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LOreal one of the leading cosmetic companies

Paper Type: Free Essay Subject: Business
Wordcount: 5508 words Published: 1st Jan 2015

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It is era of globalization where competition are increasing day by day, due to competition, it is hard for company to keep hold policy , old method of production . Companies need change to stay in the market.

L’Oreal is a one of leading cosmetic company who is producing world famous brands , company regular making changes , like acquisition policy , building new research centres in most of developed countries. Using technology, and making stakeholder collaboration through using this technology.

Organization structure and culture of the organization can play key role in the process of change . Change is not just changing the method of production but can be any type of change , either recruiting polices , making fair laws , adopting new laws which are implementing etc.

Company background

L’Oreal is known as the world’s leading cosmetics organization which has a portfolio that consists of many world’s dominant beauty products. Company sales almost 80% doing from outside the France, with action in every key region . It is only Cosmetics Company which has distribution, almost 140 countries. In year 1907 a young French chemist Eugene Schuler, developed a creative hair-colour formula. The named this new, completely safe hair dye “Aureole”. The history of L’Oreal began; Eugene Schueller invented and manufactured their own products. L’Oreal started their production with hair-colour business, but the company quickly pronged out in to other beauty products. Company marketing more than 5 hundreds brand and which have thousands of special products in all division of the beauty business. Styling aids, Hair colour, permanents, body and skin care, cleansers and fragrances. They are found in all distribution channels, from hair salons and perfumeries to hyper – the supermarkets, health and beauty outlets, pharmacies and direct mail.


L’Oreal strives to make a reality within the reach of every woman and every man.



L’Oreal Paris

Le club des createurs

Maybelline ny

Soft sheen Carson


Loreal professional








Helena rubinstein


Shu uemura

Giorgio armani

Ralph lauren


Viktor & rolf




La roche-posay


Skin ceuticals


Kotler .P. (1996) Planning start with complete analysis of company’s situation, company do analyse environmental to find the opportunities and to escape threats of environment. For change and its implementation environmental analyse is play dominant role.


Needham Dave & Dransfield Rob( 2000) SWOT analysis is known as strategic planning tool which used to assess strengths , weaknesses , opportunities and threats


L’Oreal is considered the biggest seller of hair care and beauty product in the whole world, spotlighting on 19 global brands. Numbers of these products are expanded through price and some by culture image. L’Oreal is building the attraction of various cultures through its products. Consequently, L’Oreal is reaching out more people across a bigger range of incomes and cultures.

The 2nd strength is that L’Oreal offering a huge significance and spending lots on research and improvement uses and expands leading-edge technology and effectively introduces new product. Company has about 16 research centres across the world and 13 evaluation centres. It’s opened recently opened new research and development centre in, Shanghai China .

L’Oreal strategy of diversity and training of its workforce is one of the assets. Company employing group of people from different backgrounds which leads to improve creativity and innovation. Development and preparation can play vital part of life at L’Oreal each year approximately 100 employees attend industry-specific and leadership development training and conferences at L’Oreal management development centres in Tokyo, Paris and New York.

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L’Oreal’s acquisition strategy- aspirant on integrating recognized and well-known brands. Examples of unbeaten acquisitions are Carson Inc which measured as the 3rd largest provider of adult women’s hair relaxer in America. The acquisition of body shop the British natural based cosmetics retailer with bout 2,290 stores through out worldwide. Company making more attractive to the green consumer those strives no doubt after look both their environment and body , there is no doubt.

Company strength stated as strong sales diagonally all geographical area with rising posting market the faster like for like growth rate for the phase.

Its took advantages of economies of scale in packaging and advertising result as a L’Oreal operation profitability which has been increased through cost cutting efforts.


Organizational decentralized structure which makes control more tricky. Global market functioning , the problems increase due to coordination and control of performances and image.

Company’s geographical power is currently determined on western European over trust on full grown Western European market ,which gives maturity offers few predictions for growth.

During 90s L’Oreal was hit by claims over past links to racial discrimination, anti-Semitism which are giving of jobs to Nazi co-workers after the World War two. They went some way to satisfy there critics with a boardroom change and other measures.

Liliane Bettencourt, L’Oreal’s main shareholder, is known as the wealthiest lady in France. Two years ago L’Oreal’s slogan was reduced from “Because I’m worth it” to “Because you’re worth it” after fears in France that the original emerged too money-oriented.

During July 2007, the Garnier division and an external employment agency were fined €30,000 for employment practices that disqualified non-white women from sponsoring its shampoo, “Fructis Style”. L’Oreal is report as proverb the decision was “incomprehensible”, and will challenge the measure in court.

During May 2007, L’Oreal was one of number cosmetic manufacturers ordered by the Therapeutic Goods Administration in Australia (The TGA is responsible for conducting assessment and monitoring activities to ensure that therapeutic goods accessible in Australia are of an acceptable standard and that access to therapeutic advances is in a timely manner) to withdraw advertising regarding the wrinkle elimination capabilities of their products.

One experienced candidate said she realize it was not eligible because she was of mixed race.

In July 2007, the British Advertising Standards Authority knocked L’Oreal for a television commercial on its “Telescopic” mascara, featuring Penélope Cruz, stating it will make you eyelashes 60% longer. In reality, it only made the lashes look 60% bigger, with thickening and separating the roots and by thickening the tips of the lashes. They also failed to state that the model was wearing false eyelashes, a common trick of the trade.

Rumours of L’Oreal’s failing in US have been seriously inflated as The group’s North American division is yet the smallest contributor to sales, accounting for approximately 25% of the total in the first nine months of 2007 and contributing barely 13.5% of sales growth in that period.

Different emission gases causing harm to environment

Great disaster for the environment storage of different fuels and chemicals underground.

Different flammable and gases toxic mainly fire used for different chemical reactions is consider major risk for environment.

It is first French organization which is convicted for racial bias cosmetic giant fined for its recruitment campaign.

July, 7 2009 The Guardian’ an article regarding world’s biggest beauty firm Part of the cosmetics giant L’Oreal was found guilty of racial discrimination after it sought to exclude non-white women from promoting its shampoo. It is a landmark case, the Garnier division of the beauty empire, along with a recruitment agency it employed, were fined €30,000 (£20,300) each after they recruited women on the basis of race. The historic ruling – the first time a major company has been found guilty of systematic race discrimination in France – saw a senior figure at the agency given a three-month suspended prison sentence.(The Guardian, July, 7, 2009).


Company has chance to develop rising presence in promising markets their activities in rising areas such as Eastern Europe, Africa and Middle East where growth in cosmetics and toiletries sales is normally to precede that of global sales. It has a three largest potential market to expand which are Russia, Brazil and china.

L’Oreal’s acquisition of already recognized brands offered opportunities to enter new areas at lower costs Diversity by promise.

Training at school levels Adopted measures to combat discrimination and support diversity and equal opportunity for all by signing charter for Corporate Commitment to Equal Opportunities in France.

Worldwide profit sharing scheme Increase in proportion of Female manager up to 54% and 34% in management committees L’Oreal set up 22 Observatories on diversity in France.

L’Oreal helped the Disadvantaged finding jobs about 657,429 applications received of which 63,691 were interviewed and 2,333 managers were recruited which is 15% higher than 2005.

‘Follow Up and Integration Track’ FIT is a project started by L’Oreal for optimum integration of new employees. L’Oreal since 2001 started ‘Worldwide Profit Sharing Plan’ implanted in all the countries.

Opportunities for suppliers with a commitment of long term partnership based on mutual respect, sharing of information, transparency and strong communication and high standards.

Share their expertise with suppliers to overcome challenges in the outer world with regular business reviews, logistics, and development, packaging and innovation meetings.

‘SHE’ (Safety, Health and Environment) to identify strategic business opportunities.

Signing up of letter for ‘Ethical Commitment’ by suppliers available in 11 languages.

Opening of 89 new stores in Western Europe 15, North America 8 and rest of the world 66. L’Oreal market share with Body Shop in 2006 is 15.6%


Rivalry from private labels, L’Oreal is facing threats from growing shocks of private label products. Several of private label cosmetics and toiletries are getting better in quality and attracting customers. The bigger problem for global brands like L’Oreal is that the retailers are turning over more and more shelf space to their own labels.

Brand Copying risk Dubai Perfume Company Bellure sold low-value scents that it stated smelled same as perfumes. It marketed the products on this basis, using wrapping that ‘winked at’ the related company designs, and published assessment charts that named exacting company perfumes. L’Oreal sued for infringement of its trademarks and ‘passing off’, declaring that Bellure’s marketing materials took excessive advantage of the quality and repute of L’Oreal’s perfume brands. Company won the first round in the High Court, but in 2007 the case came to the Court of Appeal. It is now in limbo, pending a ruling from the ECJ, but a swing the other way looks likely. The Court of Appeal’s view was that ‘the public are not stupid’. It was unconvinced there was any likelihood that a low-value ‘smell-alike’ product would be confused with the original and took the view that, even if Bellure gained an advantage through comparing its products to L’Oreal’s, it did not follow that it was an unfair advantage. (I marketing journal) (Nov 28, 2007):

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Porter (1980) in an industry the state of competition depends on five basic competitive forces. The combined strength of these forces establishes the final profit possible in the industry, where profit potential is précised in term of long run return on invested capital. Not all industries have the similar potential. They differ fundamentally in their ultimate profit potential as the collective strength of the forces differs; the forces range from intense industries.

Bargaining Power of Buyers:

Buyer’s power is high as there is a large range of products and every company is competing to attract the customers. Nevertheless L’Oreal’s sole products put it in the top of competition.

Bargaining Power of Suppliers:

Bargaining power of traders is low because of L’Oreal’s acquisitions of several brands and also due to its huge market share which gives it the potential for monopoly. Additionally, L’Oreal’s strategy is to create strong and long term relationship with their traders.

Competitive Rivalry:

Aggressive rivalry in the cosmetic industry is high. There are many of existing cosmetic companies challenging in the market and the major competitors of L’Oreal are Unilever and Proctor & Gamble. L’Oreal decreases the competition by acquiring many well known brands in the market and also, it succeeded to stay ahead of the competition because of its strong portfolio of global brands.

Threats of new entrants:

The threat of new candidate is low and it is hard for new companies to enter this market. Barriers to entering this market contain:

The extensive time and expense essential to build a brand status to overcome existing costumer’s likings.

The extensive costs for promotional and commercial activity to protect the distribution and situation of a new entrant’s products in retail outlets.

The incapability of a new candidate to recover rapidly its huge investment in promoting its brand.

The difficulty of securing shelf-space in retail outlets.

Threat of Substitutes:

Products alternative are not presented in the market. L’Oreal products are distinguished from other products because of its strong assurance to research and development. It functions 12 research and development centres around the world. All of its products are based-on intensive scientific research and on gradually more targeted advance to enhance the quality. It employs 3,000 scientists who work in state-of-the-art research centres around the world. This allows it to justify price differences as compared with low priced products and retailer brands.

(Loreal websit)

Information Technology and L’Oreal

Koontz H and Weihrich H( 1999) IT can play vital role affecting the scale ,nature of business for instance ,IT used in connection to sales based ordering (SBO) or efficient consumer response (ECR) ,provide help to organisation to reduce the cost and remove the time barriers . John Dawson (1996) IT provide knowledge based investment , alliance based investment and productivity based investment ,which provide opportunity for new entrants in the market .For L’Oreal success IT is a key factor , it can further help to reduce the cost and making the right decision at right time , at right cost , at right place. L’Oreal operating in many countries, IT provides the connectivity with all stakeholder and first hand interaction.

Diversification of business

Zook and Allen (2001) It suggest that most sustainable growth Pattern is that of the strong or leading core business that remuneration from continual reinvestment, constant adaptation to circumstances or business environment, and persistent leveraging of the competitive advantage formed by these strengths into new markets or geographies, applications, or channels. Further suggest that management teams constantly meet with opportunities for concentric diversification and that taking advantage of these opportunities is at times absolutely necessary in order to strengthen the core.

Leavitt, H.J. (1965),

Diversification helps to manage the change , like company build their operation in many countries and reduce the cost.


Czarniawska, B. (1999), Change management (or change control) is the process during which the changes of a system are implemented in a controlled manner by following a pre-defined system with, to some extent, reasonable changes.

Change management is a structured approach to transitioning individuals, teams, and organizations from a present state to a desired state. The current definition of Change Management includes both organizational change management framework and individual change management models, which together are used to manage the people change management.

Individual change management

A number of techniques are available for understanding the transitioning of individuals through the phases of change management and strengthening organizational development initiative in both government and corporate sectors.


Leftwich, R.L. (1979), An early model of change developed by Kurt Lewin described change as a three stage procedure. The first stage he called “unfreezing”. It involved overcoming inertia and dismantling the existing “ideas”. In the second stage the change occurs. This is typically a period of confusion and transition with a little tinge of chaos. The old picture is being replaced by a new one.. The third and final stage he called “freezing” (often called “refreezing” by others). The new ideas are being accepted and one’s comfort level is returning to previous levels not completely though. Rosch (2002) argues that this often quoted three-stage version of Lewin’s approach is an oversimplification and that his theory was actually more complex and owed more to physics than behavioural science. Different theorists give different versions according to their research and experiences respectively. “. Although elaborating the process to five stages, Judson (1991) still proposes a linear, staged model of implementing a change: (a) analysing and planning the change; (b) communicating the change; (c) gaining acceptance of new behaviours; (d) changing from the status quo to a changed state, and (e) consolidating and institutionalising the new states.


The ADKAR model for individual and organizational change management was developed by Prosci with participation from more than 1000 organizations from 59 countries. This model describes five required stages for change to be realized successfully on an individual level. The building blocks of the ADKAR Model include:

Awareness – of why the change is needed

Desire – to support and give input in the change

Knowledge – of how to change

Ability – to implement new skills and behaviors

Reinforcement – to sustain the change

Organizational change management

Fill C (2002), Organizational change management includes techniques and tools for managing the people side of the change at an organizational level. These tools are used by the leaders of the organization and include a structured approach that combined with an understanding of individual change management, provide a model for managing the people side of change. Organizational change management processes include techniques for creating a change management strategy (readiness assessments), engaging senior managers as change leaders (sponsorship), building awareness of the need for change (communications), developing skills and knowledge to support the change(education and training), helping employees move through the transition (coaching by managers and supervisors), and methods to sustain the change (measurement systems, rewards and reinforcement)

The role of the management

Leftwich, R.L. (1979), Management’s responsibility and particularly that of administration is to detect trends in the macro environment as well as in the micro environment so as to be able to identify changes and initiate programs and determine the economic scenario . It is also important to estimate what impact a change will likely have on employee behavior patterns, work processes, technological requirements, motivation and availability of resources. Management must assess what employee reactions will be and craft a change management program that will provide support as workers go through the process of accepting and adopting the change. The program must then be implemented, communicated effectively throughout the organization, monitored for effectiveness, and adjustments be made where necessary. Organizations exist within a dynamic environment that is subject to change due to the impact of various factors both external and internal . To continue to operate effectively within this environmental roller coaster, organizations must be able to change themselves in response to internally and externally initiated change in minimum span of time and be adaptable to change,hence flexible enough . However, change will also impact upon the individuals within the organization. Effective change management requires an understanding of the possible effects of change upon people, and how to manage potential sources of resistance to that change. For instance people react within the organization by forming anti groups and retaliate and oppose the change. Mostly technological changes trigger this point and when new systems are replaced by old systems then conventions take a stand and people react and oppose this transition. Change can be said to occur where there is an imbalance between the current state and the environment on the whole.

Decision Downloading

Czarniawska, B. (1999)Often changes are initiated at a very senior level of management in the organization without any participation from others. For example, mergers, layoffs, and company acquisitions rarely involve input from employees at any level but the most senior. In fact, most employees are kept in the dark. These situations require special types of change management practices. As the decisions get “unfolded” to the rest of the organization there is a high probability that misunderstandings, angwish, and resilliance will surface.

Researchers have determined that employee “buy-in” can be hastened by assertively unfolding the decision. Executives who use an assertive style of downloading or announcing the decision include the following points in their message: a) how the decision was made b)reasons why it was made c) what alternatives were considered d) how it fits in with the organizational mission and aims e) how it impacts the organization f) how it impacts employees.

Executives who use this more vigorous approach to communicating double the rate of acceptance when compared to more impoverished methods.

Change Management on the level of society

Mats Larsson, in the book Global Energy Transformation (2009), suggests that change management will become necessary on the level of society in order to transform energy systems on a large scale globally|. Conversion of global systems of transportation, energy supply and industrial processes from grass root level is an undertaking that will require massive investments, change in individual behavior and company routines on a large scale and during a short span of time. This effort will also require the co-operation of many companies, public organizations and individuals. In order to achieve this on the scale of nations and regions, huge government expenditure will be required . Larsson mentions how the management principles and tools of change management could be applied in large scale national programs of mass transformation.

Larsson uses as examples previous large scale change and development programs in the United States, in which many models that are now used in corporate change management projects have been developed and used. These programs are the transformation of US industry to war production during The Second World War, The Marshall Plan and The Apollo Program. Each of these programs have different focuses and management models, but they are examples of successful large scale change management efforts on the level of society.

John P Kotter’s ‘eight steps to successful change

John Kotter’s highly recommended books ‘Leading Change’ (1995) and the follow-up ‘The Heart of Change’ (2002) describe a helpful formula for understanding and managing change. Each stage acknowledges a key principle identified by Kotter relating to people’s response and approach to change, in which people see, feel and observe followed by the Kotter’s eight step change model that can be summarised as :

Increase urgency,motivate people to move, make objectives real and relevant.

Build the right team – get the right people in place with the right emotional commitment, and the right combination of skills and expertise.

Get the vision right – get the team to establish a simple vision and strategy, focus on emotional and creative aspects necessary to drive service and efficiency with essential ingredient of commitment.

Communicate for buy-in – Involve as many people as possible, communicate the essentials, simply, and to appeal and respond to people’s needs and listen to the people’s needs. Harmonize their needs with the organizational goals on the whole.

De-clutter communications – make technology work for you rather than against for instance its a global village internet, media has advanced so much , so unfold the information down the organization as quickly as you can to penetrate deep into the minds of people for their fast adaptability to the new situation.

Implement the change – Remove barriers, enable potential feedback and lots of support from leaders – reward and recognise progress and achievements after implementation of change.

Create short-term wins – Set aims that are easy to achieve – in bite-size chunks. Manageable numbers of initiatives. Finish current stages before starting new ones.

Don’t let up – Foster and encourage determination and persistence – ongoing change – encourage ongoing progress reporting – highlight achieved and future milestones.

Make change stay – Reinforce the value of successful change via new recruitment, promotional rewards, new change leaders. Blend change into culture.

Cultural change

Culture are known as norms , values , policies , strategy , and policies of the organization . Cultures represent the company way of doing the business. It is a era of globalization where though competition between the firms , cultural change play dominant role for the success of the organization . Organization structure represent the organization culture , if the organization have centralize organization structure , then decision make mostly central level , decentralize structure , increase power sharing between organization .

Specially in case of L’Oreal it is big question how organization culture keep same in the world because, organization acquisition policy , create question mark for organization culture . Like Morrison took the Safe ways, but later the sold number of store because they can’t adopt them according to their own culture.

People who like a change tend to go through three stages unrealistic optimism , reality shock , and constructive direction . When someone fears or dislikes a change , a more complex process involving five tends to occur getting off on the wrong track , laughing it off , experiencing growing self doubt , buying in and moving in a constructive direction . Managers are challenged to help employees deal effectively with reality shock and self doubts.


Koontz H and Weihrich H( 1999) Strategy term is a general programs of action and deployment of resources to attain comprehensive objectives. According to some authors mentioned strategy means guideline, or long term plans.

Hardy Cynthia (1994) global strategy is Setting a a matter of adjusting as much as possible the business functions-manufacturing , procurement, marketing , distribution, and R&D -within the constraint of trade and investment barrier in a way which provide the best possible product/market fits. In a few cases, the best fit is a standardized product; in others a customized product fits best. Making a global strategy often involves subsequent a zig-zag line between standardization and flexibility, trading off the costs and benefits of one against those of the other.

Cateora R.Philip (1997) formative a firm’s global strategy and shaping the organization to achieve goals and objectives are the two middle tasks of global marketing management that describe the level of international integration of the company. Companies must contract with multitude of strategic issues including the extent of the internationalisation of operations.

Company tends to develop multi-culture in their underlying brands. This strategy proves to be very successful in reality and even played a dominant role in L’Oreal’s success. The most representative example is Maybelline New York. L’Oreal developed Maybelline’s brand culture instead of upsetting it after its acquisition of Maybelline. The sales figure dramatically rose after the acquisition and Maybelline product enter into more than 90 countries. Maybelline became a stylish global brand for all women all around the world from a merely regional brand. L’Oreal to create the advantages is to spread around strategic investment by sharing the production of innovation between different product divisions. L’Oreal relied on distribution channel to carry out its strategy of brand structure. There are four product departments in L’Oreal’s structure. Every department has several brands and each brand has many names

Strategic position of the company in relation to market

Mabey (1994) Company is boosting their brands architecture through acquiring different brands and increasing its operation in the world market. Its acquired Maybelline brand in 1996 for their strategic policy, Mini nurse in China, In Japan Luxury brand Shu Uemura , through acquisition strategy. Future expansion the most fast growing markets like China market , effective and cost efficient strategy ,

Company is leading in cosmetic industry , and won number of certificate and hold major market shares as shown in below figure.

Above diagram ,clearly shows the market share of the company ,which hold 45% share , it is leading position inmarket.

Information system Strategy

Cameron Kim ( 1993) Information technology can play a dominant role in this competitive world , information is data endowed with relevance and purpose. Data such as names numbers , and places need to be organized and interpreted in a timely manner if they are to be useful in decision making . Information should have a surprise effect, meaning that it should shed light on the unknown. Information that does not surprise or elignten the individual is probably irrelevant or redundant .

Because information is the lifeblood of organization endeavor and strategic tool of increasing importance , manager need to ,view information as a resource , understand the cost of information , know how to organize and comprehend information and be familiar with the basics of information processing .

Information technology includes all mechanical and electronic devices capable of producing , manipulating , transmitting and storing words , numbers , pictures and sound. The knowledge to operate these devices also qualifies as information technology .


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