Introduction

L’oreal introduction

L'Oréal – the world leader in the cosmetics and beauty sector, was established in 1909 by French
chemist Eugène Schueller. With its headquarters located in Clichy, France, L'Oréal employs over
80,000 people worldwide and conducts business in more than 150 countries. The four primary
business sectors of L'Oréal are Consumer Products, L'Oréal Luxe, Professional Products, and Active
Cosmetics. The company is well-known for its wide range of products.

L'Oréal's portfolio of brands, which includes well-known names like L'Oréal Paris, Maybelline,
Lancôme, and Garnier, covers a broad spectrum of skincare, haircare, makeup, and fragrance goods.
With multiple research facilities worldwide devoted to developing beauty via science and technology,
L'Oréal has also been at the forefront of innovation, making significant investments in R&D.

L'Oréal places a high priority on sustainability, as seen by its dedication to the "L'Oréal for the
Future" program, which aims to reduce environmental impact and promote social responsibility. This
dedication to sustainable growth, along with ongoing product innovation, has propelled L'Oréal to the
forefront of the global beauty market, offering a diverse variety of consumers with products that
address a wide range of beauty requirements and preferences.

I. Vision, Mission and Strategic goals

L’Oréal’s mission and vision statements are evidence of a company that has set itself apart from the
rest in the personal care industry. As a leading player in this sector, L’Oréal is known for its trendy
and proven beauty products and distinguished customer services. In fact, the focus of its mission and
vision statements on the personal needs of its clients is what has seen it rise as one of the most
recognized businesses in this sector. Ideally, a corporate vision statement is a description of the future
position of a company.

L’Oréal does not have a vision statement, but the company’s mission statement is provided on the
corporate website, as follows:
- Beauty for all—For more than a century, L’Oréal has devoted itself solely to one business:
beauty. It is a business rich in meaning, as it enables all individuals to express their
personalities, gain self-confidence and open up to others.
- Beauty is a language—L’Oréal has set itself the mission of offering all women and men
worldwide the best of cosmetics innovation in terms of quality, efficacy and safety. It pursues
this goal by meeting the infinite diversity of beauty needs and desires all over the world.
- Beauty is universal. Since its creation by a researcher, the group has been pushing back the
frontiers of knowledge. Its unique Research arm enables it to continually explore new
territories and invent the products of the future, while drawing inspiration from beauty rituals
the world over.
- Beauty is a science. Providing access to products that enhance well-being, mobilizing its
innovative strength to preserve the beauty of the planet and supporting local communities.
These are exacting challenges, which are a source of inspiration and creativity for L’Oréal.
- Beauty is a commitment. By drawing on the diversity of its teams, and the richness and the
complementarity of its brand portfolio, L’Oréal has made the universalisation of beauty its
project for the years to come.
L’Oréal, offering beauty for all.

1.1. Analysis
L’Oréal does not have an official statement on its site. However, the practices of this organization
show that it focuses on “driving the cosmetic industry with an inclination on sustainability.” In this
way, L’Oréal ensures that it protects everyone and the environment. The vision statement can be
explained in the following ways:
1) Innovation and research
2) Sustainability

Based on the 9 questions of Mission Statement Components to analysis L'Oréal's mission:

1) Customers:
The mission statement indicates that L'Oréal aims to offer the best cosmetics to "all women
and men worldwide".

2) Products/services:
The core business of L'Oréal is beauty - they develop and provide a wide range of best
cosmetic products and beauty solutions (hair color, permanents, hair styling, body and skin
care, cleansers, makeup and fragrances).

3) Markets:
The phrase “globally” shows that L'Oréal competes globally, as they aim to meet the "infinite
diversity of beauty needs and desires all over the world."

4) Technology
5) Survival, growth, and profitability:
The overarching goal seems to be to "universalize beauty" and provide "Beauty for all",
suggesting an aim to make their products and services accessible to people worldwide, not
just specific market segments.

6) Philosophy:
Key values emphasized include diversity, commitment to communities, sustainability, and
a belief that beauty is a fundamental human need and right. They emphasize the importance
of “protecting the beauty of the planet” and “supporting local communities,” reflecting
their commitment to social responsibility.

7) Competitive Position:
According to the mission statement, L'Oréal has a competitive position as a leading company
in the beauty sector, with over a century of experience and a commitment to providing
“the best cosmetic products in terms of quality, effectiveness, and safety” globally. This
places them at the forefront of the global beauty industry.

8) Public Image:
L'Oréal's public image is portrayed as a company that is committed to beauty as a
fundamental aspect of life. They emphasize values such as diversity, sustainability, and
social responsibility. The phrase “Beauty is a commitment” reflects their dedication to
ethical practices and community support, contributing to a positive reputation as a
responsible and inclusive brand in the beauty industry.

9) Employees:
Employees are a vital part of L'Oréal's mission and vision.
The company highlights the importance of leveraging the diversity of their workforce and
the unique contributions of each team member.

2 Strategic goals
Universalization is about having a truly global presence through a unique organization. L'Oreal is
strategically concentrated yet operationally decentralized. Local teams are empowered. This ensures
that in every country they are close and relevant to their consumers.
That means also creating and producing cosmetics at a local level, so that their formulations are
perfectly adapted to the needs of consumers, wherever they live. To achieve that, L’Oreal have
developed a worldwide network of Research & Innovation and marketing hubs, one for each of our
strategic markets: the United States, Japan, Brazil, China, India and South Africa. To complement
their work in development, L’Oréal also has a global industrial presence, so that these innovations can
be brought to market quickly and efficiently.

Regarding sustainable development, Corporate Knights, a Global Responsible Investment Network,

has selected L’Oréal for its 2012 ranking of the Global 100 Most Sustainable Corporations in the
World. L’Oréal has received this distinction for the fifth consecutive year. L’Oréal has more than 84
percent of its production globally being manufactured in compliance with the ISO 9001 (quality), ISO
14001 (environment), OHSAS 18001 (safety) certifications.

In San Luis Potosi, Mexico, L’Oréal opened the largest hair color production plant in the world in
2012, the firm’s second plant in Mexico. L’Oréal views Mexico as the gateway between both North
and South America. The new plant is in the process of becoming LEED certified and features
advanced technologies for water treatment and solar-powered equipment. L’Oréal Mexico has
reduced water consumption per unit by 60 percent and carbon dioxide emissions per unit by 60
percent in recent years.

On November 12, 2012, for its 10th anniversary, Vigeo European rating agency revealed a new range
of environmental-social-governance (ESG) indices measuring companies’ corporate and social
responsibility on a global or European level, and more specifically in France and the United Kingdom.
Vigeo’s France index ranks L’Oréal as “the leading company in social responsibility” among 20
companies. The France index is based on 35 criteria, consolidated in an overall score covering six
areas of social responsibility: human rights, human resources, environment, business behavior,
corporate governance, and community involvement. L’Oréal ranks fourth in Vigeo’s Europe index
(120 companies) and fifth in Vigeo’s World index (120 companies).

3. Current strategies

Corporate-level Strategies

Corporate-level strategy is the company-wide plan focused on long-term growth and managing a
portfolio of businesses, often including market expansion, product diversification, and leveraging
competitive advantages.
-> In L’Oréal’s case in 2013, this strategy centered on expanding globally and entering new markets,
especially in developing economies, while also growing a diverse product portfolio from affordable to
luxury cosmetics. L’Oréal’s approach aimed to use both strong international brands and local brands
to meet customer needs flexibly and ensure sustainable growth.
- Market Development: In 2013, L'Oréal expanded into emerging markets like China by
acquiring the cosmetics company Magic Holdings International for approximately $840
million to meet the rising demand for beauty products. The company also adapted its products
and marketing strategies to local preferences, which significantly boosted revenue from these
regions. Expanding into these emerging countries contributed significantly to L'Oréal’s
revenue, enabling the company to capitalize on the large growth potential of these regions
such as HongKong, China, Indonesia or Africa and so on.
- Product Development: Product innovation was a key strategy for L'Oréal in 2013, as the
company heavily invested in research and development. That year, L'Oréal launched new
products featuring advanced technology, including long-lasting beauty products (SuperStay
Full Coverage Foundation from Maybelline NY), anti-aging treatments (Advanced Génifique
Serum from Lancome), and natural, chemical-free formulas (Garnier SkinActive Micellar
 Cleansing Water). These innovations strengthened L'Oréal’s position as a quality leader in the
beauty industry, attracting customer segments seeking safe and effective products.
- Horizontal Integration: L'Oréal's horizontal integration strategy focused on acquiring and
merging with well-known cosmetics brands or industry players to expand its market position.
In 2013, L'Oréal made several acquisitions to strengthen its brand portfolio. These
acquisitions not only broadened L'Oréal’s product offerings but also enhanced its presence in
the U.S. and international markets. These acquisitions helped L'Oréal increase
competitiveness and gain market share in both high-end and mid-tier cosmetics, while
leveraging the acquired brands to reach new customer segments.
- Related Diversification: L'Oréal also pursued related diversification by expanding its
product lines in cosmetics, skincare, and personal care to address a variety of consumer needs.
In 2013, it broadened its portfolio to include natural skincare, fragrances, premium hair care,
and youth-oriented makeup lines (e.g. L'oreal Paris True Match Foundation). This
diversification helped L'Oréal cross-promote its offerings and expand its brand’s reach while
maintaining a cohesive brand image. Related diversification supported L'Oréal’s growth and
competitive edge, appealing to new customers and increasing loyalty among existing ones as
the beauty market became more dynamic and consumer preferences evolved.

Strategic Business Unit (SBU) Level Strategy

Strategic Business Unit (SBU) strategies are distinct strategies that each business unit within a
company uses to effectively compete in its market. The goal is to maximize the performance of each
SBU to support the overall strategic objectives of the company.

Case Analysis for L'Oréal:

For targeting differently segmented of customers with its 34 brands in several product categories, it
has devised differentiation strategy to target middle, upper middle and upper-income class
customers majority of who are working professionals and are those who want to flaunt their personas.

=> L'Oréal organizes its operations through three main branches: Cosmetics, The Body Shop, and
Dermatology. Each branch has its own strategy tailored to serve specific market segments and align
with the company's long-term objectives.

a. Cosmetics Branch

The Cosmetics branch is the core of L'Oréal's business strategy, contributing significantly to revenue
and reinforcing its market-leading position. This branch is divided into four main segments:
Consumer Products, Professional Products, Luxury Products, and Active Cosmetics, each with a
unique strategy to meet diverse consumer needs and expectations.

● Consumer Products : Represented by brands such as L'Oréal Paris and Garnier, this SBU
focuses on providing quality products at affordable prices => Cosmetic innovation accessible
to all => to attract mass-market consumers. The 5.5% growth highlights the effectiveness of
this strategy in expanding market share and retaining broad consumer appeal.

2013 was a big year for hair care:

+ The hair color growth champion in 2013 was Olia by Garnier. The technological
breakthrough of this ammonia free formula, in which the oil acts as a vector for the color, is a
spectacular success.
+ No.1 in afro-specific haircare , is launching Dark and Lovely amla Legend, a complete
range of six products, from a hair relaxer to hair care products, formulated with amla, a fruit
that comes from india.
=> The Consumer Products Division offers the best in cosmetics innovation to the greatest number of
people on every continent. Its brands are available in mass-market channels (hypermarkets,
supermarkets, drugstores and traditional stores). The division is the spearhead of the group’s quest to
win over a further billion consumers.

● L’Oréal Luxe: This segment targets high-end customers with brands like Lancôme and
Giorgio Armani, by offering high-quality products with advanced technology and a
prestigious brand image =>A vision of excellence (message): Each brand has its own
universe, and a unique way of relating to its customers to provide an ideal service. Evidence
from the case study shows an 8.1% revenue growth in Q1 2013, demonstrating the success of
this strategy in capturing the premium customer segment.

Ví dụ

+ Lancôme sublimates beauty for women

+ Kiehl’s is shining bright in Asia
+ Femininity according to Giorgio Armani
+ Urban Decay, A strategic make-up acquisition
+ Around the world with Clarisonic
+ Travel retail, The sixth continent

=> L’Oréal Luxe offers both men and women throughout the world an array of prestigious and
modern international brands with a unique heritage. The brands of L’Oréal Luxe strive to promote
the different specialities of luxury beauty: skincare, make-up and fragrances. They also set out to
offer high-quality products through a selective distribution channel, and provide excellent service
that respects the diversity of its consumers.

● Professional Products : This segment serves professional salons and beauty experts,
emphasizing B2B relationships and high-quality specialized products => Offering the best
in professional beauty. Although it experienced a slight 0.4% decline, L'Oréal maintained its
position through its commitment to products that meet the high standards of the industry

=> Thanks to first-class education and the most advanced innovations in haircare products and
services, the Professional Products Division makes sure that with each passing day more and more
people can take advantage of the highest standards of quality and expertise from beauty salon
professionals all over the world.

● Active Cosmetics: This SBU targets consumers seeking medical-grade skincare solutions,
with brands like La Roche-Posay and Vichy => Responding to the quest for advice,
efficacy and safety. Its strategy combines scientific skincare with high safety standards,
building trust and attracting a niche customer base.

=> The Active Cosmetics Division’s mission is to help everyone improve the quality and health of
their skin, whether they are affected by sensitive skin or dermatological conditions, in all healthcare
channels worldwide, including pharmacies, drugstores and medi-spas. Thanks to its highly
complementary brands and its close links with health professionals, dermatologists, pediatricians and
doctors practicing aesthetic medicine, the division is world No.1 in dermocosmetics

b. The Body Shop-Retailer

The Body Shop: UK-based natural cosmetics retailer, which has about 2,550 retail stores worldwide.

is an SBU of L'Oréal that focuses on natural and sustainable products, with a strong commitment
to ethics and social responsibility. The brand's strategy includes developing safe, user-friendly
products that are rigorously tested to meet the demands of the global market.
In the third quarter of 2012, the brand recorded a 5.3% increase in sales, driven by products such as
BB Cream All-in-One and Pore Minimiser. The Body Shop expanded through 20 e-commerce sites
and launched the Pulse boutique model, contributing to a 0.8% growth in Q1 2013.

c. Dermatology-Nghiên cứu dược phẩm

The Dermatology branch: discover their latest clinical studies, publications and scientific posters.

Products in this branch are developed with extensive research and clinical testing to ensure high
quality.

Ex: Galderma has devised a differentiated strategy based on three pillars: prescription drugs, self-
medication products, and aesthetic and corrective medical solutions.

The Dermatology branch strengthens L'Oréal's position in the medical skincare market, enhancing
consumer trust and expanding its business scope, which adds value to the overall brand reputation.

-> L'Oréal strategically organizes and implements its SBU strategies effectively, from the Cosmetics
branch with its diverse segments to The Body Shop and Dermatology. Each SBU has a tailored
strategy to meet the needs of specific market segments, enabling the company to optimize resources,
maintain a competitive edge, and drive sustainable growth in the global cosmetics industry.

Functional Level Strategy

Functional strategies are plans developed and executed within specific departments or functional
areas, such as marketing, operations, finance, and human resources. The purpose of these strategies is
to improve each function's abilities to support the overall business strategy.

Case Analysis for L'Oréal:

● R&D and Technology: L'Oréal invests heavily in research and development, with five
R&D centers located in France, Japan, and China, allowing the company to develop
products tailored to local needs. Investment in advanced technologies, such as
nanotechnology, has led to breakthrough products, reinforcing L'Oréal's market leadership in
innovation
● Marketing: L'Oréal employs flexible, localized marketing strategies tailored to specific
regions. For example, the shift in the slogan from “Because I’m worth it” to “Because
we’re worth it” reflects the company's effort to create deeper connections with consumers
and emphasize community and inclusivity.

● Supply Chain Management: L'Oréal maintains a global manufacturing network with a

significant plant in Indonesia, where 70% of production is for export. This approach helps
the company reduce production costs and optimize its supply chain to respond to global
market demands efficiently
● L’Oréal has a portfolio of 27 international, diverse, and complementary brands. With sales
amounting to 22.5 billion euros in 2012, L’Oréal employs 72,600 people worldwide, has 43
production plants worldwide, 146 distribution centers, more than 20,000 employees in
industrial operations worldwide, and 5.8 billion units produced.

Results of Applying the Strategy:

Functional-level strategies have allowed L'Oréal to achieve consistency in its global operations, from
product development to distribution and promotion. Robust R&D has enabled the company to
introduce new products quickly and effectively, maintaining its pioneering position in innovation and
ensuring customer satisfaction. Global supply chain management has allowed the company to react
swiftly to market needs and maintain high production efficiency.

⇒ L'Oréal has demonstrated its ability to build and implement strategies at all three levels: corporate,
SBU, and functional. The combination of differentiation strategies, R&D investment, and localized
marketing has helped the company maintain its leading position in the global cosmetics industry.
These efforts enable L'Oréal not only to thrive in existing markets but also to expand into new ones,
creating sustainable value and customer satisfaction worldwide.

External audit

5-forces model
1. Rivalry among competing firms: HIGH
Rivalry Among Competing Firms in 2013 was high. L’Oréal faced fierce competition from Estée
Lauder, Coty, Revlon, and Avon, all vying for global market share in different product segments. The
beauty industry was saturated, with competitors competing on innovation, brand prestige, product
differentiation, and marketing effectiveness. L’Oréal’s strategy involved heavy advertising and
continuous acquisitions to expand its brand portfolio and global reach.
=> Competitors: Estée Lauder, Coty, Revlon, and Avon.

2. Potential Entry of New Competitors: LOW

The threat of new entrants in 2013 was relatively low for L’Oréal. L'Oréal's global production scale,
with 41 factories, provides a major pricing advantage and pressures smaller potential competitors.
Collaborating with over 100 research institutes and over 600 patents since 2011, L'Oréal stays
technologically advanced, making it hard for new entrants to compete. Strict licensing and
certification requirements in the cosmetics industry further create high barriers to entry.

3. Potential development of substitute products: MODERATE

The threat of substitutes is moderate. Consumers may opt for alternatives like natural or homemade
beauty treatments or invest in dermatological solutions that promise more permanent results.
[Link] Power of Suppliers : LOW

Overall, supplier power has little impact on L’Oréal. L’Oréal has numerous large and small suppliers
worldwide, including local suppliers in the countries where L’Oréal operates. This reduces the
bargaining power of suppliers since L’Oréal has the option to switch suppliers if necessary. L’Oréal
owns multiple manufacturing facilities across the globe, providing a diverse supplier base. This gives
L’Oréal greater leverage in negotiations and the ability to lower costs with suppliers.

[Link] Power of consumers: HIGH đưa hết vào

+ 2013: In 2013, L’Oréal operated in a highly competitive market where numerous competitors,
such as Estée Lauder and Avon, offer similar products. Consumers in this space have a significant
level of bargaining power due to the large number of available options and the ease of product
comparison. The case highlights a dual consumer base. On one hand, some segments remain
highly brand-loyal, prioritizing the value and prestige associated with L’Oréal's premium brands.
On the other hand, a significant portion of consumers are price-sensitive, particularly within the
mass-market segment.

PEST
1. Political
Political: Political stability in France: France is one of the countries with stable political
conditions, especially as part of the European Union (EU). This stability creates a favorable
environment for businesses to operate and grow without concern for major political conflicts or
instability.
Policy: Free trade policies within the EU: France is a member of the EU, which maintains free trade
policies between member countries. This allows businesses to export products from France to other
EU countries without tariffs, facilitating international market expansion.
Legal system: Environmental protection laws and regulations for eco-friendly products: France
and the EU have strict environmental protection regulations, requiring cosmetics companies to adhere
to high standards of safety and environmental friendliness. This includes restricting the use of harmful
chemicals and encouraging sustainable materials.
Regulatory: Product safety and quality regulations: According to EU Regulation (EC No.
1223/2009), all cosmetics products must undergo strict safety testing before being allowed on the
market. This requires companies to disclose ingredients and ensure that products meet high safety
standards, particularly as the EU bans animal testing.

Opportunities:

● Political stability in France and the EU creates a favorable environment for cosmetics
companies to operate and invest long-term.
● Free trade policies within the EU help cosmetics companies export products more easily,
reducing costs and boosting revenue across EU markets.
● Building a trustworthy brand image: Strict regulations on cosmetics safety and quality help
compliant companies build consumer trust, especially in France and the EU, where consumers
have high standards for product safety.
● Innovate and develop eco-friendly product lines: Regulations encouraging the use of
sustainable materials drive companies to research and develop new product lines that meet
green standards => creating a competitive advantage in the market for companies leading
trends in clean and eco-friendly cosmetics.

=> L'Oréal can leverage stable policies and free trade to expand its market and build a green brand,
the company

Challenges:

● High compliance costs: Compliance with environmental, safety, and supply chain
transparency regulations also puts pressure on businesses, requiring significant investment,
increasing production costs, and reducing profit margins.
● Risk of policy changes: Sudden policy changes related to product regulations pose
difficulties for companies in adapting products in a timely manner.
● Increased competition: A stable political environment creates favorable business conditions
for all companies, leading to increased competition. This requires companies to continuously
improve, not only to meet standards but also to maintain market share.

=> L'Oréal also faces high compliance costs, pressure from transparency requirements, the need for
rapid adaptation, and increased competition from rivals.

[Link]

● In 2013, the European economy in general and France in particular were still recovering
from the 2008-2009 global financial crisis and the European sovereign debt crisis. The
unemployment rate in France remained high, around 10.3% in 2013 => This affected
consumer spending sentiment, especially in the luxury segment.
● France recorded weak GDP growth in 2013, with a growth rate of about 0.3% => Weak
GDP growth reduced purchasing power and directly impacted consumer demand for non-
essential products like luxury cosmetics.
 ● Inflation in France during 2013 remained moderate; however, input costs were rising,
affecting production costs for companies.
=> The prolonged recession impacts consumer spending: Tighter budgets → decreased demand for
non-essential products, including cosmetics → overall purchasing power of consumers across
Europe, particularly in France, has dropped significantly.
● President François Hollande's economic reforms, including increased corporate taxes and
tighter financial policies, have raised cost pressures on the fast-moving consumer goods
(FMCG) sector, especially in the cosmetics industry and reduced consumer purchasing power.
=> Carefully consider risks and adjust strategic directions and investment decisions to ensure
sustainable business operations.

Opportunities:

● Develop affordable and mid-range segments to meet budget-conscious consumer demand

while attracting price-sensitive, middle-income customers.
● Domestic cost pressures may encourage companies to increase investments in international
markets where operating costs are lower or growth opportunities are higher => L'Oréal can
leverage developing markets such as China, India, and Brazil to offset declining consumer
demand in the European market.
● Driving innovation and cost optimization: Higher corporate taxes and increased operating
costs compel companies to focus on optimizing production processes and improving
technology to reduce costs.

Challenges:

● Tightened spending reduces consumer purchasing power => Reduced spending on luxury
products => L'Oréal's premium segment may be affected as French consumers prioritize
essential goods over luxury products.
● Inflationary pressures and rising input costs: This could drive up product prices and impact
L'Oréal's competitiveness.
● Cost pressures and reduced profit margins:Higher corporate taxes and financial costs
increase operating expenses, potentially reducing profit margins and affecting
competitiveness => L'Oréal will face significant pressure to maintain profitability with
increased spending on taxes and operating costs. This requires L'Oréal to balance between
pricing and profit margins.

3. Social
Consumer trends: post-crisis economy→ tightening spending→ reducing consumption.(này ptich ở
E rồi nên mình sẽ nói qua nhé)
Consumption habits:
- Consumption of organic and natural products: French consumers prefer products that do
not harm the environment, → a great growth opportunity for L'Oréal, especially with The
Body Shop brand and Active Cosmetics line.
- Transparency and ethics: French consumers demand high transparency → require L'Oréal
to be transparent about the origin, product composition and production processes.
- Boycott of animal-tested products: consumers boycott branches that exhibit animal-tested
behavior.

Opportunities: Developing a natural and environmentally friendly product line: L'Oréal can
expand its organic products, focusing on safety and sustainability to match consumer trends.
Challenges:
● It is necessary to create a reputable and transparent[h] image and brand.
 ● It requires higher technological advancement and is constantly changing to meet the
needs of consumers.
● Along with that comes the cost of research and alternative methods.

4. Technological

- The increase in online shopping on e-commerce websites and online sales platforms. Sites
like Sephora and Ulta have thrived with features like product reviews, video tutorials, and
blogs.
- Social media is thriving, platforms like Instagram and Pinterest have become important tools
for product marketing.
- AR and VR technologies (which have been around since 1990 but are not as common as
they are today) allow customers to test products virtually, enhancing the shopping experience.
Opportunities:
● Create interesting and attractive buying experiences, attract consumers.
● Optimize costs and management processes → increase revenue and profits
Challenges:
● High costs for technological innovation: Innovating technology requires significant
investment, and ensuring profitability from these investments is a major challenge.
● Risks of information security: The growth of e-commerce also brings risks related
to customer data security, necessitating investments in cybersecurity and information
management.

Internal audit
1. Internal business analysis

● Production/Operation competence:
- With a global manufacturing network (more than 40 factories in 2013) and 5.8 billion units
produced, L’oreal is able to produce close to major markets, optimizing the supply chain and
reducing transportation costs.
→ Creating a major competitive advantage, ensuring a stable supply and the ability to respond
quickly to changing market demands.
- The hair dye factory in San Luis Potosi, Mexico with advanced water treatment equipment
and solar energy systems has helped reduce water consumption and CO₂ emissions by up to
60% per unit of product.
- Their flexible production strategy aligns with 4 product segments (Consumer products,
Luxury products, Professional products, and Active cosmetics).
- L'Oréal has pursued additional strategic acquisitions globally to adapt to local market
demands and boost production capacity such as the purchase of Magic Holdings International
in China, a Hong Kong-listed cosmetics producer based in Guangzhou.

● Human Resource:

- A diverse workforce includes more than 72,600 employees and more than 20,000 employees
in industrial operations worldwide.
- Nearly 2,000 researchers globally → focus on highly skilled employees in R&D, likely
supported by robust training and development programs to maintain innovation in products.
- L'Oréal faced discrimination lawsuits in France related to hiring practices concerning race and
diversity. In the UK, it also encountered criticism regarding the diversity of its spokespersons,
facing “condemnation from the Office of Communications.
- Operates with a divisional-by-geographic and divisional-by-product structure, but lacks a
chief operations officer.
→ Address market-specific needs while leveraging global resources
→ Cause reporting complications, as professional operations in regions like Africa and the Middle
East may face divided leadership.

→ L’oreal influences human resources by promoting responsible practices and aligning with global
standards, enhancing its brand image and appeal as an employer focused on social responsibility.

● Finance competence:
- Revenue: has been consistently growing year by year. 2012: €22,462.7 million/2011:
€20,343.1 million
- Net income: has increased over these years, indicating rising profitability and effective cost
control. 2012: €2,438.4 million/2011: €2,286.8 million
- Cash: The cash and cash equivalents have increased from 2011 ($257,587 thousand) to 2012
($294,348 thousand), which indicates an improvement in liquidity and cash management.
- Assets: suggests growth in the company’s resource base, possibly from investments in
equipment, inventory, or other assets.

“L’oreal goodwill increased almost 6 billion euro in 2011, but the company has been paying off its
long-term debt nicely”
→ Strong revenue base, commitment to R&D and investment in sustainability
→ Support its long-term growth and market leadership.

● Research & Development competence:

- 5 research and development centers worldwide located in France, the USA, Japan, and China
=> phát triển các sản phẩm phù hợp với nhu cầu của từng thị trường và từng xu hướng trong các giai
đoạn khác nhau
- L’oreal owns Dallas-based SkinCeuticals that conducts cosmetology and dermatology research.
- R&D also seeks to improve production processes to reduce water and energy consumption, reduce
CO₂ emissions
→ Towards sustainability development

● Organization culture:
- L'Oréal's organizational culture combines innovation, sustainability, high quality, and
flexibility to meet the demands of the global market. The company fosters a work
environment that encourages creativity and respects core values, while maintaining a
commitment to customers and the community.

● Marketing:
- L'Oréal continually expands its product portfolio to meet the diverse needs of global
consumers, from premium brands like Lancôme to affordable options like Garnier. In 2013,
L'Oréal recognized the growth in the facial mask segment, especially in the Chinese market,
and acquired Magic Holdings to add new products to its portfolio that suited local demand.
Also, with a global distribution network, L'Oréal is present in over 140 centers all around the
world and has effective retail, agency and distribution systems.

● Management:
- Overseeing the company’s daily business operations
- Establishing strategic directions to expand global markets and drive sustainable growth
- Making decisions on adjusting the business model and organizational structure to enhance
management efficiency and quickly adapt to beauty market trends
- Deciding on investment plans and projects in beauty technology and sustainable development
 2. Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating Weighted

score

Strengths

1. L'Oréal has set itself the mission of offering all women 0.07 4 0.28
and men worldwide the best of cosmetics innovation in
terms of quality, efficacy and safety. It pursues this
goal by meeting the infinite diversity of beauty needs
and desires all over the world.

2. Using the word "WE" in slogan to create stronger 0.05 3 0.15

consumer involvement.

3. L'Oréal has more than 50 percent of sales generated 0.04 4 0.16

outside Europe

4. L'Oréal currently markets more than 500 brands and 0.06 3 0.18
many thousands of individual products in all sectors of
the beauty business: hair color, permanents, hair
styling, body and skin care, cleansers, makeup and
fragrances.

5. L'Oréal today has five worldwide research and 0.04 4 0.16

development centers located in: (1) Aulnay, France, (2)
Chevilly, France, (3) Clark, New Jersey, (4) Kawasaki,
Japan, and (5) Shanghai, China.

6. L'Oreal has a talented and diverse workforce, with 0.08 3 0.24

employees from over 150 nationalities

7. By 1950, the research teams were 100 strong; that 0.05 3 0.15
number reached 1,000 by 1984 and is nearly 2,000
today.

8. L'Oreal has the highest Market Capitalization with 83,3 0.07 4 0.28
Billion U.S dollars → More stable and carry less risk

9. L'Oréal owns UK-based natural cosmetics retailer The 0.04 3 0.12

Body Shop International, which has about 2,550 retail
stores worldwide. L'Oréal's dermatology unit,
Galderma S.A., is a joint venture with Nestlé.

10. For Q1 of 2013, L'Oréal reported sales of 5.93 billion 0.03 3 0.09
eurosup 6.5 percent overall including 8.5 percent up in
North America and 11.8 percent up in Africa and the
Middle East.

11. L'Oréal's revenues and net income have increased 0.05 3 0.15
nicely in recent years. L'Oréal's goodwill increased
almost €5 billion in 2011, the company has been paying
off its long-term debt nicely.
 12. Regarding sustainable development, Corporate 0.09 3 0.27
Knights, a Global Responsible Investment Network,
has selected L'Oréal for its 2012 ranking of the ‘Global
100 Most Sustainable Corporations in the Worha’
L'Oréal has received this distinction for the fifth
consecutive year. L'Oréal has more than 84 percent of
its production globally being manufactured in
compliance with the ISO 9001 (quality), ISO 14001
(environment), OHSAS 18001 (safety) certifications.

13. L'Oreal Mexico reduced water consumption per unit by 0.04 3 0.12
60% and CO2 emission per unit by 60% in recent
years.

Weaknesses

1. L'Oreal does not have a vision statement. 0.03 2 0.06

2. There is no chief operations officer (COO). 0.05 1 0.05

3. Positioning and unique selling proposition is not clearly 0.03 1 0.03

defined which can lead to the attacks in this segment
from the competitors.

4. The corporation is slow and bulky. The management of 0.03 1 0.03

personnel is also a concern in L'oreal as the company
employs about 72,600 people. Therefore, the expenses
of human capital are enormous.

5. Limited online presence: While L'Oreal has a strong 0.08 2 0.16

retail presence, its online presence at that time is
relatively limited.

6. High attrition rate in workforce - compared to other 0.03 2 0.06

organizations in the industry L'Oreal has a higher
attrition rate and has to spend a lot more compared to
its competitors on training and development of its
employees.

7. The days inventory is high compared to its competitors 0.04 1 0.04

because L'Oreal is not very good at demand forecasting
thus end up keeping higher inventory both in-house and
in channel.

Total 1.00 2.78

c) Assessment

- The IFE Matrix for L'Oréal, with a weighted score of 2.78, reflects a moderately strong
internal position. This score, slightly above the average, highlights L'Oréal's solid strengths in
areas like global market reach, diversified product lines, and a dedicated approach to research
and development, with five key R&D centers worldwide. Additionally, its high market
capitalization and achievements in sustainability, such as significant reductions in water and
CO₂ emissions, strengthen its brand value and operational resilience. However, the score also
suggests that L'Oréal faces notable weaknesses, such as an underdeveloped online presence,
 high human resource costs, and a lack of a Chief Operations Officer, which may limit its
agility in response to rapid industry changes.
- L'Oréal’s competitive advantage is rooted in its global reach, extensive product portfolio, and
strong focus on innovation through research and development. With over 500 brands and a
diverse range of products, L'Oréal is able to meet the varied beauty needs of consumers
worldwide, establishing a loyal customer base and strong brand equity. Its investment in five
major R&D centers located in strategic regions (France, the USA, Japan, and China) allows
the company to innovate continuously and adapt products to local market preferences.
Additionally, its commitment to sustainable practices—evident in the reduction of water
usage and CO₂ emissions in its production facilities—enhances its brand image, appealing to
environmentally conscious consumers.

Strengths

1. Leading in the cosmetics industry globally

2. Diverse product lines.
3. Strong international market presence
4. Strong in R&D
5. Strong financial capability
6. Diverse and talented workforce
7. High Sustainability level

Weaknesses

1. Incompleted organizational structure

2. Incompleted positioning and unique selling proposition
3. Low operational efficiency and high personnel cost
4. Inefficient inventory management
5. Limited online presence
6. High attrition rate in workforce
7. Higher expenses on employee training and development

Opportunities

1. Political stability in France and the EU

2. Free trade policies within the EU
3. Domestic cost pressures => increase investments in international markets
4. Increase in potential customer base through social media
5. Developing a natural and environmentally friendly product line

Threats

1. High compliance costs

2. Increased competition
3. reduces consumer purchasing power
4. Cost pressures and reduced profit margins
5. Higher technological advancement
ALTERNATIVE STRATEGIES

1. SO Strategy - Product Development: Leveraging L'Oréal strong international market

presence and R&D capabilities to develop natural, environmentally-friendly product
lines

a) This strategy based on:

- Relevant strengths (nhắc lại)
● Strong international market presence: L'Oréal generates more than 50% of its sales outside of
Europe, indicating a well-established global footprint. This presence provides a strong
foundation to introduce new products, particularly in emerging markets.
● Strong R&D capabilities: L'Oréal operates five research centers globally (France, New Jersey,
Japan, China), highlighting its strength in innovation and product development. With nearly
2,000 researchers, L'Oréal has the resources to design and develop new products that align
with global trends.
- Relevant opportunities:
● Growing demand for natural and environmentally friendly products: Consumer preferences
are shifting toward sustainability, with a particular emphasis on safe, eco-friendly products.
This trend is strong in both developed and emerging markets where environmental
consciousness is increasing.
● Potential in developing markets: Developing markets like China, India, and Brazil offer
substantial growth potential as they have high demand for cosmetics. Economic growth in
these regions is driving consumer interest in both premium and sustainable products.

b) Detailed strategy and actions:

- Develop a "Green" product line:
● Create a new product line focused on sustainability, utilizing natural, organic, and eco-
friendly ingredients. For example, this line could include products with biodegradable
packaging, sustainably sourced ingredients, and formulations free from harmful chemicals.
● How: Use R&D resources to innovate around “green chemistry,” which reduces the
environmental impact of product ingredients. Collaborate with environmentalists to ensure
that products meet the highest environmental standards.

→ This aligns with consumer demand for safer and more environmentally conscious products,
building brand equity around sustainability.

- Partnership with environmental organizations:

● Form partnerships with environmental NGOs and certification bodies (e.g., EcoCert, Leaping
Bunny) to validate and promote the sustainability of the new product line.
● How: Obtain certifications that demonstrate environmental responsibility, such as “Certified
Organic” or “Cruelty-Free.” Partner with local organizations in target markets to organize
eco-friendly beauty workshops or campaigns.

→ These certifications and partnerships enhance brand credibility and appeal to environmentally
conscious consumers, making L'Oréal the preferred choice for sustainable cosmetics.

- Leverage E-commerce and sustainability platforms:

● Utilize e-commerce channels and platforms dedicated to sustainable products to reach a
broader audience for the green product line. Websites focused on ethical brands or eco-
friendly products can be effective distribution channels.
 ● How: Offer products on marketplaces like Amazon’s “Climate Pledge Friendly” or other
regional e-commerce platforms that prioritize sustainability. Highlight the sustainable
attributes of products through visuals and descriptions.

→ Expanding online distribution through sustainable platforms can attract eco-conscious consumers
globally, boosting sales while aligning with consumer values.

→ This SO strategy involves Product Development by introducing a new line of eco-friendly products
that aligns with current trends. This approach not only addresses environmental demands but also
strengthens L'Oréal's brand image and market share in both existing and emerging markets.

2. WO Strategy - Market Penetration: Enhancing L'Oréal's online presence to increase market

penetration

a) This strategy based on:

- Relevant weaknesses:
● Limited online presence
- Relevant opportunities:
● Increase in potential customer base through social media

b) Detailed strategy and actions

- Enhance online presence through E-Commerce platforms:
● Strengthen L'Oréal’s e-commerce channels by developing a dedicated online platform and
improving its presence on third-party digital marketplaces like Amazon, Alibaba, and local
online platforms in emerging markets.
● How: Optimize product listings, integrate advanced technology-driven recommendations, and
introduce online-exclusive products. Leverage data analytics to personalize shopping
experiences and increase conversions.

→ Expanding online accessibility increases market penetration, particularly in developing markets,

and helps capture a larger share of the growing e-commerce sector.

- Invest in online marketing campaigns:

● Launch targeted digital marketing campaigns aimed at enhancing brand awareness and
promoting L'Oréal’s eco-friendly and natural products.
● How: Utilize social media platforms to engage with younger consumers, highlighting
L'Oréal’s commitment to sustainability and innovation. Partner with influencers and beauty
bloggers to amplify the message.

→ Enhanced brand presence and engagement, particularly among digital-native consumers, leading to
increased online sales and brand loyalty.

→ This WO strategy focuses on Market Penetration, aiming to increase L'Oréal's market share by
addressing its limited online presence. The company will enhance its digital engagement, expand its
reach in developing markets, and optimize operations to better serve online consumers. This strategy
utilizes L'Oréal’s innovation strength and financial capabilities to overcome its operational
weaknesses and capitalize on the growing technology trend. By improving its online presence,
L'Oréal can strengthen its competitive position and capture a larger share of the global cosmetics
market.