Loreal’s Way to Success in the European Haircare Products Industry Essay Example

haircare market, using L'Oreal as a case study for critical success factors.

Hooley et al (1998, p. 45) state that critical success factors (CSFs) refer to product features which are highly valued by a specific group of customers. Organizations must excel in these areas in order to outperform competitors and gain a competitive advantage based on customer value, such as superior quality, lower prices or better service. According to Hamel and Prahalad (cited Lynch 2003, p. 235), core competences are the skills and technologies that enable organizations to provide unique benefits to consumers, serving as fundamental resources for the organization.

According to Johnson ; Scholes (2002, p. 156), robustness, or the difficulty of imitation, is the most crucial aspect of core competence, which can only be achieved through constant innovation. The critical success factors of L'oreal are analyzed below.

According to Porter (1985), there are four types of resources that can generate a competitive advantage: Processes, Products, Services, Human Resources, Information, and Financial Resources. He further suggests that implementing cost leadership and differentiation strategies could be the way to leverage these resources.

The key factors behind L’oreal’s success include its core competencies and constant focus on research and innovation, which have been crucial in maintaining its competitive position. The importance of research has been evident since the company's inception in 1907 by Eugene Schuller, as research has always been at the heart of the company's development strategy. Over time, it has become clear that the results obtained through research and innovation serve as the main determinant of L'oreal's competitiveness.

In 978, Elseve was marketed as a shampoo for damaged hair and was considered too rich, nourishing, and heavy for everyday

use. However, with the increasing frequency of shampoo use, consumers began to prefer products that were gentle and mild enough for daily use. As a result, Timotei, Ultra Doux, and Mixa baby shampoo became the market leaders due to their mild formulas. In an effort to extend the Elseve brand, L’oreal created separate products for frequent and less-frequent shampooing, including Elseve Balsam, Elseve Frequency, Elseve Volume, and Elseve for Oily Hair. Despite these efforts to improve positioning, there has not been much improvement.

In 1987, Timoei launched a new product which sparked a trend in the market for active ingredients and natural ingredients began to be introduced in products. As a result, L’oreal renewed their Elseve products and aimed at new market segments by offering products for all types of hair. The formula was enriched with a different active ingredient suitable for each hair type. In 1994, L’oreal developed a silicone-based formula that treated each strand of hair individually, leaving it soft, easy to comb and thoroughly detangled.

Upon its entry into the regular hair market, L'Oreal was promptly noticed by consumers. Making full use of polyesters and silicone, the company capitalized on the two ingredients' effectiveness in shampoo formulas, setting itself apart from competitors and boosting its market position considerably. 1995 saw L'Oreal's introduction of both Elseve Multicitamines and Technicare, further expanding the Elseve product line.

Elseve Multivitamines utilized a silicone-based formula that outperformed Procter &Gamble's silicone-based Pantene, which was the leading brand in the European market. By launching Elseve Multivitamines, Elseve was able to broaden its target audience, catering not only to consumers with hair damage or other hair care issues but also

those with normal hair. The new formula represented a significant milestone in L'oreal's shampoo industry competition. This research innovation produced a series of favorable outcomes, including increased sales and prices.

By increasing revenue, L'Oreal was able to expand its advertising budget and experienced additional growth in market share. The company has remained at the forefront of its industry by continuously developing new skills, implementing successful marketing strategies, and innovating. Currently, research and development remain a top priority for L'Oreal as it strives to maintain and enhance its competitive edge. As a result of these efforts, the brand has gone from being a leader in France to becoming a leading force across Europe and globally.

L'Oreal prioritizes research as the foundation of its operations and allocates more resources towards it compared to other companies. In order to consistently introduce innovative products, L'Oreal has struck a fine balance between R;D driven by creativity and R;D driven by marketing strategies.

The goal of advanced research is to conduct long-term studies focused on the development of new ingredients, gaining a better understanding of their effectiveness and toxicological properties. An example of this is the natural fruit-based shampoo range, Fructis, that was developed for the European market. It took a decade of intense research and development to create a formula that was effective. L’oreal allows scientists to have the freedom to work on their long-term ideas. Finally, in July of 1996, tests conducted in France showed remarkable results in improving hair quality with the use of the Fructis range.

Within its first six months on the market, L’oreal sold almost 5 million units of its shampoo product. The product has aided

in capturing 28 percent of the European shampoo market, and it has been distributed in a range of locations including Europe, Scandinavia, Russia, and Chile. With a focus on safety, L’oreal’s International Safety Assessment Department meticulously evaluates the toxicological profile of every ingredient and assesses the safety and tolerance of each formulation before launch. Additionally, L’oreal leverages ideas from both internal advanced research and external sources in applied research to develop and implement new materials. Determining the effectiveness and adoption of these advancements will require an extended evaluation period.

The Research Institute in Chicago conducts advanced research to enhance knowledge about the properties and specific necessities of the skin and hair of people with African descent. During the creation of new products, it is highly significant for researchers to remain mindful of industrial reality. This institute establishes more formal contact between scientists and marketers than other companies and frequently organizes formal meetings, such as discussing current project progress once a month and two to three yearly meetings where scientists can present their findings to marketers.

L'oreal strives to outpace its rivals in the current highly competitive market by carrying out renovations at a faster pace. Mere sustainable positioning strategies no longer suffice when seeking to obtain an edge over others. In order to prevent competitors from imitating them, L'oreal consistently introduces fresh products and brands with the hope of making a swift and substantial impact on the market. One approach for businesses to increase their worth is through managing different resources that encompass operations, goods, and services. To attain this objective, L'oreal meticulously picks raw materials and maintains close partnerships with suppliers.

L'Oreal's dedication to

guaranteeing the safety and efficacy of their products is apparent through their continuous renewal of all 2,800 raw materials at a rate of 150 per year. Their commitment to obtaining top-quality natural ingredients is supported by suppliers from across the globe. The company strives to promote and enhance the utilization of raw materials sourced from natural and sustainable sources. In 2002, 39.7% of their raw materials, measured by volume, were procured from plants.

L'Oreal Research collaborates productively and continuously with its suppliers, resulting in the development of novel raw materials that are chosen using a diverse selection approach. The company has established strong, long-term relationships based on innovation, safety, and quality with its partners in order to achieve advancements. Through aggressive management of top brands, packaging improvements have been made which streamline production processes and reduce operating costs. An instance of this is the Elseve brand shampoo bottles requiring 25% less material now, leading to an annual saving of nearly 450 tons of polyethylene.

L'Oreal aims to make their products accessible to women and men around the world. They have reduced their environmental impact and minimized indirect effects on transportation and recycling. L'Oreal has conducted a thorough study to address possible market segments by dividing the total European market based on geographic segmentation, age, gender, typology, nature of hair, washing frequency, and amount used (See Appendices 1 to 4).

L’oreal introduced two new brands, the L’oreal’s Studio Line for men and P’tit Dop for children. To target specific markets, L’oreal conducts detailed research on the attractiveness of people in various European countries. For instance, Germany is more focused on price than other nations, thus reducing the cost of

Elvital can significantly boost its market share. Additionally, Spain has the greasiest and least straight hair among European countries.

The introduction of new products with technological innovations and natural ingredients has been well-received by the market. L'oreal's umbrella brand strategy allows the company to compete in various market segments and avoid product cannibalism through unique positioning strategies. By combining sales for different brands, L'oreal is able to compete for market leadership. Additionally, the company's broad distribution channels make advanced technologies accessible to a large audience.

All of the brands within the Group, especially those focused on offering modern and affordable products to a wide audience, work to make the latest breakthroughs more accessible. Additionally, L'Oreal's communication strategy involves partnering with internationally renowned stars in the entertainment and fashion industries to endorse particular items. In the UK, Jennifer Anniston, a well-known actress from the popular TV show "Friends," was chosen as a spokesperson for the brand. Known for her stylish hair, Jennifer Anniston conveyed a powerful and contemporary image to audiences ranging from 15 to 35 years old. Furthermore, the Ceramide R molecule used in the product was effective in injecting "strength" back into hair when washed.

The entire range of Elvive in the UK was advertised as claiming superiority. The delicate advertising design played a key role in Elvive's success, as it captured more than 6% market share in 1997 and achieved a rise to 8% the following year. This led to Elvive becoming the second-ranked brand on the market. L'oreal's leading brand Elvive also utilizes tempting advertisements to capture the feeling of pleasure, as evidenced by their famous slogan, "Because I'm worth it."

(Kotler, p. 459)

According to Principle 2 of human resources, it is important to provide optimal working conditions and prioritize personalized employee relations. Additionally, recruiting individuals from diverse cultural backgrounds and fostering diversity are essential for success.

3) The WPS scheme at L'Oreal resulted in bonuses of €43 million paid out in 2003 for the previous financial year, which equated to roughly two weeks' salary on average. 4) It is important to motivate employees, with a focus on remuneration and mobility. 5) Personal and professional development can be achieved through the Continuing Education training programs and the sharing of experiences. 6) L'Oreal has increased its partnerships with universities, now maintaining 120 relationships globally.

Various forms of support are available, such as financial backing for chairs, including those at Oxford's Business School. Information resources are also crucial for a successful marketing strategy, as noted by Keegan (p. 189). Applied research at L'Oreal also involves monitoring competition, with approximately 20 employees dedicated to scouring the internet and locating 1,000 new products from other companies.

The examination of around 700 to 800 details is carried out meticulously, with financial resources playing a significant role in influencing and restricting a company's strategy, according to John & Scholes (p.).

According to (348), possessing 'deep pockets' provides an advantage in enduring intense competition, as it allows a competitor to acquire global competitive intelligence and allocate resources wherever necessary to protect their interests or combat competition. L'Oreal achieved success in Europe by establishing a competitive advantage through its financial resources. By introducing a new formula in 1995, L'Oreal was able to increase the price of Elseve products by 20%, resulting in higher revenue and increased advertising expenditure. As

a result, Elseve was able to target more segments with personalized messaging, which further boosted its market share.

The Marketing Environment is complex and consists of controllable and uncontrollable forces and actors that affect a company's performance, according to Kotler et al (1997, p. 64). Managing marketing functions is challenging even under ideal circumstances, when only the controllable marketing-mix variables are in play. However, a successful company can analyze the environment to identify threats and opportunities, and thus perform well.

The Macro-Environment encompasses various uncontrollable external factors that impact a company's success. If a new product or marketing campaign is in tandem with these trends, it is more likely to perform well. The following are the key forces of the Macro-Environment:
1. Political: The political landscape of the 1990s resulted in most nations adopting market-based economies and promoting free trade policies between nations. (Johnson, p.)

Wright (p. 5) observes that governments are increasingly dismantling monopolies and passing consumer-focused laws, which empower consumers to dictate the products' production. Meanwhile, Kotler et al (p. 105) argue that adopting the euro as a standard currency will eliminate political barriers and streamline cross-border trade on an economic level.

59) Environmental Factors:

The current global market trend signifies a growing resemblance between markets, resulting in a rise of convergence in customer demands and interests. Furthermore, the swift evolution of technology plays a vital role in contributing to environmental instability.

New technology brings about high innovation turbulence, creating new markets and opportunities while making other companies and markets obsolete. The Micro-Environment of a company consists of the company itself, suppliers, customers, competitors, and the public. Thorough analysis has been conducted on L'oreal's successful sectors to produce detailed statements.

In order to effectively take advantage of opportunities and avoid threats, L'oreal heavily relies on understanding its environment; for this purpose, a SWOT analysis proves useful.

Through its rapid innovation with over 3,000 new formulas and superior technology, L'Oreal has created formidable obstacles for potential competitors to overcome. Its extensive product line caters to both genders worldwide and the company can apply advanced technologies across all categories of products, making it accessible to many.

By offering cutting-edge products and catering to specific subsegments and niches, L'Oreal has effectively met the needs of a diverse range of buyers through its various brands. This makes it difficult for competitors to replace them. Additionally, L'Oreal's advanced research enables them to turn potential uncertainties into successful products, which with strong financial backing eventually become profitable cash cows as they mature in the market.

Despite the temporary advantages of its many shining stars and cash cows, L'oreal may sustain its long-term advantage through a series of such advantages. However, its presence in 130 countries with 290 subsidiaries presents weaknesses as the management may not be efficiently conducted in each subsidiary due to social and cultural differences. Furthermore, the large distribution may encounter unexpected trade troubles from political risks, risking loss of control, ownership of assets, and market access.

According to Bradley's book (p. 133), the French haircare products market was saturated in 1995. However, L'oreal was able to enter the European market thanks to the success of their new formula. This opportunity gave L'oreal a boost.

The acceleration of entry was brought about by globalization, deregulation, and the emergence of the European Union. The haircare industry is experiencing a trend towards similarities in

customers’ needs and preferences across different countries, with the desire for healthy and shiny hair gaining popularity. These opportunities have provided L’oreal with additional room for development.

L'Oreal has been forced to invest heavily in innovation due to the powerful threat it faces from established brands like Procter & Gamble and Unilever. The company has allocated 3 percent of its consolidated sales to research and employs 2823 people dedicated to cosmetics and dermatological research. In 2002, it registered 501 patents. In contrast, Procter & Gamble and Unilever spend only 1.7 percent and 1 percent on research, respectively.

According to Brassington & Pettitt (p. 385), L’oreal has a cosmetics turnover that is 20% lower than its competitors. However, L’oreal can maintain a low threat level by continuously generating patents and releasing new products faster than its competitors. Ultimately, L’oreal's strengths overshadowed its weaknesses, outperforming rivals' threats and opportunities.

L'Oreal's progress is supported by the overall trend towards environmentalism. This success can be attributed to L'Oreal's strong core competency in innovation and adaptable, effective marketing strategies. The company's future looks promising thanks to these factors. References: Kotler, P., and Armstrong, G., 1997.

The book "Marketing: an Introduction" is in its 4th edition and was published by Prentice Hall in Harlow. This information is presented within a paragraph tag.

Wright, R., published the first edition of Marketing: Origins, Concepts, Environment back in 1999.

London's Thomson Learning publication features Doyle's first edition of "Value-based Marketing: Marketing Strategies for Corporate Growth and Shareholder Value" from the year 2000.

Chichester: John Wiley & Sons, Ltd. [4]. Keegan, W.J., 2002.

The 7th edition of "Global Marketing Management" by Person Education, Inc. was written by F. Bradley.

The book "International Marketing

Strategy" was published in 2002, and it is the 4th edition. The publisher is Prentice Hall, located in Harlow.

Brassington, F., and Pettitt, S. authored Principles of Marketing in 2003.

7. Kotler, P. et al. Harlow: Pearson Education Limited, 3rd edition.

The third European edition of "Principles of Marketing" was published in 2001 by Pearson Education Limited, with its location in Harlow.

. 8. Johnson and Scholes, G. K.

The 6th edition of "Exploring Corporate Strategy" was published in 2002 by Prentice Hall in Harlow. The source is listed as 9.

Hooley, G. J., and his colleagues published a research paper in 1998.

The article titled "Marketing Strategy ; Competitive Positioning" by M.E. Porter is a valuable resource.

Free Press published Competitive Advantage by Michael Porter in 1985, which includes 11 chapters.

The article "The Core Competence of the Corporation" by C. K. Prahalad and G. Hamel was published in the Harvard Business Review in May/June 1990.

79-91.