http://www.ashridge.org.uk/Website/IC.nsf/wFARATT/Generic%20strategies:%20a
%20substitute%20for%20thinking/$File/GenericStrategies.pdf
19 http://www.coursework4you.co.uk/essays-and-dissertations/sample85.php
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In terms of branding strategy we should mention that LOreal is launching different brand
marketing strategy for its brands, each of them having their own personalities, different market
segments for product design , price positioning, advertising communication and channel
construction in order to meet consumer demand for differentiation. The LOreal mark of
products like Lancome, Helena Rubistein, Biotherm and others is hard to be seen, because the
company tries to create different brand images to its products, each being unique in its own way,
finally belonging to the same group.
Also in terms of recruiting strategy, LOreal is highly innovative and revolutionary, and the
game Reveal is the best prove of this. REVEAL represents and educative game for young people
that are interested in the business of a multinational company and in the opportunities they could
have in their carrier. Ana Perrin, HR Manager defines 3 priorities in term of human resources:
recruitment of the most talented persons, promotion of the diversity inside the company and
sustain the professional development of the employees. Having a solid business model, the
recruitment strategy aims to attract as various profiles as possible from the entire world.20

Methods of pursuing strategies within company

Any of the strategies established by LOreal may be undertaken in a different way or by a
different strategic method. By strategic method we understand the means by which a strategy can
be pursued and can be divided in 3 types: organic development, acquisition and alliances.
(Johnson et al, 2008 )
a. Organic development is the method through which strategies are developed by building on
and developing an organizations own capabilities. LOreal is a well-known firm for its strategy
focused on organic development. The group has concentrated its efforts for a long while on the
development of its own brands by undertaking a few targeted acquisitions. To acquire new
competences, a large confidence is granted to the R&D centers present in France, in the US, in
Japan and in China.

b. Mergers and Acquisition represents the method where an organization takes ownership of
another organization, whereas a merger implies a mutually agreed decision for joint ownership
between organizations.
In 1996 , LOreal acquired Maybelline for a total amount of 758 million dollars and started a
campaign of makeover of the brand moving the headquarter of this acquired company to New
York City. The strategic purpose of this acquisition was to have that urban American chic
products that will be the ambassador of the American origins.
In 1998 LOreal acquired Soft Sheen, a U.S. line of hair-care products aimed at AfricanAmerican women in order to prepare the field for its entrance on the African markets.

20
http://www.fashionandbeauty.ro/extras/presscenter/beauty_loreal_propune_o_platfor
ma_online_revolutionara_reveal.html)
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On may 2001, the LOreal Group signs an agreement with CosMedic Concepts Company
through which the latter yields its BioMedic brand and range of products to LOreal. The main
idea behind this acquisition was to strengthen LOreals position on the market of cosmetics
designed for use of dermatologists and plastic surgeons.
LOreal entered the Chinese market by acquiring the Chinese brand Mininurse in December 2003
, followed by an agreement to acquire Yue-Sai a Chinese make-up and skincare brand on January
2004. The purpose of this acquisition was to enforce the growth in that strategic market and to
speed up Garniers roll-out in China.
Also it should be mentioned the acquisition of Skinceuticals in 2005 in value of 35 mil $, one of
the largest and fastest growing brands in the professional premium skin care market, having as
purpose to strengthen the companys position in high-performance professional skin care.
In 2006 the Luxury Products Division acquires the Diesel line of fragrances.
During 2006 LOreal Made several acquisitions of Beauty Alliance, The Body Shop, Malys
West, Sanoflore and PureOlogy, actions which led to an increase of 8.1 percent during an year.21
In 2008, the European Commission admitted the acquisition of Yves Saint Laurent Beaute , the
value of the acquisition being of 1.78 billion dollars and the contract specifies that The LOreal
Group will have exclusive license only for YSL fragrances.
Mainly LOreal chooses to acquire the brands mentioned above in order to enter easily on new
markets like African or Asian market. Also if the Group intended to enter on a certain area of the
cosmetics industry, also the acquisitions were the best option.
c. Alliances represent the method where two or more organizations share resources and activities
to pursue a strategy
In 1981, LOreal and Nestle decide the creation of a joint-venture named Galderma specialized in
research , development and marketing of innovative medical solutions in dermatology.
In 2002, LOreal moves into new markets for cosmetic nutritional supplements through the
creation of Inneov. Gathering the knowledge of LOreal Research and Nestle Research, Inneov
will face a scientific breakthrough to develop this fast-growing market.22
In 2003 another alliance, this time with Mr. Shy Uemura, a great make-up artist enables
LOreals Luxury Division to enter the strategic Japanese market but also to give global
resonance to that luxury Japanese brand.

Strategy evaluation
In general, when assessing the validity of strategic options there are three success criteria which
can be used: suitability, acceptability and feasibility.
Further, we are going to evaluate LOreals strategy using all the criteria listed above.
Suitability is concerned with whether a strategy addresses the key issues relating to the strategic
position of the organization; therefore it is concerned with the overall rationale of a strategy. In
evaluating if a strategy is suitable for an organization, there has to be made an assessment of the
extent to which the strategic options fit with the key drivers and expected challenges in the
21 http://zpryme.com/news-room/la-ora-al-recent-mergers-acquisitions-zpryme.html
22 www.loreal.com
14

environment, exploit strategic capabilities are appropriate in the context of shareholders

expectations and cultural influences.
In order to assess the suitability of the strategy we will use TOWS Matrix which is a method of
identifying the strategic options on the basis of a SWOT analysis.

Opportunitie
s

Internal factors
Strengths
- diversification;
- product development strategy;
- superior market position;

Externa
l factors
Threats

- improved service to customers;

- reliable products;

Weaknesses
- acquisitions;
- investment in innovation;
- develop strong brand
portfolio;
- improve product quality
-downstream operations;

Acceptability is concerned with the expected performance outcomes of a strategy and the extent
to which these meet the expectations of stakeholders.
Feasibility is concerned with weather a strategy could work in practice; therefore it has the
capabilities to deliver a strategy.

Conclusion
The dynamics of the cosmetics industry is very obvious, increasing from one year to another,
despite the condition of the economy and more and more people start to use, even from
adolescence, products for skin care, offering to the producers the possibility to increase their
market share. L`Oreal is the world`s leading beauty company and this is due to their
continuously strategy development (every year they improve or change their strategy so that the
company can adapt well to the business environment). Through their commitment to innovation
and continuous research, they keep on bringing up new products on the market, adapting to the
market demand that is always looking for something new, revolutionary. Their marketing
campaigns are strongly promoted in any kind of media, from internet and TV commercials to
banners and newspapers.
L`Oreal keeps on being the number one beauty products company in the world and specialists
say it will still remain like this for at least 5 years. Why? Because theyre worth it!

15

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Company website [Online] available

<www.sustainabledevelopment.loreal.com

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<www.lorealparis.ro>,

<www.loreal.com>,

18