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L'Oreal Strategic Management Change

1. INTRODUCTION.

During the previous years the organizations have been going right through an activity of broadening their barriers to attain new markets across the globe, this process in known as globalization, this identifies the process where societies, ethnicities, and economies are actually integrated creating a massive market all over the world in which different companies can participate.

The following survey was made after L'Oreal inspecting how every acquisition made by the company was a fundamental part to become the first choice and biggest cosmetic company in the beauty industry, how did they enter the united states market by acquiring the main US brands at that one time, and finally it will analyze their implemented strategies and market troubles exhibiting how new strategic associates can make possible expansion through globalization.

The centre of attention of the survey will be centered on the internal and external affects to L'Oreal, and exactly how globalization could have an effect on insurance policies and decisions created by the business.

L'Oreal was created by Eugene Schueller in France 1907 and known as after his first product L'Aureole, the aim of this French chemist was to create the first artificial hair-color product ever made and then start retailing it within France and perhaps some elements of Europe, however, as enough time goes on, L'Oreal located as the leader in European head of hair color market and skin care, but this wasn't good enough to them, as they wanted to reach new market segments as the American, and Asian, therefore, L'Oreal made sure acquisitions, as well as the execution of new market strategies and corporate strategies to effectively reach their goals.

1. 1 SWOT Examination THEORY.

Now the first area of the record will be centered on the primary interior and external affects that the company is at the mercy of, to have the ability to analyze this influences, I would like to work with the SWOT evaluation which really is a strategic planning solution to identify the internal and external factors that are adding or retaining the company to attain their goals, The strengths and weaknesses refer to the company and its products whereas the opportunities and hazards are usually taken to be exterior factors over which the company does not have any control. SWOT evaluation requires understanding and analysing the talents and weaknesses and figuring out threats to the business as well as opportunities available on the market. Once that is done, we can then try to exploit advantages, overcome the weaknesses, understand the opportunities and defend the organization against threats. That is one of the most important parts of the look process. SWOT evaluation asks the questions that will enable you to decide whether your enterprise and the merchandise will really have the ability to fulfil your plan and the actual constraints will be. [1]

1. 2 STRENGTHS.

L'Oreal has gone through different kinds of management of their creator, to the CEO Owen Jones, Jones management style has taken to the business a revolution from a French centered cosmetic company to a world innovator in the aesthetic industry, L'Oreal main capability is to obtain local cosmetic brands (Ralph Lauren Fragrances, Helena Rubinstein)[2] re-arrange their operational strategy and lastly place them in an improved location on the list of competitors, their brand management is a massive tool to position L'Oreal in the area these are, as every single product and brand they take care of is aiming to an specific section of the several markets, rather than putting their products indiscriminately as every market has another type of demand to be supplied.

Another strength of L'Oreal that may be clearly discovered is their patent desire to invest in Research and Development, with this we can assure that L'Oreal is an business that is getting excited about implement the latest technology in all their products in order to efficiently satisfy almost all their customer needs. They spent and average of 3% of these revenue in R & D, when the average of the industry is less than 2%[3], L'Oreal is aware that in the days we live in, any move forward in technology symbolizes a competitive benefits and subsequently that is the best manner to possess market.

L'Oreal has also shown their durability when it gets to marketing campaigns as they know that in order to be successful internationally you must be flexible and able to adapt to new environments, also to be more specific you must e able to produce just what a person is demanding, which is the truth of Savannah-Based Carson, which experienced a 35% talk about of the united states ethnic hair treatment market and founded occurrence in South Africa, this market has an estimated value of 1 1 billion us dollars, corresponding to L'Oreal's product administrator "You cant pretend to be No 1 in the world and forget about 1 billion consumers of African source[4]

1. 3 WEAKNESSES.

Now to look at the weaknesses of the company, despite having the success of the globalization impact, L'Oreal haven't done so much to diversify their products, alternatively than that, they have got focused all their efforts in developing products for the main areas the work on (locks, skin, make up, and perfume).

With the united states brands acquisition, L'Oreal put into 3 main product divisions, consumer, professional, and luxury, in his aim to be the world innovator in the beauty industry, CEO Jones has centered his initiatives on the consumer brands because they are easier to retail, and relatively less expensive therefore isn't that hard to develop a trusted data base, nevertheless the other 2 areas are very important as well an eventually if they focused their attempts on improving each one or even both of these the response may maintain positivity and subsequently they will be in a position to reach a greater portion of the market. [5]

Another weakness of the business, and is commonly seen in this type of organizations is the decentralized organizational composition, with this I am referring to the circulation of information and control of the business due to many subdivision, this could affect the production level of the organization because of the need of presenting guide the other users of the plank and directors of the company.

1. 4 OPORTUNYTIES.

Due to the nice performance of L'Oreal, they have had certain opportunities that they understood how to use, including the market in Africa, as that they had the vision to recognize the enormous probable of this market, now L'Oreal is the first choice of this section, which wasn't very appealing to the opponents, at the first level because they didn't know that individuals in Africa may be considering this sort of products which cause them to lose interest because of this segment and as a consequence L'Oreal relax as the leader of the industry by implementing their acquiring strategy along with specific marketing strategies, basically, L'Oreal came to the realization that the key thing to take over Africa was to build up a product which completely meet the population, because of this, L'Oreal invest in a multi million money research and development center in Chicago to target specifically on the mane and skin area needs of the people of African-American descent. [6]

As explained before another big chance of L'Oreal to develop is to target more on their line of dermocosmetics (anti-aging), as this area has an extremely small part of the revenue and taking into consideration the research network they have got, it would be interesting if the centered their efforts to create a new anti-aging product at affordable price and allocated through their stations to reach a larger population.

L'Oreal being the entire world leader of the wonder industry could diversify aiming to enter new marketplaces so on the clothing taking advantage of their popular name as they curently have a strong influence over the new tendencies of fashion in conditions of constitute, hair and skin care.

1. 5 THREATS.

In regards to the hazards and obstacles, even that L'Oreal is the market world leader; there are a few competitors on the market and competitors for every single product department of L'Oreal (consumer - professional - luxury), competitors like Estee Lauder, Proctor & Gamble, Revlon, and Potential Factor, specially for the Japan market, which is the marketplace that L'Oreal is looking to control.

L'Oreal is the globe leader in the industry, however their rivals have had the opportunity to strategic place some of their products in the real market, reason L'Oreal is considering acquiring an other brand (Nivea) so that they can gain a much better position in the European market.

1. 6 SWOT MATRIX

STRENGTHS

* The ability to acquire new brands and transform then into new market leaders

WEAKNESSES

* Lack of diversity on the product catalogue

OPPORTUNITIES

* As they have all the knowledge and capacity they are able to explode new marketplaces so on the African market

THREATS

* Various other competitors in the industry that presently are stronger in a few other segments of the marketplace like in Asia

Now that the SWOT analysis has been done, it's clear that the reason of success of L'Oreal is the target they have implemented on the strategies, as they have got been able to identify internal and exterior influences that provides them a competitive advantage over the rest of the competitors on the market, as they know exactly where do they would like to be, how will be the going to accomplish their goals, and what's the best way to reach that desire success.

Profit margins are often damaged when companies give attention to internal issues versus the external conditions that influence customers. Revenue comes from the exterior, from customers buying products or services, not from utilizing new technology, re-engineering business procedures or building great clubs. Focusing on exterior forces increases the bottom line. In fact, by shifting for an external target, companies could increase revenue from 5 to ten percent. An external emphasis, however, means more than just gathering competitive and market intellect. It requires more than bare customer-centred rhetoric. It starts off with the CEO and requires primary behaviours to give attention to where the money comes from. [7]

2. GLOBALIZATION.

The second part of the article will be analyzing the following subject areas:

* The impact of globalization in the business.

* How does it influence their policies and decision making,

* How effective has L'Oreal been relating to this new situation.

2. 1 CONCEPT OF GLOBALIZATION

As stated with time International (1999), globalization means that countries, economies, companies or people generally are coming nearer together. This is not because they're forced to take action, but because they want to do so. Actually they want a whole lot to come closer to others that they can not help themselves. As worldwide communications progress, information, technology, people and financial flows move faster. The ethnical assumptions and premises of democracy and free marketplaces spread and become more commonly accepted. This very attractive and almost irresistible globalization process becomes more widespread[8].

Friedman (2000) expresses that the driving a car force behind globalization is free market capitalism, which uses free trade and competition to build exclusive rulers of the world marketplaces. These very powerful capitalists make economies to increase and become efficient. Using the opening up of world markets, globalization has turned into a major pressure shaping both management theory and practice. Pushes of globalization have been accelerating and, so, are shaping policies and behaviours of region state governments as well as corporate and business entities all around the globe. [9]

2. 2 How have L'Oreal become the biggest beauty company?

The acquisition strategy applied by L'Oreal guide these to be the planet head company in the wonder industry; all these US acquisition they made created a sub section of their products catalogue, consumer, professional, and luxury, L'Oreal's success is an obvious example of how to execute a commercial strategy and manage a brandname internationally to achieve a massive progress even when the marketplace they sell their products in isn't very steady, the main element was to understand and successfully fulfill the needs of each customer through its products like they performed with the Moist Lipstick in Japan, or the Research and Development process they carry out to gratify the afro-American customer needs. L'Oreal can reach more people across the world than every other beauty company because of their distribution stations and is able to generate a larger income alternatively than other companies due to their big products catalogue.

2. 3 The Acquisition process.

As stated in the case, the success of L'Oreal was achieved because of all the acquisitions made through out the globe and especially in america, all the process started out by acquiring Ralph Lauren, and Helena Rubinstein which was a cosmetic maker with international distribution, after five many years of negotiating process L'Oreal took full ownership of both companies. Another acquisition of the business was Redken in 1994 nevertheless the new products launched under L'Oreal's ownership weren't successful so they decide to rename the business to Redken 5th Avenue NY.

Following their process the next company to be received was Maybelline which was the third major company completely located in the US and it was very attractive because of the anti-aging lines that was very eye-catching to young human population, on the market this is very representative for L'Oreal as this will bring a fresh image to the company renewing the old French fashion, making it a fresh young image.

Soft Sheen and Carson was an integral element in the acquisition process as they helped bring a whole new market to the business that hasn't been taken care of because the existing competitors didn't realize that that section of the population may be thinking about this sort of products, and in addition L'Oreal spent 3% of these earnings in research and development to create a new product specially to them.

In the 2000 L'Oreal bought Matrix focusing on their professional range supplying the necessity of hairdressers and beauty saloons with a high quality standart.

The most significant acquisition created by L'Oreal was manufactured in the 2000, they bought Kielh's after a three season countership, the owners finally agreed to sell their company once they recognize that they couldn't meet the demand, however some of the employees weren't very happy about the new acquisition as they thought that the business wont have any independence still left after L'Oreal's take over, this new acquisition was very very important to the company as Kielh's could bring an improved position related to the store high-end section of the business enterprise.

2. 4 WHAT WAS THE ROLE OF ACQUISITIONS IN SUCH A GROWTH?

The possibility of increasing profitability and market share by acquisitions is constantly on the exercise a far more seductive and immediate appeal to business leaders than a reliance on progress alone. There has been a substratum of mergers, acquisitions and, indeed, divestments in every developed economies. However, the amount of this depends on the buoyancy of the overall economy. The periodic rise and fall of such activity has heightened controversy among professionals, academics, politicians, and regulators about acquisition activity and their benefits, as well as moral considerations (Vinten, 1992). Mergers and acquisitions (M&A) have a unique potential to change firms, and also to contribute to commercial renewal (Angwin, 2001). They can help a firm renew its market position at a velocity not attainable through internal development (Haspeslagh and Jemison, 1991; Harrison, 2002). [10]

Value creation is the top purpose in successful acquisitions. Yet, empirical and other studies continue to highlight the reduced success rates associated with acquisitions. Regardless of how attractive is the business enterprise opportunity associated with an acquisition process, value is not created until functions are transferred, and folks from both organisations collaborate in order to make the expected benefits and the unpredicted opportunities. This collaboration relies on the will and ability of managers from both organisations to interact towards a fresh future. The key to integration is to obtain the participation of people involved without compromising the strategic activity. Finding similar organisational cultures and management styles has turned into a common panacea for steering clear of employee dissatisfaction which could undermine M&A performance. Different creators agree that it is important to consider social compatibility as a criterion for screening potential candidates for M&A. Alternatively, managing the ethnic differences has been proved as a far more realistic and successful strategy in integration processes than locating the ``ideal culture fit''. Buono and Bowditch consider that successful integration can be achieved even between diversified organisational cultures. This point of view is followed in this exploratory analysis. It examines the strategies being employed by professionals that encourage employees' diversity tolerance while allowing for learning to arise within father or mother and acquired firm. It looks at the strategies the businesses implemented to assist in the units to interact, and integrative routines involving firms within the same industry but from different countries and contrasting commercial values. In combining businesses with different skills and knowledge bases, acquisitions create unique learning opportunities for the partner firms. As recently argued by management researchers, knowledge and the capability to create, transfer, transform and utilise it are the most crucial sources of a firm's lasting competitive advantages[11].

Acquisitions have performed a very important role in L'Oreal's growth, particularly in their enlargement through out the world, the greater companies the find the bigger L'Oreal was getting as well as their revenue, in 1996 they bought Maybelline for $758 million dollars and began a complete restructuration of the brand, starting from moving the head office within the united states.

With all the restructuration L'Oreal's CEO Owen Jones effectively achieved to reach from 3% to 15% on the nail market, they also have raise their sales in practically a 100% and located Maybelline in over 70 countries.

Globalization has had a very positive impact over L'Oreal as because of this they had the need to reorganize their company making some sort of decisions like relocating their headquarter for the USA businesses in Chicago in order to have control of all the operations occurring in the us in a central place where they can keep track of almost all their progress, it has also brought another issue related to globalization which is the technology, L'Oreal has invested 3% of the revenue in developing new products where the average of investment in this field in the industry is around 2%, technology has also brought new channels of communication where they may easily be in touch within the company and also they have had the opportunity to use cost-efficient distribution stations thanks to their acquisition of Soft sheen-Carson as that they had developed cheap delivery systems.

2. 5 L'OREAL EFFECTIVENESS

L'Oreal has been going through a massive change since their start as they started out their business making a man-made hair-color product to be bought from France and probably around Europe, the response of the visitors to the product was so excellent that the company decided to enter the beauty market, diversifying their product catalogue not and then hair care but to skin care as well, with the result of being the marketplace leader. Nevertheless the effectiveness of the business is not very clear at this time as the merchandise alone cant warrant the success of the business, instead of that, a good proper management along with a visionary CEO can bring a major power to the business and will build self-assurance within the business to achieve their goals as they mentioned at the beginning, well, this is actually the case our company is analyzing, as previously mentioned, CEO Owen Jones had the perspective to increase the limitations of the business by acquiring proper associates that can donate to a massive growth for L'Oreal, his authority permits him to see and opportunity of development taking benefit of the globalization increase and his eyesight of opportunities where in fact the competition didn't see anything was an integral to succeed in some elements of the entire world, L'Oreal was excellent enough to understand that the needs or wants of the people in America were not the same as the individuals in Asia or in Africa reason why they decided to create products for each and every single market and this offered them the chance to be the entire world leaders in the market. After all this facts it is clear that L'Oreal has already established an effective respond to the new changing environment because they are prepared to adapt to new situations and is also a company ready to cope with organizational change, this is a gigantic benefit for the business as they can simply gain competitive advantage at a low cost of opportunity.

2. 6 IMPROVEMENT AREAS.

L'Oreal is the entire world leader company in the beauty industry because of their great management and their products; however there is always just a little extra that you can do to attain that additional little little bit of the market. In my own viewpoint I would suggest that the business hire an Asian Marketing Administrator hopefully with a strong Japanese background to become able to completely take over the forex market as the forex market has a huge potential which was turned out with the Damp Lipstick, perhaps if indeed they commit some part with their revenue in research and development as the did with the African market, they might get a good response as all the markets should be kept in mind as a major opportunity.

L'Oreal may possibly also consider broadening to the Latin American market and specially the South American, given that they control the US market (THE UNITED STATES), they can put into action their expansion strategy to dominate central and south America which really is a market that haven't been explode yet or not as much as they could. L'Oreal could execute the same strategy executed by Dell in Brazil, as they decided to relocate their herb in SOUTH USA (Brazil) to be able to control all the marketplace from there, taking benefit of the Mercosul market which enables the company to save lots of on fees within the continent.

And finally L'Oreal should think about to extent their products catalogue to clothing and accessories as this might give them a competitive edge over all of those other companies in the same industry, it is vital to attempt to be always one step ahead of the company and be visionary in order to forecast what the marketplace wants and exactly how to supply that demand.

2. 7 Final result.

After studying this case it is clear how important is to truly have a good tactical management and understand how the environment make a difference every group from the most insignificant change to any huge change which may involve any of the decisions of the business, its understandable that the perspective of the CEO of the company can bring success to the organization and build a good know how that will allow the company to enter in new marketplaces.

2. 8 Recommendations.

[1] Westwood, John. How exactly to Write a Marketing Plan (3rd Model). London, GBR: Kogan Web page, Small, 2006. p 27.

[2] L'Oreal and the globalization of American beauty, Site 5.

[3] L'Oreal and the globalization of American beauty, Page 15.

[4] L'Oreal and the globalization of American beauty, Webpage 9.

[5] L'Oreal and the globalization of American beauty, Page 2.

[6] L'Oreal and the globalization of North american beauty, Web page 9.

[7] Emerald Insight Staff (CB). Change Strategies. Bradford, GBR: Emerald Group Publishing Limited, 2004. p 4.

[8] Samli, A. Coskun. Searching for an Equitable, Sustainable Globalization: The Bittersweet Dilemma.

Westport, CT, USA: Greenwood Posting Group, Incorporated, 2002. p 21.

[9] Samli, A. Coskun. Searching for an Equitable, Ecological Globalization: The Bittersweet Problem.

Westport, CT, USA: Greenwood Publishing Group, Incorporated, 2002. p 34.

[10] Emerald Perception Staff (CB). Mergers and Acquisitions.

Bradford, , GBR: Emerald Group Publishing Limited, 2005. p 4.

[11] Emerald Information Personnel (CB). Mergers and Acquisitions.

Bradford, , GBR: Emerald Group Posting Limited, 2005. p 5.

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