Loreal Swot

3.) Abstract

The purpose of this cases study was to analyse the main problem of L’Oreal which is moral issue, aiming to recommend suitable ways to mitigate the effect of the moral issue. A SWOT analysis was conducted to find the strengths, weakness, opportunities and threats of the performance of L’Oreal. Results indicated that L’Oreal has a strong brand with a strong capability of research and development, having a diversified geographic presence. Yet, the company performances badly in Western Europe which is also a cause of slow revenue growth. Moreover, its moral issue on animal testing is also a problem affecting the company’s profitability. It is recommended the company should differentiation its products compared not only with the competitors such as P&G and Estee Lauder but also the company’s own brands.

4.) Introduction

This report is aiming to give the best solution to L’Oreal of its biggest threat with a SWOT analysis. The reason of choosing L’Oreal is because it’s debatably moral issue on animal testing cause lots of echo in the society, having a lot of debates and disputes on this particular issue with L’Oreal no intention to change. L’Oreal is the world’s largest cosmetics and beauty company which has developed different activities in the field of cosmetics, concentrating on hair color, skin care, skin care, sun protection, make up, perfumes and hair care. This successful French beauty giant was first founded by Eugene Schueller, a young French chemist in 1901. After nearly more than 100 years with a series of acquisition, innovation products as well as formulae, L’Oreal is currently acting as a monopoly in the beauty industry, primarily operating in Europe and North America. In this report, Moral issue will be the issue that particularly concentrated as it is interesting to show how a business moral issue can greatly affect the company’s performance, profitability as well as reputation.

5.) Methodology

This report was based on the four factors of SWOT analysis which are Strengths, Weaknesses, Opportunities and Treats. Throughout this report, we analyzed L’Oreal according to SWOT analysis in order to recommend some solutions that L’Oreal may need after looking at some financial and market share data of L’Oreal. In addition, much of the information and data came from the internet and personal findings.

6.) Findings

According to SWOT analysis, I found some major issues that L’Oreal is facing. I decided to concentrate on the moral issue of L’Oreal which I think it is the biggest problem that the company needs to cope with as this issue may ruin not only the company’s profitability but also reputation.

Strengths

i) Strong brands

L’Oreal, undoubtedly, is one of the world’s famous brand names, especially for beauty industry, founded as a cosmetics business since 1909. (According to Datamonitor Company 2006) A series of advertising such as television, magazines, newspaper and radio, took L’Oreal to spend nearly 367 million on advertising and promotion in 2005. It therefore now builds up its brand lineup which includes strong names such as LancÐ"Ò'me, Maybelline, L'Oreal professional and so on. Moreover, L’Oreal is using different celebrities in various areas as its famous promotion policy, such as Beyonce in US.

ii) Worldwide shops

L’Oreal has operations in over 130 countries across five continents, namely, London, New York, Hong Kong and Tokyo, having a diversified geographic presence. (According to L’Oreal 2007)In 2005, revenue from Western Europe accounted for 46.9%, while North America accounted for 27.9% and �the rest of the world’ contributed the remaining 25.2% of total revenue. It showed L’Oreal, is not particular dependent upon any regions, which is good at stability of revenue growth.

iii) Strong research and development capability

In the year of 2005, L’Oreal spent 496 million on research and development with a numerous 529 registered patents related to cosmetics and dermatology. In recent, the company has introduced the brand new men skin care series product. The strong capability on research and development allows L’Oreal to continuously bring out innovative ideas and products which may therefore build up the customer loyalty as well as attract new customers. (According to Datamonitor Company 2006)

iv) Market leader

L’Oreal is able to act as global and local. For global, the company is one of the biggest manufacturers of cosmetics, skin care products in the world, having nearly 52403 employees over the world with a worldwide reputation. In contrast, L’Oreal is using various specific promotions according to different culture in different countries. China market, for example, is one of the L’Oreal targeted market. Therefore, the company has used different policies in order to take root in the Chinese market, using lots of different celebrities and slogan which aim to increase the market share.

Weaknesses

i) Slow revenue growth

L’Oreal has a slow growth on revenue 1.4% compared with their competitive rivals like Estee Lauder 8.1% growth during 2001-2005 and industry average revenue 7.6% over the same time, which indicate that the company lack of revenue driving products. (According to Datamonitor Company 2006)

ii) Weak performance in Western Europe.

Western Europe, largest geographical market of L’Oreal, absolute revenues remains flat. Moreover, L’Oreal has been losing market share to P&G in the shampoo segment and hair styling market as well as Henkel in the hair coloration market.

iii) Moral issue

L’Oreal continues to use thousands of animals to test upon every year with around 10 different types of animal testing, being one of the controversial issue censured by public. L’Oreal certainly has no intention of revealing animal testing to their customers in order to prevent negative effect from public. However, the company still keeps on using animal testing