Reference no: EM13669488

L'OréalWhen it comes to globalizing beauty, no one does it better than L'Oréal. The company was founded in Paris over 100 years ago by a young chemist, Eugene Schueller, who sold his patented hair dyes to local hairdressers and salons. By the 1930s, Schueller had invented beauty products like suntan oil and the first mass-marketed shampoo. Today, the company has evolved into the world's largest beauty and cosmetics company, with distribution in 130 countries, 23 global brands, and over €17.5 billion in sales. Much of the company's international expansion and success is credited to Sir Lindsay Owen-Jones, who transformed L'Oréal from a small French business to an international cosmetics phenomenon with strategic vision and precise brand management. During his almost 20 years as CEO and chairman, Owen-Jones divested weak brands, invested heavily in product innovation, acquired ethnically diverse brands, and expanded into markets no one had dreamed of, including China, South America, and the former Soviet Union. His quest: to achieve diversity, "meet the needs of men and women around the globe, and make beauty products available to as many people as possible." Today, L'Oréal focuses on its five areas of expertise: skin care, hair care, makeup, hair coloring, and perfume. Its brands fall into four different groups: (1) Consumer Products (52 percent of L'Oréal's portfolio, including mass-marketed Maybelline and high-technology products sold at competitive prices through mass-market retailing chains), (2) Luxury Products (prestigious brands like Ralph Lauren perfume offered only in premium stores, department stores, or specialty stores), (3) Professional Products (brands such as Redken designed specifically for professional hair salons), and (4) Active (dermo-cosmetic products sold at pharmacies). L'Oréal believes precise target marketing-hitting the right audience with the right product at the right place-is crucial to its global success. Owen-Jones explained, "Each brand is positioned on a very precise [market] segment, which overlaps as little as possible with the others." The company has built its portfolio primarily by purchasing local beauty companies all over the world, revamping them with strategic direction, and expanding the brand into new areas through its powerful marketing arm. For example, L'Oréal instantly became a player (with 20 percent market share) in the growing ethnic hair care industry when it purchased and merged the U.S. companies Soft Sheen Products in 1998 and Carson Products in 2000. L'Oréal believed the competition had overlooked this category because it was previously fragmented and misunderstood. Soft Sheen-Carson now derives approximately 30 percent of its annual revenues from South Africa. L'Oréal also invests money and time in innovating at 14 research centers around the world, spending 3 percent of annual sales on R&D, more than one percentage point above the industry average. Understanding the unique beauty routines and needs of different cultures, countries, and consumers is critical to L'Oréal's global success. Hair and skin greatly differ from one part of the world to another, so L'Oréal scientists study consumers in laboratory bathrooms and in their own homes, sometimes achieving scientific beauty milestones. In Japan, for example, L'Oréal developed Wondercurl mascara specially formulated to curl Asian women's eyelashes, which are usually short and straight. The result: within three months it had become Japan's number-one selling mascara, and girls excitedly lined up in front of stores to buy it. L'Oréal continued to research the market and developed nail polish, blush, and other cosmetics aimed at this new generation of Asian girls. Well known for its 1973 advertising tagline-"Because I'm Worth It"-L'Oréal is now a leader in beauty products around the world. As Gilles Weil, L'Oréal's head of luxury products, explained, "You have to be local and as strong as the best locals, but backed by an international image and strategy."

1. Review L'Oréal's brand portfolio. What role have target marketing, smart acquisitions, and R&D played in growing those brands?

2. Who are L'Oréal's greatest competitors? Local, global, or both? Why?

3. What has been the key to successful local product launches such as Maybelline's Wondercurl in Japan?

4. What's next for L'Oréal on a global level? If you were CEO, how would you sustain the company's global leadership?